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Healthier
Lives, Happier
Homes
Bringing Our Purpose to Life
Reckitt Benckiser Group plc (RB)
Annual Report and Financial Statements 2017
RB is inspired by a vision of a world where
people are healthier and live better.
We continually invest and innovate to find
new ways for people to look after themselves,
their families and their homes. We believe
passionately in doing things the right way
and have a culture that pushes us to
outperform, every day.
Contents
Strategic Report
Highlights
01
02
04
06
10
Our business model
Chairman’s Statement
Chief Executive’s Statement
Strategic objectives, targets and
key performance indicators
betterenvironment in action
betterbusiness in action
bettersociety in action
14
20
22
24 Operating review
30 Megatrends
32
Health
34
36
42 Our framework for risk
Financial review
Hygiene Home
management
Governance
52
56
58
Board of Directors
Executive Committee
Corporate Governance–
Chairman’s Statement
Transformation of RB 6page
Strategy
10page
betterbusiness
61
69
71
76
78
82
83
84
95
98
Corporate Governance
Statement
Nomination Committee Report
Audit Committee Report
Corporate Responsibility,
Sustainability, Ethics and
Compliance Committee Report
Directors’ Remuneration Report
Remuneration Policy at a glance
Implementation of specific
commitments made to
Shareholders for 2017
Annual Report on Remuneration
Report of the Directors
Directors’ Statement of
Responsibilities
Mead Johnson Nutrition
integration
Financial Statements
99
176
Financial Statements
Shareholder Information
bettersociety
betterenvironment
Sale of
RB Food
page
29
page
7
Highlights
01
Strategic Report
Governance
Financial Statements
betterbusiness
Net Revenue
Reported Earnings Per Share (diluted)
Health and Hygiene
867.9p
+238%
79%
of RB base business Net Revenue1
Adjusted1 Earnings Per Share (diluted)
DvM
324.6p
+7%
33%
of RB base business Net Revenue1
Total dividend for the year
164.3p
+7%
1 Definitions of non-IFRS measures and their
reconciliation to IFRS measures are shown on
page 39.
£11.5bn
Like-for-like (LFL) growth1 Flat
Total reported growth +21%
Reported Gross Margin
59.7%
-150bps
Adjusted1 Gross Margin 61.1%
(-10bps)
Adjusted1 Operating Margin
27.1%
-70bps
Reported Operating Margin 23.8%
(-10bps)
bettersociety
Net Revenue from more
sustainable products
People reached with Health and
Hygiene messaging
19%
568m
Continued transformation of RB
The acquisition of Mead Johnson Nutrition
(MJN), disposal of RB Food and reorganisation
into two new, focused business units
continues RB’s transformation into
a consumer health and hygiene company.
betterenvironment
Greenhouse gas emissions per
unit of production
Water usage per unit of
production
31%
Reduction since 2012
37%
Reduction since 2012
% Net Revenue from consumer health
at end of 2011 versus end of 2017
50%
29 percentage points increase since 2011
(pro-forma2)
2 Assuming ownership of MJN from 1 January 2017.
This is based on the 2017 definition of Health as
per Note 2 to the Financial Statements.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 02 Reckitt Benckiser Group plc (RB)
Annual Report and Financial Statements 2017
Our
business model
We’re using
our strengths
Strategic inputs
Our people and culture
We employ outstanding people, who work in a
unique culture that harnesses their passion and
allows them to make a real difference
Our brands
We have 20 Powerbrands, which are leaders in
their markets and offer faster growth and
higher margins
Our knowledge and skills
We have deep consumer understanding, proven
R&D capabilities and an agile organisation, which
gets products to market fast
Our relationships
We develop strong, value-creating relationships
with customers, consumers, suppliers and
communities
Our infrastructure
Our business is underpinned by well-invested
manufacturing sites, R&D laboratories and
logistics centres
Our financial strength
Shareholders’ equity, debt and retained profit
give us the financial resources to implement
our strategy
Our operating segments
In 2017, RB was organised into three operating segments –
Europe and North America (ENA), Developing Markets (DvM)
and Infant and Child Nutrition (IFCN).
