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Reckitt Benckiser 2009 55
24 FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (CONTINUED)
Effective 1 January 2009, the Group adopted the amendment to IFRS 7 for financial instruments that are measured in the balance sheet at fair value,
this requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:
1) Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
2) Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly
(that is, derived from prices) (level 2). If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
3) Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
The following table presents the Group’s assets and liabilities that are measured at fair value at 31 December 2009:
Level 2 Level 3 Total
£m £m £m
Assets:
Assets as per the balance sheet:
Auction rate securities – 16 16
Derivative financial instruments – FX forward exchange contracts 4 – 4
Total assets 4 16 20
Derivative financial instruments – FX forward exchange contracts 5 – 5
Total liabilities 5 – 5
Specific valuation techniques used to value financial instruments include:
1) The fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date, with the resulting value
discounted back to present value.
2) Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining financial instruments.
As the value of the level 3 instruments at 31 December 2009 is not material, no further level 3 disclosures have been made.
Reckitt Benckiser 200956
Notes to the accounts continued
24 FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (CONTINUED)
Financial risk management
The Group’s multi-national operations expose it to a variety of financial risks that include the effects of changes in foreign currency exchange rates,
credit risks, liquidity and interest rates. The Group has in place a risk management programme that seeks to limit the adverse effects on the financial
performance of the Group by using foreign currency financial instruments, including debt and other instruments, to fix interest rates.
The Group’s financing and financial risk management activities are centralised into the Group Treasury Centre (GTC) to achieve benefits of scale and
control. The GTC is not a profit centre, but adds value to the business operations by managing financial exposures of the Group centrally in a manner
consistent with underlying business risks. The GTC manages only those risks and flows generated by the underlying commercial operations and
speculative transactions are not undertaken.
The Board of Directors reviews and agrees policies, guidelines and authority levels for all areas of treasury activity and individually approves significant
activities. The GTC operates under close control of the Chief Financial Officer and is subject to periodic independent reviews and audits, both internal
and external.
1. Market risk
(a) Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures. Foreign exchange risk arises from
future commercial transactions, recognised assets and liabilities and net investments in foreign operations.
The Group’s policy is to align interest costs and operating profit of its major currencies in order to provide some protection against the translation
exposure on foreign currency profits after tax. The Group may undertake borrowings and other hedging methods in the currencies of the countries
where most of its assets are located.
It is the Group’s policy to monitor and only where appropriate hedge its foreign currency transaction exposure. These transaction exposures arise mainly
from foreign currency receipts and payments for goods and services and from the remittances of foreign currency dividends and loans. The local
business units enter into forward foreign exchange contracts with the GTC to manage these exposures where practical and allowed by local regulations.
The GTC matches the Group exposures, and hedges the net position where possible, using spot and forward foreign currency exchange contracts.
The notional principal amount of the outstanding forward foreign exchange contracts at 31 December 2009 was £1,610m payable (2008:
£829m payable).
Hedge of net investment in foreign entity
The Group had US dollar-denominated borrowings which it has designated as a hedge of net investment in its subsidiaries in the USA. The carrying
value of the dollar borrowings at 31 December 2009 was £104m (2008: £1,245m). A foreign exchange gain of £78m (2008: loss of £378m) on
translation of the borrowings into sterling has been recognised in the foreign currency translation reserve. There was no ineffectiveness to be recorded
from net investment in foreign entity hedges. At 31 December 2009, if the US dollar had strengthened by 5% against sterling, with all other variables
held constant, the foreign exchange loss recognised in the foreign currency translation reserve would have been £5m higher.
Cash flow hedge profile
As at 31 December 2009, the Group had no material individual financial instruments classified as cash flow hedges. The same was true as at
31 December 2008.
The Group held forward foreign exchange contracts denominated as cash flow hedges primarily in US dollars, Canadian dollars, Euros and Australian
dollars. Notional value of the payable leg resulting from these financial instruments was as follows:
2009 2008
£m £m
Euro 79 55
Canadian dollars 39 –
281 158
These forward foreign exchange contracts are expected to mature evenly over the period January 2010 to January 2011 (2008: January 2009 to
March 2010).
The ineffective portion recognised in the income statement that arises from cash flow hedges amounts to £nil (2008: £nil).
Gains and losses recognised in the hedging reserve in other comprehensive income on forward exchange contracts in 2009 of £15m loss (2008: £19m
gain) are recognised in the income statement in the period or periods during which the hedged forecast transaction affects the income statement,
which is generally within 12 months from the balance sheet date.
The maximum exposure to credit risk at the reporting date is the fair value of the derivative assets in the balance sheet.
