TIDMRKT
RNS Number : 8348T
Reckitt Benckiser Group PLC
27 July 2022
27 July 2022
STRONG MOMENTUM CONTINUES
FULL-YEAR REVENUE AND MARGIN TARGETS UPGRADED
Q2 2022 H1 2022
--------------------- -------------------------- ----------------------------
Change(2) Change(2)
GBPm Actual Constant GBPm Actual Constant
--------------------- ------ ------- --------- ------- -------- ---------
Net Revenue 3,464 +12.0% +5.9% 6,888 +4.4% +2.2%
Like-for-like (LFL) +11.9% +8.6%
Adjusted(1) ex
IFCN China
Operating Profit 1,765 +23.9% +20.0%
Operating Profit 25.6% +290bps
Margin
Adjusted(1) inc
IFCN China
Operating Profit 1,765 +23.9% +20.0%
Total EPS (diluted) 178.6p +25.2%
IFRS
Operating Profit 1,745 Nm
Operating Profit 25.3% Nm
Margin
Total EPS (diluted) 187.8p Nm
--------------------- ------ ------- --------- ------- -------- ---------
1. Adjusted measures are defined on page 25
2. Change vs prior year presented. Constant measured on a
constant exchange rate basis (see page 25)
All amounts GBPm, unless otherwise stated
Highlights (H1 unless indicated):
-- Group like-for-like (LFL) revenue growth of 8.6% . Price/mix
was 7.4% and volume 1.2%. Continued broad-based growth and momentum
across all Business Units and geographies. Growth includes an
estimated 2.4% benefit from US Nutrition temporary competitor
supply issues.
-- Q2 Group LFL growth of 11.9%. Price/mix was 9.7% and volume
2.2%. Strong growth across our Health (+24.2%), Nutrition (+26.8%)
and Hygiene (-2.5%, +8.9% excluding Lysol) portfolios, with Lysol
in line with expectations. Growth includes an estimated 3.3%
benefit from US Nutrition temporary competitor supply issues.
-- 70% of the portfolio less sensitive to Covid dynamics grew
low double digits (Q2: mid-teens). Excluding the positive impact
from US IFCN, growth was high-single digits (Q2: low-double
digits), driven by continued innovation and in-market execution
across the portfolio.
-- Our Health GBU delivered 22.4% LFL growth driven by a
combination of strong demand and share gains in our OTC portfolio,
and continued momentum in our Intimate Wellness, VMS and germ
protection brands.
-- Disinfection performance fully in line with expectations.
Dettol in growth for Q2 with stable revenue trends at c.40% above
pre-pandemic levels. Lysol was down by around 30% from Covid peaks
in H1 2021 plus some retailer de-stocking in H1. Lysol consumption
trends were strong at 50-65% above pre-pandemic levels.
-- Nutrition growth in Q2 of 26.8% driven by low-teens growth in
Latin America / ASEAN and around 40% growth in the US with strong
execution amidst temporary competitor supply issues.
-- H1 adjusted operating margin of 25.6%: Growth of +290bps was
driven by the combination of favourable product mix, productivity
initiatives, pricing and phasing of investments, aided by leverage
benefits in US Nutrition and the gain on sale of surplus land in
Asia (+85bps).
-- H1 adjusted EPS (diluted) of 178.6p (+25.2%). Strong growth
driven by a combination of revenue growth, margin expansion, and
foreign exchange benefits.
-- H1 2022 dividend recommended to be 73.0p: in line with H1 2021.
Outlook:
-- Following a strong H1 we are increasing our expectations for
2022. We now expect LFL net revenue growth of +5 - 8% for 2022, and
growth in adjusted operating margins.
-- We are already delivering sustainable mid-single digit net
revenue growth and remain firmly on track to deliver our
medium-term goal of mid-20s adjusted operating margins by the
mid-2020s.
Commenting on the results, Laxman Narasimhan, Chief Executive
Officer, said:
"We have delivered an excellent first half performance in 2022.
Innovation and improved in-market execution are driving sustained,
broad-based revenue growth and market share momentum across our
portfolio. Our brands less sensitive to the impact of Covid are
growing ahead of our mid-single digit target, whilst our
disinfection brands are performing as expected, well above
pre-pandemic levels. The actions we have taken to broaden the
shoulders of our Lysol and Dettol franchises, combined with our
innovation and penetration building initiatives have built a
significantly larger, sustainable base from which we will grow.
Driving our earnings model to mitigate the very challenging
inflationary environment is a key focus throughout our entire
organisation. Our productivity programme has delivered over GBP370m
of savings in the first half, well ahead of our ingoing
expectations. This, combined with favourable product mix and
pricing, accompanied by one-off and short-term benefits, have
enabled us to deliver adjusted operating profit growth in H1 well
above net revenue growth.
Imperative to our strong performance this period is the
exceptional execution across our global operations. I want to thank
each and every one of our colleagues for their tireless commitment
during our transformation journey, and for their outstanding
delivery amidst extremely challenging circumstances. It is this
embedded ownership culture that continues to be a unique factor in
our success for the future.
We have built a stronger, more resilient business around our
portfolio of trusted brands in growth categories. Despite
challenging conditions, we are confident about the rest of the
year, we are already delivering sustainable mid-single digit net
revenue growth, and remain firmly on track to deliver our
medium-term adjusted operating margin goal".
H1 2022 RESULTS PRESENTATION TODAY
There will be a results presentation for analysts and investors
at 08:30 BST which will be held at the Auditorium, UBS, 5
Broadgate, London, EC2M 2QS.
To attend in person, please email your details to ir@reckitt.com
to register
For those wishing to follow the webcast 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
+44 20 3936
All other locations: 2999
Participant access
code: 926790
Further Information and Contacts
Richard Joyce +44 (0)7807 418516
Head of Investor Relations
Patty O'Hayer
+44 (0)7825 755688
Director, External Relations and Government Affairs
Finsbury
Faeth Birch
+44 (0)7768 943171
Cautionary note concerning forward-looking statements
This announcement contains statements with respect to the
financial condition, results of operations and business of the
Reckitt Benckiser Group plc group of companies (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; increases or volatility in the cost of raw
materials and commodities; 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
Outlook
Following a strong H1 performance we now expect LFL net revenue
growth of +5-8% (previously towards the upper end of +1-4%). This
reflects OTC and IFCN normalising in H2, disinfection products
performing in line with expectations, and the remainder of the
business growing mid-single digits.
The input environment remains unpredictable. We continue to
expect inflation on our cost of goods sold to remain in the high
teens for the full year, based on current commodity pricing.
In H1 our adjusted operating margin benefitted from favourable
product mix, productivity initiatives, pricing and phasing of
investments . In addition, margins benefited in the half from a
gain on sale of surplus land in Asia (+85bps) plus volume leverage
and mix benefits from the temporary supply shortages of infant
nutrition products in the US.
In H2, we expect Nutrition margins to normalise, a less
favourable phasing of investments and to face a tougher
inflationary environment as more favourable hedge positions
prevailing in the first half are renewed at higher rates impacted
by inflation.
For the full year we now expect growth in operating margins
(previously "in-line with the prior year" (excluding IFCN
China)).
Guidance for interest and capital expenditure and our effective
tax rate remains unchanged from that indicated on 29 April
2022.
We are already delivering sustainable mid-single digit net
revenue growth and remain firmly on track to deliver our
medium-term goal of mid-20s adjusted operating margins by the
mid-2020s.
Group Overview
H1 2022
Group net revenue
-- Group net revenue grew by 8.6% on a LFL basis in H1 with
volume growth of 1.2% and price / mix improvements of 7.4%. Volume
was impacted by lower Lysol, down from Covid peaks, and the
temporary benefit in US IFCN. Excluding Lysol and US IFCN, volumes
remained strong, growing by around 7%. On an IFRS basis, net
revenue grew 4.4%.
-- Growth has been broad-based across the business, with brands
less sensitive to Covid dynamics, representing around 70% of the
portfolio, growing low double digits. Excluding US IFCN, growth was
high-single digits, with strong growth in Finish, Harpic, Vanish,
Nurofen, our VMS portfolio and our emerging markets Nutrition
business.
-- Net revenue growth benefitted from the temporary uplift in
demand for Reckitt US Nutrition products due to the supply
shortages of infant nutrition products in the US. We estimate this
benefit to have added approximately 2.4% to our LFL growth rate in
H1.
-- The supply chain environment in H1 continues to be
challenging, both in terms of logistical availability and certain
raw material constraints. While our supply team works to find
mitigations, we continue to monitor the situation and look to
continue to improve our customer service.
