Annual Report and
`Financial Statements 2011
`
`Innovating
`for a healthier
`future
`
`Page 1
`
`

`

`
`
` Contents
`
` 1 Chairman’s Statement
`
` 2 Chief Executive’s Statement
`
` 10 Business Review 2011
`
` 18 Board of Directors and Executive
`
` Committee
`
` 19 Report of the Directors
`
` 22 Chairman’s Statement on Corporate
`
` Governance
`
` 23 Corporate Governance Report
`
` 28 Statement of Directors’ Responsibilities
`
` 29 Directors’ Remuneration Report
`
` 36 Independent Auditors’ Report to the
`members of Reckitt Benckiser Group plc
`
` 37 Group income statement
`
` 37 Group statement of comprehensive
`income
`
` 38 Group balance sheet
`
` 39 Group statement of changes in equity
`
` 40 Group cash flow statement
`
` 41 Notes to the financial statements
`
` 75 Five-year summary
`
` 76 Parent company – Independent
`Auditors’ Report to the members of
`Reckitt Benckiser Group plc
`
` 77 Parent company balance sheet
`
` 78 Notes to the parent company financial
`
` statements
`
` 84 Shareholder information
`
`b
`
`2011
`
`Page 2
`
`

`

`North America & Australia (NAA). The area
`covers the markets of North America (USA,
`Canada), Australia and New Zealand.
`
`2011 total net revenue increased +5% (+3%
`like-for-like) to £2,402m. Growth came from
`health & personal care, dishwashing and food.
`The increase in health & personal care was
`driven by Mucinex, which benefited from the
`Q3 rollout of Mucinex Fast Max. In dishwashing,
`Finish Quantum and All-in-1 tablets and gel
`packs contributed to an excellent performance.
`The increase in food came from the consumer
`brands French’s Mustard and Frank’s Red Hot
`Sauce, which was supported by additional
`marketing activity.
`
`Adjusted operating profit increased +10% to
`£652m: the operating margin was +130 bps
`higher at 27.1%.
`
`Developing Markets. The area covers the
`regions of Latin America (Brazil, Mexico,
`Argentina and smaller markets), Africa Middle
`East (South Africa, Middle East, Pakistan, East
`Africa, West Africa), South Asia (India,
`Bangladesh, Sri Lanka, Indonesia) and East Asia
`(Korea, Hong Kong, China, Taiwan, Singapore,
`Malaysia, Thailand, Japan).
`
`2011 net revenue was ahead +24% (+13%
`like-for-like) to £2,312m. By category, health &
`personal care continued to grow well with
`good growth coming from Dettol, Strepsils,
`Gaviscon and Veet. The increase in fabric care
`was driven by Vanish, while Harpic and Veja
`were the key drivers in surface care. In home
`care, both air care and pest control contributed
`to its performance.
`
`Adjusted operating profit increased by +48%
`to £399m. This resulted in a +270 bps
`improvement in the operating margin to 17.3%.
`
`Pharmaceuticals. RB Pharmaceuticals is
`responsible for the development of the Group’s
`Subutex and Suboxone prescription drug
`business. Both products are based on
`Buprenorphine for treatment of opiate
`dependence. Suboxone is a more advanced
`product compared to Subutex, as it has
`substantially better protection against abuse by
`the opioid-dependent population. In the US,
`Suboxone lost the exclusivity afforded by its
`orphan drug status on 8 October 2009.
`
`On 31 August 2010, the Group announced
`that it had received approval from the US Food
`and Drug Administration for its New Drug
`Application to manufacture and market
`Suboxone sublingual film. Suboxone sublingual
`film has been developed through an exclusive
`agreement with MonoSol Rx, utilising its
`proprietary PharmFilm® technology, to deliver
`Suboxone in a fast-dissolving sublingual film.
`
`As with all prescription drugs, the protection of
`the business has a finite term unless replaced
`with new treatments or forms.
`
`As a result of the loss of exclusivity in the US,
`up to 80% of the revenue and profit of the
`Suboxone tablet business in the US might be
`lost in the year following the launch of generic
`competitors, with the possibility of further
`erosion thereafter. However, in the event of
`generic competition to the Suboxone tablet,
`
`the Group expects that the Suboxone
`sublingual film will help to mitigate the impact.
`
`2011 total net revenue grew +6% to £762m.
`The patent-protected Suboxone sublingual film
`continued to grow, and by the end of
`December had captured a 48% volume
`share of the total market and has further
`strengthened its position as market leader,
`ahead of tablets. The North America business
`net revenue declined -2% to £587m of which
`the film generated £249m. In Europe and rest
`of the world, the result was helped by the buy
`back of the sales and distribution rights in the