Reckitt Benckiser 2009 57
24 FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (CONTINUED)
In the case of cash flow hedges, these are denominated in a diverse range of currencies, where a fluctuation in one individual currency relationship
with all others held constant does not have a significant effect on the income statement or shareholders’ equity. A fluctuation analysis has been
performed for all currencies. The largest potential fluctuation would be in respect of forward contracts between the Canadian and US dollar, if the
Canadian dollar had strengthened/weakened by 5% against the US dollar, with all other variables held constant, shareholders’ equity would have been
£2m (2008: 15%: £8m) lower/higher.
The remaining major monetary financial instruments (liquid assets, receivables, interest and non-interest bearing liabilities) are directly denominated in
the functional currency or are transferred to the functional currency through the use of derivatives. As at 31 December 2009 if all other currencies had
strengthened/weakened by 5% against sterling with all other variables held constant, this would have had an insignificant effect on the income
statement or shareholders’ equity (2008: insignificant).
The gains and losses from fair value movements on financing derivatives recognised in finance income and expense were £1m gain.
(b) Price risk
The Group is not exposed to equity securities price risk. Due to the nature of its business the Group is exposed to commodity price risk related to the
production or packaging of finished goods using oil related and a diverse range of other raw materials. This risk is, however, managed primarily through
medium-term contracts with certain key suppliers and is not therefore viewed as being a material risk.
(c) Cash flow and fair value interest rate risk
The Group has both interest-bearing and non interest-bearing liabilities. The Group manages its interest expense rate exposure using a mixture of fixed rate
and floating rate debt. The Group manages its interest income rate exposure on its gross financial assets by using a combination of fixed rate term deposits.
The Group analyses its interest rate exposure on a regular basis. Various scenarios are simulated taking into consideration refinancing, renewal of
existing positions, alternative financing and hedging. Based on these scenarios, the Group calculates the impact on the income statement of a defined
interest rate shift. For each simulation, the same interest rate shift is used for all currencies, calculated on a full year and pre tax basis. The scenarios are
only run for liabilities that represent the major interest-bearing positions. Based on the simulations performed, the impact on the income statement of a
50 basis-point shift in interest rates would be a maximum increase of £2m (2008: 100 bps: £10m) or decrease of £2m (2008: 100 bps: £10m),
respectively for the liabilities covered. The simulation is done on a periodic basis to verify that the maximum loss potential is within the limit given
by management.
2. Credit risk
The Group has no significant concentrations of credit risk. Credit risk arises from cash and cash equivalents, derivative financial instruments, deposits
with banks and financial institutions, as well as credit exposures to customers. The credit quality of trade and other receivables is detailed in note 13.
Financial institution counterparties are subject to approval under the Group’s counterparty risk policy and such approval is limited to financial institutions
with a BBB rating or above. The amount of exposure to any individual counterparty is subject to a limit defined within the counterparty risk policy,
which is reassessed annually by the Board. Derivative financial instruments are only traded with counterparties approved in accordance with the Board
policy. Derivative risk is measured using a risk weighting method.
The table below summarises the Group’s major financial institution counterparties by credit rating and balances (cash equivalents, derivative financial
instruments, deposits) at the balance sheet date.
Counterparty Risk
2009 2008
S&P Limit Exposure S&P Limit Exposure
Counterparty rating £m £m rating £m £m
Bank A A 100 57 A 125 104
Bank B AAA 300 50 AAA 300 50
Bank C A 125 50 A 125 22
Bank D AA 200 41 AA 200 41
Reckitt Benckiser 200958
Notes to the accounts continued
24 FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (CONTINUED)
3. Liquidity risk
Cash flow forecasting is performed by the local business units and aggregated by the GTC. The GTC monitors rolling forecasts of the Group’s liquidity
requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing
facilities. Funds over and above those required for short-term working capital purposes by the overseas businesses are generally remitted to the GTC.
The Group uses the remittances to settle obligations, repay borrowings, or, in the event of a surplus, invest in short-term instruments issued by
institutions with a BBB rating or better.
Borrowing facilities
The Group has various borrowing facilities available to it. The Group has bilateral credit facilities with high-quality international banks. All of these
facilities have similar or equivalent terms and conditions, and have a financial covenant, which is not expected to restrict the Group’s future operations.
At the end of 2009, the Group had, in addition to its long-term debt of £4m (2008: £4m), committed borrowing facilities totalling £1,675m
(2008: £1,675m), of which £1,650m exceeded 12 months’ maturity. Of the total facilities at the year end, £nil (2008: £206m) was utilised. The
committed borrowing facilities, together with available uncommitted facilities and central cash and investments, are considered sufficient to meet
the Group’s projected cash requirements.
