TIDMRKT
RNS Number : 5241G
Reckitt Benckiser Group PLC
27 July 2021
27 July 2021
RECKITT (RKT.L)
BUILDING A BETTER HOUSE: ON TRACK TO DELIVER SUSTAINABLE
GROWTH
Q2 2021 H1 2021
-------------------------- -------------------------- -------------------------------
Change(2) Change(2)
GBPm Actual Constant GBPm Actual Constant
------ ------- --------- --------- --------- ---------
Net Revenue 3,092 (8.2%) (1.3%) 6,598 (4.5%) 1.5%
Like-for-like (LFL) (1.0%) 1.5%
Adjusted(1)
Operating Profit 1,424 (16.0%) (9.6%)
Operating Profit 21.6% (290bps)
Margin
Continuing EPS (diluted) 142.6p (14.4%)
Adjusted(1) ex IFCN
China
Net Revenue 2,960 (5.4%) 1.9% 6,274 (2.7%) 3.6%
LFL 2.2% 3.7%
Operating Profit 1,425 (11.9%) (5.0%)
Operating Profit 22.7% (240bps)
Margin
GAAP
Operating Loss (1,828) nm
Operating Profit (27.7%) nm
Margin
Continuing EPS (diluted) (245.8p) nm
1 Adjusted measures are defined on page 15. GAAP represents
measures as reported under IFRS, previously termed Reported.
2 Change vs prior year presented. Constant measured on a
constant exchange rate basis (see page 16)
All amounts GBPm, unless otherwise stated
Performance in H1 2021
-- Excluding IFCN China, H1 LFL net revenue was up 3.7%, and the
two-year stacked LFL net revenue growth vs H1 2019 was 17.6%.
Including IFCN China the two-year stacked LFL net revenue growth vs
H1 2019 was 13.4%.
-- Q2 2021 LFL net revenue (ex IFCN China) was up 2.2%, as
slower growth in Hygiene was partly offset by improving trends in
Nutrition and our OTC brands.
-- H1 2021 adjusted operating margin (ex IFCN China) was 22.7%
(H1 2020: 25.1%). Margin including IFCN China was 21.6%, down
290bps, as a result of planned investment, cost inflation and
adverse margin mix.
-- Net loss on a GAAP basis of GBP2.4bn from agreement to sell
IFCN China; operating loss of GBP3.0bn offset by a net tax credit
of GBP0.6bn (GBP0.9bn deferred tax credit offset by a tax charge
GBP0.3bn).
-- Free cash flow was GBP520m in H1 2021, down 72.7% due to the
partial unwind of the working capital benefit in 2020; net debt of
GBP9,084m at 30 June 2021;
-- H1 2021 dividend recommended to be 73.0p, in line with H1
2020, reflecting our policy of sustaining 2019 levels to rebuild
cover to two times.
Commenting on the results, Laxman Narasimhan, Chief Executive
Officer, said:
"Against a challenging environment, I am encouraged by the
progress we have made in the first half of the year. Around 70% of
our revenue, excluding IFCN China, is from brands growing by
mid-single digits in the period, in line with our strategic vision.
The remaining 30% includes our disinfection brands, which are
structurally rebasing, as well as our cold and flu brands, which
are now starting to show positive momentum. Overall demand in the
disinfectant category remains significantly higher than pre-COVID
levels and the two-year stacked growth of our hygiene portfolio is
up 34.1%, compared to a normal growth rate, pre-COVID, of around
4%.
"The markets are dynamic, reflecting several factors which we
are closely monitoring, including the prevalence of COVID strains
and government guidelines such as new lockdowns and social
distancing. Although the third quarter will be slower due to strong
prior year comparators, as the world gradually opens up and
socialisation returns, cold and flu trends indicate a moderate
season which should strengthen performance in the fourth quarter.
Based on the current situation, we therefore continue to expect
like-for-like net revenue growth to be within the 0-2% range set
out in February 2021.
"Cost inflation accelerated in the second quarter and it will
take time to offset this headwind with productivity and pricing
actions being implemented in the back half of the year and early
next year. This will largely offset the margin accretion in 2021
from the disposal of IFCN China. As a result, our guidance, which
now excludes IFCN China, is for the adjusted operating margin to be
between 22.7% to 23.2% which is 40 to 90bps lower than the 23.6%
reported for the full year 2020.
"The benefits of the investments that we have made in the
business in innovation, service, quality and supply are starting to
come through and we have grown revenues, with 60% of revenue from
our Core CMUs gaining or holding share vs H1 2019, despite a very
dynamic trading environment. eCommerce net revenue (ex IFCN China)
now accounts for 12% of Group net revenue and increased by over 95%
on a two-year stacked basis. Our innovation pipeline for 2022 is
over 50% larger than this year and we are actively managing the
portfolio for growth with the acquisition of Biofreeze, the sale of
Scholl and agreement to sell IFCN China.
"We are encouraged by the progress we have made to strengthen
the foundations of the business and reposition ourselves for
sustainable growth. We expect to exit 2022 with a revenue growth
run rate in the mid-single digits as we make our way towards our
medium-term adjusted operating profit margin target in the mid-20s
by the mid-20s."
H1 2021 Results Presentation Today
A recording of the results presentation for investors and analysts will be available on the
Company's website today, 27 July 2021 at 7:30am (BST) and there will be a question-and-answer
session at 9:00am (BST).
For those wishing to follow the webcast and participate in the Q&A please click on the link
below:
https://www.reckitt.com/investors/results-and-presentations/ . Alternatively, dial in details
are as follows:
United Kingdom 0800 640 6441
United Kingdom (Local) 020 3936 2999
+44 203 936
All other locations 2999
Participant access
code 699931
-----------------------------------------------------------------------------------------------
FURTHER INFORMATION AND CONTACTS
Simon Whittington +44 (0)7408 812062
Deputy Head of Investor Relations
Patty O'Hayer +44 (0)7825 755688
Director, External Relations and Government Affairs
Finsbury
Faeth Birch +44 (0)7768 943171
GROUP OVERVIEW
Strategy and operating model
-- In February 2020 we set out our strategy to rejuvenate sustainable growth.
-- Our purpose is to protect, heal and nurture in the relentless
pursuit of a cleaner, healthier world.
-- Our financial goals are to grow revenues consistently by
mid-single digits with adjusted operating margins in the mid 20s by
the mid-2020s.
-- Our key sustainability ambitions are to increase our net
revenue from more sustainable products to over 50% by 2030; to
contribute to a healthier planet by becoming carbon neutral by
2040; to ensure we treat the people we employ, or which are part of
our value chain, fairly and equally.
-- We grow net revenue by developing consumer insight driven
innovations for our premium purpose-led brands. This, combined with
excellent execution in sales and eCommerce, allows us to grow
through increased penetration, market share gains, and entering new
spaces and new places.
-- The operational leverage of mid-single digit net revenue
growth, together with productivity gains and supply capabilities
allows us to re-invest in our category leading brands to sustain
growth while maintaining margins in the mid-20s.
-- We have a strong balance sheet and we generate strong cash flows and our priorities are to:
a) target a single A credit rating;
b) invest to support our organic revenue growth and margin goals;
c) actively manage the portfolio to ensure we are playing in attractive markets and categories;
d) pay a dividend in line with our policy of sustaining 2019
levels to rebuild cover to two times, thereafter, we will grow the
dividend progressively in line with adjusted net income growth;
and
e) any surplus capital will be used to reduce debt or will be returned to shareholders.
Strategic update
-- We continue to make progress in our transformation journey.
Around 70% of the portfolio, excluding IFCN China, is already
growing in line with our medium-term goals, as we gain share,
increase penetration and enter new places and new spaces. Select
examples include:
o Increased penetration: Lysol now used by an additional 22m new households globally since 2019;
o Market share gains : strong market share improvements in US
IFCN driven by continued successful marketing of Neuropro
innovation, and growing Healthcare Professional recommendations of
Nutramigen;
o New places: continued geographic expansion of Lysol and
Dettol, with a total of 68 new markets now entered since the
beginning of 2020 out of a plan to enter 70. Recent launches have
included Scandinavia, Austria and Switzerland;
o New spaces: Successful launch of GaviNatura, 100% natural
heartburn and indigestion relief tablets, and Veet Pure / Minima
range entering the naturals space with up to 50% fewer
chemicals.
-- In our disinfectant products we are seeing strong brand
equity with heavier consumption by our most loyal users. The brand
equity is particularly strong as seen by the amount of new
repertoire consumers attracted to the brand at the height of the
pandemic and are therefore structurally better positioned to grow
into new places and new spaces in the future.
-- Since 2020 we have invested around GBP1bn in total to
strengthen the foundations of the business, improve our
capabilities, increase our production capacity for many brands and
reposition the business for growth.
-- As a result of our investment in R&D, our 2022 base case
innovation pipeline is over 50% higher than in 2021 which will
allow us to accelerate in new product launches through 2022.
-- eCommerce net revenue is up 15% in H1, excluding IFCN China,
and now accounts for 12% of group net revenue. This business is
comprised of many channels and business models and our ability to
continuously execute well is becoming an important competitive
advantage.
-- The progress we are making to improve our supply chain,
quality and customer service capabilities has allowed us to manage
considerable volatility in the past 18 months. We have been able to
capture the significant COVID related growth opportunities and
continue to improve our execution capabilities in these areas.
-- We continue to seek to lead and inspire our people, and have
strengthened our Leadership Behaviours of Own, Create and Deliver,
broadened with Care, embedding strong cultural change across the
business.
ESG
-- In H1 2021, we formally launched our sustainability roadmap:
For a Cleaner, Healthier World. The delivery of our ambitions will
be backed by more than GBP1bn investment over the next ten
years.
-- Following recent improvements in our third-party ratings, we
are now considered by MSCI to be a Leader ('AA' rating) and ranked
fifth out of 101 peers by Sustainalytics.
-- Reckitt continues to work closely with the UK government in
preparation for the COP 26 Climate Summit in Glasgow where Reckitt
is the Official Hygiene Partner.
-- We have also formed a strategic partnership with the
Cambridge Centre for Risk Studies (CCRS) to better equip us to
understand, and respond to, the impact of climate change.
-- We have continued to demonstrate the social impact we enable
for communities. Our recently published social impact report showed
how we engaged 34m people and created positive impacts for 771,000
through our programmes and partnerships.
H1 2021
Group net revenue
-- Like-for-like net revenue for the group in H1 2021 grew by
1.5%, which includes 130bps from the annualisation of deferring net
revenue for certain shipments in H1 2020. Excluding IFCN China
like-for-like net revenue grew by 3.7% which reflects volume growth
of 0.3% and price / mix improvements of 3.4%. Performance was
driven by continued growth in Hygiene, particularly in North
America, offset by declines in Health due to pantry loading in the
comparative period, a weak cold and flu season and a continued
competitive environment in IFCN China. Total net revenue at actual
exchange rates was down 4.5%, reflecting foreign exchange headwinds
of 6.0%.
-- The two-year stacked like-for-like net revenue growth for H1
2021 vs H1 2019 (the summation of the year-on-year growth rates for
H1 2021 and H1 2020) for the group excluding IFCN China was 17.6%.
This was driven by two-year stacked like-for-like net revenue
growth of 34.1% in Hygiene, and 6.8% and 3.4% in Health and
Nutrition (excluding IFCN China) respectively.