-- The net effect of M&A was a 6.4% reduction in net revenue
in the half, representing the disposal of IFCN China, EnfaBebé in
Argentina, Scholl, E45 and Dermicool, offset by the acquisition of
Biofreeze.
-- FX tailwinds increased net revenue by 2.2% primarily as the
result of a strengthening of the US Dollar against Sterling.
-- eCommerce LFL net revenue grew 19% in the half and represents 13% of Group net revenue.
Group operating margins and profit
-- Adjusted operating profit (excluding IFCN China) in H1 2022
was GBP1,765m (H1 2021: GBP1,425m) at an adjusted operating margin
of 25.6% (H1 2021: 22.7%).
-- The margin accretion of 290bps versus H1 2021 reflects
favourable product mix, productivity initiatives, pricing and
phasing of investments mitigating significant inflation in our cost
base. Margin growth in H1 was aided by an 85bps (GBP59m) benefit
from the gain on sale of surplus land in Asia, and volume leverage
and mix benefit arising from the temporary supply issue of infant
nutrition products in the US.
-- IFRS operating profit was GBP1,745m, versus a loss of
GBP1,828m in 2021 which 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 EPS was 178.6p in H1 2022 (H1 2021: 142.6p),
25.2% higher than H1 2021 driven by higher adjusted operating
profit and the positive impact of foreign exchange. IFRS diluted
total EPS was 187.8p (2021: 241.7p loss).
-- The dividend in H1 2022 is recommended to be 73.0p, in line with H1 2021.
Free cash flow
-- Free cash flow was GBP727m in H1 2022 (H1 2021: GBP520m),
with net working capital levels at -10% as a percentage of 12-month
net revenue (including IFCN China) and cash conversion of 57% on
adjusted net income. Capital investment to support our growth and
margin ambitions was GBP175m, 2.5% of group net revenue (H1 2021:
GBP187m, 2.8% of group net revenue).
Portfolio
-- In the first half of 2022 we completed the sale of our E45
and Dermicool brands for a net cash consideration of around
GBP240m.
Operating Segment Review
Hygiene 42% of net revenue in H1 2022
Net Revenue GBPm Volume Price LFL(1) FX Actual
/ Mix
------------- ------ ------- ------- ------- ------ -------
H1 2022 2,879 -12.0% +6.0% -6.0% +1.1% -4.9%
Q2 2022 1,414 -11.1% +8.6% -2.5% +4.5% +2.0%
------------- ------ ------- ------- ------- ------ -------
Operating Profit GBPm Constant FX (CER)(1) Actual
--------------------------------------- ------ --------------------- --------
Adjusted Operating Profit(1) 621 -21.9% -19.8 %
Adjusted Operating Profit Margin(1) % 21.6% -400bps
--------------------------------------- ------ --------------------- --------
(1) Adjusted measures are defined on page 25
Hygiene net revenue was -6.0% on a like-for-like basis (grew by
+6.3% excluding Lysol) in H1 with strong, broad-based growth across
our core brands, offset by Lysol, down as expected due to tough
comparatives, consumption normalisation and some reduction in
retailer inventory levels. Volume was -12.0% (due to Lysol) and
price / mix improvements of +6.0% reflects the impact of pricing,
partially offset by the normalisation of Lysol trade
initiatives.
41% of Core Hygiene CMUs (weighted by net revenue) held or
gained market share (H1 2022 versus H1 2021) with share gains in
Air Wick, Finish, Mortein and Harpic. Lysol saw share gain in the
core disinfection spray category, as well as the laundry sanitiser
segment, offset by a reduction in wipes which is lapping a branded
competitor's distribution challenges last year.
By brand, Lysol net revenue is over 50% higher than pre-pandemic
levels driven by expansion in both core and new markets and
adjacent categories over the past two years, and as consumers
continue to exhibit elevated hygiene behaviours. We continue to
focus on new demand spaces, with innovation across the "On the Go"
range and accelerating penetration of Laundry Sanitisers. In
addition, we launched new fragrances in our Lysol "Neutra Air" and
"Brand New Day" portfolios. Versus the prior year Lysol was down in
line with expectations by around 30% (in both Q2 and H1), following
strong growth in H1 2021.
Finish net revenue grew high-single digits with particularly
strong growth across Europe and Developing markets underpinned by
our latest Finish Quantum "All in 1" innovation, delivering better
performance to mid-tier consumers, leveraging thermoforming
technology to deliver higher quality and more sustainable auto-dish
solutions.
Air Wick net revenue was broadly flat, with strong market shares
gains and innovation offsetting weak market conditions which lap a
high base. Net revenue remains well above 2019 levels as consumers
continue to spend more time at home than pre-pandemic. Our Liquid
Electrical range has benefitted from strong innovation with both
new fragrances to address the growing trend of authentic, natural
fragrances as well as larger pack sizes to offer consumers better
value for money.
Vanish net revenue grew low-teens as consumers return to a more
normalised environment versus the prior year, and strong market and
distribution gains in a number of key markets.
Harpic net revenue grew mid-teens with strong growth in emerging
markets, driven by market share gains, innovation, such as our new
thicker Harpic Power Plus, a 20% more viscous liquid with better
cleaning performance.
Our pest business delivered high-single digit growth driven by
penetration growth and the launch of innovations.
Adjusted operating profit for Hygiene at GBP621m was down 21.9%
on a constant FX basis. Adjusted operating margin was 21.6%, 400bps
lower than last year due to significant inflationary increases
impacting the COGS base and lapping strong Lysol comparatives,
partially offset by pricing and productivity.
Second Quarter Performance
Net revenue was -2.5% (grew by +8.9% excluding Lysol) on a
like-for-like basis in the second quarter, with strong trading
across most brands and major markets. Volume declined by -11.1%,
mostly on Lysol, while price / mix grew by +8.6%.
Lysol US consumption remained strong between 50% to 65% above
pre-pandemic levels. Whilst consumption was down year-on-year for
the quarter due to strong comparatives, this returned to growth in
June driven by growth in Lysol bathroom and kitchen products,
multi-purpose cleaners and laundry sanitisers.
Lysol net revenue was down by around 30% compared to the prior
year, due to tough comparatives and adjustments in retailer
inventory levels. We expect some further retailer inventory
normalisation during H2.
Finish, Harpic and Vanish continued to show strong momentum in
the quarter, led by innovation (Finish Quantum, Harpic Power Plus
and Aeroguard Insect Repellent) combined with penetration
improvements and market share gains.
Health 41% of net revenue in H1 2022
Net Revenue GBPm Volume Price LFL(1) Net M&A FX Actual
/ Mix
------------ ----- ------ ------ ------ ------- ----- ------
H1 2022 2,820 +15.3% +7.1% +22.4% -3.0% +2.2% +21.6%
Q2 2022 1,418 +15.1% +9.1% +24.2% -2.6% +6.4% +28.0%
------------ ----- ------ ------ ------ ------- ----- ------
Operating Profit GBPm Constant FX (CER)(1) Actual
--------------------------------------- ------ --------------------- ---------
Adjusted Operating Profit(1) 799 +61.1% +66.5%
Adjusted Operating Profit Margin(1) % 28.3% +760 bps
--------------------------------------- ------ --------------------- ---------
(1) Adjusted measures are defined on page 25
Health net revenue grew 22.4% on a LFL basis in H1 to GBP2,820m.
This reflected volume growth of 15.3% and price / mix improvements
of 7.1%, with mix benefitting from a strong OTC performance.
54% of Core Health CMUs held or gained market share with gains
across cold and flu, intimate wellness and most disinfection
markets.
OTC net revenue grew over 60% in H1 due to the combination of
Omicron, a cold and flu season against a weak comparator for
Mucinex and Strepsils, plus significant market share gains across
the portfolio. Recent launches including Mucinex Instasoothe, the
brand's first entry into the sore throat relief segment, has gained
significant market share since its launch at the end of 2021. Our
recent innovation, Nurofen Meltlets, have also made a strong
start.
Our Intimate Wellness portfolio grew mid-single digits in H1
resulting from a continued renewed focus on execution, innovation
and investment behind omnichannel growth. Growth was impacted in
the latter part of H1 due to Covid related lockdowns in parts of
mainland China. Durex has recently launched its softest
polyurethane condom driving superior comfort, fit, and sensation to
maximise the consumer's sensorial experience.
Dettol net revenue declined low-single digits in H1, as it laps
tough comparators, but continues to stabilise at around 40% above
pre-pandemic levels. Growth returned in Q2, underpinned by
innovation such as Dettol Tru Protect 4in1 laundry pods, with germ
protection, cleaning power, softness and colour protection.
Our Vitamins, Minerals and Supplements grew double digits,
driven by strong growth in Move Free in China, continued
penetration growth in our cognitive health brand, Neuriva, in the
US and our immunity support brand, Airborne.
