Bart Becht Chief Executive
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Shareholders’ Review and Summary Financial Statement 2007 Seeing is believing Over 15 million products sold every day! Leading the way Our Power Brands go from strength to strength Delivering the goods Our 8th consecutive year of above industry average growth Visible gains Dividend up by 21% Chief Executive’s review Seeing is believing Our results speak for themselves. They articulate just how much we live and love what we do. And that’s the driving force behind the strength of our brands and our success We believe at the heart of our success lies our clear consumer-centric vision, a clear and consistent strategy, the strength of our organisation and culture and our ever stronger product portfolio of globally leading brands in attractive categories. Bart Becht Chief Executive Our vision is to deliver consumers and customers better • Support these brands with a marketing investment that solutions for that short period of time every day that they use is amongst the highest in the industry. household cleaning, health or personal care products. Our • Continue to roll out our Power Brands into new enduring passion to make continuous progress in this area geographies to make them stronger market leaders and forms the foundation of our success. further enhance our corporate net revenue growth. A clear and consistent strategy Transforming growth into profit and cash flow Disproportionate focus on our 18 Power Brands to realise We focus on turning the growth of the business into our vision and drive above industry growth attractive profit and cash flow through margin expansion • We narrowly focus on these 18 brands as they typically and cash conversion. are global market leaders in categories with strong • We expand margins through an unrelenting attention growth potential. to cost optimisation and by focusing on higher margin • We use high levels of brand investment and innovation products and categories. to nurture our Power Brands to above industry and • We focus on converting this to cash through tight company average growth rates. control and management of our net working capital • Continuously develop innovative new products to and relentless attention to cash. strengthen the position of the Power Brands in their categories and enhance their consumer appeal. 2007 was a great year! relief provide clear opportunities for further growth for the Group financial highlights brand in the USA and in new geographies. We made excellent progress in making our 18 Power Brands 2007 2006 change stronger global market leaders. Bar one, that held flat, all As we are looking forward, we are excited by the growth and £m £m % Power Brands gained market share due to high levels of brand margin potential the Power Brands in consumer healthcare can Net revenues 5,269 4,922 +7 investment and the launch of exciting new products like Operating profit 1,233 910 +35 bring to Reckitt Benckiser. Air Wick Freshmatic Mini and Vanish Oxi Action Multi. Not only Adjusted operating profit* 1,190 1,059 +12 Strong in-market results drove our financial success in the Net income for the year 938 674 +39 did the Power Brands gain in the markets where they are sold, year. 2007 was the eighth consecutive year of above industry Adjusted net income for the year* 905 786 +15 they are increasingly becoming global leaders as we roll these average net revenue and profit growth for Reckitt Benckiser. Diluted earnings per share 127.9p 91.8p +39 brands out to new markets. Adjusted diluted earnings per share* 123.4p 107.1p +15 Net revenues at constant exchange grew by 10% in total and Power Brands now account for 61% of Reckitt Benckiser’s Declared dividend per share 55.0p 45.5p +21 9% on a like-for-like basis, with exchange reducing both total net revenues, up from 40% in 2001. The continued numbers by 3%. Adjusted profit for the year advanced by 15% *adjusted to exclude the impact of exceptional items strong development behind these increasingly clear global at actual exchange. leaders in categories with strong growth potential positions the Company well for the future. The strong financial results and confidence in the continued momentum of the Company led the Board to increase 2007 We also started to realise our ambition of becoming a real dividends by 21% and continue with a £300m share buy global player in consumer healthcare, another area where back programme. we believe the Company can achieve good growth at very attractive margins. Investors often ask us why we have been successful and even more importantly if we can continue our track record. Since In February 2006, we acquired the Boots Healthcare the formation of Reckitt Benckiser in 1999, the Company has International (BHI) business. In 2007, not only did we complete delivered consistently above