`majority of countries in July 2010.
`Adjusted operating profit for the total RB
`Pharmaceuticals business increased +1% to
`£518m. The operating margin was down
`-400 bps to 68.0%, largely due to the lower
`margins on the film variant and the impact
`of higher rebates primarily relating to Medicaid.
`
`THE GROUP’S BRAND PORTFOLIO, MARKET
`POSITION AND PERFORMANCE
`The Group benefits from many very strong
`market positions for its brand portfolio.
`The Group has leading positions in selected
`household, health & personal care categories.
`These positions derive from the strength of
`the Group’s leading brands, described as
`Powerbrands, which are the flagship brands
`in the Group’s five major categories and on
`which the Group focuses the majority of its
`efforts and investment. The Group also has
`other portfolio brands which play a role as
`builders of scale in local markets.
`
`These leading positions include:
`
`Health & Personal Care
`The health & personal care category consists of
`products that relieve or solve common personal
`and health problems. The Group’s strength in
`this category was further enhanced by the
`acquisition of SSL.
`
`• No.1 worldwide in antiseptic liquids with the
`Powerbrand Dettol.
`
`• No.1 worldwide in depilatory products with
`the Powerbrand Veet.
`
`• No.1 worldwide in medicated sore throat
`products with the Powerbrand Strepsils.
`
`• No.1 worldwide in condoms for both safe
`and more pleasurable sex, with the
`Powerbrand Durex.
`
`• No.2 worldwide in cold/flu (including
`decongestants) with the Powerbrand
`Mucinex.
`
`• No.3 worldwide in acne treatment with the
`Powerbrand Clearasil.
`
`• Leading positions in analgesics and upper
`gastro-intestinal products in Europe and
`Australia with the Powerbrands Nurofen
`and Gaviscon.
`
`• Leading positions in footcare and comfort
`footwear in many markets outside North
`America and Latin America, with the
`Powerbrand Scholl.
`
`• The Group also has local leading positions
`in denture care, dry skin care and
`cold/flu products.
`
`In 2011 net revenue increased +37% to
`£3,156m or on a like-for-like basis +8%.
`In health care, the result was driven by very
`good growth for Nurofen, Mucinex, Strepsils
`and Gaviscon, boosted by such new initiatives
`as Strepsils Warm and Mucinex Fast Max. In
`personal care, Dettol continued to grow well in
`both Developing Markets, and in Europe where
`the continued roll-out of the No-Touch Hand
`Soap System has been very encouraging.
`
`Fabric Care
`• No.1 worldwide in fabric treatment
`(products to remove stains from clothes,
`carpets and upholstery) with the Powerbrand
`Vanish, around the globe and Resolve/Spray
`‘n Wash in North America.
`
`• No.1 worldwide in garment care (laundry
`cleaning products for delicate garments) with
`the Powerbrand Woolite.
`
`• No.1 worldwide in water softeners
`(products to prevent limescale build-up on
`washing machines and laundry) with the
`Powerbrand Calgon.
`
`• The Group has a number of local market
`positions in laundry detergents and fabric
`softeners (for example, in Spain, Italy, certain
`East European markets and Korea). The Group
`also has a small private label business, which
`principally provides laundry detergents to
`major multi-national retailers in Europe.
`
`In 2011 net revenue declined –5% to £1,503m,
`predominantly driven by continued weakness in
`laundry detergents and fabric softeners in
`Southern Europe. The Group continues to
`invest aggressively to protect the market
`position of Vanish against other competitor
`launches and intensive promotional activity.
`As a result market share trends are improving.
`
`Surface Care
`• No.1 worldwide in the overall surface care
`category due to leading positions across
`disinfectant cleaners, non-disinfectant
`multi-purpose cleaners, lavatory care,
`speciality cleaners and polishes/waxes.
`
`2011 Results excluding RB Pharmaceuticals
`In light of the likelihood of generic competition to Suboxone tablets, the Group provides the following
`information relating to the performance of the business in 2011 excluding RB Pharmaceuticals.
`
`
`
`
`
`Net revenue
`Adjusted operating profit
`Adjusted operating margin
`
` RB ex RB
`Pharmaceuticals
`£m
`%
`8,723
`+4%*
`1,969
`+17%**
`
`22.6%
`
` RB
`Pharmaceuticals
`£m
`%
`762
`+6%*
`518
`+1%**
`
`68.0%
`
`Total RB
` %
`£m
`+4%*
`9,485
`2,487 +13%**
`
`26.2%
`
`* like-for-like ** at constant exchange rates
`
`11
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`2011
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`Page 3
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