Our personal care portfolio grew by mid-single digits. We have
recently launched our new Veet Intimate kit for men, enabling
improved hair removal solutions.
The net effect of M&A was a 3.0% reduction in net revenue in
H1, representing the disposal of Scholl, Dermicool and E45, offset
by the acquisition of Biofreeze.
Adjusted operating profit for Health at GBP799m was up 61.1% on
a constant FX basis. Adjusted operating margin was 28.3%, up 760
basis points year on year. Growth was driven by favourable mix from
a strong OTC performance, volume leverage and pricing.
Second Quarter Performance
Net revenue increased by 24.2% on a like-for-like basis in Q2
driven by a 15.1% increase in volume and a 9.1% improvement in
price / mix. Growth was broad-based and led by OTC which saw
continued trends consistent with Q1 and strong growth in Mucinex,
Strepsils and Nurofen. Our Intimate Wellness portfolio grew by
mid-single digits, with China down, due to Covid related lockdowns.
Dettol grew by mid-single digits with strong growth in China, and
our VMS portfolio also delivered strong growth across both the US
and China.
Nutrition 17% of net revenue in H1 2022
Net Revenue GBPm Volume Price LFL(1) Net M&A FX Actual
/ Mix
------------ ----- ------ ------ ------ ------- ----- ------
H1 2022 1,189 +10.7% +12.9% +23.6% -33.3% +4.7% -5.0%
Q2 2022 632 +12.3% +14.5% +26.8% -29.6% +8.5% +5.7%
------------ ----- ------ ------ ------ ------- ----- ------
Operating Profit GBPm Constant FX (CER)(1) Actual
Adjusted Operating Profit(1) 345 +97.6% +102.9%
Adjusted Operating Profit Margin(1) % 29.0% +1,540 bps
Adjusted Operating Profit Margin 29.0% +1,060bps
(ex IFCN China) %
--------------------------------------- ------ --------------------- -----------
(1) Adjusted measures are defined on page 25
Nutrition net revenue grew 23.6% on a LFL basis to GBP1,189m.
This reflected volume growth of 10.7% and price / mix improvements
of 12.9% (which includes c.7.5% of gross price).
The benefit from competitor supply issues is estimated to be
16.1% in the first half, reflected across both volume and
price/mix. This growth was driven by a combination of substitution
purchases in the absence of competitor product availability in
store, consumers building up 'safety stocks' out of concerns on
availability and additional WIC sales, which do not incur rebate
claims from the US government.
95% of Core Nutrition CMUs held or gained market share with
particularly strong share gains across the US and Canada.
IFCN US net revenue grew around 40% on a LFL basis, with strong
growth in both our core Enfa and specialty brands. Significant
market share growth was driven by strong execution in response to
increased demand.
Our focus remains doing everything possible to put more infant
formula on shelves, addressing concerns of parents across the US,
while safeguarding the highest levels of quality. We have recently
been granted a temporary import approval by the Food and Drug
Administration (FDA) which enables us to import additional infant
formula supplies into the US from our manufacturing facilities in
Singapore.
We understand that the temporary supply disruptions in the US
will likely reduce in the coming weeks. As a result we expect both
the competitive environment to intensify and the temporary benefits
from additional WIC sales for which Reckitt will not incur rebates
claims from the Government, to dissipate. We therefore expect to
exit 2022 in the US with a larger, stronger business, but with more
normalised sales volumes and operating profit margins.
Latin America and ASEAN both grew high-single-digits in H1,
driven by improved in-market execution and increased expert
recommendations for our products. Growth was broad-based across
markets and our product base of core infant formula, specialty and
adult products.
The net effect of M&A was a 33.3% reduction in net revenue
in H1, representing the disposal of IFCN China and EnfaBeb é in
Argentina.
Adjusted operating profit for Nutrition at GBP345m was 97.6%
higher on a constant FX basis. Adjusted operating margin was 29.0%,
up 1,540 basis points year on year reflecting a 480bps benefit from
the exclusion of IFCN China, a 500bps benefit from a gain on sale
of surplus land in Asia, plus the combination of strong volume
leverage, positive mix benefits in the US and responsible pricing,
more than offsetting a high inflationary impact on the cost base.
We expect operating margins to normalise as we exit 2022 due to the
expected resolution of competitor supply issues, and their
increased investment to regain market share.
Second Quarter Performance
Nutrition net revenue grew by 26.8% on a LFL basis in the
quarter as trends seen in Q1 continue in Q2. The US business grew
by around 40% as competitor supply issues continue, and the
recovery in our Latin America and ASEAN business maintains
momentum.
Performance by Geography
GBPm Volume Price / Mix LFL(1) Net M&A FX Actual
H1 2022
------------------- ----- ------ ----------- ------ ------- ------ ------
North America 2,256 -4.4% +7.7% +3.3% +1.8% +7.2% +12.3%
Europe / ANZ 2,215 +7.5% +5.4% +12.9% -3.9% -4.3% +4.7%
Developing Markets 2,417 -0.1% +9.6% +9.5% -15.5% +3.7% -2.3%
------------------- ----- ------ ----------- ------ ------- ------ ------
Total 6,888 +1.2% +7.4% +8.6% -6.4% +2.2% +4.4%
------------------- ----- ------ ----------- ------ ------- ------ ------
Q2 2022
------------------- ----- ------ ----------- ------ ------- ------ ------
North America 1,102 -3.9% +7.8% +3.9% +2.3% +12.0% +18.2%
Europe / ANZ 1,108 +9.4% +8.6% +18.0% -3.8% -1.3% +12.9%
Developing Markets 1,254 +1.1% +12.3% +13.4% -14.2% +7.2% +6.4%
------------------- ----- ------ ----------- ------ ------- ------ ------
Total 3,464 +2.2% +9.7% +11.9% -5.8% +5.9% +12.0%
------------------- ----- ------ ----------- ------ ------- ------ ------
(1) Adjusted measures are defined on page 25
North America H1 net revenue grew 3.3% on a LFL basis, with
strong growth in our IFCN, OTC and VMS portfolios, offset by the
expected performance in Lysol given the tough comparative base.
Europe / ANZ H1 net revenue grew 12.9% on a LFL basis. Growth
was broad-based with every main market in growth. Growth was
broad-based across the product portfolio, with Finish, Lysol,
Vanish, Nurofen and Strepsils growing double-digit.
Developing markets H1 net revenue grew 9.5% on a LFL basis, with
each of our regions in growth. Each of our GBUs (Hygiene, Health
and Nutrition) grew around double-digits in the half. Growth was
particularly strong in Greater China, led by Dettol and our VMS
portfolio.
Other Matters
Russia
On 13 April 2022, Reckitt announced it had begun a process aimed
at transferring ownership of its Russian business, which may
include a transfer to a third party or to local employees. The net
assets of the Russian business at 30 June 2022 were c.GBP260m and
on disposal foreign exchange losses of c.GBP40m would be recycled
to the income statement. At 30 June 2022 the assets and liabilities
had not met the criteria to be reclassified as held for sale.
Detailed financial review - six months ended 30 June 2022
The following section should be read in conjunction with the
condensed financial statements and the adjusted and other non-IFRS
measures, definitions and terms section.
Group operating profit
Adjusted operating profit was GBP1,765m (2021: GBP1,424m) at an
adjusted operating margin of 25.6%, 400bps higher than the prior
year (2021: 21.6%) or 290bps higher excluding IFCN China. The
margin improvement reflects favourable product mix, productivity
initiatives, pricing and phasing of investments mitigating
significant inflation in our cost base. Margin growth in the first
half was aided by a GBP59m benefit (+85bps) from a gain on sale of
surplus land in Asia, and a volume and mix benefit arising from the
temporary supply issue of infant nutrition products in the US.
IFRS operating profit was GBP1,745m (2021: GBP1,828m IFRS
operating loss) at an IFRS operating margin of 25.3% (2021:
-27.7%). IFRS operating loss in 2021 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.
Net finance expense
Adjusted net finance expense was GBP110m (2021: GBP116m). The
decrease is due to lower average net debt and the impact of higher
interest rates on the Group's deposits.
IFRS net finance expense of GBP33m (2021: GBP115m) includes
GBP69m of reclassified translational foreign exchange gains
resulting from the liquidation of a number of subsidiaries to
simplify the Group's legal entity structure (2021: GBPnil).
Tax
The adjusted effective tax rate ('ETR') was 21.1% (2021: 22.0%)
reflecting the reassessment of uncertain tax positions following
progress on and conclusions of tax authority audits.