ENA
DvM
Europe (including Russia/CIS
and Israel), North America and
Australia/New Zealand
Africa, Middle East (excluding
Israel), Turkey, Asia (excluding
Russia/CIS) and Latin America
Net Revenue
Net Revenue
£6.7bn
IFCN
£3.3bn
IFCN is the acquired MJN business, which includes the world’s leading
franchise in infant and children’s nutrition
Net Revenue (pro-forma1)
£2.9bn
Our categories
1 Refer to page 39 for basis of preparation.
Health
Nourishing the best start to life with the IFCN
business, and treatments for everyday issues such as
pain and flu, wellness products covering sexual
wellbeing, footcare, vitamins and supplements
Hygiene
Personal and home hygiene products which provide
the foundation for healthy living
Home
Brands that make the home environment more
harmonious and less stressful, so families are happier
every day
Reorganising for growth
From Q1 2018, RB is developing a platform for future growth and
outperformance by creating two focused, fully accountable and
more agile business units – Health and Hygiene Home.
See page 9
To power our business Our purpose is to make a difference
by giving people innovative solutions
for healthier lives and happier homes
Thomas and
Isaac Reckitt
build the Maud
Foster mill
1819
Reckitt & Sons
founded in Hull
1840
Mead Johnson
founded
1905
Gaviscon
Acquisition
1970
Ecolab
Acquisition
1987
Lehn & Fink
Acquisition
1994
Reckitt and
Benckiser
Merged
1999
Adams
Respiratory
Therapeutics
Acquisition
2008
Schiff Nutrition
Acquisition
2012
Hypermarcas
Condom and
Lubricant
Acquisition
2016
Benckiser
founded in
Germany
1823
Reckitt
launched on
London Stock
Exchange
1888
Reckitt & Sons
merges with J
& J Colman to
become Reckitt
& Colman
1938
Air Wick
Acquisition
1985
Boyle Midway
Acquisition
1990
Sold Colman's
Food Business
1995
Boots
Healthcare
Acquisition
2006
SSL
International
Acquisition
2010
K-Y Brand
Acquisition /
Spin off Indivior
– (RB Pharma)
2014
Mead Johnson
Nutrition
Acquisition/
Sold Food
Business
2017
Two companies, both rich in history
and expertise, joined forces.
MJN brings to RB:
Excellence in infant and child nutrition
Deep understanding of new parents
Respected relationships with healthcare
professionals
Scale and infrastructure in new markets
Together we will find new and exciting
ways to promote health and wellbeing,
from infancy to adulthood around the world
RB 2.0 reorganising
for long-term growth
and outperformance
Now we are starting a new chapter of
sustainable outperformance with the
creation of two focused, fully accountable
and more agile business units – Health and
Hygiene Home.
We are driven by:
Front line obsession
Category focus and expertise
Ownership & Entrepreneurship
Ready to disrupt
Radical simplification
The future of RB is exciting. The changes
we are making will reignite the potential of
our people and our brands and create value
for years to come.
w
1819
Better
together
2017
RB 2.0
2018
Mortein
launched
1880
Scholl
launched
1904
Lysol
launched
1912
Veet
launched
1922
Harpic
launched
1923
Durex
launched
1929
Dettol
launched
1932
Nutramigen
launched
1942
Woolite
launched
1951
Air Wick
launched
1943
Finish
launched
1953
Calgon
launched
1956
Strepsils
launched
1958
Enfamil
launched
1959
Clearasil
launched
1959
Gaviscon
launched
1965
Nurofen
launched
1983
Vanish
launched
1983
Mucinex
launched
2002
Cillit Bang
launched
2004
Enfamil has been trusted
by generations of mums,
dads, caregivers and
healthcare professionals
for safe, high-quality,
beneficial products based
on leading-edge nutritional
science.
Nutramigen was the first
and is the most extensively
studied formula of its kind.
Seventy-five years after
its launch, it remains the
world’s #1 brand for the
dietary management of
Cow’s Milk Allergy (CMA) in
infants and young children.