-- We believe that given the significant growth seen in H1 2020
due to the pandemic, measuring market share vs H1 2019 is a fairer
measure of our relative performance. On this basis, 60% of Core
Category Market Units (CMUs), excluding IFCN China, held or gained
share. In Hygiene it was 60% and in Health and Nutrition it was 49%
and 75% respectively (weighted by net revenue).
-- Brands representing around 70% of our net revenue grew by
mid-single digits, in-line with our medium-term target of
mid-single digit growth. The remaining 30% which includes our
disinfection brands (Lysol and Dettol) and our cold and flu brands
(Mucinex, Strepsils and Lemsip) have been more impacted by COVID
and declined by mid-single digits in H1 2021 as they are still
rebasing.
-- The 70% of our net revenue, excludes our disinfection and
cold and flu brands and is the entire range of brands including
Finish, Airwick, Harpic and Veet, which have seen continued growth,
albeit at lower rates, as well as brands like Durex, Vanish and
Nurofen which are returning to growth as market conditions
normalise.
-- The remaining 30% of our net revenue is still experiencing
COVID related normalisation. Our disinfection brands Dettol and
Lysol account for around 25% of net revenue. They are now over 80%
larger than H1 2019 when they accounted for 16% of net revenue. We
are seeing different consumer behaviours depending on vaccine
rollout rates, government advice and new waves. Nevertheless, both
brands are more relevant with consumers than pre-pandemic and are
therefore structurally better positioned to grow into new places
and new spaces in the future. Our cold and flu brands Mucinex,
Strepsils and Lemsip, which account for around 5% of net revenue,
showed encouraging signs in Q2, however it is still early in the
year, and lockdowns, social distancing and mask mandates may
influence the strength of the season.
-- eCommerce net revenue, excluding IFCN China, grew by 15% in
H1 2021 and now accounts for 12% of group net revenue. The two-year
stacked growth is over 95%.
Group operating margins and profit
-- Adjusted operating profit in H1 2021 was GBP1,424m (H1 2020:
GBP1,696m) at an adjusted operating margin of 21.6% (H1 2020:
24.5%). The competitive environment in IFCN China is increasingly
challenging and excluding IFCN China, the group adjusted operating
margin was 22.7% (H1 2020: 25.1%).
-- The margin decline of 290bps (including IFCN China) versus H1
2020 reflects continued investment in capabilities and adverse
product mix due to a weak cold and flu season which more than
offset productivity savings and pricing.
-- GAAP operating loss was GBP1,828m, and included a GBP2,997m
loss on re-measurement of IFCN China to its fair value and a
GBP165m loss on the sale of Scholl.
EPS and dividends
-- Adjusted diluted continuing EPS was 142.6p in H1 2021 (GAAP:
-245.8p loss), 14.4% lower than H1 2020 due to the lower adjusted
operating profit and the adverse impact of foreign exchange.
-- The dividend in H1 2021 is recommended to be 73.0p, in line
with H1 2020 as a result of our policy of sustaining 2019 levels to
rebuild cover to two times. Thereafter, we will grow the dividend
progressively in line with adjusted net income.
Free cash flow
-- Free cash flow was GBP520m in H1 2021 (H1 2020: GBP1,902m),
as expected this was lower than the prior year due to the partial
unwind of significant working capital favourability experienced in
2020. Capital investment to support our growth and margin ambitions
was GBP187m, 2.8% of group net revenue.
Portfolio
-- In the first half of 2021 following a strategic review, we
announced an agreement to sell our IFCN China business to Primavera
Capital Group for an implied enterprise value of $2.2bn. The
transaction is on track to complete in H2 2021.
-- In H1 2021, we also sold Scholl to Yellow Wood Partners for
an enterprise value of GBP275m. The sale brings greater focus to
our personal care portfolio.
-- In July 2021, we completed the acquisition of Biofreeze for
$1,075m (GBP777m). The acquisition will allow us to participate in
the fast-growing topical pain treatment category. We see exciting
potential for geographic expansion and innovation.
Outlook
-- We expect the third quarter to be slower due to stronger
prior year comparators, and although it is early in the year, we
are encouraged by the Q2 trends in our cold and flu portfolio and
expect a moderate season to strengthen our performance in the
fourth quarter. Based on the current situation, we therefore
continue to expect like-for-like net revenue growth to be within
the 0-2% range set out in February 2021.
-- Cost inflation accelerated in the second quarter and it will
take time to offset this headwind with productivity and pricing
actions being implemented in the back half of the year and early
next year. This will largely offset the margin accretion from the
disposal of IFCN China. As a result, our guidance which now
excludes IFCN China for the entire year, is for the adjusted
operating profit margin to be between 22.7% to 23.2% (40 to 90bps
lower than the 23.6% reported for the full year 2020).
-- Net finance expense for 2021 is now expected to be around
2.9% of net debt, down from 3.0% previously.
-- The adjusted tax rate for 2021 is expected to be around 22%, down from 23% previously.
-- Capital investment is expected to be around 4% of net revenue.
-- The FX headwind on EPS is expected to be around 6-7%.
-- Our progress is tangible and on track, and we expect to hit a
run rate of mid-single digits net revenue growth at the back end of
2022, and adjusted operating profit margin of mid-20s by the mid
2020s.
OPERATING SEGMENT REVIEW
Hygiene 46 % of net revenue in H1 2021
GBPm Volume Price LFL(1) FX GAAP
/ Mix
H1 2021 3,027 +13.9% +4.1% +18.0% -7.4% +10.6%
------ ------- ------- ------- ------ -------
Q2 2021 1,386 +5.4% +2.4% +7.8% -7.5% +0.3%
------ ------- ------- ------- ------ -------
Operating Profit GBPm Constant FX (CER)(1) GAAP
Adjusted Operating Profit(1) 774 +21.5% + 12.7%
------ --------------------- --------
Adjusted Operating Profit Margin(1) % 25.6% +50bps
------ --------------------- --------
(1) Adjusted measures are defined on page 15
Hygiene net revenue grew 18.0% on a like-for-like basis in the
six-month period with strong demand across most markets. Volume
grew by 13.9% and price / mix improvements of 4.1% reflects in part
a year-on-year reduction in trade promotions in Lysol. On a
two-year stacked like-for-like basis, net revenue is up 34.1%.
60% of Core Hygiene CMUs (weighted by net revenue) held or
gained market share (H1 2021 versus H1 2019) with strong share
gains in almost all Lysol and Finish markets offset by declines in
Harpic, Vanish and Veja.
By brand, Lysol net revenue continued to grow strongly in the
half and on a two-year stacked like-for-like basis, net revenue
grew over 100%. Overall demand in the disinfectant category remains
significantly higher than pre-COVID levels. Lysol is present in 22m
more households globally today compared to 2019 and the brand
continues to take share in its key markets. As expected, we have
seen some reduction in frequency of usage compared to the peak
levels experienced in the first quarter of this year. We have
continued to grow in new places and new spaces, with ongoing
success in Global Business Solutions (GBS) and the entry into seven
new markets so far in 2021. In addition, we are broadening the
shoulders of the brand with new innovations such as Lysol On the
Go, Lysol Pet and Lysol Fabric Disinfectant each beginning
shipments in the period.
Finish net revenue grew high single digits, in part due to the
brand's purpose-led campaign called 'Skip the Rinse'. In Turkey -
one of the brand's largest markets - net revenue grew strong double
digits as the campaign, which has helped save 24m tons of water
over the past year, drove strong commercial performance with both
brand equity and market share metrics up significantly.
Air Wick grew double digits reflecting growth across all major
markets, despite strong prior year comparators when the
introduction of lockdowns kept consumers at home. Vanish returned
to growth as the reduction in social restrictions increased the
demand for the removal of clothes stains. Harpic grew as a result
of continued penetration increases in key markets like India where
revenue was up double digits. The balance of the Hygiene portfolio,
which includes local hero brands, grew low double-digits.
By geography, growth was led by North America and, to a lesser
extent, India. Growth was softer in Europe as a result of Sagrotan
declines in a number of markets due to strong prior year
comparators.
Adjusted operating profit for Hygiene at GBP774m was up 21.5% on
a constant FX basis. Adjusted operating margin was 25.6%, 50bps
higher than last year as the leverage from net revenue growth has
more than offset increased investment and cost inflation.
Second Quarter Performance
Net revenue grew by 7.8% on a like-for-like basis in the second
quarter, with strong trading across most brands and major markets.
Growth was driven by 5.4% volume and 2.4% price / mix. Lysol
continued to grow at double digit rates. Growth moderated from the
first quarter, which benefited from a degree of retailer
restocking, due to softer overall underlying consumer demand
compared to peak and increased industry capacity in the Wipes
segment. Finish declined slightly reflecting the very strong prior
year comparator but remains significantly higher than 2019. Air
Wick grew double digits. Trends in other brands have been broadly
similar to that of Q1.
Health 32 % of net revenue in H1 2021
GBPm Volume Price LFL(1) Net M&A FX GAAP
/ Mix
H1 2021 2,144 -11.5% +1.3% -10.2% +0.3% -4.4% -14.3%
------ ------- ------- ------- -------- ------ -------
Q2 2021 1,021 -8.5% +2.9% -5.6% -0.7% -5.6% -11.9%
------ ------- ------- ------- -------- ------ -------
Operating Profit GBPm Constant FX (CER)(1) GAAP
Adjusted Operating Profit(1) 468 -30.7% -34.6%
------ --------------------- ---------
Adjusted Operating Profit Margin(1) % 21.8% -680 bps
------ --------------------- ---------
(1) Adjusted measures are defined on page 15
Health net revenue declined by 10.2% on a like-for-like basis in
the period with strong growth in Intimate Wellness, Gaviscon and
Personal Care offset by the effect of challenging comparators in
Dettol and the weak cold and flu season. Price / mix growth of 1.3%
which included strong pricing improvements in Durex and Dettol, was
more than offset by a reduction in OTC volume. On a two-year stack
basis, net revenue is up 6.8%.
49% of our Core Health CMUs (weighted by net revenue) held or
gained market share (H1 2021 versus H1 2019). Strong gains in
Dettol, Durex and Gaviscon were offset by some declines in our cold
and flu relief products which tend to see share declines in weaker
seasons. However, in recent months we have started to see an
improvement in Mucinex share, growing 300bps in June, driven in
particular by performance in non mask-mandated states in the
US.
Following the exceptional growth in Dettol in 2020 with
household penetration globally increasing by over 530bps, Dettol
net revenue declined low double digits in the first half. Most
major markets were lower year on year as demand normalises from the
2020 peak, but we are seeing early signs of stabilisation in some
markets. In India, Dettol's largest market, revenue growth remained
strong despite operational and supply challenges. Overall, Dettol
net revenue is currently over 40% higher on a two-year stack basis.
During the period, the brand entered 20 new markets, launched
innovations such as Dettol 'Tru Clean' and saw increased momentum
with the expansion of our disinfectant spray into new markets such
as Pakistan. We continue to use the strength of the brand to raise
public awareness of the importance of personal hygiene habits in
many markets, including our Dettol Banega Swasth India campaign.
Dettol is the Official hygiene partner for the FA UK in 2021 and
has become the Official Hygiene Partner for Dubai EXPO 2020. Dettol
also has partnerships with the Ministry of Health and Ministry of
Tourism in Indonesia and the Thailand Ministry of Public Health to
uplift Hygiene Standard and habits.