The IFRS tax rate for the six months to 30 June 2022 is 19.8%
(2021: 9.8%). The IFRS ETR in 2022 reflects the reassessment of
uncertain tax positions following progress on and conclusions of
tax authority audits. The IFRS tax charge in 2022 benefits from
largely non-taxable gains on sale of E45 and foreign exchange gains
on liquidation of subsidiaries. The IFRS ETR 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.
Discontinued operations
Income from discontinued operations was GBPnil (2021: GBP29m).
Income from discontinued operations in 2021 represented 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)
Total adjusted diluted EPS was 178.6p (2021: 142.6p), the
increase of 36.0p or 25.2% was driven by higher adjusted operating
profit and the positive impact of foreign exchange.
Total IFRS diluted EPS was 187.8p (2021: loss per share of
241.7p). The loss per share in 2021 resulted from the post-tax loss
of GBP2.4bn on re-measurement of IFCN China to its fair value.
Balance sheet
At 30 June 2022, the Group had total equity of GBP8,972m (31
December 2021: GBP7,453m).
Current assets of GBP5,550m (31 December 2021: GBP4,862m)
increased by GBP688m, due to higher trade receivables and
inventories, reflecting strong business growth in the first half of
2022.
Current liabilities of GBP7,939m (31 December 2021: GBP8,088m)
decreased by GBP149m. The repayment of GBP2.4bn ($3.2bn) of bonds
which matured in the first half of 2022 has been offset by the
issuance of new commercial paper of GBP2.1bn.
Non-current assets of GBP23,455m (31 December 2021: GBP21,941m)
primarily comprise of goodwill and other intangible assets of
GBP20,282m (31 December 2021: GBP18,868m) and property, plant and
equipment. The increase of GBP1,514m is predominantly due to the
foreign exchange retranslation of USD-denominated assets.
Non-current liabilities of GBP12,095m (31 December 2021:
GBP11,405m) have increased by GBP690m. This is principally due to
the adverse foreign exchange movements on USD-denominated debt.
Net working capital
During the period, net working capital increased by GBP547m from
negative GBP1,882m to negative GBP1,335m. Net working capital as a
percentage of 12-month net revenue (incl. IFCN China) is -10% (31
December 2021: -14%) due to higher trade receivables and
inventories, and lower payables following the settlement of
variable pay liabilities.
Cash Flow
30 Jun 30 Jun
2022 2021
GBPm GBPm
Adjusted Operating Profit 1,765 1,424
Depreciation, share based payments and gain on disposal of fixed assets (net of proceeds) 238 197
Capital expenditure (175) (187)
Movement in working capital and provisions (592) (416)
Cash flow in relation to adjusting items (24) (26)
Interest paid (113) (105)
Tax paid (372) (367)
------------------------------------------------------------------------------------------- ------- -------
Free Cash Flow 727 520
Free Cash Flow Conversion 57% 51%
------------------------------------------------------------------------------------------- ------- -------
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 57% (2021: 51%) as a result of the effect of adverse movements
in working capital in the first half of 2022.
Net cash generated from operating activities has increased by
GBP125m to GBP837m (2021: GBP712m), as higher profitability has
been offset by the movement in net working capital.
Net debt
30 Jun 30 Jun
2022 2021
GBPm GBPm
Opening net debt (8,378) (8,954)
Free cashflow 727 520
Shares reissued 37 57
Acquisitions, disposals and purchase of investments 217 87
Dividends paid (745) (739)
New lease liabilities in the period (30) (85)
Exchange and other movements (416) 25
Cash flow attributable to discontinued operations 6 5
----------------------------------------------------- -------- --------
Closing net debt (8,582) (9,084)
----------------------------------------------------- -------- --------
At 30 June 2022 net debt was GBP8,582m, an increase of GBP204m
from 31 December 2021, as higher free cash flow and proceeds from
the disposal of brands were offset by unfavourable foreign exchange
movements on USD-denominated debt .
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 2021:
GBP4,500m), 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 2022 dividend of
73.0 pence (2021: 73.0 pence), consistent with its policy and
guidance from February 2020. The ex-dividend date will be 4 August
2022 and the dividend will be paid on 14 September 2022 to
shareholders on the register at the record date of 5 August 2022.
The last date for election for the share alternative to the
dividend is 23 August 2022.
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 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 return surplus cash to shareholders as appropriate.
Principal Risks And Uncertainties
The Group's principal risks and uncertainties are detailed on
pages 88-102 of the Annual Report for the year ended 31 December
2021. The headings for these risks are listed below:
-- 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 and Compliance: Tax disputes, product regulations,
legal & compliance, and South Korea Humidifier Sanitiser
(HS)
-- Other: 'Black Swan' event.
The Group's emerging risks included geopolitical, sector
consolidation, emergence of environmental tax instruments and
science and technology "disruptors".
In 2021 the Group reported a further emerging risk titled
'Economic Volatility in a post-Covid-19 World'. In light of
changing market conditions over the last 6-12 months, this risk has
now been elevated to become a new principal risk. The risk
addresses the economic challenges that we are currently facing or
may face in the future and includes: increasing commodity prices,
most acutely energy costs; rising inflation; volatility in global
trade and financial markets; and the impact of changing local
economic conditions. The risk also acknowledges the current crisis
in Ukraine/Russia, specifically the likelihood of further price
rises attributed to the conflict and the impact of sanctions on
financial markets. We have taken, and continue to take, appropriate
measures to mitigate any adverse impacts arising during periods of
volatility. These include leveraging the strength of our brands to
balance price and volume-led growth and using the benefits from
productivity and investment programmes to offset inflation and make
the business more resilient.
The nature and potential impact of the other principal and
emerging risks remain essentially unchanged for the second half of
2022.
Half Year Condensed Financial Statements
Group Income Statement Six months
For the six months ended 30 June 2022 ended
30 June 30 June
2022 2021
Note GBPm GBPm
------------------------------------------------------ ---- ------- -------
Net Revenue 6,888 6,598
Cost of sales (2,886) (2,784)
------------------------------------------------------ ---- ------- -------
Gross profit 4,002 3,814
Gains/(losses) on assets held for sale and disposal
of goodwill and brands 14 14 (3,199)
Other net operating expenses (2,271) (2,443)
------------------------------------------------------ ---- ------- -------
Net operating expenses (2,257) (5,642)
------------------------------------------------------ ---- ------- -------
Operating profit/(loss) 1,745 (1,828)
------------------------------------------------------ ---- ------- -------
Foreign exchange gains on liquidation of subsidiaries 69 -
Other net finance expense (102) (115)
------------------------------------------------------ ---- ------- -------
Net finance expense 5 (33) (115)
Impairment of equity-accounted investments (19) -
Share of loss of equity-accounted investees, net of
tax (2) (1)
------------------------------------------------------ ---- ------- -------
Profit/(loss) before income tax 1,691 (1,944)
------------------------------------------------------ ---- ------- -------
Income tax (charge)/credit 6 (335) 191
------------------------------------------------------ ---- ------- -------
Net income/(loss) from continuing operations 1,356 (1,753)
------------------------------------------------------ ---- ------- -------
Net income from discontinued operations - 29
------------------------------------------------------ ---- ------- -------
Net income/(loss) 1,356 (1,724)
------------------------------------------------------ ---- ------- -------
Attributable to non-controlling interests 10 1
Attributable to owners of the parent company 1,346 (1,725)
------------------------------------------------------ ---- ------- -------
Net income/(loss) 1,356 (1,724)
------------------------------------------------------ ---- ------- -------
Basic earnings/(loss) per ordinary share
From continuing operations (pence) 7 188.3 (245.8)
From discontinued operations (pence) 7 - 4.1
------------------------------------------------------ ---- ------- -------
From total operations (pence) 188.3 (241.7)
------------------------------------------------------ ---- ------- -------
Diluted earnings/(loss) per ordinary share
From continuing operations (pence) 7 187.8 (245.8)
From discontinued operations (pence) 7 - 4.1
------------------------------------------------------ ---- ------- -------
From total operations (pence) 187.8 (241.7)
------------------------------------------------------ ---- ------- -------
Group Statement of Comprehensive Income
For the six months ended 30 June 2022 Six months ended
30 June 30 June
2022 2021
GBPm GBPm
-------------------------------------------------------- -------- --------
Net income/(loss) 1,356 (1,724)
Other comprehensive income/(expense)
Items that are or may be reclassified to income
statement in subsequent years
Net exchange gains/(losses) on foreign currency
translation, net of tax 1,049 (319)
(Losses)/gains on net investment hedges, net of
tax (72) 63
(Losses)/gains on cash flow hedges, net of tax (22) 3
Reclassification of foreign currency translation
reserves on disposal or liquidation
of foreign operations, net of tax (59) 21
--------------------------------------------------------- -------- --------
896 (232)
-------------------------------------------------------- -------- --------
