28 February
2024
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A YEAR OF PROGRESS WITH Mid-single-digit
growth in health & hygiene
Adjusted1
|
IFRS
|
Unaudited
£m
|
2023
|
vs 20222
|
Unaudited £m
|
2023
|
vs 20222
|
Full Year
|
|
|
|
|
|
Like-for-like (LFL) net revenue
growth3
|
|
+3.5%
|
Net revenue
|
14,607
|
+1.1%
|
Hygiene
|
|
+5.1%
|
Hygiene
|
6,135
|
+2.9%
|
Health
|
|
+5.0%
|
Health
|
6,062
|
+1.2%
|
Nutrition
|
|
-4.0%
|
Nutrition
|
2,410
|
-3.6%
|
Gross profit
margin
|
60.0%
|
+220bps
|
Gross profit margin
|
60.0%
|
+220bps
|
Operating
profit
|
3,373
|
-1.9%
|
Operating profit
|
2,531
|
-22.1%
|
Operating
profit (constant FX)3
|
|
+0.9%
|
|
|
|
Operating
profit margin
|
23.1%
|
-70bps
|
Operating profit
margin
|
17.3%
|
-520bps
|
Diluted
EPS
|
323.4p
|
-5.4%
|
Diluted EPS
|
228.7p
|
-29.6%
|
Free cash
flow
|
2,258
|
+11.2%
|
Cash generated from operating
activities
|
2,636
|
+10.0%
|
Cash returns to
shareholders4
|
1,546
|
+23.8%
|
|
|
|
Q4
|
|
|
|
|
|
LFL net
revenue growth
|
|
-1.2%
|
Net revenue
|
3,561
|
-7.0%
|
1. Adjusted measures
are defined on page 27.
2. All growth rates
are presented on an actual basis, except for LFL net revenue growth
and where separately noted.
3. LFL net revenue and
adjusted operating profit growth is measured on a constant exchange
rate basis (see page 27).
4.
Cash returns to shareholders represents dividend paid during the
year plus cash returned to shareholders through share
buybacks.
Commenting on the results, Kris Licht,
Chief Executive Officer, said:
"2023 was a year of progress for Reckitt. We delivered a good
trading performance in Health and Hygiene. Nutrition began rebasing
and held market leadership in the US. Our innovation
platforms proved that they can deliver meaningful growth through
premiumisation, household penetration and category creation.
We drove our gross margins back to historical levels,
increased investment behind our brands and innovation and launched
our fixed cost optimisation programme. We generated strong
free cashflow and significantly increased cash returns to
shareholders, enhanced by our new, sustainable share buyback
programme.
The organisation is fully focused on executing the strategy
which I outlined in October, including strengthening our product
superiority, optimising our fixed cost base and improving our
in-market execution.
While our performance in Q4 was unsatisfactory, we look to
2024 and beyond with confidence. We target another year of
mid-single-digit growth in Health and Hygiene, driven by a more
balanced contribution from price, mix and volume. We expect
Nutrition to return to growth late in the year. We will
continue to invest in, and harness the growth from, our
strengthened pipeline. We will advance our fixed cost
optimisation programme, and we will further increase cash returns
to shareholders, aiming to double what we returned in
2019."
FY Highlights:
· A year of continued
progress, focused on executing on our strategy,
revenue growth, driving product superiority through innovation,
increased investment behind brands and cash returns to
shareholders.
· Innovations delivering,
including Lysol Air Sanitiser, Finish Ultimate Plus
All-in-One, Mucinex InstaSoothe, Dettol Laundry Pods and Enfamil
NeuroPro, driving category growth and premiumisation.
· Group LFL net revenue growth of
+3.5%. For the full year, growth was
broad-based, with mid-single-digit growth across Hygiene and Health
at +5.1% combined. Nutrition declined by -4.0% as the US laps
the prior year competitor supply issue. Our strong performance in
the first three quarters was partially offset by a weaker fourth
quarter.
· Group reported net revenue growth of
+1.1%. LFL growth of +3.5% offset by FX
headwinds of -2.1% and a net M&A impact of -0.3%.
· Gross margins returned to historic
strength. Gross margin of 60.0% (+220bps)
returns to historically strong levels, which funded increased
investment behind brands (BEI +13.2% on a constant FX
basis).
· Adjusted operating profit margin of
23.1%. Expansion of +10bps when adjusting
for US Nutrition competitor impact last year. -70bps on a reported
basis.
· +24% increase in cash returns to
shareholders. A full year dividend of 192.5p
(+5%) and £0.2bn from initial share buyback programme enabled by
strong free cashflow generation
of £2.3bn (+11.2%
versus 2022).
Q4 Performance
· Like-for-like (LFL) net revenue decline
of -1.2%, led by growth of +5.2%
across Hygiene. Health declined -2.0% driven by the phasing
and shape of the cold and flu season. Nutrition LFL net revenue
declined -14.8%, as our North America business continued to rebase
due to lapping of the prior year competitor supply issue, in
addition to the voluntary recall of Nutramigen.
· Late in our year end close process
we identified, through our on-going compliance procedures, an
understatement of trade spend in two Middle Eastern markets related
to the fourth quarter and prior quarters of 2023. As a result, our
full year net revenue performance was £55m lower than previously
expected which is fully reflected in our Q4 results (adjusted
operating profit impact of £35m). Following
investigation, we concluded a small group of employees had acted
inappropriately and we are taking necessary disciplinary action. We
are confident this is an isolated incident specific to these two
markets and does not impact our 2024 outlook and medium-term
goals.
Other
· Full year IFRS operating profit of
£2,531m (2022: £3,249m) including IFCN
goodwill impairment of £810m reflecting higher interest rates and
changes in the regulatory environment.
2024 outlook
Our outlook
is as follows:
· We are confident
in the year ahead and expect LFL net revenue growth of
+2% to +4% for the Group, with mid-single-digit growth for our
Health and Hygiene portfolios.
· We expect a mid-
to high-single-digit decline for our Nutrition business
as it continues to rebase in the first half of the
year and returns to growth late in the year.
· We expect
adjusted operating profit to grow ahead of net revenue
growth.
· Revenue and
profit growth will be second half weighted as we lap high OTC
comparatives from Q1 last year and will see the majority of the
rebasing of our US Nutrition business in H1.
Other technical guidance
· Adjusted net
finance expense is expected to be in the range of
£300m to £320m (2023: £247m).
· The adjusted tax
rate is expected to be 25-26% (2023: 25.2%).
· Capital
expenditure is expected to be 3-3.5% of net revenue (2023:
3.1%).
GROUP OVERVIEW
Net Revenue
Unaudited
|
£m
|
Volume
|
Price / Mix
|
LFL1
|
Net M&A
|
FX
|
Actual
|
FY
2023
|
14,607
|
-4.3%
|
+7.8%
|
+3.5%
|
-0.3%
|
-2.1%
|
+1.1%
|
Q4 2023
|
3,561
|
-4.3%
|
+3.1%
|
-1.2%
|
-0.1%
|
-5.7%
|
-7.0%
|
|
|
|
|
|
|
|
|
|
1. Adjusted measures
are defined on page 27
Group net revenue
· Group net
revenue of £14,607m grew by +3.5% on a LFL basis in the year,
reflecting price / mix improvements of +7.8% and a volume decline
of -4.3%. Our Hygiene brands delivered broad-based growth
(+5.1%) across our brand portfolio with improving volume trends
throughout the year. Health growth (+5.0%) was led by our OTC
and Intimate Wellness portfolios, and Nutrition declined (-4.0%) as
the US lapped the prior year competitor supply issue.
· Total net
revenue on an IFRS basis was up +1.1%, reflecting net M&A
impact of -0.3% and foreign exchange headwinds of -2.1%.
· 44% of our Core
Category Market Units (CMUs) held or gained share, with 47% in
Hygiene, 46% in Health and 37% in Nutrition (weighted by net
revenue).
· E-commerce net
revenue grew by +9% in 2023 and now accounts for 15% of Group net
revenue.
· Q4 LFL net
revenue growth was -1.2%. Price / mix improvements were +3.1%
and volume declined by -4.3% with further sequential improvement in
Hygiene (-2.6%). Health volumes (-2.2%) remained robust but
were impacted by seasonal OTC declines. Nutrition
volumes (-14.3%) declined due to the rebasing of our US business,
and category-led volume declines in Developing Markets.
· In Q4 our
Hygiene GBU grew +5.2%, led by Lysol and Finish. Our Health
GBU declined -2.0%, with growth across our Intimate Wellness, VMS
and non-seasonal OTC portfolios more than offset by high seasonal
comparatives in our cough, cold and flu OTC portfolio.
Nutrition declined -14.8% as the US business continues to rebase as
it laps strong prior year comparatives.
· Late in our year
end close process we identified, through our on-going compliance
procedures, an understatement of trade spend in two Middle Eastern
markets related to the fourth quarter and prior quarters of 2023.
As a result, our full year net revenue performance was £55m lower
than previously expected which is fully reflected in our Q4 results
(adjusted operating profit impact of £35m).