On 17 August 2017, the Group sold the RB Food
business to McCormick & Company, Inc. for
US$4.2 billion (£3.2 billion) in cash.
Health
We will change the world by making people
healthier and live better by nourishing the best
start in life and empowering people to take
health into their own hands
Hygiene Home
We will create a cleaner world by bringing our
innovative solutions to a billion homes
Reckitt Benckiser Group plc (RB)
Annual Report and Financial Statements 2017
03
Strategic Report
Governance
Financial Statements
And pursue
our purpose
Our purpose is to make a difference, by giving people
innovative solutions for healthier lives and happier homes.
Our strategy and operating model
create value for all our stakeholders.
40,000+
challenging careers
20
market-leading Powerbrands
160%
Total Shareholder Return
since adoption of our
strategy in 2012
568m
people reached with health and
hygiene messaging
Bricks and
mortar and
e-commerce
People
RB provides exciting and
challenging careers, with
excellent rewards for
outstanding performance
Consumers
Consumers receive
innovative, safe and
high-quality products, which
give them healthier lives and
happier homes
Shareholders
Shareholders benefit from
strong operational and
financial performance,
resulting in attractive returns
via dividends and long-term
share price appreciation
Communities
Our products and social
programmes lead to
improved health and
hygiene standards
Customers
Customers gain from selling
our leading brands, which
grow each category and
drive customer value in
relevant channels
Megatrends
Powerful long-term trends are influencing our markets
and driving demand for our products, from longer lives
and increasing incomes to the relentless rise of
technology and e-commerce.
See pages 30 to 31.
Our strategy
We have designed our strategy to respond to these
trends and deliver long-term success.
betterbusiness
How we outperform,
through our focus on
our brands, markets,
people and creating
a digitally connected
company
bettersociety
How we support our
communities and
drive quality and
safety in all we do
betterenvironment
How we reduce our
environmental impact
and ensure we source
materials responsibly
Our operating model
Our three-part model enables us to rapidly scale up our
ideas and offer them to consumers worldwide.
Create
Create innovative
products that meet
consumers’
under-served
demands
Scale
Scale our
innovations, to make
them as global as
possible
Activate
Activate our ideas
through our customer
relationships, while
driving consumer
demand through
offline and digital
channels
Our values
Our values help us to realise our vision and purpose
and are key to our distinct culture.
Achievement
Ownership
Hungry for
outperformance
Responsibility
‘It’s my business,
I own it, I drive it’
Doing the
right thing
Partnership
Building trusted
relationships to
create value
Entrepreneurship
Courage to disrupt
the status quo
See pages 16 to 17.
So we drive outperformance 04 Reckitt Benckiser Group plc (RB)
Annual Report and Financial Statements 2017
Chairman’s
Statement
RB made substantial
progress with its strategy
during 2017.
This is my final report to you as Chairman of
RB and as I pass on the Chairmanship I am
immensely proud to have been a part of this
exceptional company. The transformation
of the Group from a household cleaning
business to a world leader in consumer
health has been an ongoing journey; one
that took a significant step forward in 2017,
leaving RB even better placed to achieve its
purpose of healthier lives and happier homes
in the years ahead.
A significant year for RB
The acquisition of Mead Johnson
Nutrition (MJN) represented
a step change in the scale
and geographic spread of our
consumer health business, while
the disposal of the non-core
Food business continued RB’s
transformation into a global leader
in consumer health and hygiene.
Food has exceptional brands and
people, and was an excellent
investment during RB’s ownership.
Against a backdrop of a changing
global business environment,
these important changes to the
Group, and in particular the
acquisition of MJN, have given
us the opportunity to consider
where we want RB to be in the
medium to longer term. We have
therefore created two end-to-
end, fully accountable business
units – Health and Hygiene
Home – to position RB to deliver
superior Shareholder returns for
years to come. More information
on all these strategic moves can
be found in Rakesh’s statement
on the following pages.