Intimate Wellness continued to grow strongly as a result of good
execution and product innovation, with double digit growth in most
markets. This is against soft H1 2020 comparators where government
guidelines limited social activity, particularly in China, as well
as continued share gains in the polyurethane (PU) condoms launched
in October 2020. eCommerce continues to support performance, with
online shares in the UK and Germany up over 2000bps driven by lubes
and 'Play Feel' gel. During the period, we acquired Queen V, a
feminine intimate wellness brand focused on vaginal health.
Our over the counter (OTC) portfolio declined by just over 30%
in the period. Our cold and flu products such as Mucinex, Nurofen
and Strepsils, had strong prior year comparators due to pantry
loading and low incidences of cold and flu in the first quarter.
However, trends improved as the second quarter progressed and
retailer stocks are now at more normal levels. Gaviscon demand
continues to grow due to the Double Action and Guardium innovations
and launch of naturals products, whilst the 60% capacity expansion
of our UK factory has resulted in pack fill rates - a measure of
our ability to meet customer orders - over 20% points ahead of the
prior year. Combined, this led to continued acceleration in
Gaviscon revenue growth, which was up strong double digits in the
half.
Our portfolio of personal care products grew high single digits
in the period. This was led by double digit growth - despite strong
prior year comparators - in Veet driven by strong double digit
online growth, the expansion of Veet Men and our entry into new
spaces such as Veet Minima / Pure.
Performance by geography reflects the geographic mix of brands,
with growth in India, China and the UK more than offset by declines
in North America where Mucinex is the largest brand.
The sale of Scholl completed on 1 June and has therefore been
removed from LFL net revenue in the first half. Scholl contributed
30bps to GAAP Health net revenue growth in the period as
performance benefited from soft comparators due to the social
restrictions in place during H1 2020.
Adjusted operating profit for Health at GBP468m was down 30.7%
on a constant FX basis. Adjusted operating margin was 21.8%, down
680 basis points year on year. In addition to increased investment,
this significant reduction in margin is due primarily to the mix
effect resulting from the exceptional decline in our cold and flu
relief products, which have higher gross margins than the rest of
the portfolio.
Second Quarter Performance
Net revenue declined by 5.6% on a like-for-like basis in Q2
driven by an 8.5% decline in volume and a 2.9% improvement in price
/ mix. The sequential improvement versus the first quarter of the
year is the result of improved cold and flu trends in Australia and
in non-mask mandated states in the US combined with the
annualisation of the market share losses of Nurofen.
Nutrition 22 % of net revenue in H1 2021
GBPm Volume Price LFL(1) FX GAAP
/ Mix
H1 2021 1,427 -11.3% +2.8% -8.5% -6.2% -14.7%
------ ------- ------- ------- ------- -------
H1 2021 (ex
IFCN China) 1,103 -6.6% +5.7% - 0.9% - 7.9% - 8.8%
------ ------- ------- ------- ------- -------
Q2 2021 685 -14.0% +4.3% -9.7% -7.4% -17.1%
------ ------- ------- ------- ------- -------
Q2 2021 (ex
IFCN China) 553 -5.0% +8.7% 3.8% -9.6% -5.8%
------ ------- ------- ------- ------- -------
Operating Profit GBPm Constant FX (CER)(1) GAAP
------ ---------------------
Adjusted Operating Profit(1) 182 -31.0% -37.9%
Adjusted Operating Profit
(ex IFCN China) 183 -3.9% -14.5%
Adjusted Operating Profit 12.8% -470bps
Margin(1) %
Adjusted Operating Profit Margin % (ex IFCN China) 16.6% -110 bps
(1) Adjusted measures are defined on page 15
Nutrition net revenue declined by 8.5% on a like-for-like basis,
primarily due to the significant decline in IFCN China. Excluding
IFCN China, like-for-like net revenue declined 0.9% as 5.7% price /
mix growth, which reflects improvements in North America, largely
offset the reduction in volume. On a two-year stacked basis, net
revenue excluding IFCN China was up 3.4%.
Excluding IFCN China 75% of our Core Nutrition CMUs (weighted by
net revenue) held or gained market share (H1 2021 versus H1 2019).
This is a result of gains in US WENR IFCN, which represents a
significant proportion of the net revenue of Nutrition Core CMUs
and Airborne.
IFCN LFL net revenue grew by 2.2%, excluding China (on a
two-year stacked like-for-like basis net revenue grew 0.4%). In
North America, net revenue growth was driven in part by ongoing
good execution of our Omega3-DHA led product, NeuroPro. Here we
continue to build on the successful marketing campaigns of 2020
which directly highlight the nutritional advantages of our product.
Share in the WENR (un-subsidised) market remains strong and we
recently retained the New York WIC contract. We have also grown
market share in the allergy space, where we have improved share of
recommendation amongst Healthcare Professionals. Latin America grew
strongly year on year following the upgrade to the spray-dryer
factory which occurred in Q2 2020. Net revenue in ASEAN continued
to decline slightly as trading in several countries remains
adversely impacted by COVID.
In Greater China, IFCN net revenue declined significantly in the
period as the market continues to be challenging. Competitive
pressures are intensifying, the Hong Kong border remains closed and
the 18% decline in 2020 birth rates is materially impacting demand.
In addition, we have experienced a degree of retailer destocking in
recent months. In the six months to 30 June 2021, following the
strategic review, a loss of GBP2,997m was recognised on
re-measurement of IFCN China to its fair value on classification as
held for sale.
Net revenue in our Vitamins, Minerals and Supplements business
declined by 15% (on a two-year stacked like-for-like net revenue
growth basis was up 27%) reflecting the challenging comparators due
to COVID, and the effect of the weak cold and flu season on
Airborne - our immunity support brand. This was partially offset by
continued exceptionally strong growth in Neuriva, our brain support
supplement launched in 2019, which now represents approximately 24%
of the VMS portfolio. The brand continues to drive category
penetration, and during the period launched a major campaign
partnering with a celebrity neuroscientist.
Adjusted operating profit for Nutrition at GBP182m was 31.0%
lower on a constant FX basis. Adjusted operating margin was 12.8%,
down 470 basis points year on year reflecting principally the
negative leverage related to the significant decline in IFCN China
revenue. Excluding IFCN China, adjusted operating profit for
Nutrition would have been GBP183m (16.6% margin).
Second Quarter Performance
Nutrition net revenue declined by 9.7% on a like for like basis
in the quarter due to the soft performance in IFCN China. Excluding
IFCN China, Nutrition revenue grew by 3.8% on a like-for-like basis
with strong growth in IFCN partially offset by softer VMS
performance against a prior year comparator which was positively
impacted by COVID. Excluding IFCN China, volume declined by 5.0%,
partly offset by price / mix improvement of 8.7% reflecting
WIC/WENR volume mix and price increases taken during the
quarter.
Performance by Geography
GBPm Volume Price / Mix LFL(1) Net M&A FX GAAP
H1 2021
------ ------- ------------ ------- -------- ------- ------
North America 2,009 +1.0% +5.3% +6.3% -0.2% -9.0% -2.9%
------ ------- ------------ ------- -------- ------- ------
Europe / ANZ 2,115 -2.6% +0.9% -1.7% +0.1% -2.1% -3.7%
------ ------- ------------ ------- -------- ------- ------
Developing Markets 2,474 -2.0% +2.5% +0.5% 0.0% -7.0% -6.5%
------ ------- ------------ ------- -------- ------- ------
Total 6,598 -1.3% +2.8% +1.5% 0.0% -6.0% -4.5%
------ ------- ------------ ------- -------- ------- ------
Q2 2021
------ ------- ------------ ------- -------- ------- ------
North America 932 -3.4% +5.3% +1.9% -0.4% -10.6% -9.1%
------ ------- ------------ ------- -------- ------- ------
Europe / ANZ 981 -0.7% -0.9% -1.6% -0.6% -3.4% -5.6%
------ ------- ------------ ------- -------- ------- ------
Developing Markets 1,179 -6.0% +3.2% -2.8% 0.0% -6.7% -9.5%
------ ------- ------------ ------- -------- ------- ------
Total 3,092 -4.1% +3.1% -1.0% -0.3% -6.8% -8.2%
------ ------- ------------ ------- -------- ------- ------
(1) Adjusted measures are defined on page 15
North America like for like net revenue grew by 6.3% as growth
in Hygiene brands, Durex and IFCN more than offset the significant
decline in Mucinex.
In Europe/ANZ like for like net revenue declined by 1.7% as
declines in Germany and Australia offset growth in UK and
France.
Developing markets like for like net revenue growth excluding
IFCN China was 6.7% with strong performances in India and
Mexico.
GROUP FINANCIAL REVIEW - SIX MONTHSED 30 JUNE 2021
The following section should be read in conjunction with the
condensed financial statements and the adjusted and other non-GAAP
measures, definitions and terms section.
Net revenue
On a Group basis, net revenue was GBP6,598m in the first half of
2021, representing 1.5% growth on a LFL basis of which -1.3% was
volume and 2.8% price / mix. Excluding IFCN China, LFL net revenue
growth was 3.7%. Like-for-like net revenue for the group in H1 2021
includes 130bps from the annualisation of deferring net revenue for
certain shipments in H1 2020.
Total net revenue at actual exchange rates was down 4.5%,
reflecting a foreign exchange headwind of 6% driven by a general
strengthening of sterling.
Gross margin
Gross margin decreased by 310bps to 57.8% as a result of adverse
product mix principally in Health and the impact of higher
commodity costs and other charges which together more than offset
productivity savings within our cost of goods sold.
Net operating expenses
Brand Equity Investment (BEI) was down 1.0% at constant exchange
rates, at 13.5% of net revenue, 30bps lower than the prior year as
productivity savings (including insourcing some activities using
capability built inside Reckitt) offset continued investment behind
our brands.
Other costs increased by 0.9% at constant exchange rates, up
10bps as a percentage of net revenue, reflecting continued
investment in capabilities offset by lower year-on-year performance
related costs and productivity savings.
GAAP net operating expenses also included a pre-tax loss of
GBP2,997m on re-measurement of IFCN China to its fair value on
classification as held for sale and a loss of GBP165m on disposal
of Scholl. Further details on other adjusting items can be found on
page 17.
Group operating profit
Adjusted operating profit was GBP1,424m (2020: GBP1,696m) at an
adjusted operating margin of 21.6%, 290bps lower than the prior
year (2020: 24.5%). The margin decline of 290bps versus H1 2020
reflects continued investment in capabilities and adverse product
mix due to a weak cold and flu season which more than offset
productivity savings and pricing. Adjusted operating margin
excluding IFCN China was 22.7% (2020: 25.1%) .
GAAP operating loss was GBP1,828m (2020: GBP1,595m operating
profit) at a GAAP operating margin of -27.7% (2020: 23.1%) driven
by disposal related losses for IFCN China and Scholl.
Net finance expense
Adjusted net finance expense was GBP116m (2020: GBP141m). The
decrease is due to lower average net debt and a favourable
comparison with prior year adjusted net finance expense which
included the interest element of a sales tax provision.
GAAP net finance expense of GBP115m (2020: GBP157m) includes
GBP1m of finance income on tax balances (2020: GBP16m expense)
which are reclassified to income taxes on an adjusted basis.
