Reckitt Benckiser Group Plc · LSE:RKT
Reckitt Benckiser — FY2005 Earnings Presentation
39 slides from Reckitt Benckiser's earnings presentation, Feb 8, 2006
Slide 1: Reckitt Benckiser Full Year Results 2005
Reckitt Benckiser Full Year Results 2005 8th February 2006 07/02/2006 17:51 1
Slide 2: Bart Becht, Chief Executive Officer
Bart Becht Chief Executive Officer 07/02/2006 17:51 2
Slide 3: Summary: 2005
Summary: 2005 • Financial Targets Exceeded – Net Revenue Growth +6% – Consistent margin expansion 20.1% +80bps – Net income growth +16% • High Quality Growth – All Areas & Categories, Driven by Power Brands & Innovation • BHI: a new platform for growth & margin expansion • Cash returned to sharehold
Slide 4: Reckitt Benckiser success story continues
Reckitt Benckiser success story continues 6 straight years of above industry average growth Net Revenues Net Income 2005 +6% C 4,179 2005 +16%A 669 4200 700 4000 600 577 3800 3871 500 3713 489 3600 400 408 3400 3454 3365 300 340 3200 275 3133 200 200 3000 2989 2800 100 2600 0 1999 - 2005 1999 - 2005
Slide 5: All areas contributing to growth
All areas contributing to growth Net revenue trend £m & CAGR % @ constant exchange 2200 2000 1800 1600 1400 1200 1000 800 2005 +4% 600 2005 +5% 400 200 2005 +12% 0 Europe NA&A DM Reckitt Benckiser plc Annual Results 2005 – 8 February 2006 07/02/2006 17:51 5
Slide 6: All categories contributing to growth
All categories contributing to growth Net revenue trend £m & CAGR % @ constant exchange 1200 1000 800 600 400 200 2005 +2% 2005 +9% 2005 +6% 2005 +8% 2005 +9% 0 Fabric Surface Dishwashing Home H&PC CAGR +6% CAGR +6% CAGR +6% CAGR +15% CAGR +13% Reckitt Benckiser plc Annual Results 2005 – 8 February
Slide 7: Power Brands: More Focus
Power Brands: More Focus % of net revenues from top 15 brands • Further increase in proportion of total net 60 revenues coming from 54 top 15 brands 48 42 • Power brands net revenues +12% 36 constant rate year on 30 year vs total company 53 56 51 24 46 +6% 40 18 12 • On track to achieve 6 target of
Slide 8: Innovation Driven
Innovation Driven Reckitt Benckiser plc Annual Results 2005 – 8 February 2006 07/02/2006 17:51 8
Slide 9: Market Share & Volume driven
Market Share & Volume driven • Volume +5% • Price/ Mix +1% • Total like-for-like growth +6% Reckitt Benckiser plc Annual Results 2005 – 8 February 2006 07/02/2006 17:51 9
Slide 10: Boots Healthcare International
Boots Healthcare International • A new platform for growth and margin expansion • Completed 1st February 2006 Reckitt Benckiser plc Annual Results 2005 – 8 February 2006 07/02/2006 17:51 10
Slide 11: Cash Returned to Shareholders
Cash Returned to Shareholders 600 £562m 550 Total Cash Returned +13% 500 450 400 Dividends Share Buyback 350 300 250 200 150 100 2000 2001 2002 2003 2004 2005 >£1.8 billion returned to shareholders 2000-05 Reckitt Benckiser plc Annual Results 2005 – 8 February 2006 07/02/2006 17:51 11
Slide 12: Colin Day, Chief Financial Officer
Colin Day Chief Financial Officer 07/02/2006 17:51 12
Slide 13: Profit & Loss Account
Profit & Loss Account 2004 2005 % change £m £m Act Con Q4 Net Revenues 1,022 1,107 +8 +5 Operating Profit 238 285 +20 +17 Net Income 197 227 +15 +13 Full Year Net Revenues 3,871 4,179 +8 +6 Operating Profit 749 840 +12 +10 Net Income 577 669 +16 +14 EPS fully diluted 77.1p 90.0p +17 2004 restated fo
Slide 14: Consistent margin progression
Consistent margin progression Full Year Margins % Gross margin +10bps Operating margin +80bps 54.9 55 21 20.1 54.8 20 53 53.3 19 19.3 18 18.3 51 51.4 17 16.7 49 16 48.5 15.6 15 47.7 47 14 14.4 45 13 2000-2005 2000-2005 2004 Restated following the adoption of IFRS Reckitt Benckiser plc Annual Results
