Reckitt Benckiser Investor Presentation: Half Year 2010 26th July 2010
1 Bart Becht Chief Executive Officer
2 HY 2010: Summary
• Total business continues to perform very strongly
• Ex-RBP, HY10 performance in line with full year financial targets
• Cash flow generation remains strong
• Interim dividend per share increased by +16% to 50.0p
• FY 2010 targets re-iterated
3 Total business continues to perform strongly HY 2010 analysis Net revenue (£bn) Adj.* net income (£m)
HY 2010: +6% @ constant (+7% @ actual) HY 2010: +18% @ constant (+19% @ actual)
4.5 800 728 4.1 4.0 700 3.8 613 600 3.5 500 3.0 3.1 465 400 395 2.5 2.7 2.4 300 303 268 2.0 2.0 234 1.9 200 199 1.8 1.8 173 1.7 165 1.6 116 1.5 1.5 100 103
1.0 0 1999 - 2010 1999 - 2010
2004 restated following the adoption of IFRS * Adjusted to exclude the impact of exceptional items 4 Growth by Area HY net revenue trend, 2006-2010 (in £m & % growth @ constant exchange)
5,000
4,000
3,000
2,000
1,000 HY10: -1% HY10: +4% HY10: +19% HY10: +5% HY10: +24% HY10: +6%
0 Europe NAA DvM Base RBP Total RB
CAGR: +4% CAGR: +7% CAGR: +15% CAGR: +7% CAGR: +41% CAGR: +8%
Net revenue (ex-RBP) of +5% (@ constant) consistent with FY target
5 Growth by category HY net revenue trend, 2006-2010 (in £m & % growth @ constant exchange)
1,200
800
400
HY 2010: +7% HY 2010: -1% HY 2010:+5% HY 2010: +8% HY 2010: +2%
0 HP&C Fabric Surface Home Dishwashing
CAGR: +12% CAGR: +4% CAGR: +5% CAGR: +10% CAGR: +5%
Category growth reflective of strong contribution by DvM 6 Colin Day Chief Financial Officer
7 Q2 & HY 2010 results Profit & Loss summary
2009 2010 % change £m £m actual constant
Q2 2010: Net revenue 1,872 2,061 +10% +6%
Gross profit 1,115 1,246 +12% +8%
Operating profit 414 503 +21% +17%
Net income 310 380 +23% +18%
HY 2010:
Net revenue 3,783 4,064 +7% +6%
Gross profit 2,234 2,437 +9% +8%
Operating profit 819 964 +18% +17%
Net income 613 728 +19% +18%
8 High quality net revenue growth Volume versus price / mix: HY 2010
% Base Total RB
Volume +4 +5
Price/mix +1 +1
Constant FX growth +5 +6
Exchange +1 +1
Reported growth +6 +7
9 Strong business momentum Volume growth by quarter
Q109 Q209 H109 Q309 Q409 FY09 Q110 Q210 HY10
Base +3% +4% +3% +5% +6% +5% +5% +4% +4% business Total RB +4% +6% +5% +6% +9% +6% +6% +5% +5%
Consistent volume growth
10 Growth by Area At constant exchange
Q2 2010: Net revenue Operating profit £m %ch £m %ch Europe 846 -1 195 +0 NAA 545 +4 101 +19 DvM 491 +18 78 +28 Base business 1,882 +5 374 +10 RBP 179 +21 129 +47 Total 2,061 +6 503 +17
HY 2010: Net revenue Operating profit £m %ch £m %ch Europe 1,752 -1 401 +0 NAA 1.073 +4 206 +16 DvM 929 +19 142 +37 Base business 3,754 +5 749 +10 RBP 310 +24 215 +48 Total 4,064 +6 964 +17
11 Consistent margin progression HY gross margin, 2006-2010 (%)
HY 2010: +90bp
60.0 • Improvement largely from the base
59.1 business, and driven by: 60 58.3 ¾ Input cost savings 57.6 ¾ Positive FX transaction impact on raw & 58 packs
55.7 ¾ Squeeze / X-Trim contribution 56 ¾ Volume leverage
¾ Consistent with the +50-80bp previously 54 indicated for FY10
52
50
2006 2007 2008 2009 2010 12 Consistent margin progression HY operating margin, 2006-2010 (%)
HY 2010: +210bp
• Increased media activity at more 24 23.7 favourable rates
¾ HY media spend: 11.7% NR versus 22 21.6 12.1% in HY 2009
20.5 • Significant growth in Other Consumer
20 19.9 Marketing
• Base business: +100bp 18 17.1 ¾ c. 80% from GM uplift, 20% from operating leverage
16
14 2006 2007 2008 2009 2010
13 Margins by Area HY operating margin %, 2006-2010
40
35
30
25
20
15
10
5
0 Europe NAA DvM Base RBP Total RB 22.9% (+30bp) 19.2% (+240bp) 15.3% (+200bp) 20.0% (+100bp) 69.4% (+1,070bp) 23.7% (+210bp)