The undrawn committed facilities available, in respect of which all conditions precedent have been met at the balance sheet date, were as follows:
2009 2008
£m £m
Undrawn committed borrowing facilities
Expiring within one year 25 –
Expiring between one and two years 900 25
All borrowing facilities are at floating rates of interest.
The facilities have been arranged to cover general corporate purposes including support for commercial paper issuance. All facilities incur commitment
fees at market rates.
Headroom between net debt and available facilities at 31 December 2009 was £1,895m (2008: £579m).
The Group’s borrowing limit at 31 December 2009 calculated in accordance with the Articles of Association was £54,729m (2008: £52,587m).
The table below analyses the Group’s financial liabilities and the derivatives which will be settled on a net basis into relevant maturity groupings based
on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual
undiscounted cash flows which have been calculated using spot rates at the relevant balance sheet date, including interest to be paid.
Carrying Less than Between 1 Between 2 Over
values 1 year and 2 years and 5 years 5 years
At 31 December 2009 £m £m £m £m £m
Commercial paper (104) (104) – – –
Other borrowings (32) (28) (3) (1) –
Other borrowings (234) (230) (3) (1) –
Trade payables (882) (882) – – –
Other payables (1,205) (1,184) (21) – –
The table below analyses the Group’s derivative financial instruments which will be settled on a gross basis into relevant maturity groupings based on
the remaining period between the balance sheet and the contractual maturity date. The amounts disclosed in the table are the contractual
undiscounted cash flows which have been calculated using spot rates at the relevant balance sheet date.
Less than Between 1 Between 2 Over
1 year and 2 years and 5 years 5 years
At 31 December 2009 £m £m £m £m
Forward exchange contracts
Outflow (1,607) (3) – –
Inflow 1,601 3 – –
Inflow 890 5 – –
4. Capital risk management
Capital risk management is discussed in detail in the Business Review on page 9.
Reckitt Benckiser 2009 59
25 OPERATING LEASE COMMITMENTS
2009 2008
Land and Plant and Land and Plant and
buildings equipment buildings equipment
£m £m £m £m
Total commitments under non-cancellable operating leases due:
Within one year 28 4 26 5
Later than one and less than five years 85 2 72 4
After five years 57 – 38 –
170 6 136 9
Operating lease rentals charged to the income statement in 2009 were £23m (2008: £28m) in respect of land and buildings and £7m (2008: £8m)
in respect of plant and equipment.
As at 31 December 2009, total amounts expected to be received under non-cancellable sub-lease arrangements were £9m (2008: £10m).
Amounts credited to the income statement in respect of sub-lease arrangements were £1m (2008: £1m).
26 CONTINGENT LIABILITIES
Contingent liabilities for the Group, comprising guarantees relating to subsidiary undertakings, at 31 December 2009 amounted to £28m
(2008: £41m).
The Group is involved in a number of investigations by competition authorities in Europe. It is too early to determine the likely outcome of these matters
and the Directors have made no provisions for such potential liabilities.
The Group has recently received a Statement of Objections from the Office of Fair Trading in the United Kingdom regarding alleged anti-competitive
activity involving the Gaviscon brand. In the event that the Office of Fair Trading finds against the Group it may impose a fine of up to the statutory
maximum of ten percent of Group worldwide turnover. The Board considers it appropriate to disclose a contingent liability in this regard. The Statement
of Objections is under review and the Group will present an appropriate response to the Office of Fair Trading in due course. The Directors at this stage
believe that there are substantive questions of law brought forward by the Statement of Objections, questions that have not been settled in prior
competition law cases and which require thorough analysis and debate.
27 RELATED PARTY TRANSACTIONS
The Group’s subsidiary in Zimbabwe (Reckitt Benckiser (Zimbabwe) (Private) Ltd) is not consolidated as noted in the accounting policies. Therefore
transactions between the Group and Reckitt Benckiser (Zimbabwe) (Private) Ltd are classified as related party transactions. During 2009 Group
companies sold to and purchased from Reckitt Benckiser (Zimbabwe) (Private) Ltd products and services of less than £1m (2008: less than £1m).
At 31 December 2009 Group companies had receivable and payable balances with Reckitt Benckiser (Zimbabwe) (Private) Ltd of less than £1m
(2008: less than £1m). There are no other significant related party transactions in 2009 (2008: none).
Key management compensation is disclosed in note 5a.
28 POST BALANCE SHEET EVENTS
Share capital issued since 31 December 2009
In the period 31 December 2009 to 28 February 2010 the parent company has not issued any ordinary shares.
On 23 February 2010 the Group received a Statement of Objections from the Office of Fair Trading in the UK regarding alleged anti-competitive activity
involving the Gaviscon brand. This is further detailed in note 26.