Group operating margins and profit
· Adjusted
gross margin was 60.0% (2022: 57.8%), an increase of +220bps,
driven by pricing and productivity efficiencies - predominantly
across revenue growth management and procurement. These
levers more than offset inflation of mid-single digits in the
year.
· Brand equity
investment (BEI) increased by +13.2% (+£0.2bn) on a constant FX
basis as we invest behind innovation launches and the long-term
strength of our brands. BEI percentage of net revenue was up
+130bps to 13.1% (2022: 11.8%).
· Adjusted
operating profit was £3,373m (2022: £3,439m) at an adjusted
operating margin of 23.1% (2022: 23.8%), -70bps
lower than prior year, with gross margin expansion offset by
increased brand equity investments and inflation-led cost base
increases. When excluding the one-off benefits of circa 80bps in
2022 related to US Nutrition, adjusted operating profit margin grew
+10bps.
· IFRS operating
profit was £2,531m (2022: £3,249m) at an operating profit margin of
17.3% (2022: 22.5%). This was impacted by the IFCN goodwill
impairment of £810m (2022: £nil), reflecting higher interest rates
and changes in the regulatory environment. Refer to Note 6
for further details.
EPS and dividends
· Total adjusted
diluted EPS was 323.4p in 2023 (2022: 341.7p), -5.4% below
2022 as higher adjusted operating profit at constant
exchange rates was more than offset by adverse foreign exchange and
a higher adjusted effective tax rate in 2023.
Total IFRS diluted EPS was 228.7p (2022: 324.7p).
· Full year
dividend increased by 5% to 192.5p (2022: 183.3p) per
share, in line with our
policy to deliver sustainable dividend growth. The final proposed
dividend is 115.9p (2022: 110.3p) per share.
Free cash flow
· Free cash flow
was £2,258m in 2023 (2022: £2,031m) a +11% increase year on year
driven by an improvement in net working capital.
· Net debt ended
the year 1.9x adjusted EBITDA (2022: 2.1x adjusted
EBITDA).
OPERATING SEGMENT
REVIEW
Hygiene
42% of net revenue in 2023
Net Revenue
Unaudited
|
£m
|
Volume
|
Price / Mix
|
LFL1
|
Net M&A
|
FX
|
Actual
|
FY
2023
|
6,135
|
-6.0%
|
+11.1%
|
+5.1%
|
-
|
-2.2%
|
+2.9%
|
Q4 2023
|
1,531
|
-2.6%
|
+7.8%
|
+5.2%
|
-
|
-6.7%
|
-1.5%
|
|
|
|
|
|
|
|
|
|
Operating Profit
(Unaudited)
|
£m
|
Constant FX
(CER)1
|
Actual
|
Adjusted Operating
Profit1
|
1,236
|
+4.7%
|
+1.8%
|
Adjusted Operating Profit
Margin1 %
|
20.1%
|
|
-30bps
|
1. Adjusted measures
are defined on page 27
Full Year
Performance
Hygiene net revenue grew +5.1% on a LFL basis
to £6,135m for the full year. Innovation-led pricing and favourable
mix (price / mix +11.1%) were the key drivers partially offset by
volume decline of 6%. Importantly, our volume trend substantially
improved quarter by quarter throughout the year. Net revenue growth
was broad-based across all major brands delivering positive LFL net
revenue growth and total Hygiene market share momentum
improving in Q4 driven by continued momentum in Auto Dish (Finish).
We successfully launched innovations in most categories that
improved consumer delight, delivered more premium solutions for our
consumers and grew penetration, in line with our category growth
strategy.
47% of Core Hygiene CMUs (weighted by net
revenue) gained or held share during the year.
Within Auto Dish, our market leading brand
Finish, grew low-double digits LFL net revenue and grew market
share driven by the successful launch of our new super premium
tier, Finish Ultimate Plus All-in-One, delivering more superior
solutions to consumers and driving premiumisation in the
category.
Lysol returned to growth in the year driven by
strengthened brand equity and the broadening of the brand's
shoulders with continued strong growth in Laundry Sanitiser
expanding household penetration and the recent creation of the Air
Sanitisation category with the launch of Lysol Air Sanitisers in
the US, the first and only antimicrobial product approved by
the EPA that kills 99.9% of airborne viruses and bacteria while
eliminating odours.
Adjusted operating profit for Hygiene at
£1,236m was up +4.7% on a constant FX basis and +1.8% on an actual
basis. Adjusted operating profit margin was 20.1%, down
-30bps. Strong gross margin expansion was offset by increased
investment behind innovation launches and brand building
initiatives, and inflation-led fixed costs.
Fourth
Quarter Performance
Hygiene net revenue grew +5.2% in the quarter
on a LFL basis, with price / mix improvements of +7.8% and an
improving sequential volume performance of -2.6%. Auto Dish
(Finish) and Disinfectants (Lysol) were the key growth drivers in
the quarter, led by premiumisation in Finish and broad-based growth
across all Lysol segments. Lavatory Care (Harpic) and Pest
(Mortein, SBP, Aeroguard) delivered strong growth in the
quarter.
Health
42% of net revenue in
2023
Net Revenue
Unaudited
|
£m
|
Volume
|
Price / Mix
|
LFL1
|
Net M&A
|
FX
|
Actual
|
FY
2023
|
6,062
|
-0.3%
|
+5.3%
|
+5.0%
|
-0.6%
|
-3.2%
|
+1.2%
|
Q4 2023
|
1,507
|
-2.2%
|
+0.2%
|
-2.0%
|
-0.1%
|
-6.0%
|
-8.1%
|
|
|
|
|
|
|
|
|
|
Operating Profit
(Unaudited)
|
£m
|
Constant FX
(CER)1
|
Actual
|
Adjusted Operating
Profit1
|
1,690
|
+6.3%
|
+2.5%
|
Adjusted Operating Profit
Margin1 %
|
27.9%
|
|
+40bps
|
1. Adjusted measures
are defined on page 27
Full Year
Performance
Health net revenue grew +5.0% on a LFL basis
to £6,062m for the full year. This reflected price / mix
improvements of +5.3% and volume decline of -0.3%.
46% of Core Health CMUs (weighted by net
revenue) gained or held share during the year.
Our OTC portfolio grew low-double digits on a
LFL net revenue basis behind a combination of both volume and price
/ mix growth. Nurofen, Strepsils, Gaviscon and Biofreeze all
grew-double digits, driven by innovation launches, premiumisation
and pricing actions, brand whitespace expansion (Biofreeze
Overnight Relief in the US and Nurofen Liquid caps into a number of
European markets), as well as some retailer inventory
rebuilding in Europe in Q1. Mucinex delivered
low-single-digit growth which laps a very strong and earlier cold
& flu season in Q4 2022. Mucinex added a new medicated
throat spray to its Instasoothe product range, further extending
its presence in the $1bn US sore throat market.
Intimate Wellness delivered high single-digit
growth in the year. Growth was broad-based across Europe,
following the rebranding of the product range during 2022.
Our portfolio in China benefitted from the end of COVID-related
lockdowns and innovation, including Durex Fetherlite, our new
hyaluronic acid condom with water-based lubricant providing a
natural moisturisation experience. Growth was also strong
across LATAM, and India where we increased total distribution
points share during the year by around +400bps.
Dettol declined mid-single digits in the year,
with a mixed performance across markets. A number of markets
delivered growth and market share gains, underpinned by
innovations, including an extension of Dettol Cool in India, Dettol
Washing Machine Cleaner and Dettol Laundry Pods in China.
However, growth was offset by declines in ASEAN due to category
weakness and specific in-market challenges. The actions taken
during the second half of the year to address these challenges have
driven an improved performance in Q4.
Adjusted operating profit for Health at
£1,690m was up +6.3% on a constant FX basis and +2.5% on an actual
basis. Adjusted operating margin was 27.9%, an increase of
+40bps, with gross margin expansion more than offsetting increased
investment behind our brands and inflation-led fixed cost
increases.
Fourth
Quarter Performance
Net revenue declined by -2.0% on a LFL basis in
the quarter with price / mix improvements of +0.2% and volume
decline of -2.2%. As expected, our cough, cold and flu
related OTC portfolio declined high-single digits as we lapped an
early and strong season in Q4 last year. Dettol declined by
low double-digits with growth in India more than offset by high
comps in China and declines in the Middle East. These
declines were partially mitigated by double-digit growth in our
Intimate Wellness and VMS portfolios, and mid-single-digit growth
in our non-seasonal OTC portfolio.
Nutrition
16% of net revenue in 2023
Net Revenue
Unaudited
|
£m
|
Volume
|
Price / Mix
|
LFL1
|
Net M&A
|
FX
|
Actual
|
FY
2023
|
2,410
|
-10.0%
|
+6.0%
|
-4.0%
|
-0.1%
|
+0.5%
|
-3.6%
|
Q4 2023
|
523
|
-14.3%
|
-0.5%
|
-14.8%
|
-0.1%
|
-3.0%
|
-17.9%
|
|
|
|
|
|
|
|
|
|
Operating Profit
(Unaudited)
|
£m
|
Constant FX
(CER)1
|
Actual
|
Adjusted Operating
Profit1
|
447
|
-22.4%
|
-22.5%
|
Adjusted Operating Profit
Margin1 %
|
18.5%
|
|
-460bps
|
1. Adjusted measures
are defined on page 27
Full Year
Performance
Nutrition net revenue declined -4.0% on a LFL
basis to £2,410m for the full year. Volume declined -10.0%
due to the lapping of peak market shares in the US from the
competitor supply shortage in the prior year and category-led
volume declines in LATAM and ASEAN. Price / mix improvements
were +6.0% with pricing actions partially offset by more normalised
trade conditions in the US.