Prior to 2008, RBP was included within Europe and NAA. Previous years have been restated to exclude RBP 2006, 2007 and 2008 adjusted to exclude exceptional items 14 Income statement
HY 2009 HY 2010 %ch %ch £m £m actual constant
Operating profit 819 964 +18 +17
Interest (3) 7
Profit before tax 816 971 +19 +18
Taxation (203) (243) +20 +18
- Underlying tax rate 25% 25%
Net income 613 728 +19 +18
- Net income % NR 16.2% 17.9%
EPS – fully diluted 85.1p 99.2p +17
15 Strong cash flow generation HY operating & net cash flow, £m
1,200
1,000 • Cash generated from operations -3%, at £1,090m
800 ¾ 113% operating profit
600 • Net cash flow of £692m ¾ Reflects settlement of a number of 400 outstanding tax matters • Net working capital of minus 200 £1,229m
¾ 15.3% net revenue 0 2006 2007 2008 2009 2010
Cash generated from operations Net cash flow
16 Net cash / (debt) In £m Net cash flow 692 Dividends (411) Other (inc. FX) 76 Change in net cash 357
800
600
400
200
0
-200
-400
-600
-800
-1,000
-1,200 FY 2008 HY 2009 FY 2009 HY 2010
Continued strong cash flow generation
17 Dividend per share In pence
100
90 100.0
80
70 80.0
60
50 55.0 50.0 40 45.5 43.0 30
20
10
0 FY06 FY07 FY08 FY09 HY09 HY10
H1 dividend increased to 50.0p, +16% 18 Bart Becht Chief Executive Officer
19 Same proven strategy …
• Above industry average net revenue growth − Focus on Powerbrands in higher growth categories − Systematic innovation to excite consumers − Geographical roll-outs − Exploit opportunities from add-on acquisitions
• Convert into strong profit growth and cash flow − Cost optimisation − Price and mix management − Net working capital controls − Focus on cash returns
20 Initiatives for H2 2010 Dettol®
Roll out of Lysol® No-Touch™ Hand Soap System under Dettol® Removes the need to touch a grimy soap pump ever again, helping to stop the spread of germs and infections
21 Initiatives for H2 2010 Dettol®
Dettol® personal care Continued roll-out into new geographies including Israel, Sweden and Romania, following on from Brazil, Turkey Italy and Poland (amongst others) during the first half year
22 Initiatives for H2 2010 Lysol®
Lysol® Neutra Air Fabric Mist Both kills germs and eliminates odours on soft surfaces
23 Initiatives for H2 2010 Strepsils®
Strepsils® Warm Combines a comforting warming sensation with effective sore throat relief
24 Initiatives for H2 2010 Nurofen® / Mucinex®
Nurofen® for Children Children’s Mucinex® Multi- An ibuprofen suspension offering fever and pain Symptom Cold Liquid relief specifically to children over the age of six Provides relief relief from a stuffy nose, a cough years and chest infection
25 Initiatives for H2 2010 Airwick®
Airwick® Touch of Luxury Airwick® Ribbons Launch of Airwick Touch of Luxury, providing A premium candle with the benefit of consumers with more luxurious fragrancing “super-fragrancing”, delivered through and available in -motion, Freshmatic and fragrance ribbons packed with electrical formats essential oils
26 Initiatives for H2 2010 Finish®
Finish® Quantum Target Finish® Shine + Dry Rinse Aid An improved formula with new cleansing With new Quick-Dry formula, which actively removes microbeads to target and soften even the toughest water spots and drops for sparkling dry dishes stains, as well as offering amazing shine and straight from the dishwasher cleaning 27 Targets for 2010 re-iterated
• RB ex-RBP
¾Net revenue: +5% @ constant exchange (continuing operations, base: £7,144m)
¾Operating profit: +10% @ constant exchange (continuing operations, base: £1,512m)
¾Exchange might add c.+5% points*
• Total RB
¾Continued good growth in 2010
¾Not considered appropriate to give specific targets, owing to uncertain timing of generic competition to Suboxone in the U.S.