Adrian Bellamy
Chairman
Business performance
RB’s top line performance was
affected by a number of issues in
2017, notably a sophisticated cyber
attack, which originated in the
Ukraine, in June, which had a
significant impact on our supply
availability in the third quarter. We
also saw the residual effects of the
Humidifier Sanitizer (HS) issue in
Korea and the underperformance
of the Scholl/Amopé Wet &
Dry Express Pedi, which we
launched in 2016. The HS issue
was tragic and we continue to
make both public and personal
apologies to victims, as we
continue to work to resolve it.
Conditions were also challenging
in some markets with, for example,
more difficult trading conditions in
Europe and India and geopolitical
uncertainties affecting the Middle
East. Consumer behaviour is
changing rapidly and products
are being purchased through a
broader range of channels, such
as e-commerce and value-oriented
niche retail formats. Retailers are
responding and we are seeing
the impact in a number of ways,
including payment terms, inventory
management and pricing. The Board
believes that in these conditions,
RB has demonstrated resilience
and commitment, although we
did not outperform our markets.
Net Revenue from continuing
operations rose by 21% in 2017,
including the initial contribution
from MJN and the benefit
of positive foreign exchange
movements. Net Revenue for the
RB base business (see page 39 for
definition) was flat, while MJN
delivered pro-forma revenues
which were up 2% during the
period of our ownership, in line
with our expectations. Reported
Operating Profit from continuing
operations was up 21% in actual
currency and 14% in constant
currency. Adjusted Operating
Profit from continuing operations
rose by 18% in actual currency
and 12% in constant currency,
resulting in a 70bps decrease in
our Adjusted Operating Margin.
As described on page 140, RB
recorded a provision of £296
million within discontinued
operations, relating to
ongoing discussions with the
US Department of Justice
about Indivior PLC, formerly
RB Pharmaceuticals, which
we demerged in 2014. This
05
Message from
Chris Sinclair
I would like to thank Adrian for his extraordinary
contribution as Chairman and to add my thanks to Ken
Hydon and Judy Sprieser for their wise counsel during
their time on the Board. RB is an outstanding company
and it is an honour to follow Adrian as Chairman.
As I take on the mantle of Chairman of the Board,
I see a number of priorities for RB as I look forward.
Our main priority is to reignite our Powerbrands. The
competitive landscape and transformation of retail put
a premium on companies who can innovate and build
out their brand franchises. The reorganisation is
central to achieving this.
We need to ensure that MJN is extremely well
integrated, so we capture the true value in the
business while combining its capabilities within RB’s.
We will consider further inorganic opportunities to
add to the portfolio in line with our strategic goals,
particularly in Health, but we will exercise discipline
and only make acquisitions where we believe they will
create value for Shareholders.
When it comes to the people elements of the strategy,
we will continue to build the talent and depth of RB’s
management team, while sustaining RB’s culture.
The Board and management are keenly focused on
effective governance and risk management and this
will be increasingly important as we move further into
health-related sectors. Board renewal will continue.
In summary, RB is well positioned in growing,
high-margin sectors, with a powerful arsenal of
brands, excellent management and a culture built on
high performance. RB’s clear vision and commitment
to its purpose are also crucial. These factors combine
to guide every action we take and give everyone
in RB a strong sense of who we are and what we
can achieve, by working together towards a common
goal. They are the strengths that make RB a global
powerhouse and I am excited about its future.
Chris Sinclair
Chairman-elect
19 March 2018
contributed to reported Diluted
Earnings Per Share of 867.9
pence, up 238%. Adjusted
Diluted Earnings Per Share
increased by 7% to 324.6 pence.
The growth in adjusted earnings
enables us to reward Shareholders
through rising dividends. The
Directors have proposed a final
dividend of 97.7 pence per share,
up 3%. When added to the interim
dividend of 66.6 pence per share,
this gives a total dividend per share
of 164.3 pence, an increase of 7%.
Subject to Shareholder approval,
the final dividend will be paid on
24 May 2018 to Shareholders on
the register at 13 April 2018.
RB continues to be highly cash
generative, with free cash flow as
a percentage of continuing
Adjusted Net Income of 94% in
2017. The Group has a robust
financial position, following the
acquisition of MJN and the receipt
of the $US4.2 billion of proceeds
from the sale of Food. Immediately
following the completion of the
MJN purchase, we raised $US7.75
billion in bonds, with the level of
investor interest and good timing
enabling us to achieve very
attractive rates.