Reckitt Benckiser 200960
Five year summary
2009 2008 2007 2006 2005
Income statement £m £m £m £m £m
Net revenues 7,753 6,563 5,269 4,922 4,179
Operating profit 1,891 1,505 1,233 910 840
Net finance income/(expense) 1 (31) (24) (36) 36
Profit on ordinary activities before tax 1,892 1,474 1,209 874 876
Tax on profit (474) (354) (271) (200) (207)
Attributable to minority interests – – – – –
Net Income 1,418 1,120 938 674 669
Total assets less current liabilities (excluding current liability provisions) 5,858 5,039 3,480 3,044 2,694
Creditors due after more than one year:
Borrowings/other (182) (153) (148) (134) (186)
Provisions for liabilities and charges** (1,662) (1,592) (947) (1,044) (652)
Equity minority interests (2) (2) (2) (3) (1)
Total equity 4,012 3,292 2,383 1,863 1,855
Statistics
Reported basis
Operating profit to net revenues 24.4% 22.9% 23.4% 18.5% 20.1%
Total interest to operating profit (times covered) n/a 48.5x 51.4x 25.3x n/a
*Adjusted basis is calculated by deducting the exceptional items from profit for the year.
†Dividend cover is calculated by dividing earnings/adjusted earnings by ordinary dividends paid.
All the years included in the table are reported under IFRS.
**Provisions for liabilities and charges includes deferred tax liabilities, retirement benefit obligations and restructuring provisions.
Reckitt Benckiser 2009 61
Other matter
We have reported separately on the Group
financial statements of Reckitt Benckiser Group
plc for the year ended 31 December 2009.
Ian Chambers (Senior Statutory Auditor)
for and on behalf of
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
15 March 2010
Notes:
• ThemaintenanceandintegrityoftheReckitt
Benckiser Group plc website is the
responsibility of the Directors; the work
carried out by the auditors does not involve
consideration of these matters and,
accordingly, the auditors accept no
responsibility for any changes that may have
occurred to the financial statements since
they were initially presented on the website.
• LegislationintheUnitedKingdomgoverning
the preparation and dissemination of
financial statements may differ from
legislation in other jurisdictions.
Opinion on financial statements
In our opinion the parent company
financial statements:
• giveatrueandfairviewofthestateofthe
Company’s affairs as at 31 December 2009;
• havebeenproperlypreparedinaccordance
with United Kingdom Generally Accepted
Accounting Practice; and
• havebeenpreparedinaccordancewiththe
requirements of the Companies Act 2006.
Opinion on other matters prescribed by the
Companies Act 2006
In our opinion:
• thepartoftheDirectors’Remuneration
Report to be audited has been properly
prepared in accordance with the Companies
Act 2006; and
• theinformationgivenintheReportofthe
Directors for the financial year for which the
parent company financial statements are
prepared is consistent with the parent
company financial statements.
Matters on which we are required to
report by exception
We have nothing to report in respect of
the following matters where the Companies
Act 2006 requires us to report to you if, in
our opinion:
• adequateaccountingrecordshavenotbeen
kept by the parent company, or returns
adequate for our audit have not been
received from branches not visited by us; or
• theparentcompanynancialstatementsand
the part of the Directors’ Remuneration
Report to be audited are not in agreement
with the accounting records and returns; or
• certaindisclosuresofDirectors’remuneration
specified by law are not made; or
• wehavenotreceivedalltheinformationand
explanations we require for our audit.
We have audited the parent company
financial statements of Reckitt Benckiser
Group plc for the year ended 31 December
2009 which comprise the Parent company
balance sheet and the related notes. The
financial reporting framework that has been
applied in their preparation is applicable law
and United Kingdom Accounting Standards
(United Kingdom Generally Accepted
Accounting Practice).
Respective responsibilities of Directors
and auditors
As explained more fully in the Statement of
Directors’ responsibilities set out on page 16,
the Directors are responsible for the preparation
of the parent company financial statements and
for being satisfied that they give a true and fair
view. Our responsibility is to audit the parent
company financial statements in accordance
with applicable law and International Standards
on Auditing (UK and Ireland). Those standards
require us to comply with the Auditing Practices
Board’s Ethical Standards for Auditors.
This report, including the opinions, has been
prepared for and only for the Company’s
members as a body in accordance with Chapter
3 of Part 16 of the Companies Act 2006 and
for no other purpose. We do not, in giving
these opinions, accept or assume responsibility
for any other purpose or to any other person to
whom this report is shown or into whose hands
it may come save where expressly agreed by
our prior consent in writing.