* Based on average H110 rates and assuming 30/6/10 spot rates as the average for H210 28 Offer for SSL International plc (“SSL”)
The boards of Reckitt Benckiser Group plc ("Reckitt Benckiser“ or “RB”) and SSL International plc ("SSL") announced that they have reached agreement on the terms of a recommended cash offer to be made by Reckitt Benckiser plc, a wholly-owned subsidiary of Reckitt Benckiser, to acquire the entire issued and to be issued share capital of SSL (the “Offer”).
Information about the Offer has been provided in the Rule 2.5 Announcement, published on 21 July 2010 and made available at http://www.rb.com/Media- Investors/Reckitt-Benckiser-offer-for-SSL-International. Under the requirements of the City Code on Takeovers and Mergers (the “Code”), Reckitt Benckiser cannot provide commentary or ancillary remarks about the Offer that do not meet the obligations of the Code. This presentation and all comments made by representatives of RB about the Offer will be limited to the substantive information provided in the Rule 2.5 Announcement.
29 Background
• About SSL
¾Focused consumer products company
¾Last reported financials (31 March 2010)
¾ Net revenue £802.5m, operating profit: £126.0m
¾ Underlying growth: +4.1% in branded consumer business, +1.8% overall business
¾ Product breakdown of net revenue: Durex/Contex 43%, Scholl 34%, Local brands 10%, Other 13%
¾ Geographic breakdown of net revenue: Europe 78%, Asia Pacific/RoW 18%, Americas 4%
• The Offer
¾1,163 pence per SSL share …
¾… plus entitlement to SSL dividend of 8 pence per share
¾Fully-diluted offer value of c.£2,540m
¾Immediately earnings enhancing, excluding restructuring charges
30 Another step change in HPC: also in East Asia H&PC net revenue, 2006-2009 (in £bn)
• H&PC has been a key driver of RB’s past 3.0 2.8 success
¾ 2009 LFL net revenue: +14% vs “base
2.1 business” +6% ¾ LFL net revenue CAGR, 2006-2009: +14%, 2.0 vs “base business” +7% 1.7 • >+36% increase in RB’s HPC net revenue as a result of the acquisition 1.2 1.0 1.1 ¾ H&PC will be one-third total group NR
• Materially enhances RB’s scale and critical mass in China and Japan
0.0
2006 2007 2008 2009 2009 PF
31 Financially and strategically attractive
• Leading global brands in Durex and Scholl with potential for further growth
¾Durex/Contex: global leader in condoms
¾Scholl: footcare leader in many markets
¾Would become Powerbrands for RB
• Cost synergies of £100m per annum by the end of 2012
¾Removal of commercial and administrative overlaps
¾Certain procurement synergies
• Combination of good growth potential and improved margin profile post-cost synergies
• Immediately earnings enhancing, excluding restructuring charges
An attractive acquisition for RB shareholders
32 Funding SSL
• Bilateral facilities increased from £1.65bn to £1.90bn
• New 364 day (plus term out) bridging facility of £1.25bn
• New 2 year Revolving Credit facility of £0.50bn
• Total available facilities are therefore £3.65bn
33 Timing
• Offer is conditional on a number of factors
¾Sufficient valid acceptances from SSL shareholders
¾Anti-trust clearances in the EU, Russia, Ukraine and the U.S.
• Offer document will be posted within 28 days following date of announcement
¾Will include further information on timing
Expected completion during Q4 2010
34 Reckitt Benckiser Investor Presentation: Half Year 2010 26th July 2010
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