Tax
The adjusted tax rate, which excludes the effect of adjusting
items, was 22.0% (2020: 23.0%) benefitting from the reassessment of
uncertain tax positions following progress on tax authority
audits.
The GAAP tax rate was 10% (2020: 28%). The GAAP tax rate in 2021
benefited from a GBP591m net deferred tax credit in relation to the
disposal of IFCN China as deferred tax liabilities were adjusted to
reflect estimated tax payable in relation to the disposal. This net
tax credit was partially offset by a GBP196m charge due to the
enacted increase in the UK corporation tax rate from 19% to 25% on
deferred tax liabilities recorded in respect of intangible
assets.
Discontinued operations
Income from discontinued operations of GBP29m (2020: GBP48m)
represents income, net of tax, recognised in relation to an
agreement with Indivior plc to settle indemnity claims related to
the Group's previous settlement with the DoJ, and related
matters.
Earnings per share (EPS)
Adjusted diluted EPS from continuing operations was 142.6p
(2020: 166.5p), the decrease of 23.9p or 14.4% primarily driven by
lower adjusted operating profit and the adverse impact of foreign
exchange.
GAAP diluted EPS from continuing operations was a loss of 245.8p
(2020: earnings per share of 144.2p), as a result of a net loss in
the first half of 2021 due to the post-tax loss of GBP2.4bn on
re-measurement of IFCN China to its fair value.
Balance sheet
As at 30 June 2021, the Group had total equity of GBP6,581m (31
December 2020: GBP9,159m).
Following the announcement of the sale of IFCN China to
Primavera, IFCN China has been presented as held for sale on the
Group's balance sheet, with the related assets and liabilities
re-measured to their fair value less costs to sell. The Group's
current assets and current liabilities at 30 June 2021 include the
assets and liabilities of IFCN subsequent to this
re-measurement.
Current assets of GBP6,769m (31 December 2020: GBP5,314m)
increased by GBP1,455m. The increase is principally due to IFCN
China, as assets of GBP1,539m previously classified as non-current
are now included within assets held for sale. This increase has
been partially offset by lower trade receivables and lower cash and
cash equivalents. The Group's working capital movements are
described below.
Current liabilities of GBP9,363m (31 December 2020: GBP6,938m)
increased by GBP2,425m. The increase is principally due to the
re-classification of bonds of $3.2bn (GBP2,348m) which mature in
June 2022 from non-current. The reduction in trade and other
payables was offset by an increase in commercial paper. The Group's
working capital movements are described below.
No n-current assets of GBP20,956m (31 December 2020: GBP25,978m)
primarily comprise of goodwill and other intangible assets of
GBP18,039m (31 December 2020: GBP22,979m) and property, plant and
equipment. The decrease of GBP5,022m is predominantly due to the
transfer to and remeasurement of assets held for sale of GBP4,300m
of goodwill and other intangibles relating to IFCN China and
disposal of brand intangibles and goodwill of GBP374m on the sale
of Scholl.
Non-current liabilities of GBP11,781m (31 December 2020:
GBP15,195m) have decreased by GBP3,414m. This decrease is
principally due to the re-classification of bonds of $3.2bn
(GBP2,348m) which mature in June 2022 from non-current to current
liabilities , the early repayment of $400m (GBP291m) of term loans
and the reduction in deferred tax liabilities as a result of the
announced disposal of IFCN China.
Net working capital
At 30 June 2021 GBP127m (31 December 2020: GBPnil) of negative
net working capital relating to the IFCN China business is
presented within assets and liabilities held for sale. The
information below includes net working capital for the Group
including net working capital of IFCN China.
During the period, net working capital (including IFCN China)
changed by GBP370m from negative GBP2,229m to negative GBP1,859m.
Net working capital as a percentage of 12-month net revenue (incl.
IFCN China) is -14% (31 December 2020: -16%).
The change in net working capital is driven by lower payables
(down GBP422m) and higher inventories (up GBP41m) partially offset
by lower receivables (down GBP93m). The decrease in payables is due
to lower manufacturing payables, the partial unwind of COVID
related increases in 2020 and the settlement of variable pay
liabilities in 2021.
Cash Flow
30 Jun 30 Jun
2021 2020
GBPm GBPm
------- -------
Adjusted Operating Profit 1,424 1,696
Depreciation, amortisation and share based payments 1 97 208
Net capital expenditure (187) (142)
Movement in working capital, provisions and other creditors (416) 711
Net interest paid (105) (147)
Tax paid (367) (391)
Cash flow in relation to adjusting items (26) (33)
------- -------
Free Cash Flow 520 1,902
------- -------
Free Cash Flow Conversion 51 % 160%
------- -------
Free cash flow (FCF) is the amount of cash generated from
continuing operating activities after net capital expenditure on
property, plant and equipment and intangible software assets. Free
cash flow reflects cash flows that could be used for payment of
dividends, repayment of debt or to fund acquisitions or other
strategic objectives.
Free cash flow as a percentage of continuing adjusted net income
was 51% (2020: 160%). The lower free cash conversion in 2021 was
expected, principally resulting from the partial unwind of
significant working capital favourability experienced in the prior
year.
Net cash from operating activities was GBP712m (2020:
GBP2,034m), down GBP1,322m due to adverse movements in working
capital as outlined above.
Net debt
30 Jun 30 Jun
2021 2020
GBPm GBPm
Opening net debt (8,954) (10,749)
Free cashflow 520 1,902
Shares reissued 57 48
Acquisitions, disposals and purchase of investments 87 -
Dividends paid (739) (732)
Movement in lease liabilities (85) (66)
Exchange and other movements 25 (595)
Cash flow attributable to discontinued operations 5 (10)
-------- ---------
Closing net debt (including IFCN China) (9,084) (10,202)
-------- ---------
At 30 June 2021 net debt was GBP9,084m, an increase of GBP130m,
as the payment of the 2020 final dividend more than offset free
cashflow and net proceeds from disposals in the period.
The Group regularly reviews its banking arrangements and
currently has adequate facilities available to it. The Group has
committed facilities totalling GBP4,500m (31 December 2020:
GBP5,500m), GBP3,500m of which expire after more than two years,
which are undrawn and available to draw. The Group remains
compliant with its banking covenants. The committed borrowing
facilities, together with cash and cash equivalents, are considered
sufficient to meet the Group's projected cash requirements.
Dividends
The Board of Directors recommends an interim 2021 dividend of
73.0 pence (2020: 73.0 pence), consistent with its policy and
guidance from February 2020. The ex-dividend date will be 5 August
2021 and the dividend will be paid on 15 September 2021 to
shareholders on the register at the record date of 6 August 2021.
The last date for election for the share alternative to the
dividend is 24 August 2021.
Capital returns policy
Reckitt has consistently communicated its intention to use its
strong cash flow for the benefit of shareholders. Our priority
remains to reinvest our financial resources back into the business,
including through value-adding acquisitions, in order to deliver
sustainable growth in net revenue and improving earnings per share
over time.
In managing the balance sheet, we intend to maintain key
financial ratios in line with those expected of an A-grade
credit-rated business. This will broadly define acceptable levels
of leverage overtime.
Repatriating cash to shareholders through a growing dividend
remains a long-term goal of the business. As a result of the
investments being made during 2021, which will benefit long-term
sustainable growth, our pay-out for 2021 is expected to be in
excess of our policy of paying an ordinary dividend to around 50%
of total adjusted net income. As set out in February 2020, we will
maintain the dividend pay-out per share at 2019 levels until we
rebuild dividend cover to target levels, at which time we will be
able to resume growth in dividends in line with the growth in
adjusted net income.
We will continue to rigorously evaluate our portfolio to
actively migrate it to higher growth.
Adjusted and Other Non-GAAP Measures
The financial information included in this interim announcement
is prepared in accordance with International Financial Reporting
Standards (IFRS) as well as information presented on an adjusted
basis.
Financial information presented on an adjusted basis excludes
certain cash and non-cash items which management believe are not
reflective of the underlying financial performance of the business.
Financial information on an adjusted basis is consistent with how
management reviews the business for the purpose of making operating
decisions. Adjusting items comprise exceptional items, other
adjusting items and the reclassification of finance expenses on tax
balances.
-- Exceptional items are material, non-recurring items of expense or income.
-- Other adjusting items relate to expenses or income that the
Group adjust for because their pattern of recognition is largely
uncorrelated with the underlying performance of the business. This
includes the following items:
o Amortisation of acquired brands, trademarks and similar
assets;
o Amortisation of certain other intangible assets, inventory
fair value adjustments and professional/advisor costs recorded as
the result of a business combination;
o Profits or losses relating to the sale of brands and related
intangible assets
o Changes to deferred tax liabilities relating to (a) acquired
brands, trademarks and similar assets and (b) certain other
intangible assets recorded as the result of a business combination;
and
o Re-cycled foreign exchange translation reserves upon the sale,
liquidation, repayment of share capital or abandonment of a
subsidiary previously controlled by the Group.
-- Adjusting items include a reclassification of finance
expenses on tax balances into income tax expense, to align with the
Group's tax guidance. As a result, these expenses are presented as
part of income tax expense on an adjusted basis.
Adjusted measures
-- Excluding IFCN China: Following the completion of the IFCN
China strategic review, certain adjusted measures have been
presented for the Group excluding IFCN China (China, Hong Kong,
Taiwan and the related manufacturing facilities in China, the
Netherlands and Australia). This information has been provided as
additional adjusted measures to provide visibility on the
performance of the remaining Reckitt Group.
-- Adjusted Operating Profit and Adjusted Operating Profit
margin : Adjusted operating profit reflects the IFRS operating
profit excluding items in line with the Group's adjusted items
policy. See page 17 for details on the adjusting items and a
reconciliation between IFRS operating profit and adjusted operating
profit. The adjusted operating profit margin is the adjusted
operating profit expressed as a percentage of net revenue.
-- Adjusted tax rate: The adjusted tax rate is defined as the
Adjusted continuing income tax expense as a percentage of Adjusted
profit before tax.
-- Adjusted diluted EPS: Adjusted diluted EPS is the IFRS
diluted EPS excluding items in line with the Group's adjusting
policy. See page 17 for details on the adjusting items and a
reconciliation between IFRS net income and adjusted net income. As
a result of the GAAP loss in the six months to 30 June 2021, the
weighted average number of shares for the 2021 is the same for both
IFRS EPS and adjusted EPS.
Other non-GAAP measures
-- Like-for-Like ("LFL"): Net revenue growth or decline at
constant exchange rates (see below) excluding the impact of
acquisitions, disposals and discontinued operations. Completed
disposals are excluded from LFL revenue growth for the entirety of
the current and prior years. Acquisitions are included in LFL
revenue growth twelve months after the completion of the relevant
acquisition. LFL growth also excludes Venezuela.
-- Stacked net revenue growth : The summation of the net revenue
growth for the relevant period in 2021 and 2020, to provide
visibility of growth versus periods prior to the start of the
COVID-19 pandemic.
-- Constant exchange rate ("CER"): Net revenue growth or decline
adjusting the actual consolidated results such that the foreign
currency conversion uses the same exchange rates as were applied in
the prior period.
-- Brand Equity Investment ("BEI") : BEI is the marketing
support designed to capture the voice, mind and heart of our
consumers.