Scope of the audit of the financial
statements
An audit involves obtaining evidence about the
amounts and disclosures in the financial
statements sufficient to give reasonable
assurance that the financial statements are
free from material misstatement, whether
caused by fraud or error. This includes an
assessment of: whether the accounting policies
are appropriate to the parent company’s
circumstances and have been consistently
applied and adequately disclosed; the
reasonableness of significant accounting
estimates made by the Directors; and the
overall presentation of the financial statements.
Parent company – independent auditors’ repo to the members of Recki Benckiser Group plc
Reckitt Benckiser 200962
Parent company balance sheet
2009 2008
As at 31 December Notes £m £m
Fixed assets
Investments 2 14,542 14,499
Current assets
Debtors due within one year 3 39 22
Debtors due after more than one year 4 11 6
50 28
Net assets 13,256 13,729
EQUITY
Capital and reserves
Share capital 6 72 72
Profit and loss reserve 7 13,184 13,657
Total equity 13,256 13,729
Approved by the Board on 15 March 2010.
Adrian Bellamy Bart Becht
Director Director
Reckitt Benckiser 2009 63
Notes to the parent company accounts
1 PARENT COMPANY ACCOUNTING POLICIES
Accounting convention
The financial statements are prepared under the historical cost convention as modified by the revaluation of financial instruments and share based
remuneration and in accordance with the Companies Act 2006 and applicable United Kingdom accounting standards. As permitted by s.408 of the
Companies Act 2006, no profit and loss account is presented for Reckitt Benckiser Group plc.
Foreign currency translation
Transactions denominated in foreign currencies are translated at the rate of exchange on the day the transaction occurs or at the contracted rate if the
transaction is covered by a forward exchange contract.
Assets and liabilities denominated in a foreign currency are translated at the exchange rate ruling on the balance sheet date or, if appropriate, at a
forward contract rate.
Taxation
The tax charge is based on the profit for the period and takes into account taxation deferred due to timing differences between the treatment of certain
items for taxation and accounting purposes. Deferred tax liabilities are provided for in full and deferred tax assets are recognised to the extent that they
are considered recoverable.
Fixed assets
Fixed asset investments are valued at cost less impairment.
Employee share schemes
Incentives in the form of shares are provided to employees under share option and restricted share schemes. Any shortfall between the cost to the
employee and the fair market value of the awards at date of grant is charged to the income statement over the period to which the performance
criteria relate, with the credit taken directly to the retained earnings reserve. Additional employer costs in respect of options and awards are charged to
the income statement account over the same period with the credit included in equity. Where awards are contingent upon future events an assessment
of the likelihood of these conditions being achieved is made at the end of each reporting period and reflected in the accounting entries made.
Where the Company grants rights to its equity instruments to employees of the Group, and such share based compensation is accounted for as
equity-settled in the consolidated financial statements of the Group, UITF 44 requires the subsidiaries to record an expense for such compensation in
accordance with FRS 20, “Share based payments”, with a corresponding increase recognised in equity as a contribution from the parent.
Debtors
Debtors are initially recognised at fair value and subsequently at amortised cost using the effective interest method less provision for impairment.
Creditors
Creditors are initially recognised at fair value and subsequently at amortised cost using the effective interest method.
Capital transactions
When the Company repurchases equity share capital, the amount of the consideration paid, including directly attributable costs, is recognised as a
charge to equity. Repurchased shares are either held in Treasury in order to satisfy employee options, or cancelled and, in order to maintain capital, an
equivalent amount to the nominal value of the shares cancelled is transferred from Retained Earnings to the Capital Redemption Reserve.
Cash and cash equivalents
Cash and cash equivalents comprises cash balances and other deposits with a maturity of less than three months when deposited.
Cash flow statement
Reckitt Benckiser Group plc has presented a Group cash flow statement in its Annual Report and Accounts 2009, therefore as permitted by FRS 1,
“Cash Flow Statements”, the Directors have not prepared a cash flow statement for the Company.
Reckitt Benckiser 200964
2 INVESTMENTS CLASSIFIED AS FIXED ASSETS
Shares in subsidiary
undertakings
£m
Cost:
At 1 January 2009 14,499
Additions during the year 43
At 31 December 2009 14,542
Provision for impairment:
At 1 January 2009 –
Provided for during the year –
At 31 December 2009 –
Shares in subsidiary
undertakings
£m
At 1 January 2008 14,447
Additions during the year 52
At 31 December 2008 14,499
Provision for impairment:
At 1 January 2008 –
Provided for during the period –
Principal subsidiary undertakings
The principal subsidiary undertakings at 31 December 2009, all of which are included in the consolidated financial statements, are shown below.