Strategy
Every year, the Board formally
reviews RB’s strategy. The
Board remains convinced that
the strategy is working well
and that this year’s significant
strategic moves will position
RB well in this changing market
for future outperformance.
Innovation and investment in
brand equity remain at the
heart of the Group strategy.
Differentiated products with
strong brands are essential
for expanding our categories,
driving top line growth and
supporting our pricing power.
Governance
In September 2017, we announced
my decision to retire as Chairman
and as a member of the Board,
from the 2018 Annual General
Meeting (AGM). I am delighted
that Chris Sinclair will take on the
role of Non-Executive Chairman
at that time. Chris has served
on the Board since 2015 and
is an exceptionally strong and
experienced business leader, with
a deep knowledge of consumer
goods and international markets.
Ken Hydon and Judy Sprieser will
also be retiring as Non-Executive
Directors at the AGM in May.
They have been outstanding
members of the Board and great
Chairpersons for two of our
committees. On behalf of the
Board, I thank them for their many
years of exceptional service to RB.
Moving forward, as part of the
reorganisation of RB’s business,
Rakesh Kapoor has become
President of the Health business
unit, in addition to his role as
Chief Executive Officer of the
Group. The Board believes that
Rakesh is the right person to
lead Health as it establishes
itself in the new structure of the
Group. We are also pleased that
Rob de Groot, who has nearly
three decades of experience
in our business, will lead the
Hygiene Home business unit.
In addition, during the year, we
completed a number of changes to
Board Committee responsibilities,
with André Lacroix becoming
Chair of the Audit Committee and
Mary Harris becoming Chair of the
Remuneration Committee. More
information on these changes is set
out in my statement on Corporate
Governance, starting on page 58.
The Board completed an internal
evaluation of its effectiveness
in 2017. This showed that
the Board and its committees
are successfully guiding and
overseeing the business. Further
details can be found on page 64.
Risk remains a key focus for
the Board and we have taken
a number of steps to further
enhance the Group’s risk
management, as described
on page 42. The Corporate
Responsibility, Sustainability,
Ethics and Compliance (CRSEC)
Committee supports the Board’s
oversight of risk and is well
integrated with management.
The Committee, with Pam Kirby
as its Chair, was established in
2016 and has made an important
contribution this year.
AGM resolutions
The AGM is on 3 May 2018. The
resolutions that Shareholders will
vote on are fully explained in the
Notice of Meeting.
Conclusion
I would like to thank my fellow
Board members, Rakesh Kapoor
and his executive team and
everyone in RB for their significant
efforts this year, and throughout
my time on the Board. It has been
a privilege to be Chairman of RB,
and never more so than during this
recent period when the Group has
been transformed. I am confident
that RB has the right strategy,
people and culture to deliver
outperformance in the years
to come.
Adrian Bellamy
Chairman
19 March 2018
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 06
Chief Executive’s
Statement
Our strategic moves during 2017
position the Group extremely well
for the future.
A transformational year
This was a hugely important
year for RB, as we made real
progress towards our purpose
of healthier lives and happier
homes. Our strategic moves
during 2017 enable us to meet an
even broader range of consumer
needs and position the Group
extremely well for the future.
First, we completed the acquisition
of MJN in June 2017. MJN is a
unique opportunity for RB to do
more in pursuit of healthier lives,
supporting infant nutrition in the
crucial first 1,000 days of life,
which are the most important
for determining long-term health
outcomes. The purchase brings
into sharp focus the progress we
have made over the last five years,
in transforming the portfolio from
one centred on household cleaning
to one which is predominantly
based on health and hygiene.
MJN is an excellent fit with our
base business. RB already reaches
millions of people through our
hygiene education programmes
and provides parents with relief
when their children are unwell,
through world-class brands such
Rakesh Kapoor
Chief Executive Officer
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 07
Mead Johnson
Nutrition integration
Completing the acquisition of MJN one
quarter earlier than we planned has given us
a head start on delivering the back office
and procurement synergies we had identified.