-- Net working capital ("NWC") : NWC is the total of inventory,
trade and other receivables and trade and other payables. NWC is
calculated as a percentage of last twelve months net revenue to
compare changes in NWC to the growth of the business.
-- Net Debt: The Group's principal measure of net borrowings
being a total of cash and cash equivalents, short-term and
long-term borrowings, lease liabilities and derivative financial
instruments on debt. This includes amounts presented on the balance
sheet within assets and liabilities held for sale.
-- Free Cash Flow and Free Cash Flow Conversion: The Group's
principal measure of cash flow defined as net cash generated from
continuing operating activities less net capital expenditure. A
reconciliation of cash generated from continuing operations to Free
Cash Flow is shown below. The Group tracks Free Cash Flow on a
percentage of adjusted net income to understand the conversion of
adjusted profit into cash.
30 Jun 30 Jun
2021 2020
GBPm GBPm
------- -------
Cash generated from continuing operations 1 ,179 2,582
Less: net interest paid (105) (147)
Less: tax paid (367) (391)
Less: purchase of property, plant & equipment (158) (114)
Less: purchase of intangible assets (29) (32)
Plus: proceeds from the sale of property, plant & equipment - 4
------- -------
Free Cash Flow 520 1,902
Free Cash Flow Conversion 51 % 160%
------- -------
Other definitions and terms
-- E-commerce: E-commerce channel net revenue is defined as
direct sales from Reckitt to online platforms or directly to
consumers. Estimates of total e-commerce sales as a percentage of
group net revenue includes direct sales and an estimate of sales
achieved by our brands corresponding to sales through our
omnichannel distributors and retailer' websites.
-- Category Market Unit ("CMU"): Reckitt analyses its market
share by CMUs, which represent country and either brand or
category, e.g. US Lysol. This allows us to analyse the components
of market share growth taking into account both geography and brand
/ category. Management has identified those Core CMUs that are the
most strategically important. The list of Core CMUs is kept under
continual review and will change over time based on strategic
decisions. Currently, Core CMUs cover c.70% of Group net revenue
and between c. 60% to 85% of each GBU's net revenue. As a measure
of competitiveness, management tracks the percentage of Core CMUs
holding or gaining market share, weighted by net revenue.
-- Continuing operations: Continuing operations excludes any
credits or charges related to the previously demerged RB
Pharmaceuticals business that became Indivior PLC. Net income from
discontinued operations is presented as a single line item in the
Group Income Statement.
The table below reconciles the Group's reported IFRS measures to
its adjusted measures for the six months ended 30 June 2021.
Adjusting items
GAAP Exceptional Other Finance Adjusted
Expense
items Items Reclass
(1) (2) (3)
Six months ended 30 GBPm GBPm GBPm GBPm GBPm
June 2021
----------------------------- -------- ------ --------- ---------
Net revenue 6,598 - - - 6,598
Cost of sales (2,784) - 2 - (2,782)
----------------------------- -------- ------------ ------ --------- ---------
Gross profit 3,814 - 2 - 3,816
Net operating expenses (5,642) 3,034 216 - (2,392)
----------------------------- -------- ------------ ------ --------- ---------
Operating (loss)/profit (1,828) 3,034 218 - 1,424
Net finance expense (115) - - (1) (116)
Share of loss of associate (1) - - - (1)
----------------------------- -------- ------------ ------ --------- ---------
(Loss)/profit before
income tax (1,944) 3,034 218 (1) 1,307
Income tax credit /
(charge) 191 (591) 111 1 (288)
----------------------------- -------- ------------ ------ --------- ---------
Net (loss)/income
from continuing operations (1,753) 2,443 329 - 1,019
Less: Attributable
to non-controlling
interests (1) - - - (1)
----------------------------- -------- ------------ ------ --------- ---------
Net (loss)/income
from continuing operations
attributable to owners
of the parent company (1,754) 2,443 329 - 1,018
Net profit for the
period from discontinued
operations 29 (29) - - -
----------------------------- -------- ------------ ------ --------- ---------
Total net (loss)/income
for the year attributable
to owners of the parent (1,725) 2,414 329 - 1,018
Diluted (loss)/earnings
per share (EPS) from
continuing operations (245.8) 142.6
----------------------------- -------- ------------ ------ --------- ---------
Operating Margin % (27.7%) 21.6%
Impact of IFCN China 1.1%
Operating Margin %
(ex. IFCN China) 22.7%
----------------------------- -------- ------------ ------ --------- ---------
1. Exceptional items relate to costs in relation to the
strategic review of IFCN China (Note 14). Amounts charged to
operating profit include:
-- A loss of GBP2,997 million relating to the re-measurement of
the IFCN China disposal group to its fair value less costs of
disposal;
-- A charge of GBP37 million relating to the re-measurement of a
separate factory asset dedicated to IFCN China, not included in the
disposal to Primavera, to its fair value less costs of
disposal;
-- Included within income tax expense is a net deferred tax
credit of GBP591 million relating to the re-measurement of deferred
tax liabilities to reflect the estimated tax payable on disposal of
IFCN China.
2. Other adjusting items of GBP218 million relate to:
-- Loss of GBP165 million in relation to the sale of Scholl to Yellow Wood Partners (Note 14);
-- Amortisation of certain intangible assets recognised as a
result of the acquisition of MJN of GBP38 million;
-- Costs of GBP15 million relating to acquisitions, of which
GBP2 million is recorded within Cost of Sales.
-- Included within income tax expense is a net GBP111 million
charge, including a GBP73 million tax credit relating to the Scholl
disposal, a GBP9 million tax credit in respect of intangible asset
amortisation and a GBP196 million tax charge to adjust deferred tax
liabilities for intangible assets for the UK tax rate change.
3. Adjusting items of GBP1 million relate to the
reclassification of interest income on income tax balances from net
finance expense to income tax in the adjusted measures.
The table below reconciles the Group's reported IFRS measures to
its adjusted measures for the six months ended 30 June 2020.
Adjusting items
GAAP Exceptional Other Finance Adjusted
Expense
items Items Reclass
(1) (2) (3)
Six months ended 30 GBPm GBPm GBPm GBPm GBPm
June 2020
----------------------------- -------- ------ --------- ---------
Net revenue 6,911 - - - 6,911
Cost of sales (2,699) - - - (2,699)
----------------------------- -------- ------------ ------ --------- ---------
Gross profit 4,212 - - - 4,212
Net operating expenses (2,617) 60 41 - (2,516)
----------------------------- -------- ------------ ------ --------- ---------
Operating (loss)/profit 1,595 60 41 - 1,696
Net finance expense (157) - - 16 (141)
Share of loss of associate - - - - -
----------------------------- -------- ------------ ------ --------- ---------
(Loss)/profit before
income tax 1,438 60 41 16 1,555
Income tax credit /
(charge) (399) (2) 60 (16) (357)
----------------------------- -------- ------------ ------ --------- ---------
Net (loss)/income
from continuing operations 1,039 58 101 - 1,198
Less: Attributable
to non-controlling
interests (12) - - - (12)
----------------------------- -------- ------------ ------ --------- ---------
Net (loss)/income
from continuing operations
attributable to owners
of the parent company 1,027 58 101 - 1,186
Net profit for the
period from discontinued
operations 48 (48) - - -
----------------------------- -------- ------------ ------ --------- ---------
Total net (loss)/income
for the year attributable
to owners of the parent 1,075 10 101 - 1,186
Diluted (loss)/earnings
per share (EPS) from
continuing operations 144.2 166.5
----------------------------- -------- ------------ ------ --------- ---------
Operating Margin % 23.1% 24.5%
Impact of IFCN China 0.6%
Operating Margin %
(ex. IFCN China) 25.1%
----------------------------- -------- ------------ ------ --------- ---------
1. Exceptional items within Operating Profit include GBP20
million relating to previously announced restructuring projects
(principally RB 2.0 costs) and a charge of GBP40 million relating
to the Korea HS issue charged during the period ended 30 June 2020.
Included within income tax expense is a GBP2 million tax credit for
these exceptional costs
2. Other adjusting items of GBP41 million relate to the
amortisation of certain intangible assets recognised as a result of
the acquisition of MJN. Included within income tax expense is a net
GBP60 million charge, being a GBP10 million tax credit in respect
of this amortisation offset by a GBP70 million tax charge to adjust
deferred tax liabilities for intangible assets for the UK tax rate
change.
3. Adjusting items of GBP16 million relate to the
reclassification of interest on income tax balances from finance
expense to income tax in the adjusting measure.
Principal Risks and Uncertainties
The Group's principal risks and uncertainties are detailed on
pages 82-92 of the Annual Report for the year ended 31 December
2020. These are listed below within broad categories, with further
detail on each of the following risks in the 2020 Annual
Report:
-- Operational: COVID-19, Product safety, supply disruption,
cyber-security, employee health and safety, sustainability,
adherence to product quality standards.
-- Strategic: Innovation, disruption, China.
-- People
-- Financial: Tax disputes
-- Compliance: Product regulations, legal & compliance and
South Korea Humidifier Sanitiser (HS)
-- Other: 'Black Swan' event.
-- The Group's emerging risks were Geopolitical, Sustained / deepening economic recession and pandemic-related litigation and regulation.
The nature and potential impact of such risks remain essentially
unchanged for the second half of 2021.
Cautionary note concerning forward-looking statements
This announcement contains statements with respect to the
financial condition, results of operations and business of Reckitt
(the Group) and certain of the plans and objectives of the Group
that are forward-looking statements. Words such as 'intends',
'targets', or the negative of these terms and other similar
expressions of future performance or results, and their negatives,
are intended to identify such forward-looking statements. In
particular, all statements that express forecasts, expectations and
projections with respect to future matters, including targets for
net revenue, operating margin and cost efficiency, are
forward-looking statements. Such statements are not historical
facts, nor are they guarantees of future performance.
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 that could cause actual results and developments to differ
materially from those expressed or implied by these forward-looking
statements, including many factors outside the Group's control.
Among other risks and uncertainties, the material or principal
factors which could cause actual results to differ materially are:
the general economic, business, political and social conditions in
the key markets in which the Group operates; the ability of the
Group to manage regulatory, tax and legal matters, including
changes thereto; the reliability of the Group's technological
infrastructure or that of third parties on which the Group relies;
interruptions in the Group's supply chain and disruptions to its
production facilities; the reputation of the Group's global brands;
and the recruitment and retention of key management.
These forward-looking statements speak only as of the date of
this announcement. Except as required by any applicable law or
regulation, Reckitt expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change
in the Group's expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is
based.