Items that will not be reclassified to income statement
in subsequent years
Remeasurements of defined benefit pension plans,
net of tax 3 37
Revaluation of equity instruments - FVOCI (56) 3
--------------------------------------------------------- -------- --------
(53) 40
-------------------------------------------------------- -------- --------
Other comprehensive income/(expense), net of tax 843 (192)
--------------------------------------------------------- -------- --------
Total comprehensive income/(expense) 2,199 (1,916)
--------------------------------------------------------- -------- --------
Attributable to non-controlling interests 12 1
Attributable to owners of the parent company 2,187 (1,917)
--------------------------------------------------------- -------- --------
Total comprehensive income/(expense) 2,199 (1,916)
--------------------------------------------------------- -------- --------
Total comprehensive income/(expense) attributable
to owners of the parent company
arising from:
Continuing operations 2,187 (1,946)
Discontinued operations - 29
--------------------------------------------------------- -------- --------
2,187 (1,917)
-------------------------------------------------------- -------- --------
30 June 31 December
Group Balance Sheet 2022 2021
As at 30 June 2022 Note GBPm GBPm
--------------------------------------------- ---- -------------------- -----------
ASSETS
Non-current assets
Goodwill and other intangible assets 20,282 18,868
Property, plant and equipment 2,332 2,178
Equity instruments 117 194
Deferred tax assets 222 197
Retirement benefit surplus 324 355
Other non-current receivables 178 149
--------------------------------------------- ---- -------------------- -----------
Total non-current assets 23,455 21,941
--------------------------------------------- ---- -------------------- -----------
Current assets
Inventories 1,799 1,459
Trade and other receivables 2,201 1,926
Derivative financial instruments 85 61
Current tax recoverable 179 155
Cash and cash equivalents 1,286 1,261
--------------------------------------------- ---- -------------------- -----------
Total current assets 5,550 4,862
Assets held for sale 1 143
--------------------------------------------- ---- -------------------- -----------
Total assets 29,006 26,946
--------------------------------------------- ---- -------------------- -----------
LIABILITIES
Current liabilities
Short-term borrowings 8 (2,199) (2,485)
Provisions for liabilities and charges (199) (191)
Trade and other payables (5,335) (5,267)
Derivative financial instruments (50) (52)
Current tax liabilities (156) (93)
--------------------------------------------- ---- -------------------- -----------
Total current liabilities (7,939) (8,088)
Non-current liabilities
Long-term borrowings 8 (7,530) (7,078)
Deferred tax liabilities (2,996) (2,806)
Retirement benefit obligations (304) (318)
Provisions for liabilities and charges (54) (44)
Non-current tax liabilities (784) (826)
Other non-current liabilities (427) (333)
--------------------------------------------- ---- -------------------- -----------
Total non-current liabilities (12,095) (11,405)
--------------------------------------------- ---- -------------------- -----------
Total liabilities (20,034) (19,493)
--------------------------------------------- ---- -------------------- -----------
Net assets 8,972 7,453
--------------------------------------------- ---- -------------------- -----------
EQUITY
Capital and reserves
Share capital 9 74 74
Share premium 253 253
Merger reserve (14,229) (14,229)
Other reserves (295) (1,189)
Retained earnings 23,122 22,490
--------------------------------------------- ---- -------------------- -----------
Attributable to owners of the parent company 8,925 7,399
Attributable to non-controlling interests 47 54
--------------------------------------------- ---- -------------------- -----------
Total equity 8,972 7,453
--------------------------------------------- ---- -------------------- -----------
Group Statement of Changes in Equity
For the six months ended 30 June 2022
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
2021 74 252 (14,229) (379) 23,397 9,115 44 9,159
------------------------ -------- -------- --------- --------- --------- ------------- ------------ --------
Comprehensive income
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
------------------------ -------- -------- --------- --------- --------- ------------- ------------ --------
Balance at 1 January
2022 74 253 (14,229) (1,189) 22,490 7,399 54 7,453
------------------------ -------- -------- --------- --------- --------- ------------- ------------ --------
Net income - - - - 1,346 1,346 10 1,356
Other comprehensive
income - - - 894 (53) 841 2 843
------------------------ -------- -------- --------- --------- --------- ------------- ------------ --------
Total comprehensive
income - - - 894 1,293 2,187 12 2,199
------------------------ -------- -------- --------- --------- --------- ------------- ------------ --------
Transactions with
owners
Treasury shares
re-issued - - - - 37 37 - 37
Share-based payments - - - - 27 27 - 27
Tax on share awards - - - - 1 1 - 1
Cash dividends - - - - (726) (726) (19) (745)
Total transactions
with owners - - - - (661) (661) (19) (680)
------------------------ -------- -------- --------- --------- --------- ------------- ------------ --------
Balance at 30 June
2022 74 253 (14,229) (295) 23,122 8,925 47 8,972
------------------------ -------- -------- --------- --------- --------- ------------- ------------ --------
Group Cash Flow Statement
For the six months ended 30 June 2022 Six months ended
30 June 30 June
2022 2021
Note GBPm GBPm
------------------------------------------------------- ---- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Operating profit/(loss) from continuing operations 1,745 (1,828)
(Profit)/loss on sale of property, plant and equipment
and intangible assets (86) 152
Depreciation, amortisation, and impairment 223 216
Remeasurement of disposal group held for sale - 2,984
Share-based payments 27 19
Increase in inventories (213) (98)
(Increase)/decrease in trade and other receivables (158) 43
Decrease in payables and provisions (222) (309)
Cash generated from continuing operations 1,316 1,179
Interest paid (131) (119)
Interest received 18 14
Tax paid (372) (367)
Net cash flows attributable to discontinued operations 6 5
------------------------------------------------------- ---- -------- --------
Net cash generated from operating activities 837 712
------------------------------------------------------- ---- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Disposal proceeds from sale of brands 243 252
Purchase of property, plant and equipment (143) (158)
Purchase of intangible assets (32) (29)
Proceeds from sale of property, plant and equipment 71 -
Acquisition of businesses, net of cash acquired (12) (144)
Other investing activities (14) (21)
Net cash generated from/(used in) investing activities 113 (100)
------------------------------------------------------- ---- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Treasury shares re-issued 37 57
Proceeds from borrowings 2,345 522
Repayment of borrowings (2,934) (348)
Dividends paid to owners of the parent company 10 (726) (725)
Dividends paid to non-controlling interests (19) (14)
Other financing activities 325 (160)
------------------------------------------------------- ---- -------- --------
Net cash used in financing activities (972) (668)
------------------------------------------------------- ---- -------- --------
Net decrease in cash and cash equivalents (22) (56)
Cash and cash equivalents at beginning of the year 1,259 1,644
Exchange gains/(losses) 48 (30)
------------------------------------------------------- ---- -------- --------
Cash and cash equivalents at end of the year 1,285 1,558
------------------------------------------------------- ---- -------- --------
Cash and cash equivalents comprise:
Cash and cash equivalents per the balance sheet 1,286 1,478
Cash and cash equivalents within assets held for
sale - 81
Overdrafts (1) (1)
------------------------------------------------------- ---- -------- --------
1,285 1,558
------------------------------------------------------- ---- -------- --------
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
2022 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 2022. The Half Year Condensed
Financial Statements have been reviewed by our independent auditor
KPMG LLP (see page 31).
2. Basis of Preparation
The Half Year Condensed Financial Statements for the six months
ended 30 June 2022 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 2022 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 have 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 2021 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 2021 were also in compliance with UK-adopted International
Accounting Standards and in compliance with International Financial
Reporting Standards as issued by the International Accounting
Standards Board (IASB).
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 2021 were approved by the Board of Directors on 13 April
2022 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 210-216 of the Annual Report and Financial
Statements for the year ended 31 December 2021.
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 2021.
The following amended standards and interpretations were adopted
by the Group on 1 January 2022. They have not had a significant
impact on the Group Financial Statements.
-- Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37).
-- Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16).
-- Annual Improvements to IFRS Standards 2018-2020
-- Reference to the Conceptual Framework (Amendments to IFRS 3)
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. On 1
January 2022, the Vitamins, Minerals and Supplements (VMS) business
was moved from Nutrition to Health, and operating segment
information relating to prior periods has been accordingly
restated.