As a result, we achieved synergies of around
US$25 million in 2017, helping to offset margins
in MJN that were lower at the completion of
the acquisition than we expected. We now
expect to achieve in the region of US$300
million in annual cost savings by the end of
the third year of ownership, an increase over
our original target of US$250 million (£200
million).
The next phase of integration will see MJN
become an integral part of the new Health
business unit, with the opportunity to bring the
best of both companies to benefit consumers
and drive growth.
See more on page 26
as Nurofen and Mucinex. MJN
brings a deep understanding of
a new mother’s journey and the
leading global brand in infant
nutrition, Enfamil. As well as
giving us entry to this structurally
advantaged, fast-growing and
high-margin category, the
acquisition also achieved an
important goal for RB, by giving
us a strong platform in important
developing markets. These include
China, the Philippines, Vietnam
and many parts of Latin America.
We completed the acquisition
ahead of schedule and have
already made good progress with
our acquisition objectives, both
financially and operationally.
Our second key strategic move was
the sale of our Food business. This
was a very strong operation, with
fantastic people and brands, which
generated considerable value for
Shareholders over a long period.
However, it was not core to RB’s
purpose and given the acquisition
of MJN, it was the right moment
to find the best owner for this
business. We exited at about the
time we completed the MJN deal,
for a very good price, benefiting
Shareholders and enabling us to
reduce our debt and interest costs.
Acquiring MJN means that for
the first time, consumer health
accounts for more than 50% of
Group revenues on a pro-forma
basis. Achieving this critical mass
in consumer health has given us
the opportunity to determine
where we want to be in the
future. Under RB 2.0, we have
created two focused, agile and
fully accountable business units
– Health, incorporating MJN, and
Hygiene Home – which together
form one RB. This new structure
was put in place effective Q1
2018. More information about the
reorganisation can be found on
page 9, with details of Health and
Hygiene Home on pages 32 to 35.
Performance
In a year that transformed RB
strategically, we continued to
face challenging conditions in
key markets. We also suffered
from both known and unforeseen
issues, as a result of which our
performance in 2017 was not
good enough and we did not
outperform our markets.
The known issues included
the impact of the South Korea
Humidifier Sanitizer (HS) issue
and the Scholl/Amopé innovation
in 2016. We continue to engage
with all stakeholders, including
other companies, to resolve the
tragedy in Korea and remain
committed to putting victims first.
The issue we did not foresee was
a serious cyber attack, which
hit RB and a number of other
companies on 27 June 2017. This
had a significant impact, disrupting
key operations including our
manufacturing capacity, logistics,
and our go-to-market operations,
with a corresponding effect on
our performance, particularly in
the third quarter of the year.
While we had always invested
in our cyber security, we have
learned many lessons about
how to improve. Our aim is to
prevent further attacks, but their
increasing sophistication means we
cannot rely on prevention alone.
We are therefore enhancing our
programmes for rapid detection
of, and response to, attacks,
enabling us to quickly mitigate
the impact, and improving our
ability to efficiently restore
our systems, so we are up and
running again as fast as possible.
The year also brought some
notable successes, not least
the improving performance
in infant nutrition. Since the
acquisition, we have worked hard
to accelerate MJN’s innovation
pipeline in the key markets of
China and the US. Similarly we
are bringing our expertise in
digital and e-commerce to drive
transformational growth. We
have also targeted investment
into other significant growth
channels, notably mom-and-
baby stores in China. In addition,
we have injected the RB culture,
with its passion, discipline
and focus on performance.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 08
Chief Executive’s Statement
continued
United Nations (UN) Sustainable
Development Goals
The UN has 17 Sustainable Development Goals, which together
form an agenda for radical improvements for people, the planet
and prosperity. The goals are underpinned by detailed targets,
to be achieved by 2030. RB’s products already contribute to
the achievement of a number of these goals and targets, in
particular those relating to good health and wellbeing and
clean water and sanitation. The acquisition of MJN means we
now also contribute to ending stunted growth in children, which
has life-long health and developmental impacts and is a key
target under the Zero Hunger goal.