Slide 15: Supported by a high level of media / marketing investment
Supported by a high level of media / marketing investment Media £m • Media Investment further increased +3% 500 +3% in 2005 • The highest level of reinvestment in the 400 industry • Other consumer marketing substantially 300 increased • Total marketing 200 increase ~ net 2000 2001 2002 2003 2004 200
Slide 16: Cost Optimisation
Cost Optimisation Relentless focus on containing costs • Gross margin ended year ahead (+10bps) as cost optimisation progressively countered input costs (Q4 +60bps) • Squeeze/Xtrim delivered target of £30m plus substantial addition to overcome input cost pressures. • Personnel and other fixed costs
Slide 17: All Areas Contributing to Growth
All Areas Contributing to Growth Regional Analysis 2005 at constant exchange Q4 Full Year Net Revenues £m %ch £m %ch Europe 521 +1% 2,135 +4% NA & A 377 +8% 1,281 +5% Developing 209 +12% 763 +12% Total Operations 1,107 +5% 4,179 +6% Operating Profit £m %ch £m %ch Europe 151 +11% 502 +6% NA & A 112 +
Slide 18: All areas contributing to margin expansion
All areas contributing to margin expansion Operating margin % 25 20 15 10 5 0 23.5% +60bps 21.1% +90bps 8.9% +250bps -5 Europe NA&A DM 2004 Restated following the adoption of IFRS Reckitt Benckiser plc Annual Results 2005 – 8 February 2006 07/02/2006 17:51 18
Slide 19: Interest & Tax
Interest & Tax Net Interest £m Tax Rate % 80 69 32 60 31 60 51 30 Non-recurring 40 32 29 credit of 28 £16m = 2% 19 20 27 31 30 26 0 28 1999 2000 2001 2002 2003 2004 2005 25 27 26 26 26 -20 -9 24 23 -40 -36 1999 2000 2001 2002 2003 2004 2005 -60 £27m improvement - £7m Convertible - £20m cash inflow 2
Slide 20: Strong cash flow
Strong cash flow Operating & net cash flow £m 1000 946 • Cash flow 886 914 – Cash generated from 752 operations £946m 750 – Net Cash Flow £758m +14% 758 603 • Lower tax paid 656 664 502 500 582 • Capex ~ maintained 408 – Consistently converting over 416 100% of profit into cash both 250 382 operatin
Slide 21: Net fund position built up
Net fund position built up Net debt /net funds position 887 632 292 -105 -467 Net Cash Flow 758 -595 Dividends (262) -736 Share Buyback (300) Other 59 Change in Net Funds 255 1999 2000 2001 2002 2003 2004 2005 £3.5bn generated 1999-2005 2004 Restated following the adoption of IFRS Reckitt Benckiser
Slide 22: Returning cash to shareholders
Returning cash to shareholders • Dividend increase: • Rolling share buy back – 2002 25.5p – 2003/04 Program: £250m – 2004/05 Program: £300m – 2003 28.0p +10% – 2005 Program – 2004 34.0p +21% completed £300m – 2005 39.0p +15% – 2006 program £300m • H1 18p +13% • H2 21p +17% Reckitt Benckiser plc Annu
Slide 23: Shares in Issue
Shares in Issue Million shares End 2004 724.5 Issued (options exercise etc) 7.0 Convertible Bond conversions March 8.1 Bought Back (17.4) End 2005 722.2 Reckitt Benckiser plc Annual Results 2005 – 8 February 2006 07/02/2006 17:51 23
Slide 24: BHI - Update
BHI - Update • Proforma 2005 Full Year (on RB policies) £m Net Revenues 528 Operating Profit 98 • Proforma net borrowings post BHI £m Net Funds at 31/12/2005 887 less operational cash requirements (150) Cost of BHI (1,926) Transaction costs (15) Initial Proforma net borrowings c 1,200 Reckitt Bencki
Slide 25: Bart Becht, Chief Executive Officer
Bart Becht Chief Executive Officer 07/02/2006 17:51 25
Slide 26: The strategy is working… so keep doing it!