LEI: 5493003JFSMOJG48V108
Half Year Condensed Financial Statements
Group Income Statement
For the six months ended 30 June 2021
Six months
ended
30 June 30 June
2021 2020
Note GBPm GBPm
-------------------------------------------------------- ---- ------- -------
Net Revenue 6,598 6,911
Cost of sales (2,784) (2,699)
-------------------------------------------------------- ---- ------- -------
Gross profit 3,814 4,212
Losses on assets held for sale and disposal of goodwill
and brands 14 (3,199) -
Other net operating expenses (2,443) (2,617)
-------------------------------------------------------- ---- ------- -------
Net operating expenses (5,642) (2,617)
-------------------------------------------------------- ---- ------- -------
Operating (loss)/profit (1,828) 1,595
-------------------------------------------------------- ---- ------- -------
Finance income 10 50
Finance expense (125) (207)
-------------------------------------------------------- ---- ------- -------
Net finance expense (115) (157)
Share of loss of equity-accounted investees, net of
tax (1) -
-------------------------------------------------------- ---- ------- -------
(Loss)/profit before income tax (1,944) 1,438
-------------------------------------------------------- ---- ------- -------
Income tax credit / (charge) 5 191 (399)
-------------------------------------------------------- ---- ------- -------
Net (loss)/income from continuing operations (1,753) 1,039
-------------------------------------------------------- ---- ------- -------
Net income from discontinued operations 29 48
-------------------------------------------------------- ---- ------- -------
Net (loss)/income (1,724) 1,087
-------------------------------------------------------- ---- ------- -------
Attributable to non-controlling interests 1 12
Attributable to owners of the parent company (1,725) 1,075
-------------------------------------------------------- ---- ------- -------
Net (loss)/income (1,724) 1,087
-------------------------------------------------------- ---- ------- -------
Basic (loss)/earnings per ordinary share
From continuing operations (pence) 6 (245.8) 144.6
From discontinued operations (pence) 6 4.1 6.8
-------------------------------------------------------- ---- ------- -------
From total operations (pence) (241.7) 151.4
-------------------------------------------------------- ---- ------- -------
Diluted (loss)/earnings per ordinary share
From continuing operations (pence) 6 (245.8) 144.2
From discontinued operations (pence) 6 4.1 6.7
-------------------------------------------------------- ---- ------- -------
From total operations (pence) (241.7) 150.9
-------------------------------------------------------- ---- ------- -------
Group Statement of Comprehensive Income
For the six months ended 30 June 2021
Six months ended
30 June 30 June
2021 2020
GBPm GBPm
-------------------------------------------------------- -------- --------
Net (loss)/income (1,724) 1,087
Other comprehensive (expense)/income
Items that are or may be reclassified to income
statement in subsequent years
Net exchange (losses)/gains on foreign currency
translation, net of tax (319) 370
Gains/(losses) on net investment hedges, net of
tax 63 (122)
Gains on cash flow hedges, net of tax 3 14
Reclassification of foreign currency translation
reserves on disposal
of foreign operations, net of tax 21 -
--------------------------------------------------------- -------- --------
(232) 262
-------------------------------------------------------- -------- --------
Items that will not be reclassified to income statement
in subsequent years
Remeasurements of defined benefit pension plans,
net of tax 37 (82)
Revaluation of equity instruments - FVOCI 3 (9)
--------------------------------------------------------- -------- --------
40 (91)
-------------------------------------------------------- -------- --------
Other comprehensive (expense)/income, net of tax (192) 171
--------------------------------------------------------- -------- --------
Total comprehensive (expense)/income (1,916) 1,258
--------------------------------------------------------- -------- --------
Attributable to non-controlling interests 1 13
Attributable to owners of the parent company (1,917) 1,245
--------------------------------------------------------- -------- --------
Total comprehensive (expense)/income (1,916) 1,258
--------------------------------------------------------- -------- --------
Total comprehensive (expense)/income attributable
to owners of the parent company
arising from:
Continuing operations (1,946) 1,197
Discontinued operations 29 48
--------------------------------------------------------- -------- --------
(1,917) 1,245
-------------------------------------------------------- -------- --------
Group Balance Sheet
As at 30 June 2021
30 June 31 December
2021 2020
Note GBPm GBPm
------------------------------------------------- ---- -------- -----------
ASSETS
Non-current assets
Goodwill and other intangible assets 7 18,039 22,979
Property, plant and equipment 2,082 2,233
Equity instruments 158 136
Deferred tax assets 243 258
Retirement benefit surplus 277 226
Other non-current receivables 157 146
------------------------------------------------- ---- -------- -----------
Total non-current assets 20,956 25,978
------------------------------------------------- ---- -------- -----------
Current assets
Inventories 1,476 1,592
Trade and other receivables 1,768 1,921
Derivative financial instruments 38 30
Current tax recoverable 146 125
Cash and cash equivalents 1,478 1,646
------------------------------------------------- ---- -------- -----------
4,906 5,314
------------------------------------------------- ---- -------- -----------
Assets of disposal group classified as held for
sale 14 1,863 -
------------------------------------------------- ---- -------- -----------
6,769 5,314
Total assets 27,725 31,292
------------------------------------------------- ---- -------- -----------
LIABILITIES
Current liabilities
Short-term borrowings 8 (3,578) (763)
Provisions for liabilities and charges (245) (243)
Trade and other payables (4,976) (5,742)
Derivative financial instruments (41) (118)
Current tax liabilities (80) (72)
------------------------------------------------- ---- -------- -----------
(8,920) (6,938)
------------------------------------------------- ---- -------- -----------
Liabilities of disposal group classified as held
for sale 14 (443) -
------------------------------------------------- ---- -------- -----------
(9,363) (6,938)
------------------------------------------------- ---- -------- -----------
Non-current liabilities
Long-term borrowings 8 (7,025) (9,794)
Deferred tax liabilities (3,005) (3,562)
Retirement benefit obligations (368) (372)
Provisions for liabilities and charges (48) (49)
Non-current tax liabilities (928) (1,021)
Other non-current liabilities (407) (397)
------------------------------------------------- ---- -------- -----------
Total non-current liabilities (11,781) (15,195)
------------------------------------------------- ---- -------- -----------
Total liabilities (21,144) (22,133)
------------------------------------------------- ---- -------- -----------
Net assets 6,581 9,159
------------------------------------------------- ---- -------- -----------
EQUITY
Capital and reserves
Share capital 9 74 74
Share premium 252 252
Merger reserve (14,229) (14,229)
Other reserves (611) (379)
Retained earnings 21,064 23,397
------------------------------------------------- ---- -------- -----------
Attributable to owners of the parent company 6,550 9,115
Attributable to non-controlling interests 31 44
------------------------------------------------- ---- -------- -----------
Total equity 6,581 9,159
------------------------------------------------- ---- -------- -----------
Group Statement of Changes in Equity
For the six months ended 30 June 2021
Total
attributable
to owners
of the Non-
Share Share Merger Other Retained parent controlling Total
capital premium reserves reserves earnings company interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- -------- -------- --------- --------- --------- ------------- ------------ --------
Balance at 1 January
2020 74 245 (14,229) (80) 23,353 9,363 44 9,407
------------------------ -------- -------- --------- --------- --------- ------------- ------------ --------
Comprehensive income
Net income - - - - 1,075 1,075 12 1,087
Other comprehensive
income/(expense) - - - 261 (91) 170 1 171
------------------------ -------- -------- --------- --------- --------- ------------- ------------ --------
Total comprehensive
(expense)/income - - - 261 984 1,245 13 1,258
------------------------ -------- -------- --------- --------- --------- ------------- ------------ --------
Transactions with
owners
Share-based payments - - - - 19 19 - 19
Current tax on share
awards - - - - 5 5 - 5
Deferred tax on share
awards - - - - 14 14 - 14
Treasury shares
re-issued - - - - 48 48 - 48
Cash dividends - - - - (721) (721) (11) (732)
------------------------ -------- -------- --------- --------- --------- ------------- ------------ --------
Total transactions
with owners - - - - (635) (635) (11) (646)
------------------------ -------- -------- --------- --------- --------- ------------- ------------ --------
Balance at 30 June
2020 74 245 (14,229) 181 23,702 9,973 46 10,019
------------------------ -------- -------- --------- --------- --------- ------------- ------------ --------
Balance at 1 January
2021 74 252 (14,229) (379) 23,397 9,115 44 9,159
------------------------ -------- -------- --------- --------- --------- ------------- ------------ --------
Net loss - - - - (1,725) (1,725) 1 (1,724)
Other comprehensive
(expense)/income - - - (232) 40 (192) - (192)
------------------------ -------- -------- --------- --------- --------- ------------- ------------ --------
Total comprehensive
(expense)/income - - - (232) (1,685) (1,917) 1 (1,916)
------------------------ -------- -------- --------- --------- --------- ------------- ------------ --------
Transactions with
owners
Treasury shares
re-issued - - - - 57 57 - 57
Share-based payments - - - - 19 19 - 19
Tax on share awards - - - - 1 1 - 1
Cash dividends - - - - (725) (725) (14) (739)
Total transactions
with owners - - - - (648) (648) (14) (662)
------------------------ -------- -------- --------- --------- --------- ------------- ------------ --------
Balance at 30 June
2021 74 252 (14,229) (611) 21,064 6,550 31 6,581
------------------------ -------- -------- --------- --------- --------- ------------- ------------ --------
Group Cash Flow Statement
For the six months ended 30 June 2021
Six months ended
30 June 30 June
2021 2020
Note GBPm GBPm
-------------------------------------------------------- ---- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Operating (loss)/profit from continuing operations (1,828) 1,595
Losses on sale of property, plant and equipment
and intangible assets 152 -
Depreciation, amortisation, and impairment 216 230
Remeasurement of disposal group held for sale 2,984 -
Share-based payments 19 19
Increase in inventories (98) (168)
Decrease in trade and other receivables 43 166
(Decrease) / increase in payables and provisions (309) 740
-------------------------------------------------------- ---- -------- --------
Cash generated from continuing operations 1,179 2,582
Interest paid (119) (196)
Interest received 14 49
Tax paid (367) (391)
Net cash flows attributable to discontinued operations 5 (10)
-------------------------------------------------------- ---- -------- --------
Net cash generated from operating activities 712 2,034
-------------------------------------------------------- ---- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Disposal proceeds from sale of brands 252 -
Purchase of property, plant and equipment (158) (114)
Purchase of intangible assets (29) (32)
Proceeds from the sale of property, plant and equipment - 4
Acquisition of businesses, net of cash acquired (144) -
Purchase of equity instruments (21) -
-------------------------------------------------------- ---- -------- --------
Net cash used in investing activities (100) (142)
-------------------------------------------------------- ---- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Treasury shares re-issued 57 48
Proceeds from borrowings 522 2,904
Repayment of borrowings (348) (3,205)
Dividends paid to owners of the parent company 10 (725) (721)
Dividends paid to non-controlling interests (14) (11)
Other financing activities (160) 74
-------------------------------------------------------- ---- -------- --------
Net cash used in financing activities (668) (911)
-------------------------------------------------------- ---- -------- --------
Net (decrease) / increase in cash and cash equivalents (56) 981
Cash and cash equivalents at beginning of the year 1,644 1,547
Exchange (losses)/gains (30) 26
-------------------------------------------------------- ---- -------- --------
Cash and cash equivalents at end of the year 1,558 2,554
-------------------------------------------------------- ---- -------- --------
Cash and cash equivalents comprise:
Cash and cash equivalents per the balance sheet 1,478 2,557
Cash and cash equivalents within assets held for
sale 14 81 -
Overdrafts (1) (3)
-------------------------------------------------------- ---- -------- --------
1,558 2,554
-------------------------------------------------------- ---- -------- --------
Notes to the condensed financial statements
1. General Information
Reckitt Benckiser Group plc (the 'Company') is a public limited
company listed on the London Stock Exchange and incorporated and
domiciled in the UK. The address of its registered office is
103-105 Bath Road, Slough, Berkshire SL1 3UH. These condensed
consolidated interim financial statements ('Half Year Condensed
Financial Statements') as at and for the six months ended 30 June
2021 comprise the Company and its subsidiaries (together referred
to as 'the Group').