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 2022 and 30 June 2021 is as follows:
Adjusting
Hygiene Health Nutrition(1) items Total
Six months ended 30 June 2022 GBPm GBPm GBPm GBPm GBPm
------------------------------------------- ------- ------ ------------ ---------- -----
Net Revenue 2,879 2,820 1,189 - 6,888
-------------------------------------------- ------- ------ ------------ ---------- -----
Operating profit 621 799 345 (20) 1,745
Net finance expense (33)
Impairment of equity-accounted investments (19)
Share of loss of equity-accounted
investees, net of tax (2)
-------------------------------------------- ------- ------ ------------ ---------- -----
Profit before income tax 1,691
Income tax charge (335)
-------------------------------------------- ------- ------ ------------ ---------- -----
Net income from continuing operations 1,356
-------------------------------------------- ------- ------ ------------ ---------- -----
Adjusting
Six months ended 30 June 2021 (restated) Hygiene Health Nutrition(2) items Total
(1) GBPm GBPm GBPm GBPm GBPm
----------------------------------------- -------- ------ ------------ --------- -------
Net Revenue 3,027 2,320 1,251 - 6,598
----------------------------------------- -------- ------ ------------ --------- -------
Operating profit/(loss) 774 480 170 (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)
----------------------------------------- -------- ------ ------------ --------- -------
(1) Segmental information for the six months ended 30 June 2021
has been restated to reflect the Group's current operating
segments, the composition of which changed with effect from 1
January 2022 when the Vitamins, Minerals and Supplements (VMS)
business was moved from Nutrition to Health.
(2) Following the start of the strategic review of IFCN China,
the CODM also reviewed financial information for net revenue and
adjusted operating profit excluding IFCN China. In the six months
ended 30 June 2021, Nutrition net revenue excluding IFCN China was
GBP927 million and Nutrition adjusted operating profit excluding
IFCN China was GBP171 million.
Financial information for the Hygiene, Health and Nutrition
operating segments is presented on an adjusted basis which excludes
certain cash and non-cash items. These items have a pattern of
recognition that is largely uncorrelated with the trading
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. Further detail on
adjusting items is included on page 25.
5. Net finance expense
30 June 30 June
2022 2021
GBPm GBPm
----------------------------------------------------------- ------- -------
Foreign exchange gain on liquidation of subsidiaries
Gains on liquidation 69 -
----------------------------------------------------------- ------- -------
Total foreign exchange gain on liquidation of subsidiaries 69 -
----------------------------------------------------------- ------- -------
Other net finance expense
Finance income 17 10
Finance expense (119) (125)
----------------------------------------------------------- ------- -------
Other net finance expense (102) (115)
----------------------------------------------------------- ------- -------
Net finance expense (33) (115)
----------------------------------------------------------- ------- -------
As a result of the simplification of the Group's legal entity
structure, a number of entities were liquidated and the cumulative
foreign exchange reserves were recycled to the Income Statement,
resulting in foreign exchange gains of GBP69 million (2021:
GBPnil).
6. Income Tax
The IFRS tax rate for the six months to 30 June 2022 is 19.8%
(2021: 9.8%). Income tax expense is recognised based on
management's best estimate of the effective tax rate ("ETR")
expected for the full year. The IFRS ETR in 2022 reflects the
reassessment of uncertain tax positions following progress on and
conclusions of tax authority audits. The IFRS tax charge in 2022
benefits from largely non-taxable gains on sale of E45 and foreign
exchange gains on liquidation of subsidiaries.
The IFRS ETR 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.
7. Earnings per share
Six months ended
30 June 30 June
2022 2021
pence pence
---------------------------------------- -------- --------
Basic earnings/(loss) per share
From continuing operations 188.3 (245.8)
From discontinued operations - 4.1
---------------------------------------- -------- --------
Total basic earnings/(loss) per share 188.3 (241.7)
Diluted earnings/(loss) per share
From continuing operations 187.8 (245.8)
From discontinued operations - 4.1
---------------------------------------- -------- --------
Total diluted earnings/(loss) per share 187.8 (241.7)
Basic
Basic earnings/(loss) per share is calculated by dividing the
net income/(loss) attributable to owners of the parent company from
continuing operations (2022: GBP1,346 million income; 2021:
GBP1,754 million loss) and discontinued operations (2022: GBPnil;
2021: GBP29 million income) by the weighted average number of
ordinary shares in issue during the period (2022: 714.9 million;
2021: 713.7 million).
Diluted
Diluted earnings/(loss) 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. As at 30 June 2022, there were 12.8 million (30 June 2021: not
applicable) Executive Share Awards and 2.4 million (30 June 2021:
not applicable) Employee Sharesave Scheme Options excluded from the
dilution because the exercise price for the options was greater
than the average share price for the year or the performance
criteria have not been met.
Six months ended
30 June 30 June
2022 2021
Average Average
number number
of shares of shares
million million
----------------------------------------------------------- ---------- ----------
On a basic basis 714.9 713.7
Dilution for Executive Share Awards (1) 1.4 -
Dilution for Employee Sharesave Scheme Options outstanding
(1) 0.3 -
----------------------------------------------------------- ---------- ----------
On a diluted basis 716.6 713.7
----------------------------------------------------------- ---------- ----------
(1) As there was a loss in the six months ended 30 June 2021,
the effect of potentially dilutive shares was anti-dilutive.
8. Financial Liabilities - Borrowings
30 June 31 December
2022 2021
GBPm GBPm
------------------------------------------------------- -------- ------------
Bank loans and overdrafts 26 22
Commercial paper 2,103 -
Bonds - 2,401
Lease liabilities 70 62
-------------------------------------------------------- -------- ------------
Total short-term borrowings 2,199 2,485
-------------------------------------------------------- -------- ------------
Bonds 5,876 5,568
Senior notes 1,363 1,229
Other non-current borrowings 22 15
Lease liabilities 269 266
-------------------------------------------------------- -------- ------------
Total long-term borrowings 7,530 7,078
-------------------------------------------------------- -------- ------------
Total borrowings 9,729 9,563
-------------------------------------------------------- -------- ------------
Derivative financial Instruments 139 76
Less overdrafts presented in cash and cash equivalents
in the cash flow statement (1) (2)
-------------------------------------------------------- -------- ------------
Total financing liabilities 9,867 9,637
-------------------------------------------------------- -------- ------------
At 30 June 2022, the Group has GBP4.5 billion (31 December 2021:
GBP4.5 billion) of committed borrowing facilities remaining which
were undrawn as at 30 June 2022. 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
2022 2021
Undrawn committed borrowing facilities GBPm GBPm
--------------------------------------- -------- ------------
Expiring within two years 1,000 1,000
Expiring after more than two years 3,500 3,500
---------------------------------------- -------- ------------
4,500 4,500
--------------------------------------- -------- ------------
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 2021 736,535,179 74
---------------------- ----------- -------
At 30 June 2022 736,535,179 74
---------------------- ----------- -------
At 30 June 2022, issued ordinary shares were 736,535,179 (31
December 2021: 736,535,179), of which 21,102,000 shares were held
as Treasury shares (31 December 2021: 22,122,980). All shares were
fully paid.
10. Dividends
A final dividend of 101.6 pence per share for the year ended 31
December 2021 was paid on 9 June 2022 to Shareholders who were on
the register on 29 April 2022, amounting to GBP726 million.
The Directors have declared an interim dividend of 73.0 pence
per share in respect of the year ending 31 December 2022 which will
absorb an estimated GBP522 million of shareholders' funds. It will
be paid on 14 September 2022 to shareholders who are on the
register on 5 August 2022.
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 2021: GBP75 million) in relation to the HS issue in South
Korea.
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 2022
Assets as per the Balance Sheet
Derivative financial instruments - FX forward exchange
contracts - 85 - 85
Equity instruments - FVOCI 24 40 49 113
------------------------------------------------------- ----- ----- ----- -----
Liabilities as per the Balance Sheet
Derivative financial instruments - FX forward exchange
contracts - (51) - (51)
Derivative financial instruments - Interest rate
swaps (1) - (117) - (117)
Derivative financial instruments - Cross currency
interest rate swaps (1) - (75) - (75)
------------------------------------------------------- ----- ----- ----- -----
Level Level Level
1 2 3 Total
GBPm GBPm GBPm GBPm
------------------------------------------------------- ----- ----- ----- -----
At 31 December 2021
Assets as per the Balance Sheet
Derivative financial instruments - FX forward exchange
contracts - 62 - 62
Equity instruments - FVOCI 14 114 43 171
------------------------------------------------------- ----- ----- ----- -----
Liabilities as per the Balance Sheet
Derivative financial instruments - FX forward exchange
contracts - (52) - (52)
Derivative financial instruments - Interest rate
swaps (1) - (22) - (22)
Derivative financial instruments - Cross currency
interest rate swaps (1) - (49) - (49)
------------------------------------------------------- ----- ----- ----- -----
(1) Included in Other non-current liabilities in Group Balance
Sheet.