See more in our
Sustainability Report
at RB.com
RB has always prioritised being
a responsible company and
we must continue to do so if
we are to achieve our goals.
During 2017, we therefore added
a new value of responsibility,
formalising the message that
we must always do the right
thing, even when it is hard. More
information about our values can
be found on pages 16 to 17.
RB 2.0 Reorganising for growth
The world is changing rapidly.
Long-term trends in consumer
health remain strong, with ageing
populations in developed markets
and rising incomes in emerging
markets both driving spending
on health and wellbeing. The
Health category is competitively
advantaged, with consumers
wanting brands they know and
trust in their moment of need,
and channel transformation is
less pervasive than in personal
care and home care, in part due
to regulation. The Hygiene and
Home categories have substantial
penetration opportunities,
particularly in emerging markets,
and the chance to reap the full
potential of our excellent brands.
RB aims to be the global leader in
consumer health, with a strong
presence in major categories
and a broad geographic spread.
It will have the expertise and
focus to build on its dedicated
health platform, in a structurally
advantaged category.
The higher focus and resource
allocation to consumer health
has delivered strong results for
RB in recent years, but it means
we have not done full justice
to Hygiene Home’s portfolio of
global Powerbrands. The new
business unit will unleash the
potential of those brands, by
speeding up innovation, creating
more opportunity to invest in
our brands, and sharpening
its go-to-market focus.
The RB base business (defined
on page 39) is driving growth in
digital and e-commerce, especially
in China. We delivered further
strong growth in this channel in
2017, with e-commerce generating
more than 50% of China’s Net
Revenue, up from more than
30% in 2016. This puts us ahead
of schedule to reach our target
of 50% of China’s Net Revenue
coming from e-commerce by
2020. More information about
our e-commerce growth initiatives
can be found on page 19.
Innovation is the lifeblood of
RB and we continued to launch
new and exciting products in
2017. Examples include the SiTi
Shield range, which creates a new
category by protecting people
from the pressing global health
issue of air pollution (see page 33).
Other notable health innovations
were a Scholl Express Pedi for the
value end of the market, especially
to drive penetration in emerging
markets; Durex Naturals Intimate
Gel, which is the first in a line
of Durex natural products; and
Digestive Advantage Chocolate
Bites, a delicious way to get your
daily probiotics to promote long-
term digestive and immune health.
We also continued to innovate in
the Hygiene and Home categories.
New Hygiene products included
a completely new formulation
of Finish, to suit the table-top
dishwashers which are driving
penetration in China. Lysol
Disinfecting Wipes now use a
new material designed to pick
up dirt and germs better, and we
have overhauled the entire Veja
brand in Brazil, with the biggest
update to the range in the last
five years. In the Home category,
key innovations include Vanish
White and Air Wick’s VIPoo.
RB depends on its talented people
to drive its success. We have a real
depth of talent and the creation of
our new business units allows us to
deploy this strength, by providing
new opportunities for them to
flourish. We have put together
strong leadership teams for each
business unit, which meet the
specific needs of those businesses
and support our growth ambitions.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 09
RB 2.0 Reorganising
for growth
RB has transformed its portfolio during the past five
years, delivering strong returns to Shareholders.
The acquisition of MJN and the disposal of RB Food have
given us the opportunity to start a new chapter of
sustainable outperformance. From 1 January 2018,
RB has two business units – Health and Hygiene Home.
Each business unit is fully end-to-end accountable, from
innovation, through brand development and supply,
ensuring healthier lives and happier homes
for our consumers.
The reorganisation also aims
to position RB to succeed in
the new world of channel
fragmentation. New channels
such as e-commerce, discounters
and mom-and-baby stores give
us the opportunity to provide
more tailored solutions, to
meet the specific shopping
needs of these consumers.