Country of
incorporation Effective % of
or registration share capital
Product segment and operation held by the Group
Propack Household Germany Ordinary 100
Reckitt Benckiser (Australia) Pty Limited Household Australia Ordinary 100
Reckitt Benckiser (Brasil) Limitada Household Brazil Ordinary 100
Reckitt Benckiser (Canada) Inc. Household and Food Canada Ordinary 100
Reckitt Benckiser Deutschland GmbH Household Germany Ordinary 100
Reckitt Benckiser España SL Household Spain Ordinary 100
Reckitt Benckiser France SAS Household France Ordinary 100
Reckitt Benckiser (UK) Limited Household UK Ordinary 100
None of the above subsidiaries are held directly by Reckitt Benckiser Group plc.
As permitted by s.410 of the Companies Act 2006, particulars of other subsidiary undertakings are not shown above. A full list of the Company’s
subsidiary undertakings will be annexed to the Company’s annual return to Companies House.
3 DEBTORS DUE WITHIN ONE YEAR
2009 2008
Amounts owed by Group undertakings are unsecured, interest free and are repayable on demand (2008: interest free).
Notes to the parent company accounts continued
Reckitt Benckiser 2009 65
4 DEBTORS DUE AFTER MORE THAN ONE YEAR
2009 2008
£m £m
Deferred tax assets 11 6
Deferred tax assets consist of short term timing differences.
5 CREDITORS DUE WITHIN ONE YEAR
2009 2008
£m £m
Included in the amounts owed to Group undertakings is an amount of £1,307m (2008: £760m) which is unsecured, carries interest at LIBOR
(2008: LIBOR) and is repayable on demand. All other amounts owed to Group undertakings are unsecured, interest free and are repayable on demand
(2008: interest free).
6 CALLED UP SHARE CAPITAL
Equity Nominal Subscriber Nominal
ordinary value ordinary value
Authorised shares £m shares £m
At 1 January 2009
Ordinary shares of 10p each 945,500,000 95 2 –
At 31 December 2009
Ordinary shares of 10p each 945,500,000 95 2 –
Issued and fully paid
At 1 January 2009 722,368,512 72 2 –
Redemptions – – – –
At 31 December 2009 722,368,512 72 2 –
Non voting
Equity Nominal redeemable Nominal Subscriber Nominal
ordinary value preference value ordinary value
Authorised shares £m shares £m shares £m
At 1 January 2008
Ordinary shares of 10p each 945,500,000 95 – – 2 –
At 31 December 2008
For details of the movement in ordinary shares during 2009 see note 21 of the Group Financial Statements on pages 52 and 53.
On 23 October 2007 under a Scheme of Arrangement between Reckitt Benckiser plc, the former holding company of the Group, and its shareholders
under Section 425 of the Companies Act 1985, and as sanctioned by the High Court, all the issued shares in that Company were cancelled and
the same number of new shares were issued to Reckitt Benckiser Group plc in consideration for the allotment to shareholders of one ordinary share
in Reckitt Benckiser Group plc for each ordinary share in Reckitt Benckiser plc held on the record date, 22 October 2007. Subsequent movements relate
to shares in Reckitt Benckiser Group plc.
Reckitt Benckiser Group plc was incorporated on 8 June 2007 under the name Trushelfco (no.3293) Limited. On incorporation, the Company’s
authorised share capital was £100 divided into 100 ordinary shares of £1 each. Of such shares, two ordinary shares were taken by the subscribers
to the Memorandum of Association and were paid up in full in cash. On 28 August 2007 the Company increased its share capital by £50,000 by the
creation of 50,000 non-voting redeemable preference shares of £1 each. On 28 August 2007 the Company authorised and allotted 50,000 redeemable
preference shares of £1 each to the subscriber.
On 23 October 2007 as part of the Scheme of Arrangement noted above, a further 722,368,512 ordinary shares of 2000 pence were issued, whereby
Reckitt Benckiser Group plc was interposed as the new holding company of the Group. As required by Section 131 of the Companies Act 1985 (Merger
Relief), no share premium was recognised. On 25 October 2007 the share capital of Reckitt Benckiser Group plc was reduced by reducing the nominal
value of the ordinary shares from 2000 pence to 10 pence as sanctioned by the High Court. As a result £14,375m was added to retained earnings for
Reckitt Benckiser Group plc. For the Company this amount is distributable.
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings
of the parent company.