13. Related Party Transactions
There were no changes in the related party transactions
described in the 2021 Annual Report that have had a material effect
on the financial position or performance of Reckitt either at 30
June 2022 or in the six months to 30 June 2022.
14. Disposals
The disposal of Dermicool and E45 completed on 25 March 2022 and
1 April 2022, respectively, with combined net cash proceeds of
GBP243 million. The net assets disposed primarily comprised
goodwill and intangible assets at a book value of GBP204 million.
In addition, cumulative foreign exchange losses of GBP10 million
have been reclassified to the income statement.
The Group recognised a net pre-tax gain of GBP14 million upon
disposal of these brands, recorded within net operating expenses in
the income statement. Both Dermicool and E45 formed part of the
Health operating segment.
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.
APPIX - ALTERNATIVE PERFORMANCE MEASURES
--------------------------------------------
The financial information included in this half year
announcement is prepared in accordance with International Financial
Reporting Standards (IFRS) as well as information presented on an
adjusted (non-IFRS) basis.
Financial information presented on an adjusted basis excludes
certain cash and non-cash items. These items have a pattern of
recognition that is largely uncorrelated with the trading
performance of the business. Management reviews the business on
this basis for the purpose of making operating decisions and
showing these adjusted measures in addition to the IFRS measures
provides useful additional information on trading performance to
the users of the financial statements. These adjusted measures
should not be considered in isolation from, substitutes for, or
superior to the financial measures prepared in accordance with
IFRS.
The following items (adjusting items) are excluded from IFRS
earnings in calculating adjusted earnings.
-- Impact of business combinations where IFRS accounting results
in the recognition of certain costs that are not comparable with
those for internally generated assets, (although the net revenues
and other costs of these business combinations are not adjusted
for):
-- Amortisation of (a) acquired brands, trademarks and similar
assets and (b) certain other intangible assets recorded as the
result of a business combination;
-- Inventory fair value adjustments;
-- Professional and advisor costs recorded as the result of a
business combination; and
-- 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
as the amortisation or profit on disposal of these brands would be
treated as an adjusting item.
-- Profits or losses relating to the sale of brands and related
intangible assets as the continued active management of our
portfolio results in the recognition of profits or losses relating
to disposals of brands and related intangible assets which are
largely uncorrelated with the trading performance of the
business.
-- Re-cycled foreign exchange translation reserves upon the
sale, liquidation, repayment of share capital or abandonment of a
subsidiary previously controlled by the Group, as the gain or loss
relates to mainly exchange movements in previous periods rather
than the current period.
-- The 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.
-- Other individually material items of expense or income . Some
of these items are resolved over a period of time such that the
impact may affect more than one reporting period.
Adjusted measures
-- Adjusted Operating Profit and Adjusted Operating Profit
margin: Adjusted operating profit reflects the IFRS operating
profit/(loss) excluding items in line with the Group's adjusted
items policy. See page 26 for details on the adjusting items and a
reconciliation between IFRS operating profit/(loss) 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 26 for details on the adjusting items and a
reconciliation between IFRS net income/(loss) and adjusted net
income. The weighted average number of shares for the period 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 countries with annual
inflation greater than 100% (Venezuela).
-- Constant exchange rate (CER): Net revenue and profit 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 % 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.
-- 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 operations to Free Cash Flow
is shown on page 29. The Group tracks Free Cash Flow as a % of
adjusted net income to understand the conversion of adjusted profit
into cash.
Other definitions and terms
-- 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.65% of Group net revenue
and between c.60% to c.80% 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.
-- eCommerce: eCommerce channel net revenue is direct sales from
Reckitt to online platforms or directly to consumers. Estimates of
total eCommerce sales as a percentage of Group net revenues are
calculated by adding eCommerce channel net revenue to an estimate
of eCommerce sales achieved by our brands through omnichannel
distributors and retailer websites.
-- Discontinued operations: Includes 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 IFRS measures to its
adjusted measures for the six months ended 30 June 2022.
Adjusting items
Reclassified
foreign
exchange Other
Net gain translation individually
on on material
Impact of disposal liquidation Finance items of
business of of expense income and
IFRS combinations brands subsidiaries reclass expense Adjusted
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ -------- ------------- --------- ------------- -------- ------------- ---------
Net revenue 6,888 - - - - - 6,888
Cost of sales (2,886) 2 - - - - (2,884)
------------------ -------- ------------- --------- ------------- -------- ------------- ---------
Gross profit 4,002 2 - - - - 4,004
Net operating
expenses (2,257) 22 (14) - - 10 (2,239)
------------------ -------- ------------- --------- ------------- -------- ------------- ---------
Operating profit 1,745 24 (14) - - 10 1,765
Net finance
expense (33) - - (69) (8) - (110)
Impairment of
equity-accounted
investments (19) - - - - - (19)
Share of loss of
equity-accounted
investees, net
of tax (2) - - - - - (2)
------------------ -------- ------------- --------- ------------- -------- ------------- ---------
Profit before
income tax 1,691 24 (14) (69) (8) 10 1,634
Income tax charge (335) (6) (11) - 8 - (344)
------------------ -------- ------------- --------- ------------- -------- ------------- ---------
Net income from
continuing
operations 1,356 18 (25) (69) - 10 1,290
Less:
Attributable to
non-controlling
interests (10) - - - - - (10)
------------------ -------- ------------- --------- ------------- -------- ------------- ---------
Net income from
continuing
operations
attributable to
owners of the
parent company 1,346 18 (25) (69) - 10 1,280
Net profit for - - - - - - -
the period from
discontinued
operations
------------------ -------- ------------- --------- ------------- -------- ------------- ---------
Total net income
for the year
attributable to
owners of the
parent 1,346 18 (25) (69) - 10 1,280
------------------ -------- ------------- --------- ------------- -------- ------------- ---------
Earnings per
share (EPS)
------------------ -------- ------------- --------- ------------- -------- ------------- ---------
Continuing
operations(1)
Basic 188.3 2.5 (3.5) (9.7) - 1.4 179.0
Diluted 187.8 2.5 (3.5) (9.6) - 1.4 178.6
Discontinued
operations(1)
Basic - - - - - - -
Diluted - - - - - - -
Total
operations(1)
Basic 188.3 2.5 (3.5) (9.7) - 1.4 179.0
Diluted 187.8 2.5 (3.5) (9.6) - 1.4 178.6
------------------ -------- ------------- --------- ------------- -------- ------------- ---------
(1) Earnings per share (EPS) is calculated using 714.9m shares
(basic) and 716.6m shares (diluted)
Impact of business combinations of GBP24m comprises
-- Amortisation of GBP22m relating to certain intangible assets
recognised as a result of historical business combinations.
-- An inventory fair value adjustment of GBP2m relating to the
amount charged to cost of sales for the fair value step-up of
acquired inventories as these inventories are sold.
-- Included within income tax expense is a GBP6m tax credit in
relation to the intangible asset amortisation.
Net gain relating to the disposal of brands and related
intangible assets of GBP14m within operating profit relates to the
disposal of Dermicool (GBP49m loss) and E45 and related brands
(GBP63m gain). Included within income tax expense is a deferred tax
credit of GBP27m arising on derecognition of deferred tax
liabilities offset by a GBP16m tax charge incurred in relation to
the disposals.
Reclassified foreign exchange translation on liquidation of
subsidiaries of GBP69m is the gain following the liquidation of
legal entities as part of simplification of the Group's legal
entity structure
Reclassification of finance expense of GBP8m relates to the
reclassification of interest income on income tax balances from net
finance expense to income tax.
Other individually material items of income and expense includes
GBP6m relating to the reorganisation of the Nutrition business unit
following the strategic review and subsequent disposal of IFCN
China. A further GBP4m expense relates to costs incurred regarding
the Korean HS matter.
The table below reconciles the Group's IFRS measures to its
adjusted measures for the six months ended 30 June 2021.