37% of Core Nutrition CMUs (weighted by net
revenue) gained or held share during the year.
IFCN US net revenue declined high-single
digits on a LFL basis in the year with non-WIC market shares
rebasing during the second half as we lap the prior year competitor
supply issue. Throughout the year, we maintained our leading
volume and value market share position in the non-WIC stage 1-3
segments where we operate. Our Enfamil
brand remain the number one recommended infant formula by
paediatricians in the US.
Our Developing Markets business declined
mid-single digits with category-led volume declines partially
offset by premiumisation and growth in both the specialty and adult
segments. A reduction in our transitional service arrangement (TSA)
contract manufacturing volume relating to our disposed China
business, contributed around 60bps to the year-on-year decline.
LATAM grew mid-single digits, offset by market challenges across
certain ASEAN markets.
Adjusted operating profit for Nutrition at
£447m was down -22.4% on a constant FX basis and -22.5% on an
actual basis. Adjusted operating margin was 18.5%, down
-460bps, reflecting the year-on-year volume deleverage as we lap
the competitor supply issue in the US, and negative mix as we lose
the benefit from WIC sales in states where Reckitt does not hold
the government contract.
Fourth
Quarter Performance
Nutrition net revenue declined by -14.8% on a
LFL basis in the quarter. This performance was driven by
double-digit decline in North America due to lapping the impact of
the competitor supply issue in the US. We exited the year
with a non-WIC value market share in the low 40s. This
compares to an average value market share for 2023 of around
47%.
Developing Markets declined high-single digits
with growth in LATAM more than offset by category weakness across
certain ASEAN markets.
The Q4 net revenue was negatively impacted by
approximately -200bps due to a returns provision made in respect of
the voluntary Nutramigen recall in late December.
Performance by Geography
Net Revenue
Unaudited
|
£m
|
Volume
|
Price / Mix
|
LFL1
|
Net M&A
|
FX
|
Actual
|
FY
2023
|
|
|
|
|
|
|
|
North America
|
4,919
|
-4.9%
|
+5.7%
|
+0.8%
|
-0.1%
|
-0.9%
|
-0.2%
|
Europe / ANZ
|
4,849
|
-3.4%
|
+11.6%
|
+8.2%
|
-0.5%
|
-2.6%
|
+5.1%
|
Developing Markets
|
4,839
|
-4.6%
|
+6.5%
|
+1.9%
|
-0.2%
|
-3.1%
|
-1.4%
|
Total
|
14,607
|
-4.3%
|
+7.8%
|
+3.5%
|
-0.3%
|
-2.1%
|
+1.1%
|
Q4
2023
|
|
|
|
|
|
|
|
North America
|
1,217
|
-6.7%
|
+1.1%
|
-5.6%
|
-0.1%
|
-5.0%
|
-10.7%
|
Europe / ANZ
|
1,193
|
-4.8%
|
+9.2%
|
+4.4%
|
-
|
-5.9%
|
-1.5%
|
Developing Markets
|
1,151
|
-1.4%
|
-0.5%
|
-1.9%
|
-
|
-6.5%
|
-8.4%
|
Total
|
3,561
|
-4.3%
|
+3.1%
|
-1.2%
|
-0.1%
|
-5.7%
|
-7.0%
|
1. Adjusted measures
are defined on page 27
North America LFL net revenue grew +0.8% for
the full year. Our Hygiene brands grew mid-single digits
offset by a broadly stable performance in Health and our US
Nutrition business declined as we lap the competitor supply
shortage in the prior year. In Q4 North America saw strong
growth in Lysol which was more than offset by further US Nutrition
rebasing and tough comps in our seasonal OTC
portfolio.
In Europe / ANZ LFL net revenue grew +8.2% for
the full year, with broad-based growth across Western European
markets and Turkey. From a category perspective, growth
was led by Finish and our OTC portfolio.
Developing Markets LFL net revenue grew +1.9%
for the full year. China, India and LATAM saw good growth in
both Q4 and the full year. The Middle East declined in both
the full year and Q4. ASEAN declined due to specific
in-market challenges but saw improved volume trends improved in Q4
due to pricing actions taken in certain key Dettol markets.
FY 2023 RESULTS PRESENTATION
TODAY
There will be a results presentation for
analysts and investors at 08:30 GMT which will be held at The
Auditorium, Bank of America, 2 King Edward Street, London, EC1A
1HQ.
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:
+44 20 3936 2999
All other
locations:
+44 800 358 1035
Participant access
code
763898
FURTHER INFORMATION AND
CONTACTS
Richard
Joyce /
Hazel
Chung
+44 (0)7807
418516 / +44
(0)7408 850537
Investor Relations
Patty
O'Hayer
+44 (0)7825 755688
External Relations and Government
Affairs
FGS
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 Reckitt Benckiser Group plc and the
Reckitt 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,
geopolitical and social conditions in the key markets in which the
Group operates; the Group's ability to innovate and remain
competitive; the Group's investment choices in its portfolio
management; the ability of the Group to address existing and
emerging environmental and social risks and opportunities; 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 including the risk of cyber-attack; interruptions in
the Group's supply chain and disruptions to its production
facilities; economic volatility including increases in the cost of
labour, raw materials and commodities; the execution of acquisitions, divestitures and business
transformation projects; product safety and quality, and
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, the Group 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
ADDITIONAL FINANCIAL
COMMENTARY
The following section should be read in
conjunction with the full-year financial review from page 3 and the
alternative performance measures section from page 27.
Group operating profit
Adjusted operating profit was £3,373 million
(2022: £3,439 million) at an adjusted operating margin of 23.1%,
70bps lower than the prior year (2022: 23.8%). Excluding the one
off benefit of c.80bps in 2022 relating to US Nutrition, adjusted
operating margin was 10bps higher than 2022. This increase was
driven by higher gross margins, 220bps higher than 2022 from
productivity efficiencies and pricing. This gross margin leverage
was offset by higher BEI, 130bps higher than 2022 as we have
invested behind our innovation launches and the long-term strength
of our brands, and higher fixed costs, 160bps higher than 2022 due
to inflation led cost base increases. Adjusted operating profit in
both 2023 and 2022 included the favourable effect of adjustments to
trade spend and operational accruals, certain of which were subject
to significant estimation uncertainty when initially
recorded.
IFRS operating profit was £2,531 million (2022:
£3,249 million) at an IFRS operating margin of 17.3% (2022: 22.5%).
IFRS operating profit in 2023 was impacted by a goodwill impairment charge of £810m relating to IFCN (2022:
£Nil), reflecting higher interest rates and changes in the
regulatory environment, (see Note 6). IFRS operating
profit in 2022 was impacted by a charge of £152 million from
impairment of goodwill relating to the acquisition of
Biofreeze.
Net finance expense
Adjusted net finance expense was £247 million
(2022: £256 million). Adjusted net finance expense in 2023
benefited from foreign exchange gains on certain financing
liabilities (compared with losses in 2022), which offset the effect
of higher interest rates in 2023 as compared to 2022.
IFRS net finance expense was £130 million (2022:
£161 million). The lower net finance expense under IFRS is
principally due to £130 million of translational foreign exchange
gains resulting from the liquidation of a number of subsidiaries to
simplify the Group's legal entity structure (2022: £69
million).
Tax
The adjusted effective tax rate (ETR) was 25.2%
(2022: 21.9%). The 2022 ETR benefited from a higher level of
reassessment of uncertain tax positions following progress on and
conclusions of tax authority audits.
The IFRS tax rate was 31.4%
(2022: 23.2%). The IFRS ETR in 2023 is higher than the
adjusted ETR due to the non-deductible impairment of IFCN goodwill
offset by the benefit from largely non-taxable gains on liquidation
of subsidiaries. The IFRS ETR in 2022 benefited from a higher
level of reassessment of uncertain tax positions following progress
on and conclusions of tax authority audits, and largely non-taxable
gains on sale of E45 and foreign exchange gains on liquidation of
subsidiaries.
Discontinued operations
The Group recognised a profit from discontinued
operations of £9 million (2022: £7 million loss), in relation to
the Group's disposal of the RB Pharmaceuticals business (now
Indivior plc).
Earnings per share (EPS)
Adjusted diluted EPS was 323.4 pence (2022:
341.7 pence), a decrease of 5.4% as higher adjusted operating
profit at constant exchange rates was more than offset by adverse
foreign exchange and a higher adjusted ETR in 2023.
IFRS diluted EPS was 228.7 pence (2022: 324.7
pence).
Balance sheet
At 31 December 2023, the Group had total equity
of £8,469 million (31 December 2022: £9,483 million).
Current assets of £5,302 million (31 December
2022: £5,285 million) increased by £17 million as lower inventories
and lower corporation tax receivables were offset by higher cash
and cash equivalents and higher assets held for sale.