The Half Year Condensed Financial Statements were approved by
the Board of Directors on 26 July 2021. The Half Year Condensed
Financial Statements have been reviewed by our independent auditor
KPMG LLP (see page 33).
2. Basis of Preparation
The Half Year Condensed Financial Statements for the six months
ended 30 June 2021 have been prepared in accordance with IAS 34
Interim Financial Reporting as adopted for use in the UK. The
annual financial statements of the Group for the year ending 31
December 2021 will be prepared in accordance with UK-adopted
international accounting standards and in compliance with
International Financial Reporting Standards as issued by the
International Accounting Standards Board (IASB).
As required by the Disclosure Guidance and Transparency Rules of
the Financial Conduct Authority, the Half Year Condensed Financial
Statements has been prepared applying the accounting policies and
presentation that were applied in the preparation of the Group's
published consolidated financial statements for the year ended 31
December 2020 which were prepared in accordance with International
Accounting Standards in conformity with the requirements of the
Companies Act 2006. The financial statements for the year ended 31
December 2020 were also in compliance with International Financial
Reporting Standards as issued by the International Accounting
Standards Board (IASB) and as adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union.
These Half Year Condensed Financial Statements do not comprise
statutory accounts within the meaning of section 434 of the
Companies Act 2006. Statutory accounts for the year ended 31
December 2020 were approved by the Board of Directors on 15 March
2021 and delivered to the Registrar of Companies. The report of the
auditors on those accounts was unqualified, did not contain an
emphasis of matter paragraph and did not contain any statement
under section 498 of the Companies Act 2006.
Having assessed the principal risks, the Directors considered it
appropriate to adopt the going concern basis of accounting in
preparing the interim financial statements.
3. Accounting Policies and Estimates
The accounting policies adopted in the preparation of the Half
Year Condensed Financial Statements are consistent with those
described on pages 179 - 184 of the Annual Report and Financial
Statements for the year ended 31 December 2020.
In preparing these Half Year Condensed Financial Statements, the
significant estimates and judgements made by management in applying
the Group's accounting policies and the key sources of estimation
uncertainty were the same as those that applied to the Group
Financial Statements for the year ended 31 December 2020.
The following amended standards and interpretations were adopted
by the Group on 1 January 2021. They have not had a significant
impact on the Group Financial Statements.
-- Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS
9, IAS 39, IFRS 7, IFRS 4 and IFRS 16).
-- Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37).
-- Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16).
-- Classification of Liabilities as Current or Non-current (Amendments to IAS 1).
4. Operating Segments
The Group's operating segments comprise of the Hygiene, Health
and Nutrition Global business units reflecting the way in which
information is presented to and reviewed by the Group's Chief
Operating Decision Maker (CODM) for the purposes of making
strategic decisions and assessing group-wide performance.
The CODM is the Group Executive Committee. This Committee is
responsible for the implementation of strategy (approved by the
Board), the management of risk (delegated by the Board) and the
review of group operational performance and ongoing business
integration.
The Executive Committee assesses the performance of these
operating segments based on Net Revenue from external customers and
Adjusted Operating Profit. Intercompany transactions between
operating segments are eliminated. Finance income and expense are
not allocated to segments, as each is managed on a centralised
basis.
The segment information for the operating segments for the
periods ended 30 June 2021 and 30 June 2020 is as follows:
Hygiene Health Nutrition Adjusting Total
GBPm GBPm GBPm items GBPm
Six months ended 30 June 2021 GBPm
------------------------------------ ------- ------ --------- ---------- -------
Net Revenue 3,027 2,144 1,427 - 6,598
------------------------------------- ------- ------ --------- ---------- -------
Operating Profit/(Loss) 774 468 182 (3,252) (1,828)
Net finance expense (115)
------------------------------------- ------- ------ --------- ---------- -------
Share of loss of equity-accounted
investees, net of tax (1)
------------------------------------- ------- ------ --------- ---------- -------
Loss before income tax (1,944)
------------------------------------- ------- ------ --------- ---------- -------
Income tax credit 191
------------------------------------- ------- ------ --------- ---------- -------
Net loss from continuing operations (1,753)
------------------------------------- ------- ------ --------- ---------- -------
Hygiene Health Nutrition Adjusting Total
GBPm GBPm GBPm items GBPm
Six months ended 30 June 2020 (restated)* GBPm
------------------------------------------ -------- ------ --------- --------- -----
Net Revenue 2,737 2,502 1,672 - 6,911
------------------------------------------ -------- ------ --------- --------- -----
Operating Profit/(Loss) 687 716 293 (101) 1,595
Net finance expense (157)
------------------------------------------ -------- ------ --------- --------- -----
Profit before income tax 1,438
------------------------------------------ -------- ------ --------- --------- -----
Income tax charge (399)
------------------------------------------ -------- ------ --------- --------- -----
Net income from continuing operations 1,039
------------------------------------------ -------- ------ --------- --------- -----
* Segmental information for the six months ended 30 June 2020
has been restated to reflect the Group's current operating
segments, which changed in the second half of 2020.
Financial information for the Hygiene, Health and Nutrition
operating segments is presented on an adjusted basis, which
excludes certain cash and non-cash items which management believe
are not reflective of the underlying financial performance of the
business. Financial information on an adjusted basis is consistent
with how management reviews the business for the purpose of making
operating decisions. Adjusting items to operating profit comprise
exceptional items and other adjusting items.
-- Exceptional items are material, non-recurring items of expense or income.
-- Other adjusting items includes losses on the disposal of
brands, costs in relation to business combinations and the
amortisation of intangible assets recognised in relation to
business combinations. These items are not classified as
exceptional items because of their recurring nature.
5 Income Tax
The GAAP tax rate for the six months to 30 June 2021 is 10% (H1
2020 28%). Income tax expense is recognised based on management's
best estimate of the effective tax rate ("ETR") expected for the
full year. The rate in 2021 has been favourably impacted by the
Scholl and IFCN China transactions because the income taxes paid on
the disposals are disconnected from the accounting bases.
Additionally, there is a negative impact of GBP196m relating to the
remeasurement of deferred tax liabilities following the substantive
enactment of the increase in the UK tax rate to 25%.
6 Earnings per share
Six months ended
30 June 30 June
2021 2020
pence pence
---------------------------------------- -------- --------
Basic (loss)/earnings per share
From continuing operations (245.8) 144.6
From discontinued operations 4.1 6.8
---------------------------------------- -------- --------
Total basic (loss)/earnings per share (241.7) 151.4
Diluted (loss)/earnings per share
From continuing operations (245.8) 144.2
From discontinued operations 4.1 6.7
---------------------------------------- -------- --------
Total diluted (loss)/earnings per share (241.7) 150.9
Basic
Basic (loss)/earnings per share is calculated by dividing the
net (loss)/income attributable to owners of the parent company from
continuing operations (2021: GBP1,754 million loss; 2020: GBP1,027
million income) and discontinued operations (2021: GBP29 million
income; 2020: GBP48 million income) by the weighted average number
of ordinary shares in issue during the period (2021: 713.7 million;
2020: 710.2 million).
Diluted
Diluted (loss)/earnings per share is calculated by adjusting the
weighted average number of shares outstanding to assume conversion
of all potentially dilutive ordinary shares. The Company has the
following categories of potentially dilutive ordinary shares:
Executive Share Awards (including Executive Share Options and
Executive Restricted Share Scheme Awards) and Employee Sharesave
Scheme Options. The options only dilute earnings when they result
in the issue of shares at a value below the market price of the
share and when all performance criteria (if applicable) have been
met.
In the six months ended 30 June 2021, there was no difference in
the weighted average number of shares used for the calculation of
basic and diluted loss per share as the effect of all potentially
dilutive shares outstanding was anti-dilutive.
7 Intangible Assets
Brands Goodwill Software Other Total
GBPm GBPm GBPm GBPm GBPm
---------------------------------------- ------- -------- -------- ----- -------
Cost
At 1 January 2021 17,673 11,408 490 185 29,756
Additions - - 29 - 29
Arising on business combinations - 93 - 51 144
Disposals (344) (30) - - (374)
Reclassification to assets held for
sale (4,120) (1,509) - - (5,629)
Exchange adjustments (295) (182) (7) (1) (485)
----------------------------------------- ------- -------- -------- ----- -------
At 30 June 2021 12,914 9,780 512 235 23,441
----------------------------------------- ------- -------- -------- ----- -------
Accumulated amortisation and impairment
At 1 January 2021 449 6,039 190 99 6,777
Amortisation & impairment charge 28 - 26 13 67
Disposals - - - - -
Reclassification to assets held for
sale (161) (1,168) - - (1,329)
Exchange adjustments (7) (102) (2) (2) (113)
At 30 June 2021 309 4,769 214 110 5,402
----------------------------------------- ------- -------- -------- ----- -------
Net book value
At 31 December 2020 17,224 5,369 300 86 22,979
----------------------------------------- ------- -------- -------- ----- -------
At 30 June 2021 12,605 5,011 298 125 18,039
----------------------------------------- ------- -------- -------- ----- -------
8 Financial Liabilities - Borrowings
30 June 31 December
2021 2020
GBPm GBPm
------------------------------------------------------- -------- ------------
Bank loans and overdrafts 17 20
Commercial paper 1,150 671
Bonds 2,348 -
Lease liabilities 63 72
-------------------------------------------------------- -------- ------------
Total short-term borrowings 3,578 763
-------------------------------------------------------- -------- ------------
Bonds 5,530 8,041
Senior notes 1,206 1,221
Term loans - 291
Other non-current borrowings 15 -
Lease liabilities 274 241
-------------------------------------------------------- -------- ------------
Total long-term borrowings 7,025 9,794
-------------------------------------------------------- -------- ------------
Total borrowings 10,603 10,557
-------------------------------------------------------- -------- ------------
Derivative financial Instruments 27 43
Less overdrafts presented in cash and cash equivalents
in the cash flow statement (1) (2)
-------------------------------------------------------- -------- ------------
Total financing liabilities 10,629 10,598
-------------------------------------------------------- -------- ------------
On 30 June 2021 the Group voluntarily cancelled committed
borrowing facilities of GBP1 billion. The Group has GBP4.5 billion
(31 December 2020: GBP5.5 billion) of committed borrowing
facilities remaining which were undrawn as at 30 June 2021. The
committed borrowing facilities, together with cash and cash
equivalents, are considered sufficient to meet the Group's
projected cash requirements. The Group remains compliant with its
banking covenants.
30 June 31 December
2021 2020
Undrawn committed borrowing facilities GBPm GBPm
--------------------------------------- -------- ------------
Expiring within two years 1,000 2,000
Expiring after more than two years 3,500 3,500
---------------------------------------- -------- ------------
4,500 5,500
--------------------------------------- -------- ------------
All committed facilities are at floating rates of interest.
9 Share Capital
Equity
ordinary Nominal
shares value
Issued and fully paid number GBPm
---------------------- ----------- -------
At 31 December 2020 736,535,179 74
---------------------- ----------- -------
At 30 June 2021 736,535,179 74
---------------------- ----------- -------
At 30 June 2021, issued ordinary shares were 736,535,179 (31
December 2020: 736,535,179), of which 22,469,112 shares were held
as Treasury shares (31 December 2020: 23,800,092). All shares were
fully paid.