Adjusting items
Reclassified
foreign
exchange Other
translation individually
on material
Impact of Loss on liquidation Finance items of
business disposal of of expense income and
IFRS combinations brands subsidiaries reclass expense Adjusted
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ -------- ------------- ------------ ------------- ------------ ------------- ---------
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) 51 165 - - 3,034 (2,392)
------------------ -------- ------------- ------------ ------------- ------------ ------------- ---------
Operating
(loss)/profit (1,828) 53 165 - - 3,034 1,424
Net finance
expense (115) - - - (1) - (116)
Share of loss of
equity-accounted
investees, net
of tax (1) - - - - - (1)
------------------ -------- ------------- ------------ ------------- ------------ ------------- ---------
(Loss)/profit
before income
tax (1,944) 53 165 - (1) 3,034 1,307
Income tax
credit/(charge) 191 184 (73) - 1 (591) (288)
------------------ -------- ------------- ------------ ------------- ------------ ------------- ---------
Net (loss)/income
from continuing
operations (1,753) 237 92 - - 2,443 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) 237 92 - - 2,443 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) 237 92 - - 2,414 1,018
------------------ -------- ------------- ------------ ------------- ------------ ------------- ---------
Earnings per
share (EPS)
------------------ -------- ------------- ------------ ------------- ------------ ------------- ---------
Continuing
operations(1)
Basic (245.8) 33.2 12.9 - - 342.3 142.6
Diluted (245.8) 33.2 12.9 - - 342.3 142.6
Discontinued
operations(1)
Basic 4.1 - - - - (4.1) -
Diluted 4.1 - - - - (4.1) -
Total
operations(1)
Basic (241.7) 33.2 12.9 - - 338.2 142.6
Diluted (241.7) 33.2 12.9 - - 338.2 142.6
------------------ -------- ------------- ------------ ------------- ------------ ------------- ---------
(1) Earnings per share (EPS) is calculated using 713.7m shares.
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.
Impact of business combinations is composed of:
-- Amortisation of GBP38m relating to certain intangible assets
recognised as a result of historical business combinations.
-- Costs of GBP15m relating to acquisitions, of which GBP2m is
recorded within Cost of Sales.
-- Included within income tax expense is a net GBP184m tax
charge, principally a GBP9m tax credit in respect of intangible
asset amortisation and a GBP196m tax charge to adjust deferred tax
liabilities for intangible assets for the UK tax rate change.
Loss on disposal of brands is comprised of the loss on disposal
of Scholl (GBP165m). Included within income tax expense is a GBP73m
tax credit relating to the disposal.
Reclassification of finance expense of GBP1m relates to the
reclassification of interest income on income tax balances from net
finance expense to income tax.
Other individually material items of income and expense
include:
-- A loss of GBP2,997m relating to the re-measurement of the
IFCN China disposal group to its fair value less costs of disposal
upon classification as held for sale. A GBP591m deferred tax credit
is included within income tax expense with respect to remeasurement
of deferred tax liabilities.
-- A charge of GBP37m relating to the impairment of Australian
factory assets dedicated to IFCN China but excluded from the sale
of the IFCN China disposal group.
Calculation of Alternative Performance Measures
Reconciliation of IFRS to Like for Like Net Revenue (by GBU
For the quarter to 30 June For the half-year to 30
June
Hygiene Health Nutrition Group Hygiene Health Nutrition Group
Net Revenue GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- -------- ------- ---------- ------ -------- ------- ---------- ------
2021 IFRS 1,386 1,108 598 3,092 3,027 2,320 1,251 6,598
M&A - (51) (139) (190) - (120) (335) (455)
Exchange 11 8 4 23 (1) (1) 2 -
2021 Like
for Like 1,397 1,065 463 2,925 3,026 2,199 918 6,143
-------------- -------- ------- ---------- ------ -------- ------- ---------- ------
2022 IFRS 1,414 1,418 632 3,464 2,879 2,820 1,189 6,888
M&A - (39) - (39) - (77) - (77)
Exchange (52) (56) (45) (153) (35) (52) (54) (141)
2022 Like
for Like 1,362 1,323 587 3,272 2,844 2,691 1,135 6,670
-------------- -------- ------- ---------- ------ -------- ------- ---------- ------
Like for
Like Growth -2.5% 24.2% 26.8% 11.9% -6.0% 22.4% 23.6% 8.6%
Reconciliation of IFRS to Like for Like Net Revenue (by
Geography)
For the quarter to 30 June For the half-year to 30
June
---------------------------------------- ----------------------------------------
Net Revenue North Europe/ Developing North Europe/ Developing
America ANZ Markets Group America ANZ Markets Group
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- --------- -------- ----------- ------ --------- -------- ----------- ------
2021 IFRS 932 981 1,179 3,092 2,009 2,115 2,474 6,598
M&A (4) (40) (146) (190) (8) (92) (355) (455)
Exchange 14 1 8 23 18 (18) - -
2021 Like
for Like 942 942 1,041 2,925 2,019 2,005 2,119 6,143
-------------- --------- -------- ----------- ------ --------- -------- ----------- ------
2022 IFRS 1,102 1,108 1,254 3,464 2,256 2,215 2,417 6,888
M&A (27) (10) (2) (39) (48) (19) (10) (77)
Exchange (96) 14 (71) (153) (122) 67 (86) (141)
2022 Like
for Like 979 1,112 1,181 3,272 2,086 2,263 2,321 6,670
Like for
Like Growth 3.9% 18.0% 13.4% 11.9% 3.3% 12.9% 9.5% 8.6%
Adjusted measures excluding IFCN China (Group)
Group Nutrition GBU
---------------------------------- ----------------------------------
2021 2021
Adjusted Adjusted
2022 2021 ex. IFCN 2022 2021 ex. IFCN
Adjusted Adjusted China Adjusted Adjusted China
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- ---------- ---------- ---------- ---------- ---------- ----------
Net Revenue 6,888 6,598 6,274 1,189 1,251 927
Adjusted operating
profit 1,765 1,424 1,425 345 170 171
Adjusted operating
margin 25.6% 21.6% 22.7% 29.0% 13.6% 18.4%
Adjusted operating +290 +1,060
margin vs prior year bps bps
excluding IFCN China
Reconciliation of operating cash flow to free cash flow
30 June 30 June
2022 2021
GBPm GBPm
------------------------ -------- --------
Cash generated from
continuing operations 1,316 1,179
Less: Interest paid (113) (105)
Less: Tax paid (372) (367)
Less: purchase of
property, plant
& equipment (143) (158)
Less: purchase of
intangible assets (32) (29)
Plus: proceeds from 71 -
the sale of property,
plant & equipment
------------------------ -------- --------
Free Cash Flow 727 520
------------------------ -------- --------
Free Cash Flow
Conversion 57% 51%
------------------------ -------- --------
12 months Adjusted EBITDA to Net Debt
12 months 12 months
to 30 to 30
June June
2022 2021
GBPm GBPm
------------------------- ---------- ----------
Operating Profit/(Loss) 2,769 (1,263)
Less: Adjusting
items 449 4,292
Adjusted Operating
Profit 3,218 3,029
Less: Adjusted
Depreciation and
Amortisation 370 379
------------------------- ---------- ----------
12 months Adjusted
EBITDA 3,588 3,408
------------------------- ---------- ----------
30 June 30 June
2022 2021
GBPm GBPm
------------------------- ---------- ----------
Cash and cash
equivalents (inc.
overdrafts) 1,285 1,558
Financing liabilities (9,867) (10,642)
------------------------- ---------- ----------
Net Debt (8,582) (9,084)
------------------------- ---------- ----------
Adjusted EBITDA
/ Net Debt 2.4x 2.7x
------------------------- ---------- ----------
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:
o 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
o 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 2021. 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
Jeff Carr
Chief Financial Officer
26 July 2022
INDEPENT REVIEW REPORT TO RECKITT BENCKISER GROUP PLC
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 2022 which comprises of condensed Group
Balance Sheet, Group Income Statement, Group Statement of
Comprehensive Income, 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 2022 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").
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity ("ISRE (UK) 2410") issued 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.
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis of conclusion
section of this report, nothing has come to our attention that
causes us to believe that the directors have inappropriately
adopted the going concern basis of accounting, or that the
directors have identified material uncertainties relating to going
concern that have not been appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410. However, future events or
conditions may cause the Reckitt Benckiser Group Plc to cease to
continue as a going concern, and the above conclusions are not a
guarantee that the Group will continue in operation.
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 Reckitt Benckiser Group Plc are 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 prepared in accordance 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.
In preparing the condensed set of financial statements, the
directors are responsible for assessing the Group's ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the
Reckitt Benckiser Group Plc or to cease operations, or have no
realistic alternative but to do so.
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. Our conclusion, including our
conclusions relating to going concern, are based on procedures that
are less extensive than audit procedures, as described in the Basis
for conclusion section of this report.
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.
Andrew Bradshaw
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square,
Canary Wharf,
London,
E14 5GL
26 July 2022
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 ZZGZNRVFGZZM
(END) Dow Jones Newswires
July 27, 2022 02:00 ET (06:00 GMT)
Reckitt Benckiser (LSE:RKT)
Historical Stock Chart
From Feb 2024 to Mar 2024
Reckitt Benckiser (LSE:RKT)
Historical Stock Chart
From Mar 2023 to Mar 2024