Current liabilities of £8,338 million (31
December 2022: £8,341 million) decreased by £3 million. The
decrease principally relates to lower trade and other payables,
together with lower current tax liabilities and current provisions.
These decreases were offset by the share repurchase liability in
relation to committed purchases under the share buyback
programme.
Non-current assets of £21,834 million (31
December 2022: £23,457 million) primarily comprise goodwill and
other intangible assets of £18,588 million (31 December 2022:
£20,203 million) and property, plant and equipment. The decrease in
goodwill and other intangible assets of £1,615 million is
predominantly due to the strengthening of sterling reducing the
value of foreign currency denominated assets and the impairment of
IFCN goodwill.
Non-current liabilities of £10,329 million (31
December 2022: £10,918 million) decreased by £589 million
principally due to the strengthening of sterling reducing the value
of foreign currency denominated
liabilities.
Net working capital
During the year, net working capital decreased
by £56 million to negative £1,479 million. Net working capital as a
percentage of 12-month net revenue is -10% (31 December 2022: -11%)
mainly due to lower trade payables and lower
inventories.
Cash flow
|
Unaudited
|
Audited
|
|
31
Dec
2023
£m
|
31
Dec
2022
£m
|
Adjusted operating
profit
|
3,373
|
3,439
|
Depreciation,
share-based payments and gain on disposal of fixed assets (net of
proceeds)
|
585
|
521
|
Capital
expenditure
|
(449)
|
(443)
|
Movement in working
capital and provisions
|
(21)
|
(408)
|
Cash flow in relation
to adjusting items
|
(45)
|
(38)
|
Interest
paid
|
(263)
|
(209)
|
Tax paid
|
(922)
|
(831)
|
Free cash flow
|
2,258
|
2,031
|
Free cash flow
conversion
|
97%
|
83%
|
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 of £2,258 million increased by
£227 million or 11%. Free cash flow conversion improved by 14
percentage points to 97% as the benefit from working capital was
only partially offset by higher tax and interest
paid.
Net cash generated from operating activities
increased by £239 million to £2,636 million (2022: £2,397
million).
Net debt
|
Unaudited
|
Audited
|
|
31
Dec
2023
|
31
Dec
2022
|
|
£m
|
£m
|
Opening net
debt
|
(7,984)
|
(8,378)
|
Free cash
flow
|
2,258
|
2,031
|
Share
buyback
|
(207)
|
-
|
Purchase of ordinary
shares by employee share ownership trust
|
(2)
|
-
|
Shares
reissued
|
48
|
54
|
Acquisitions,
disposals and purchase of investments
|
(80)
|
220
|
Dividends paid to
owners of the parent company
|
(1,339)
|
(1,249)
|
Dividends paid to
non-controlling interests
|
(8)
|
(35)
|
New lease liabilities
in the period
|
(44)
|
(134)
|
Exchange and other
movements
|
76
|
(500)
|
Cash flow
attributable to discontinued operations
|
(8)
|
7
|
Closing net debt
|
(7,290)
|
(7,984)
|
At 31 December 2023, net debt was £7,290
million, a decrease of £694 million from 31 December 2022, as
continued strong free cash flow was used to pay down debt and
enabled higher capital returns through dividends (£1,339 million)
and the new share buy-back program (£207 million). Net debt
was 1.9x adjusted EBITDA at 31 December 2023 (31 December 2022:
2.1x).
The Group regularly reviews its banking
arrangements and currently has adequate facilities available to it.
The Group has committed borrowing facilities totalling £4,500
million (31 December 2022: £4,500 million), £4,450 million of which
expire after more than two years, which are undrawn at year end.
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 a final 2023
dividend of 115.9 pence (2022: 110.3 pence). The ex-dividend date
will be 11 April 2024 and the dividend will be paid on 24 May 2024
to shareholders on the register at the record date of 12 April
2024. The final 2023 dividend will be accrued once approved
by shareholders.
Return on Capital Employed (ROCE)
ROCE in 2023 was 12.5% (2022: 13.2%), a decrease
of 70bps from 2022, due to a lower Net Operating Profit after Tax
(NOPAT) as a result of the higher adjusted tax rate.
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 over time. As we reduce
leverage we will return surplus cash to shareholders as
appropriate. In October 2023, our strong free cash flow
generation and healthy balance sheet enabled us to announce a £1
billion share buy-back programme over the following twelve
months.
Growing the dividend is a long-term goal of the
business. The Board's dividend policy aims to deliver sustainable
dividend growth in future years, subject to any significant
internal or external factors. Accordingly, the 2023 dividend was
increased by 5% in line with this objective.
Condensed Financial
Statements
Group Income
Statement
For the year ended 31 December
2023
|
|
Unaudited
|
Audited
|
|
|
2023
|
2022
|
|
|
£m
|
£m
|
CONTINUING
OPERATIONS
|
|
|
|
Net
Revenue
|
|
14,607
|
14,453
|
Cost of
sales
|
|
(5,847)
|
(6,092)
|
Gross
profit
|
|
8,760
|
8,361
|
Impairment
of goodwill
|
|
(810)
|
(167)
|
Other
operating expenses
|
|
(5,419)
|
(4,945)
|
Net
operating expenses
|
|
(6,229)
|
(5,112)
|
Operating
profit
|
|
2,531
|
3,249
|
Finance
income
|
3
|
210
|
130
|
Finance
expense
|
3
|
(340)
|
(291)
|
Impairment
of equity-accounted investments
|
|
-
|
(19)
|
Share of
loss of equity-accounted investments, net of tax
|
|
-
|
(2)
|
Profit before income
tax
|
|
2,401
|
3,067
|
Income tax
charge
|
4
|
(753)
|
(711)
|
Net profit from continuing
operations
|
|
1,648
|
2,356
|
Net profit/(loss) from
discontinued operations
|
|
9
|
(7)
|
Net
profit
|
|
1,657
|
2,349
|
Attributable to non-controlling interests
|
|
14
|
19
|
Attributable to owners of the parent company
|
|
1,643
|
2,330
|
Net
profit
|
|
1,657
|
2,349
|
Basic earnings/(loss) per
ordinary share
|
|
|
|
From
continuing operations (pence)
|
5
|
227.9
|
326.7
|
From
discontinued operations (pence)
|
5
|
1.3
|
(1.0)
|
From total
operations (pence)
|
|
229.2
|
325.7
|
Diluted earnings/(loss) per
ordinary share
|
|
|
|
From
continuing operations (pence)
|
5
|
227.4
|
325.7
|
From
discontinued operations (pence)
|
5
|
1.3
|
(1.0)
|
From total
operations (pence)
|
|
228.7
|
324.7
|
Group Statement of
Comprehensive Income
For the year ended 31 December
2023
|
Unaudited
|
Audited
|
|
2023
|
2022
|
|
£m
|
£m
|
Net
profit
|
1,657
|
2,349
|
Other comprehensive
income/(expense)
|
|
|
Items that have or may be
reclassified to the Income Statement in subsequent
years
|
|
|
Net
exchange (loss)/gain on foreign currency translation, net of
tax
|
(639)
|
1,065
|
Reclassification of foreign currency translation reserves on
disposal or liquidation of foreign operations, net of
tax
|
(131)
|
(56)
|
Gains/(losses) on net investment hedges, net of
tax
|
42
|
(115)
|
Fair value
(losses) on cash flow hedges, net of tax1
|
(16)
|
(32)
|
Reclassification of cash flow hedges to the income
statement1
|
(23)
|
34
|
|
(767)
|
896
|
Items that will not be
reclassified to the Income Statement in subsequent
years
|
|
|
Remeasurements of defined benefit pension plans, net of
tax
|
(26)
|
24
|
Revaluation of equity instruments - FVOCI, net of
tax
|
(10)
|
(87)
|
|
(36)
|
(63)
|
Other comprehensive
(expense)/income, net of tax
|
(803)
|
833
|
Total comprehensive
income
|
854
|
3,182
|
Attributable to non-controlling interests
|
13
|
20
|
Attributable to owners of the parent company
|