The strategy is working… • Above Industry Average Net Revenue Growth – Focus on Power Brands in High Growth Categories – Systematic innovation to excite consumers – Geographical roll-outs – Appropriate add-on acquisitions • Convert into interesting profit & cash flow via margin expansion and net wor
Slide 27: More Focus on Power Brands
More Focus on Power Brands New Target for Top 18 Brands • Including BHI, top 18 60 Brands currently 57% 54 – Existing RB Top 15 48 42 – Plus 3 BHI brands 36 30 57 60 53 56 24 51 40 46 • New combined target is 18 still ~60% from top 18 12 brands by end 2006 6 0 2001 2002 2003 2004 2005 2005 incl 2006
Slide 28: Exciting New Products for 2006: Fabric Care
Exciting New Products for 2006 Fabric Care Vanish Oxi Action Crystal White Reckitt Benckiser plc Annual Results 2005 – 8 February 2006 07/02/2006 17:51 28
Slide 29: Exciting New Products for 2006: Surface Care
Exciting New Products for 2006 Surface Care Cillit Bang Stain & Drain Easy Off Bam Degreaser Reckitt Benckiser plc Annual Results 2005 – 8 February 2006 07/02/2006 17:51 29
Slide 30: Exciting New Products for 2006: Automatic Dishwashing
Exciting New Products for 2006 Automatic Dishwashing Finish 5-in-1 Finish Quantum Finish Additives with Power Boost Action Roll-Out Dual Protector Finish Fusion Power Cleaner Reckitt Benckiser plc Annual Results 2005 – 8 February 2006 07/02/2006 17:51 30
Slide 31: Exciting New Products for 2006: Home Care
Exciting New Products for 2006 Home Care Airwick X-press Airwick Odourstop Reckitt Benckiser plc Annual Results 2005 – 8 February 2006 07/02/2006 17:51 31
Slide 32: Exciting New Products for 2006: Home Care
Exciting New Products for 2006 Home Care Mortein Low Cost Mortein Instant Kill Liquid Vaporiser Aerosol Reckitt Benckiser plc Annual Results 2005 – 8 February 2006 07/02/2006 17:51 32
Slide 33: Exciting New Products for 2006: Health & Personal Care
Exciting New Products for 2006 Health & Personal Care Veet In Shower Cream Veet Eternally Smooth Wax Strips Reckitt Benckiser plc Annual Results 2005 – 8 February 2006 07/02/2006 17:51 33
Slide 34: Exciting New Products for 2006: Health & Personal Care
Exciting New Products for 2006 Health & Personal Care Lemsip Daytime Gaviscon Handy Packs Cold & Flu Capsules Reckitt Benckiser plc Annual Results 2005 – 8 February 2006 07/02/2006 17:51 34
Slide 35: Boots Healthcare International: A Good Acquisition for RB
Boots Healthcare International A Good Acquisition for RB • Health & Personal Care is an attractive category with strong growth and good margins – Increasing consumer self medication – Transfer healthcare cost burden from government to individual – Ageing Population • Combined Health & Personal Care
Slide 36: BHI – Prospects for 2006, 2007 and beyond
BHI – Prospects for 2006, 2007 and beyond • 2006 – Stabilise business – Manage inventories to RB standards – Integrate business and implement new organisation – Start to realise people and purchasing synergies – Develop platform for future growth • 2007 onwards – Complete integration – Fully realise
Slide 37: New Margin Target
New Margin Target Operating Margin - Total Company % of NR New Target • % of NR New Target 22% operating 22 margin in 2008 22% in 2008 20.1 – Includes BHI and synergies 20 19.3 18.3 18 • 2006 Outlook 16.7 – Input costs will be higher but 15.6 delta vs 2005 not as great as 16 2005 vs 2004 14.4 – Cost
Slide 38: 2006 Financial Targets
2006 Financial Targets • Reckitt Benckiser core business – Net revenue growth of around 5% at constant exchange against background of increasingly challenging market conditions – Net income growth in high single digits (EPS growth in double digits) at constant exchange excluding one-off tax credits
Slide 39: Reckitt Benckiser Full Year Results 2005
Reckitt Benckiser Full Year Results 2005 8th February 2006 07/02/2006 17:51 39