10 Dividends
A final dividend of 101.6 pence per share for the year ended 31
December 2020 was paid on 14 June 2021 to Shareholders who were on
the register on 7 May 2021, amounting to GBP725 million.
The Directors have declared an interim dividend of 73.0 pence
per share in respect of the year ending 31 December 2021 which will
absorb an estimated GBP521 million of shareholders' funds. It will
be paid on 15 September 2021 to shareholders who are on the
register on 6 August 2021.
11 Contingent Liabilities and Assets
Korea
The Humidifier Sanitiser ("HS") issue in South Korea was a
tragic event. The Group continues to make both public and personal
apologies to the victims who have suffered lung injury as a result
of the Oxy HS product and the role that the Oxy HS product played
in the issue.
The Group currently has a provision of GBP77 million (31
December 2020: GBP83 million) in relation to the HS issue in South
Korea. In addition, as explained in Note 20 of the 2020 Annual
Report and Accounts, there are further costs that are either not
considered probable or cannot be estimated at the current time.
Other
From time to time, the Group is involved in discussions in
relation to ongoing tax matters in a number of jurisdictions around
the world. Where appropriate, the Directors make provisions based
on their assessment of each case.
12 Financial Instruments
The fair value measurement hierarchy levels have been defined as
follows:
-- Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
-- Inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices) (level 2). If all
significant inputs required to fair value an instrument are
observable, the instrument is included in level 2.
-- Inputs for the asset or liability that are not based on
observable market data (i.e. unobservable inputs) (level 3).
The following table categorises the Group's financial assets and
liabilities held at fair value by the valuation methodology applied
in determining their fair value.
Level Level Level
1 2 3 Total
GBPm GBPm GBPm GBPm
------------------------------------------------------- ----- ----- ----- -----
At 30 June 2021
Assets as per the Balance Sheet
Derivative financial instruments - FX forward exchange
contracts - 38 - 38
Equity instruments - FVOCI 19 - 117 136
------------------------------------------------------- ----- ----- ----- -----
Liabilities as per the Balance Sheet
Derivative financial instruments - FX forward exchange
contracts - 41 - 41
Derivative financial instruments - Interest rate
swaps (1) - 12 - 12
Derivative financial instruments - Cross currency
interest rate swaps (1) - 27 - 27
------------------------------------------------------- ----- ----- ----- -----
Level Level Level
1 2 3 Total
GBPm GBPm GBPm GBPm
------------------------------------------------------- ----- ----- ----- -----
At 31 December 2020
Assets as per the Balance Sheet
Derivative financial instruments - Interest rate swaps - 7 - 7
Derivative financial instruments - Cross currency
interest rate swaps - 12 - 12
Derivative financial instruments - FX forward exchange
contracts - 30 - 30
Equity instruments - FVOCI 16 - 98 114
------------------------------------------------------- ----- ----- ----- -----
Liabilities as per the Balance Sheet
Derivative financial instruments - FX forward exchange
contracts - 118 - 118
------------------------------------------------------- ----- ----- ----- -----
(1) Included in Other non-current liabilities in Group Balance
Sheet.
13 Related Party Transactions
Put and call options with non-controlling shareholders
During the six months to 30 June 2021, the Group reviewed its
existing agreements with non-controlling interests in various Manon
subsidiaries in China and consolidated its existing arrangements
into one agreement, this led to a net GBP7 million credit to
finance income.
Under the consolidated arrangements the Group has symmetrical
put and call options existing over the non-controlling
shareholdings in RB & Manon Business Co. Ltd, RB & Manon
Business Limited and RB (China Trading) Limited, RB (Hygiene Home)
HK Limited, RB & Manon Hygiene Home (HK) Limited and RB &
Manon Hygiene Home (Shanghai) Limited. These options are due to
expire on 31 December 2023.
As at 30 June 2021, the present value of the put option
liabilities was GBP144 million (31 December 2020: GBP148
million).
14 Acquisitions, Disposals and Assets Held for Sale
Assets Held for Sale
On 5 June 2021 the Group announced the definitive agreement to
sell its Infant Formula and Child Nutrition business in China (IFCN
China) to Primavera Capital Group for an implied enterprise value
of $2.2 billion. Reckitt will retain an 8% shareholding in IFCN
China through the receipt of a shareholding in the purchaser's
acquisition structure as partial consideration.
The transaction follows a comprehensive strategic review of IFCN
China announced in February 2021. The disposal of IFCN China is
expected to complete in the second half of 2021. The transaction is
structured as a sale of the entirety of IFCN China (China, Hong
Kong and Taiwan), including the manufacturing plants in Nijmegen,
the Netherlands and Guangzhou, China. It includes a royalty-free
perpetual and exclusive license of the Mead Johnson and Enfa family
of brands in China. Following completion of the transaction Reckitt
will continue to own the Mead Johnson and Enfa family of brands
globally and will operate these brands in the rest of the
world.
At 31 December 2020, IFCN net assets totalled GBP8.8 billion on
a global basis. On announcement of the definitive agreement to sell
IFCN China, the IFCN cash generating unit (CGU) has been split into
two separate CGUs, being IFCN China and IFCN North America and the
rest of the world (IFCN RoW). Net assets of GBP3.5 billion (or net
assets of GBP4.4 billion, excluding deferred tax liabilities of
GBP0.9 billion, for the IFCN China disposal group) have been
allocated to the IFCN China CGU. The remaining IFCN net assets have
been allocated to the IFCN RoW CGU.
At 30 June 2021 the Group has classified IFCN China as held for
sale, and in the six months to 30 June 2021 recognised a pre-tax
charge of GBP2,997 million to remeasure the IFCN China disposal
group to its fair value less costs of disposal (calculated with
reference to the sale and purchase agreement). This charge has been
included within net operating expenses in the Income Statement.
Cumulative losses of GBP206 million have been recognised in Other
Comprehensive Income relating to the disposal group at 30 June
2021, this will be recycled to the Income Statement on
disposal.
IFCN China does not meet the definition of a discontinued
operation under IFRS, as it does not represent either a separate
major line of business or a geographical area of operations, and
accordingly the results of IFCN China remain within continuing
operations. IFCN China forms part of the Nutrition operating
segment.
30 June
2021
GBPm
----------------------------------------- ---------------
Goodwill and other intangible assets 1,354
Property, plant and equipment 185
Inventories 157
Cash and cash equivalents 81
Trade receivables and other assets 86
Assets held for sale 1,863
Trade payables and other liabilities(1) (443)
Liabilities directly associated with
the disposal group (443)
------------------------------------------------- --------
Net assets held for sale 1,420
------------------------------------------------- --------
(1) Includes GBP49 million non-current tax liability and GBP14
million lease liabilities.
Included in assets held for sale are GBP10 million relating to
two factories which were dedicated to production for IFCN China. In
conjunction with the IFCN China strategic review these factories
are being closed and separately marketed for sale. In the six
months to 30 June 2021 a charge of GBP37 million (2020: GBPnil) has
been included within net operating expenses to remeasure these
factories to their fair value less costs of disposal.
Disposals
On 1 June 2021 the Group completed the disposal of Scholl to
Yellow Wood Partners for cash consideration of GBP252 million. The
Group recognised a loss on disposal of GBP165 million, recorded
within net operating expenses in the income statement. Scholl
formed part of the Health operating segment.
Acquisitions
During the year the Group completed the following acquisitions
which have been accounted for as business combinations:
-- 1 April 2021, the Maple Island, USA dry processing plant as
an asset purchase. The plant was a co-packer for Enfagrow stage 3
and Metabolics
-- 4 May 2021, through a trade and asset purchase, a business
distributing Reckitt products in the UAE.
-- 31 May 2021, a Chinese PU condom business through an
acquisition of an 80% equity interest in Lanzhou Keshi Xixili
Healthcare Technologies Co Ltd.
The effect of these acquisitions, both for the period since
acquisition and if they had been acquired at the start of the
interim period, is not material.
Total assets and liabilities were recognised at the following
provisional fair values:
Provisional
fair value
GBPm
----------------------------------------- -------------------
Intangible assets 51
Other assets 23
Trade payables, provisions and deferred
tax liabilities (3)
Total identifiable net assets 71
Goodwill 93
------------------------------------------------- ------------
Total consideration transferred 164
------------------------------------------------- ------------
15 Seasonality
Demand for some of the Group's products is subject to
significant seasonal fluctuations, in particular some cold,
influenza and pest control products. The intensity of seasons can
vary from year to year with a corresponding impact on the Group's
performance.
16 Post Balance Sheet Events
On 12 July 2021, the Group acquired of 100% of the equity
interests in Lanai Holdings, owner of the Biofreeze and TheraPearl
brands and associated assets, from Performance Health for cash
consideration of $1,075 million (GBP777 million). The initial
accounting and purchase price allocation for this business
combination remains in progress at the time of publication of this
Interim Statement. Disclosure of the fair values of acquired assets
and liabilities will be included in the 2021 Annual Report and
Accounts.
Statement of Directors' Responsibilities
We confirm that to the best of our knowledge:
-- the condensed set of Financial Statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted
for use in the UK.
-- the interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency
Rules, being an indication of important events that have occurred
during the first six months of the financial year and their impact
on the condensed set of Financial Statements; and a description of
the principal risks and uncertainties for the remaining six months
of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related party transactions that have taken place in
the first six months of the current financial year and that have
materially affected the financial position or performance of the
entity during that period; and any changes in the related party
transactions described in the last annual report that could do
so.
The Directors of Reckitt Benckiser Group plc are listed in the
Reckitt Benckiser Group plc Annual Report and Financial Statements
for the year ended 31 December 2020. A list of current Directors is
maintained on the Reckitt Benckiser Group plc website:
www.reckitt.com.
By order of the Board
Laxman Narasimhan
Chief Executive Officer
Christopher Sinclair
Chairman
26 July 2021
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2021 which comprises of condensed Group
Income Statement, Group Statement of Comprehensive Income, Group
Balance Sheet, Group Statement of Changes in Equity and Group Cash
flow Statement, and the related explanatory notes to the interim
financial information.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2021 is not prepared, in all material respects, in accordance
with IAS 34 Interim Financial Reporting as adopted for use in the
UK and the Disclosure Guidance and Transparency Rules ("the DTR")
of the UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
As disclosed in note 2, the latest annual financial statements
of the Group were prepared in accordance with International
Accounting Standards in conformity with the requirements of the
Companies Act 2006. The latest annual financial statements of the
group were also in compliance with International Financial
Reporting Standards as issued by the International Accounting
Standards Board (IASB) and as adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union. The next annual
financial statements will be prepared in accordance with UK-adopted
international accounting standards and in compliance with
International Financial Reporting Standards as issued by the
International Accounting Standards Board (IASB). The directors are
responsible for preparing the condensed set of financial statements
included in the half-yearly financial report in accordance with IAS
34 as adopted for use in the UK.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
Richard Broadbelt
for and on behalf of
KPMG LLP
Chartered Accountants
15 Canada Square
Canary Wharf,
London
E14 5GL
26 July 2021
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR BCGDRRGDDGBL
(END) Dow Jones Newswires
July 27, 2021 02:00 ET (06:00 GMT)
Reckitt Benckiser (LSE:RKT)
Historical Stock Chart
From Apr 2024 to May 2024
Reckitt Benckiser (LSE:RKT)
Historical Stock Chart
From May 2023 to May 2024