841
|
3,162
|
Total comprehensive
income
|
854
|
3,182
|
|
|
|
Total comprehensive income
attributable to owners of the parent company arising
from:
|
|
|
Continuing
operations
|
832
|
3,169
|
Discontinued operations
|
9
|
(7)
|
|
841
|
3,162
|
1
2022 comparatives presented as a single line net in the 2022 Annual
Report and Accounts
Group Balance
Sheet
As at 31 December 2023
|
|
Unaudited
|
Audited
|
|
|
2023
£m
|
2022
£m
|
ASSETS
|
|
|
|
Non-current assets
|
|
|
|
Goodwill and other intangible
assets
|
6
|
18,588
|
20,203
|
Property, plant and
equipment
|
|
2,399
|
2,473
|
Equity
instruments
|
|
118
|
86
|
Deferred tax
assets
|
|
287
|
244
|
Retirement benefit
surplus
|
|
270
|
294
|
Other non-current
receivables
|
|
172
|
157
|
Total non-current assets
|
|
21,834
|
23,457
|
Current assets
|
|
|
|
Inventories
|
|
1,637
|
1,825
|
Trade and other
receivables
|
|
2,062
|
2,082
|
Derivative financial
instruments
|
|
64
|
59
|
Current tax
recoverable
|
|
80
|
155
|
Cash and cash
equivalents
|
|
1,387
|
1,157
|
Assets held for
sale
|
|
72
|
7
|
Total current assets
|
|
5,302
|
5,285
|
Total assets
|
|
27,136
|
28,742
|
LIABILITIES
|
|
|
|
Current liabilities
|
|
|
|
Short-term
borrowings
|
7
|
(1,679)
|
(1,721)
|
Provisions for liabilities and
charges
|
|
(142)
|
(227)
|
Trade and other
payables
|
|
(5,506)
|
(5,547)
|
Derivative financial
instruments
|
|
(78)
|
(55)
|
Share repurchase
liability
|
|
(296)
|
-
|
Current tax
liabilities
|
|
(620)
|
(791)
|
Liabilities held for
sale
|
|
(17)
|
-
|
Total current liabilities
|
|
(8,338)
|
(8,341)
|
Non-current liabilities
|
|
|
|
Long-term
borrowings
|
7
|
(6,858)
|
(7,163)
|
Deferred tax
liabilities
|
|
(2,899)
|
(3,037)
|
Retirement benefit
obligations
|
|
(233)
|
(240)
|
Provisions for liabilities and
charges
|
|
(57)
|
(59)
|
Derivative financial
instruments
|
|
(187)
|
(249)
|
Non-current tax
liabilities
|
|
(28)
|
(54)
|
Other non-current
liabilities
|
|
(67)
|
(116)
|
Total non-current liabilities
|
|
(10,329)
|
(10,918)
|
Total liabilities
|
|
(18,667)
|
(19,259)
|
Net assets
|
|
8,469
|
9,483
|
EQUITY
|
|
|
|
Capital and reserves
|
|
|
|
Share capital
|
|
74
|
74
|
Share premium
|
|
254
|
254
|
Merger reserve
|
|
(14,229)
|
(14,229)
|
Other reserves
|
|
(1,060)
|
(294)
|
Retained
earnings
|
|
23,409
|
23,638
|
Attributable to owners of the parent
company
|
|
8,448
|
9,443
|
Attributable to non-controlling interests
|
|
21
|
40
|
Total equity
|
|
8,469
|
9,483
|
Group Statement of Changes
in Equity
For the year ended 31 December 2023
|
Share
capital
|
Share
premium
|
Merger
reserves
|
Other
reserves
|
Retained
earnings
|
Total
attributable to owners of the parent company
|
Non-controlling interests
|
Total
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
Audited Balance at 1 January
2022
|
74
|
253
|
(14,229)
|
(1,189)
|
22,490
|
7,399
|
54
|
7,453
|
Comprehensive
income
|
|
|
|
|
|
|
|
|
Net
income
|
-
|
-
|
-
|
-
|
2,330
|
2,330
|
19
|
2,349
|
Other
comprehensive income/(expense)
|
-
|
-
|
-
|
895
|
(63)
|
832
|
1
|
833
|
Total comprehensive
income
|
-
|
-
|
-
|
895
|
2,267
|
3,162
|
20
|
3,182
|
Transactions with
owners
|
|
|
|
|
|
|
|
|
Treasury
shares reissued
|
-
|
1
|
-
|
-
|
53
|
54
|
-
|
54
|
Issuance
of shares to non-controlling interest
|
-
|
-
|
-
|
-
|
-
|
-
|
1
|
1
|
Share-based payments
|
-
|
-
|
-
|
-
|
78
|
78
|
-
|
78
|
Tax on
share awards
|
-
|
-
|
-
|
-
|
(1)
|
(1)
|
-
|
(1)
|
Cash
dividends
|
-
|
-
|
-
|
-
|
(1,249)
|
(1,249)
|
(35)
|
(1,284)
|
Total transactions with
owners
|
-
|
1
|
-
|
-
|
(1,119)
|
(1,118)
|
(34)
|
(1,152)
|
Audited Balance at 31
December 2022
|
74
|
254
|
(14,229)
|
(294)
|
23,638
|
9,443
|
40
|
9,483
|
Comprehensive
income
|
|
|
|
|
|
|
|
|
Net
income
|
-
|
-
|
-
|
-
|
1,643
|
1,643
|
14
|
1,657
|
Other
comprehensive expense
|
-
|
-
|
-
|
(766)
|
(36)
|
(802)
|
(1)
|
(803)
|
Total comprehensive
(expense)/income
|
-
|
-
|
-
|
(766)
|
1,607
|
841
|
13
|
854
|
Transactions with
owners
|
|
|
|
|
|
|
|
|
Treasury
shares reissued
|
-
|
-
|
-
|
-
|
48
|
48
|
-
|
48
|
Purchase
of ordinary shares by employee share ownership trust
|
-
|
-
|
-
|
-
|
(2)
|
(2)
|
-
|
(2)
|
Repurchase
of ordinary shares
|
-
|
-
|
-
|
-
|
(503)
|
(503)
|
-
|
(503)
|
Share-based payments
|
-
|
-
|
-
|
-
|
102
|
102
|
-
|
102
|
Tax on
share awards
|
-
|
-
|
-
|
-
|
1
|
1
|
-
|
1
|
Cash
dividends
|
-
|
-
|
-
|
-
|
(1,339)
|
(1,339)
|
(8)
|
(1,347)
|
Forward
purchase of shares held by non-controlling interest
|
-
|
-
|
-
|
-
|
(143)
|
(143)
|
(24)
|
(167)
|
Total transactions with
owners
|
-
|
-
|
-
|
-
|
(1,836)
|
(1,836)
|
(32)
|
(1,868)
|
Unaudited Balance at 31
December 2023
|
74
|
254
|
(14,229)
|
(1,060)
|
23,409
|
8,448
|
21
|
8,469
|
Group Cash Flow
Statement
For the year ended 31
December 2023
|
Unaudited
|
Audited
|
|
2022
|
2022
|
|
£m
|
£m
|
CASH FLOWS FROM OPERATING
ACTIVITIES
|
|
|
Profit
before tax
|
2,401
|
3,067
|
Net
finance expense
|
130
|
161
|
Share of
loss and impairment of equity-accounted
investments
|
-
|
21
|
Operating
profit from continuing operations
|
2,531
|
3,249
|
Profit on
sale of property, plant and equipment and intangible
assets
|
(34)
|
(82)
|
Depreciation, amortisation and impairment
|
1,290
|
607
|
Share-based payments
|
102
|
78
|
Decrease/(increase) in inventories
|
118
|
(254)
|
Increase
in trade and other receivables
|
(87)
|
(23)
|
Decrease
in payables and provisions
|
(91)
|
(145)
|
Cash generated from
continuing operations
|
3,829
|
3,430
|
Interest
paid
|
(293)
|
(243)
|
Interest
received
|
30
|
34
|
Tax
paid
|
(922)
|
(831)
|
Net cash
flows attributable to discontinued operations
|
(8)
|
7
|
Net cash generated from
operating activities
|
2,636
|
2,397
|
CASH FLOWS FROM INVESTING
ACTIVITIES
|
|
|
Purchase
of property, plant and equipment
|
(348)
|
(362)
|
Purchase
of intangible assets
|
(101)
|
(81)
|
Proceeds
from the sale of property, plant and equipment
|
63
|
84
|
Proceeds
from sale of intangible assets and related businesses, net of cash
disposed
|
1
|
247
|
Acquisition of businesses, net of cash
acquired
|
(81)
|
(12)
|
Other
investing activities
|
-
|
(15)
|
Net cash used in investing
activities
|
(466)
|
(139)
|
CASH FLOWS FROM FINANCING
ACTIVITIES
|
|
|
Treasury
shares reissued
|
48
|
54
|
Purchase
of ordinary shares by employee share ownership
trust
|
(2)
|
-
|
Repurchase
of ordinary shares
|
(207)
|
-
|
Proceeds
from borrowings
|
1,638
|
2,274
|
Repayment
of borrowings
|
(1,855)
|
(3,807)
|
Dividends
paid to owners of the parent company
|
(1,339)
|
(1,249)
|
Dividends
paid to non-controlling interests
|
(8)
|
(35)
|
Other
financing activities
|
(84)
|
383
|
Net cash used in financing
activities
|
(1,809)
|
(2,380)
|
Net increase/(decrease) in
cash and cash equivalents
|
361
|
(122)
|
Cash and
cash equivalents at beginning of the year
|
1,156
|
1,259
|
Exchange
(losses)/gains
|
(137)
|
19
|
Cash and cash equivalents at
end of the year
|
1,380
|
1,156
|
Cash and
cash equivalents comprise:
|
|
|
Cash and
cash equivalents
|
1,387
|
1,157
|
Overdrafts
|
(7)
|
(1)
|
|
1,380
|
1,156
|
1. Cash flow
from other financing activities are principally
composed of cash receipts and payments on derivative contracts used
to hedge foreign exchange gains or losses on non-Sterling financing
assets and financing liabilities between the Group's treasury
company and fellow Group subsidiaries.