industry average growth in net the integration of BHI, delivering more than the originally revenues and profits. We believe at the heart of our success lies targeted synergies and one year ahead of schedule, we our consumer-centric vision, a clear and consistent strategy, the managed to grow the BHI business by 10% on a true like-for- strength of our organisation and culture and our ever stronger like basis, well ahead of ingoing assumptions. Most of this product portfolio of globally leading brands in attractive Seeing is believing growth was driven by the three new Power Brands that came Over 15 million products sold every day! categories. We believe the same elements position us well for with the BHI acquisition: Nurofen, Strepsils and Clearasil. future success. Leading the way Our Power Brands go from strength to strength Delivering the goods Our 8 consecutive year of above industry average growth Towards the end of 2007, we announced our intent to acquire Visible gains Dividend up by 21% Adams Respiratory Therapeutics, Inc., a transaction which A consumer-centric vision completed on 30 January 2008. Adams allows us to enter the Our vision is to deliver consumers and customers better USA, the largest consumer healthcare market in the world solutions for that short period of time every day that they use with Mucinex, the clear No.1 in the US Cough Relief market. household cleaning, health or personal care products. Our Mucinex will become our 19th Power Brand. Its unique and enduring passion to make continuous progress in this area patent-protected formulas and consumer claims of 12-hour forms the foundation of our success. Seeing is believing There’s no hiding in this business. Our products are judged millions of times a day. When people open the dishwasher door, they’re looking for perfection. When they see it, they can believe it, because Finish, like everything else we do, delivers every time. 2 Reckitt Benckiser Shareholders’ Review 2007 A clear and consistent strategy and the excitement of taking calculated risks in the search for Net revenues £m better solutions. Not for us a culture of consensus, rather we 6000 6000 Disproportionate focus on our 18 Power Brands to realise enjoy constructive conflict if it leads to better decision-making. 5000 our vision and drive above industry average growth 5,269 5000 Ours is a culture that works for us. That is why we work 4,922 4000 We narrowly focus on these 18 brands as they typically very hard on recruiting and developing our talent to fit with 4,179 4000 3,713 3,871 our culture. 3000 are global market leaders in categories with strong growth 3000 potential. These are the brands that receive the lion’s share of new products to realise our vision and the bulk of our media Delivering shareholder value 2000 2000 and marketing investment to consistently grow them ahead of 1000 …in the short-term 1000 the market and company average. The result of our vision, strategy and values brought to life 0 0 Our Power Brands now account for 61% of our total business 03 04 05 06 07 by our passionate people is a performance that has delivered – up from 40% in 2001. Many of them are world leaders like growing profit and cash flow for shareholders. Our growth has Vanish in Fabric Treatment, Finish and Calgonit in Automatic outpaced our industry consistently over the past eight years. Operating margins (adjusted) % Gross margin % +160bps 60 Dishwashing or Lysol and Dettol in Disinfection. 25 And shareholders have been rewarded for this with consistent 25 60 We use high levels of brand investment and innovation to growth in the value of their shares, in a progressive dividend 22.6* 58 20 21.5* 20 58 20.1 58.3 nurture our Power Brands to above industry and company policy, and continuing share buy backs. 19.3 18.3 56 average growth rates. Our innovation rate at almost 40% of 15 56.7 …in the long-term 15 56 net revenue from products launched in the prior three years 54.9 54 10 54.8 strengthens the positions of our Power Brands within their We are also driving the long-term value of the business 10 54 categories, continually enhancing their consumer appeal. These for shareholders by making our business more sustainable, 53.3 52 innovations are then supported with a marketing investment through building our reputation as a responsible company, 5 0 5 52 that is amongst the highest in our industry – with our media and through taking actions to improve upon the social and 50 environmental impact of our business. 0 50 investment alone running at 12.4% of net revenues. 03 04 05 06 07 03 04 05 06 07 Due to the historical way our business has been built over the Reckitt Benckiser now consistently scores at the head *adjusted to exclude the impact of exceptional items years, through mergers and acquisitions, our Power Brands of industry on external measures of sustainability.