Reckitt Benckiser 200966
Notes to the parent company accounts continued
7 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS
Share Profit and
capital loss reserve Total
£m £m £m
Movements during the year:
At 1 January 2009 72 13,657 13,729
Loss for the year (16) (16)
Dividends (648) (648)
Capital contribution in respect of share based payments 46 46
Share Profit and
capital loss reserve Total
£m £m £m
Movements during the year:
At 1 January 2008 72 14,312 14,384
Loss for the year (44) (44)
Dividends (441) (441)
Capital contribution in respect of share based payments 54 54
Share based payments 13 13
Reckitt Benckiser Group plc has £13,160m (2008: £13,642m) of its profit and loss reserve available for distribution.
There were £294m of Treasury shares at 1 January 2009. No shares were repurchased in 2009 (2008: £300m) and held in Treasury, whilst
£131m (2008: £63m) of Treasury shares were issued to satisfy vestings/exercises under the Group’s various share schemes. £163m of Treasury shares
were carried forward at 31 December 2009.
The Directors are proposing a final dividend in respect of the financial year ended 31 December 2009 of 57p per share which will absorb an estimated
£410m of shareholders’ funds. It will be paid on 27 May 2010 to shareholders who are on the register on 26 February 2010.
Other post balance sheet events are described in note 28 on page 59 of the Group financial statements.
8 SHARE BASED REMUNERATION
Reckitt Benckiser Group plc has two employees, the Group’s CEO and CFO. Details of their share awards that are not fully vested are set out in the
Directors’ Remuneration Report, and the charge in relation to the year ended 31 December 2009 is set out below. The Company has used the
Black-Scholes pricing model to calculate the fair value of one award on the date of the grant of the awards.
The fair value of awards with options outstanding at 31 December 2009 is shown in note 5(c) of the Group accounts on pages 38 and 39.
Table 1: Share awards expense 2009
Movement in number of options
Total fair Charge
Options Options value of for the
outstanding at outstanding at grant as at year
Fair value of 1 January Granted/ 31 December 31 December ending
one award 2009 adjustments Lapsed Exercised 2009 2009 2009
Award Grant date £ number number number number number £m £m
Share Options
2002 17 December 2001 1.95 715,834 – – (715,834) – – –
2003 22 November 2002 2.05 1,000,000 – – (1,000,000) – – –
2004 08 December 2003 2.46 800,000 – – (800,000) – – –
2005 06 December 2004 2.99 960,000 – – (960,000) – – –
2006 05 December 2005 3.33 960,000 – – (960,000) – – –
2007 08 December 2006 4.23 960,000 – – – 960,000 4.1 1.4
2008 11 December 2007 5.99 720,000 – – – 720,000 4.3 1.4
2008 11 December 2007 27.56 360,000 – – – 360,000 9.9 3.3
2009 08 December 2008 24.31 360,000 – – – 360,000 8.8 2.9
2010 07 December 2009 27.23 – 360,000 – – 360,000 9.8 –
Reckitt Benckiser 2009 67
8 SHARE BASED REMUNERATION (CONTINUED)
Table 2: Share awards expense 2008
Movement in number of options
Total fair Charge
Options Options value of for the
outstanding at outstanding at grant as at year
Fair value of 1 January Granted/ 31 December 31 December ending
one award 2008 adjustments Lapsed Exercised 2008 2008 2008
Award Grant date £ number number number number number £m £m
2005 06 December 2004 2.99 960,000 – – – 960,000 2.9 –
2006 05 December 2005 3.33 960,000 – – – 960,000 3.2 1.1
2007 08 December 2006 4.23 960,000 – – – 960,000 4.1 1.3
2008 11 December 2007 5.99 720,000 – – – 720,000 4.3 1.4
2007 08 December 2006 21.02 480,000 – – – 480,000 10.1 3.4
2008 11 December 2007 27.56 360,000 – – – 360,000 9.9 3.3
2009 08 December 2008 24.31 – 360,000 – – 360,000 8.8 –
Other Share Awards
Further details of the share awards relating to the two employees are set out in the Directors’ Remuneration Report on pages 19 to 24.
Notes
Contractual life: Executive Share Awards have a contractual life of ten years but vest according to EPS growth criteria over a three-year period.
Accordingly, the cost is spread over the three years of the performance period. Other share awards have contractual lives of either three, five
or seven years.
Performance criteria: Executive Share Awards are subject to performance criteria based on compound average annual growth (CAAG) rates in earnings
per share over the performance period. Other Share Awards are generally not subject to any criteria other than the employee’s continued employment.
Executive Share Awards included in the above table vest as follows: CAAG of 6%: 40% of awards vest; 7% CAAG: 60%; 8% CAAG: 80%;
9% CAAG: 100%.
The assumptions made within the valuation calculation with respect to the achievement of performance criteria are based on the Directors’ expectations
in light of the Group’s business model and relevant published targets.