2. Included
within cash and cash equivalents is £229 million of cash (2022:
£276 million) which is restricted for use by the Group but is
available on demand and freely available for use within the
relevant subsidiary.
Notes to Condensed Financial
Statements
1
ACCOUNTING POLICIES
General
Reckitt Benckiser Group plc is a
public limited company listed on the London Stock Exchange and
incorporated and domiciled in England. The address of its
registered office is 103-105 Bath Road, Slough, Berkshire, SL1
3UH.
Basis of Preparation
The Unaudited Consolidated
Financial Statements have been produced in accordance with
UK-adopted international accounting standards (UK-adopted IFRS
Accounting Standards). The Condensed Financial Statements for the
year ended 31 December 2023 were authorised for issue by the Board
on 27 February 2024.
The financial information set out
above does not constitute the Company's statutory accounts for the
year ended 31 December 2023 and 31 December 2022. The financial
information for the year ended 31 December 2022 is derived from the
statutory accounts for the year ended 31 December 2022 which have
been delivered to the registrar of companies. The auditor has
reported on the the year ended 31 December 2022 accounts; their
report was (i) unqualified, (ii) did not include a reference to any
matters to which the auditor drew attention by way of emphasis
without qualifying their report and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act 2006.
The statutory accounts for the year ended 31 December 2023 will be
finalised on the basis of the financial information presented by
the Directors in this preliminary announcement and will be
delivered to the registrar of companies in due course.
Going Concern
The Directors considered it
appropriate to adopt the going concern basis of accounting in
preparing the consolidated Financial Statements. When reaching this
conclusion, the Directors took into account the Group's overall
financial position, exposure to principal risks and future business
forecasts. At 31 December 2023, the Group had cash and cash
equivalents excluding restricted cash of £1.2 billion. The Group
also had access to committed borrowing facilities of £4.5 billion,
which were undrawn at year end and of which £4.45 billion are not
subject to renewal until 2025 onwards.
New Standards, Amendments and
Interpretations
The accounting policies applied in
the preparation of these Consolidated Financial Statements are
consistent with those in the Annual Report and Financial Statements
for the year ended 31 December 2022, along with the adoption of new
and amended accounting standards with effect from 1 January 2023 as
detailed below:
On 1 January 2023, the Group
adopted certain new accounting policies where necessary to comply
with amendments to IFRS, none of which had a material impact on the
consolidated results, financial position or cash flows of the
Group.
On 23 May 2023, the International
Accounting Standards Board issued International Tax Reform-Pillar
Two Model Rules - Amendments to IAS 12. The Group has applied the
mandatory temporary exception to the accounting for deferred taxes
arising from the jurisdictional implementation of the Pillar Two
rules set out therein.
Critical accounting judgments
The judgements in the application
of the Group's accounting policies in the year ended 31 December
2023 are the same as in the year ended 31 December 2022 except for
the following:
·
Management has made judgments relating to the
allocation of consideration between the different elements in the
forward contract to purchase the non-controlling interest in RB
Manon as outlined in Note 10.
·
Management has identified matters (including the
Korea Humidifier Sanitiser, Necrotizing Enterocolitis and
Phenylephrine issues) that may incur liabilities in the future but
does not recognise these liabilities when it is too early to
determine the likely outcome or make a reliable estimate (Note
9).
Key sources of estimation uncertainty
Each year, management is required
to make a number of assumptions regarding the future. The related
year end accounting estimates will, by definition, seldom equal the
final actual results. The estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the
revision affects only that period or in the period of the revision
and future periods if the revision affects both current and future
periods. The estimates and assumptions that have a significant
risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year are the same
as in the year ended 31 December 2023.
2
OPERATING SEGMENTS
The Group's operating segments
comprise of the Hygiene, Health and Nutrition business units
reflecting the way in which information is presented to and
reviewed by the Group's Chief Operating Decision Maker (CODM) for
the purposes of making strategic decisions and assessing Group-wide
performance. The CODM is the Group Executive Committee. This
Committee is responsible for the implementation of strategy
(approved by the Board), the management of risk (delegated by the
Board) and the review of Group operational performance and ongoing
business integration.
The Group Executive Committee
assesses the performance of these operating segments based on Net
Revenue from external customers and segment profit being 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 year ended 31 December 2023 and 31
December 2022 is as follows:
Year ended 31 December
2023 Unaudited
|
Hygiene
|
Health
|
Nutrition
|
Adjusting
Items
|
Total
|
£m
|
£m
|
£m
|
£m
|
£m
|
Net
revenue
|
6,135
|
6,062
|
2,410
|
-
|
14,607
|
Depreciation and amortisation
|
(155)
|
(193)
|
(96)
|
(26)
|
(470)
|
Operating
profit
|
1,236
|
1,690
|
447
|
(842)
|
2,531
|
Net
finance expense
|
|
|
|
|
(130)
|
Profit
before income tax
|
|
|
|
|
2,401
|
Income tax
charge
|
|
|
|
|
(753)
|
Net income
from continuing operations
|
|
|
|
|
1,648
|
Year ended
31 December 2022 Audited
|
Hygiene
|
Health
|
Nutrition
|
Adjusting
Items
|
Total
|
£m
|
£m
|
£m
|
£m
|
£m
|
Net
revenue
|
5,960
|
5,992
|
2,501
|
-
|
14,453
|
Depreciation and amortisation
|
(135)
|
(177)
|
(90)
|
(35)
|
(437)
|
Operating
profit
|
1,214
|
1,648
|
577
|
(190)
|
3,249
|
Net
finance expense
|
|
|
|
|
(161)
|
Impairment of equity-accounted
investments
|
|
|
|
|
(19)
|
Share of loss of equity-accounted
investments, net of tax
|
|
|
|
|
(2)
|
Profit
before income tax
|
|
|
|
|
3,067
|
Income
tax charge
|
|
|
|
|
(711)
|
Net
income from continuing operations
|
|
|
|
|
2,356
|
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, which includes in the
year to 31 December 2023, the impairment of IFCN Goodwill (note 6),
is included on page 28.
3 NET FINANCE
EXPENSE
|
Unaudited
|
Audited
|
|
2023
£m
|
2022
£m
|
Finance
income
|
|
|
Foreign
exchange net gain on liquidation of subsidiaries
|
130
|
69
|
Interest
income on cash and cash equivalents
|
41
|
29
|
Pension
net finance income
|
8
|
5
|
Foreign
exchange gains on intercompany financing, net of hedging
|
21
|
-
|
Finance
income on tax balances
|
-
|
26
|
Other
finance income
|
10
|
1
|
Total finance
income
|
210
|
130
|
Finance
expense
|
|
|
Interest
payable on borrowings
|
(295)
|
(233)
|
Foreign
exchange losses on intercompany financing, net of
hedging
|
-
|
(24)
|
Finance
expense on tax balances
|
(22)
|
-
|
Other
finance expense
|
(23)
|
(34)
|
Total finance
expense
|
(340)
|
(291)
|
Net finance
expense
|
(130)
|
(161)
|
As a result of the simplification
of the Group's legal entity structure, a number of entities have
been liquidated. Upon liquidation, the cumulative foreign
exchange reserves were recycled to the Income Statement, resulting
in a net foreign exchange gain of £130 million (2022: a net foreign
exchange gain of £69 million).
4
INCOME TAX EXPENSE
|
Unaudited
|
Audited
|
|
2023
£m
|
2022
£m
|
Current
tax
|
783
|
766
|
Adjustment
in respect of prior periods
|
22
|
(23)
|
Total
current tax
|
805
|
743
|
Origination and reversal of temporary
differences
|
(51)
|
(20)
|
Impact of
changes in tax rates
|
(1)
|
(5)
|
Total
deferred tax
|
(52)
|
(25)
|
Cumulative
foreign exchange on deferred tax balances reclassified to the
Income Statement
|
-
|
(7)
|
Income tax
charge
|
753
|
711
|
5
EARNINGS PER SHARE
|
Unaudited
|
Audited
|
|
2023
pence
|
2022
pence
|
Basic
earnings per share
|
|
|
From
continuing operations
|
227.9
|
326.7
|
From
discontinued operations
|
1.3
|
(1.0)
|
Total basic
earnings per
share
|
229.2
|
325.7
|
Diluted
earnings per share
|
|
|
From
continuing operations
|
227.4
|
325.7
|
From
discontinued operations
|
1.3
|
(1.0)
|
Total diluted earnings per
share
|
228.7
|
324.7
|
Basic
Basic earnings per share is
calculated by dividing the net income attributable to owners of the
parent company from continuing operations (2023: £1,634 million
income, 2022: £2,337 million income) and discontinued operations
(2023: £9 million income; 2022: £7 million loss) by the weighted
average number of ordinary shares in issue during the year (2023:
716,700,954; 2022: 715,284,629).
Diluted
Diluted earnings per share is
calculated by adjusting the weighted average number of shares
outstanding to assume conversion of all potentially dilutive
ordinary shares. The company has the following categories of
potentially dilutive ordinary shares: Executive Share Awards
(including Executive Share Options and Executive Restricted Share
Scheme Awards) and Employee Sharesave Scheme Options. The options
only dilute earnings when they result in the issue of shares at a
value below the market price of the share and when all performance
criteria (if applicable) have been met as at the balance sheet
date. As at 31 December 2023, there were 15,150,221 (2022:
14,219,133) Executive Share Awards 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.
|
Unaudited
|
Audited
|
|
2023
average
number of
shares
|
2022
average
number of
shares
|
On a basic
basis
|
716,700,954
|
715,284,629
|
Dilution
for Executive Share Awards
|
1,368,088
|
1,858,996
|
Dilution
for Employee Sharesave Scheme Options
|
214,492
|
350,982
|
On a
diluted basis
|
718,283,534
|
717,494,607
|
6 GOODWILL AND OTHER
INTANGIBLE ASSETS
|
Brands
£m
|
Goodwill
£m
|
Software
£m
|
Other
£m
|
Total
£m
|
Cost
|
|
|
|
|
|
At 1
January 2022
|
13,448
|
10,212
|
547
|
266
|
24,473
|
Additions
|
-
|
-
|
77
|
4
|
81
|
Arising on
business combinations
|
-
|
(2)
|
-
|
7
|
5
|
Disposals
|
(59)
|
(6)
|
(3)
|
-
|
(68)
|
Reclassifications to held for sale
|
-
|
-
|
16
|
(16)
|
-
|
Exchange
adjustments
|
1,136
|
832
|
16
|
17
|
2,001
|
Audited At 31 December
2022
|
14,525
|
11,036
|
653
|
278
|
26,492
|
Additions
|
-
|
-
|
101
|
-
|
101
|
Arising on
business combinations
|
-
|
17
|
-
|
39
|
56
|
Disposals
|
(1)
|
-
|
-
|
-
|
(1)
|
Reclassification from tangible fixed assets
|
-
|
-
|
4
|
-
|
4
|
Reclassifications to held for sale
|
(124)
|
-
|
-
|
-
|
(124)
|
Exchange
adjustments
|
(583)
|
(660)
|
(5)
|
(4)
|
(1,252)
|
Unaudited At 31 December
2023
|
13,817
|
10,393
|
753
|
313
|
25,276
|
Accumulated amortisation and
impairment
|
|
|
|
|
|
At 1
January 2022
|
342
|
4,884
|
252
|
127
|
5,605
|
Amortisation and impairment
|
21
|
167
|
68
|
19
|
275
|
Disposals
|
-
|
-
|
(1)
|
-
|
(1)
|
Reclassifications
|
-
|
-
|
8
|
(8)
|
-
|
Exchange
adjustments
|
16
|
376
|
8
|
10
|
410
|
Audited At 31 December
2022
|
379
|
5,427
|
335
|
148
|
6,289
|
Amortisation
|
20
|
-
|
79
|
8
|
107
|
Impairment
|
-
|
810
|
2
|
-
|
812
|
Disposals
|
(1)
|
-
|
-
|
-
|
(1)
|
Reclassifications to held for sale
|
(77)
|
-
|
-
|
-
|
(77)
|
Exchange
adjustments
|
(10)
|
(422)
|
(4)
|
(6)
|
(442)
|
Unaudited At 31 December
2023
|
311
|
5,815
|
412
|
150
|
6,688
|
Net book
value
|
|
|
|
|
|
Audited At 31 December
2022
|
14,146
|
5,609
|
318
|
130
|
20,203
|
Unaudited At 31 December
2023
|
13,506
|
4,578
|
341
|
163
|
18,588
|
Annual Impairment
Review
Goodwill and other indefinite life
intangible assets must be tested for impairment on at least an
annual basis. An impairment loss is recognised when the recoverable
amount of a GCGU or CGU falls materially below its net book value
at the date of testing.
The determination of recoverable
amount, being the higher of value-in-use and fair value less costs
to dispose, is inherently judgemental and requires management to
make multiple estimates, for example around individual market
pressures and forces, future price and volume growth, future
margins, terminal growth rates and discount rates.
When forecasting the annual cash
flows that support the recoverable amount, the Group generally uses
its short-term budgets and medium-term strategic plans, with
additional senior management and Board-level review. Cash flows
beyond the five-year period are projected using terminal growth
rates. These rates do not exceed the long-term average growth rate
for the products and markets in which the GCGU or CGU
operates.
The cash flows are discounted back
to their present value using a pre-tax discount rate considered
appropriate for each GCGU and CGU. These rates have been derived
from management's views on the relevant weighted average cost of
capital, subsequently converted to the pre-tax equivalent discount
rate.
IFCN
Since the disposal of the IFCN
China business in September 2021, the IFCN CGU has represented the
Group's remaining IFCN business principally in North America, Latin
America and Asean. In impairment assessments conducted in both 2021
and 2022, management determined that the recoverable amount of IFCN
was higher than its carrying value such that no impairment was
required.
During 2023 the market environment
for IFCN continued to be influenced by the infant formula supply
shortages in the US which resulted from the temporary closure of a
major factory belonging to a competitor. The infant formula supply
shortages have resulted in an evolving regulatory environment,
which developed over the course of 2023. Compliance with enhanced
regulatory requirements is expected to increase the capital
requirement for the IFCN business and to impact the cost of
manufacture in future periods.
As a result of these regulatory
factors which developed over the course of 2023, and to incorporate
the effect of higher interest rates, management has increased the
pre-tax discount rate used to determine the value-in-use of the
IFCN CGU.
This resulted in the IFCN net book
value exceeding its recoverable amount, therefore management has
recorded an impairment loss against IFCN goodwill of £810 million
to record the IFCN CGU at its recoverable amount of £4,615
million.
The recoverable amount for IFCN has
been calculated on a value-in-use basis (2022: value-in-use basis).
The value-in-use of IFCN was determined utilising a discounted cash
flow approach with future cash flows derived from a detailed
five-year financial plan. Cash flows beyond the five-year plan are
projected using a terminal growth rate. The valuation used a
pre-tax discount rate of 11% (2022: 9%) and an IFCN specific
terminal growth rate of 2.0% (2022: 2.0%).
The determination of the
recoverable amount for IFCN at 31 December 2023 incorporates
certain assumptions, some of which are subject to considerable
uncertainty. These assumptions include but are not limited the
costs of complying with the evolving regulatory landscape, the
level at which US market shares stabilise, net revenue growth
rates, the commercial success of new product launches and the
expansion of specialty nutrition. As no headroom exists between the
IFCN recoverable amount and net book value, any changes to these
assumptions, or any deterioration in other macro or business-level
assumptions supporting the IFCN recoverable amount could
necessitate the recognition of impairment losses in future
periods.
The key assumptions used in the
estimation of value-in-use of IFCN are outlined below.
|
2023
|
Pre-tax
discount rate
|
11%
|
Terminal
growth rate
|
2.0%
|
Net
revenue compound annual growth rate (CAGR) for the period
2023-2028*
|
1.5%
|
Gross
margin CAGR for the period 2023-2028
|
2.2%
|
*The net revenue CAGR for the
period 2024-2028 is circa 4%, following rebasing of Nutrition net
revenue in 2024.
The key estimates incorporated
within the determination of the IFCN recoverable amount are
summarised below:
Key
estimates
|
Commentary
|
Market
|
In the US, management expects birth
rates to be relatively stable. Tendering for WIC contracts
continues to be highly competitive.
Within Latam and Asean, management
expects conditions to stabilise after recent inflationary price
increases.
|
Net
Revenue
|
In the short to medium term, the
valuation model assumes a five-year CAGR of 1.5%. This is expected
to be achieved through ongoing premiumisation, inflationary price
increases and revenues from new products/category launches
including the expansion of speciality nutrition.
|
Margins
|
In the short to medium term, the
valuation model assumes IFCN margins (both gross and operating) to
increase over the medium term as IFCN drives efficiencies and
improved product mix.
|
Discount
rate
|
Management determined an
IFCN-specific weighted average cost of capital (WACC) and the
implied pre-tax discount rate with the support of a third-party
expert. In addition, management performed benchmarking against
other comparable companies.
|
Terminal
growth rate
|
Management engaged a third-party
expert to help calculate an IFCN-specific terminal growth rate.
Management is satisfied with the reasonableness of the terminal
growth rate when compared against independent market growth
projections and long-term country inflation rates.
|
The table below shows the
sensitivity of the recoverable amount to reasonably possible
changes in key assumptions. The table assumes no related response
by management (for example, to drive further cost savings) and is
hence theoretical in nature.
|
2023
£m
|
Expected
Net Revenue growth rates (2024 to 2028) adjusted by
100bps
|
+
410/-400
|
Expected
EBIT growth rates (2024 to 2028) adjusted by 100bps
|
+/-
260
|
Terminal
growth rate (applied from 2029) adjusted by 50bps
|
+290/-250
|
Pre-tax
discount rate adjusted by 50bps
|
+270/-240
|
7 FINANCIAL LIABILITIES -
BORROWINGS
|
|
Unaudited
|
Audited
|
Current
|
|
2023
£m
|
2022
£m
|
Bank loans
and overdrafts1
|
|
30
|
40
|
Commercial
paper
|
|
-
|
1,190
|
Bonds
|
|
1,571
|
413
|
Lease
liabilities
|
|
78
|
78
|
Total short-term
borrowings
|
|
1,679
|
1,721
|
Bonds
|
|
5,304
|
5,461
|
Senior
notes
|
|
1,292
|
1,369
|
Other
non-current borrowings
|
|
13
|
22
|
Lease
liabilities
|
|
249
|
311
|
Total long-term
borrowings
|
|
6,858
|
7,163
|
Total
borrowings
|
|
8,537
|
8,884
|
Derivative
financial instruments
|
|
140
|
257
|
Less
overdrafts presented in cash and cash equivalents in the Cash Flow
Statement
|
|
(7)
|
(1)
|
Total financing
liabilities
|
|
8,670
|
9,140
|
1. Bank loans are denominated in a
number of currencies: all are unsecured and bear interest based on
market short-term interest rates.