Under the terms of the Plans, early exercise is not permitted and therefore the effect of early exercise is not incorporated into the calculation.
The calculation also assumes that there will be no leavers in the following year. No material modifications have been made to the Plans in 2009
or 2008 for the purposes of the valuation.
Volatility: An estimate of future volatility is made with reference to historical volatility over a similar time period, to the performance period or the
contractual life as appropriate.
Historical volatility is calculated based on the annualised standard deviation of the Group’s daily share price movement, being an approximation
to the continuously compounded rate of return on the share.
Income statement charge: the income statement charge may not exactly equal one third of the total fair value included in the table above due
to adjustments for in-year lapses or award revisions.
For share options outstanding at 31 December 2009 the range of exercise prices is disclosed in note 5c of the Group accounts. The weighted average
remaining contractual life of the outstanding options is 6.74 years (2008: 5.76 years).
The weighted average share price for the year was £28.37 (2008: £27.15).
9 AUDITORS’ REMUNERATION
The fee charged for the statutory audit of the Company was £0.05m (2008: £0.05m).
10 RELATED PARTY TRANSACTIONS
The Company has taken advantage of the exemption within Financial Reporting Standard No. 8 not to disclose related party transactions with wholly
owned subsidiaries of the Reckitt Benckiser Group. There were no other related party transactions (2008: none).
11 CONTINGENT LIABILITIES
Contingent liabilities are disclosed in note 26 of the Group accounts.
Reckitt Benckiser 200968
Annual General Meeting
To be held on Thursday 6 May 2010 at 11.15 am at The London
Heathrow Marriott Hotel, Bath Road, Hayes, Middlesex, UB3 5AN.
Every shareholder is entitled to attend and vote at the meeting.
The notice convening the meeting is contained in a separate
document for shareholders.
Final dividend for the year ended 31 December 2009
To be paid (if approved) on 27 May 2010 to shareholders
on the register on 26 February 2010.
Company Secretary
Elizabeth Richardson
Registered office
103-105 Bath Road
Slough, Berkshire SL1 3UH
Telephone: 01753 217800
Facsimile: 01753 217899
Registered and domiciled in England
No. 6270876
Company status
Public Limited Company
Auditors
PricewaterhouseCoopers LLP
Solicitors
Slaughter and May
Registrar and transfer office
If you have any queries about your shareholding, please write to,
or telephone, the Company’s Registrar at the following address:
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6ZY
Dedicated Reckitt Benckiser shareholder helpline
Telephone: 0870 703 0118
Website: www-uk.computershare.com
Key dates
Announcement of quarter 1 results 27 April 2010
Annual General Meeting 6 May 2010
Payment of final ordinary dividend 27 May 2010
Announcement of interim results 26 July 2010
Payment of interim ordinary dividend September 2010
Announcement of quarter 3 results 25 October 2010
Preliminary announcement of 2010 results 9 February 2011
Publication of 2010 Annual Report and Accounts April 2011
Annual General Meeting May 2011
Shareholder information
The following are trademarks of Reckitt Benckiser:
Air Wick, Aqua Essences, Bang, Calgon, Calgonit, Cillit, Clearasil, d-Con, Dettol, Electrasol, Finish, Finish Max in 1,
Frank’s Red Hot, French’s, Freshmatic, Gaviscon, Harpic, <i>motion, Jet-Dry, Lysol, Mortein, Mucinex, Nurofen,
Our Home Our Planet, Quantum, QuantuMatic, Resolve, Spray ‘n Wash, Strepsils, Suboxone, Subutex, Symphonia,
Vanish, Veet, Veja, Woolite as well as Reckitt Benckiser and the RB kite logos.
Designed and produced by The Workroom www.workroom.co.uk Printed by The Colourhouse
The paper used for this cover is produced using a 100% Chlorine Free (ECF) bleaching process and a minimum of 50%
FSC (Forest Stewardship Council) certified pulp from sustainable forests with a verifiable chain of custody. The paper
used for the inside pages is produced using a 100% Chlorine Free (ECF) bleaching process and PEFC (Programme
for the Endorsement of Forest Certification) certified pulp from sustainable forests with a verifiable chain of custody.
The envelope used for postal distribution of this report is made from FSC certified sustainable forest stocks.
This report is part of an integrated approach to reporting
our total performance. Our family of reports also includes
the Annual Report Highlights, the Sustainability Report
on our social and environmental responsibilities, and
regularly updated corporate responsibility information at
www.rb.com
Far left: Annual Report Highlights 2009
Left: Sustainability Report 2009 (to be published at www.rb.com)
Reckitt Benckiser Group plc
103-105 Bath Road
Slough, Berkshire SL1 3UH
United Kingdom
www.rb.com