The Group uses derivative financial
instruments to hedge certain elements of interest rate and exchange
risk on its financing liabilities. The split between these items
and other derivatives on the Balance Sheet is shown
below:
|
Assets
|
Liabilities
|
2023 (£m)
|
Current
|
Non-current1
|
Current
|
Non-current
|
Derivative
financial instruments (financing liabilities)
|
45
|
50
|
(58)
|
(177)
|
Derivative
financial instruments (non-financing liabilities)
|
19
|
-
|
(20)
|
(10)
|
Unaudited at 31 December
2023
|
64
|
50
|
(78)
|
(187)
|
|
|
|
|
|
|
|
1. Included
within Other non-current receivables on the Balance
Sheet
|
Assets
|
Liabilities
|
2022 (£m)
|
Current
|
Non-current
|
Current
|
Non-
current
|
Derivative
financial instruments (financing liabilities)
|
25
|
-
|
(34)
|
(248)
|
Derivative
financial instruments (non-financing liabilities)
|
34
|
-
|
(21)
|
(1)
|
Audited at
31 December 2022
|
59
|
-
|
(55)
|
(249)
|
|
|
|
|
|
|
|
|
Unaudited
|
Audited
|
Reconciliation of
movement in financing liabilities to Cash Flow
Statement
|
2023
|
2022
|
£m
|
£m
|
At 1
January
|
9,140
|
9,637
|
Proceeds
from borrowings
|
1,638
|
2,274
|
Repayment
of borrowings
|
(1,855)
|
(3,807)
|
Other
financing cash flows
|
(84)
|
383
|
Total financing cash
flows
|
(301)
|
(1,150)
|
New lease
liabilities
|
44
|
134
|
Exchange,
fair value and other movements
|
(213)
|
519
|
Total non-cash financing
items
|
(169)
|
653
|
At 31
December
|
8,670
|
9,140
|
8
DIVIDENDS
|
Unaudited
|
Audited
|
|
2023
£m
|
2022
£m
|
Cash dividends on equity
ordinary shares:
|
|
|
2022 Final
paid: 110.3p (2021: Final 101.6p) per share
|
790
|
726
|
2023
Interim paid: 76.6p (2021: Interim 73p) per share
|
549
|
523
|
Total
dividends for the year
|
1,339
|
1,249
|
The Directors are proposing a final
dividend in respect of the financial year ended 31 December 2023 of
115.9 pence per share which will absorb an estimated £828 million
of shareholders' funds. If approved by shareholders it will be paid
on 24 May 2024 to shareholders who are on the register on 12 April
2024, with an ex-dividend date of
11 April 2024.
9
CONTINGENT LIABILITIES AND ASSETS
Humidifier Sanitiser issue
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.
As previously reported, over the
last several years the South Korean government has designated a
number of diseases as HS injuries, in addition to the HS lung
injury for which Reckitt Korea's compensation plan was established.
These include asthma, toxic hepatitis, child interstitial lung
disease (ILD), bronchitis, upper airway disease, pneumonia, skin
disease (accompanied by respiratory injuries) and depression
(accompanied by respiratory injuries).
The Korean National Assembly passed
a bill on 6 March 2020 to amend the HS law with the main
changes in the amendment relating to: (i) the definition of HS
injury; (ii) the legal presumption of causation (shifting the
burden of proof for causation to the defendant if the plaintiff
demonstrates 'epidemiological correlation' between HS exposure and
their injury), and (iii) amendments to the fund set up by the
government and funded by the government and HS companies (the
Special Relief Fund (SRF), now called the Injury Relief Fund (IRF))
to provide expanded support payments to HS victims which would
cover all elements of court awarded damages except mental distress,
aside from KRW 100 million consolation payments for death cases,
and partial lost income.
The Group currently has a provision
of £27 million
(2022: £77 million) in relation to the HS issue in South Korea. In
addition, there are further potential costs that are not considered
probable and cannot be reliably estimated at the current time. The
impact of the HS law amendments will require further monitoring and
analysis, in particular those which will be subject to court
interpretation, such as the new epidemiological correlation
standard, any limitation applied by courts to damage awards, the
interest rate applied by individual courts to damage awards and
external factors such as the rate of future IRF
applications/recognitions. Accordingly, it is not possible to make
any reliable estimate of liability for individuals recognised by
the government as having HS injuries.
Necrotizing Enterocolitis (NEC)
Product liability actions relating
to NEC have been filed against the Group, or against the Group and
Abbott Laboratories, in state and federal courts in the United
States. The actions allege injuries relating to NEC in
preterm infants. Plaintiffs contend that human milk fortifiers
(HMF) and preterm formulas containing bovine-derived ingredients
cause NEC, and that preterm infants should receive a diet of
exclusive breast milk. The Company has denied the material
allegations of the claims. It contends that its products
provide critical tools to expert neonatologists for the nutritional
management of preterm infants for whom human milk, by itself, is
not nutritionally sufficient. The products are used under the
supervision of medical doctors. Any potential costs
relating to these actions are not considered probable and cannot be
reliably estimated at the current time.
Phenlyephrine
Starting in September 2023,
putative class action lawsuits have been filed against the Group
and competitor companies in various United States jurisdictions
that generally allege that the defendants made misrepresentations
about the effectiveness of products containing phenylephrine.
In December 2023, the Judicial Panel on Multidistrict Litigation
(JPML) transferred all currently pending federal court cases and
any similar, subsequently filed cases to a coordinated
multi-district litigation (MDL) in the Eastern District of New York
for pre-trial purposes. The Group is defending these cases,
which all remain in preliminary stages. Potential costs relating to
these actions are not considered probable and cannot be reliably
estimated at the current time.
Other
From time to time, the Group is
involved in discussions in relation to ongoing tax matters in a
number of jurisdictions around the world. Where appropriate, the
Directors make provisions based on their assessment of each
case.
10
FORWARD PURCHASE OF SHARES HELD BY NON-CONTROLLING
INTEREST
On 25 May 2023 the Group entered
into an agreement pursuant to which it will proceed to acquire the
remaining interests associated with the Company's majority owned
activities in mainland China and Hong Kong ("RB Manon") from its
existing minority shareholders. The aggregate percentage interest
of the minority shareholders in each of the three relevant Reckitt
subsidiaries is currently between 20% and 24.95%. RB Manon
undertakes non-exclusive distribution of certain Reckitt brands in
mainland China, Hong Kong and other Asian Pacific countries. The
transaction will be implemented through the purchase of the
non-controlling shareholdings in three subsidiaries of Reckitt held
by the minority shareholders. This will occur in multiple stages,
which are expected to take place through to 31 December 2038,
although the agreement contains provisions for the purchase of
shares to be made sooner.
The amounts payable to the minority
shareholders take the form of consideration for the shares and
dividends that may be paid on the shares prior to their
acquisition. Amounts payable to the minority shareholders are
dependent on the business performance of RB Manon. As at 25 May
2023, the estimated present value of the total amounts payable
under the agreement was £298 million based on projections of
future revenues and profitability of the RB Manon business, using a
discount rate of 5.5% based on the Group's borrowing costs in
China.
The agreement has different
elements which are accounted for separately. As there are no
specific accounting standards prescribing the allocation of value
in this arrangement, judgment is required to allocate the total
amount payable. The main elements relate (1) to a forward contract
for the purchase of a non-controlling interest in RB Manon and (2)
services provided by the minority shareholders in relation to the
transition of leadership and shares in RB Manon. The amount
allocated to the forward purchase of shares has been based on its
estimated value, with the residual amount allocated to the services
to transition the leadership and shares as the value of these
services are not estimable on a standalone basis.
An amount of £167 million was
allocated to the forward purchase of shares, which represents the
minimum exit value under the agreement that minority shareholders
could realise for their shares absent any transitional
arrangements. This amount was recorded as a liability with £143
million charged to retained earnings and the remaining £24 million
to extinguish the existing non-controlling interest. Any subsequent
changes to the present value of this liability after initial
recognition are recorded to the Income Statement. The Group
considers that any reasonable possible change in key assumptions
would not lead to a material adjustment to this estimated present
value in the next year. The remaining £131 million has been
allocated to the transitional services element, which will be
recognised as a liability and charged to the Income Statement over
the performance period for these services.
11
POST BALANCE SHEET EVENTS
There have been no events
subsequent to the Balance Sheet date which require
disclosure.
APPENDIX - ALTERNATIVE
PERFORMANCE MEASURES