For 2018, we are targeting total
revenue growth of 13-14% at
constant rates, which implies
like-for-like growth in the range of
2-3%, in line with overall market
growth. We also reiterate our
medium-term target of moderate
operating margin expansion. The
operating margin for 2018 will
reflect a number of specific factors,
including the arithmetical impact
of a full year of consolidating
MJN, increased synergies
relating to the integration of
MJN and the operating costs
of the new organisation.
Finally, I would like to thank
Adrian Bellamy, Ken Hydon and
Judy Sprieser for the enormous
difference they have made to RB,
during their many years on the
Board. I look forward to working
with Chris Sinclair, the Board,
and all our people to help deliver
the next phase of RB’s success,
as we make further progress
towards achieving our purpose.
Rakesh Kapoor
Chief Executive Officer
19 March 2018
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial StatementsFive guiding principles• Frontline obsession: devolving responsibility to in-country teams, to serve our consumers and customers better• Category focus and expertise: building out differentiated models to suit the needs of each category• Entrepreneurship and ownership: encouraging initiative and new ideas• Ready to disrupt: creating new categories, exploiting technology and new channels, and developing new models• Radical simplification: creating a more focused and agile organisationBenefits• Closer to our customers and consumers• Faster decision making and speed to market• Increased resources to invest for growth• More focused innovations• Opportunities for our teams to learn and leverage their expertiseSee more on pages 32 to 35 10
Strategic objectives, targets
and key performance indicators
betterbusiness
The betterbusiness
element of our strategy
has four pillars, which
focus us on faster‑growing
markets and categories
and enable us to
outperform.
See more on pages 14 to 19
Organisation and culture
Powerbrands
Our people are what make us outperform.
Respecting them, keeping them safe and
developing their skills and careers is essential
if we are to be successful.
We invest heavily in our portfolio of
20 market-leading Powerbrands. They
provide over 80% of our revenue and
offer higher growth and margins.
We recognise and embrace the value that a
diverse, engaged and motivated workforce
can bring.
Powermarkets
Virtuous earnings model
We have 16 Powermarkets. These are the
markets which have the highest absolute
growth potential for us and where we see
the greatest ability to win. They are weighted
towards developing markets which have greater
economic growth, rising middle classes and more
opportunities to increase market penetration.
We focus on higher-margin initiatives and
rigorous control of our costs. Through our
virtuous earnings model, this funds our
investment in our brands, capabilities and
development, and enables us to expand
our revenue and our Operating Margin.
Our policies
KPIs and goals
Powermarkets
Organisation and culture
Definition: Net Revenue generated in our DvM
area, as a percentage of total Net Revenue
Definition: Our performance against our targets
for organisation and culture can be found on
page 14
Target to 2020: 40%
2014
2015
2016
20171
30%
31%
31%
33%
33%
Females in Top 400
2016
2017
20%
24%
24%
Health and Hygiene (pre-RB 2.0)
Lost Work Day Accident Rate (LWDAR)
Definition: Net Revenue generated by our
Health and Hygiene categories, as a percentage
of total Net Revenue
Definition: Number of incidents resulting in at
least one lost day of work per 100,000 hours
worked
Target to 2020: 80%
2014
2015
2016
20171
72%
74%
75%
79% 79%
Target: Continued decrease of rate
0.093
2014
0.080
2015
0.071
2016
2017
0.121 0.121
1 As a percentage of RB base business
See more on page 14
Anti-bribery and anti-corruption
Our policy is that all RB companies,
employees and contractors must comply
with the anti-bribery, anti-corruption
and competition laws of the UK and all
countries in which they conduct business.
Directors, managers and others with
supervisory responsibility must ensure
that the employees and contractors they
supervise are aware of and comply with
this policy. All employees and contractors
must also certify annually that they have
complied with our Code of Conduct and
the Audit Committee periodically reviews
Internal Audit findings in relation to this.
Employee policies
RB’s Code of Conduct governs standards
of conduct in relation to our employees,
as well as all our other key stakeholders.
In addition, RB has policies setting out our
commitment to equal opportunities at work
and to providing a safe and healthy working
environment. We relaunched the Code of
Conduct and the associated policies in 2018.
Health and safety performance is monitored
through our Group Occupational Health
and Safety Management System, enabling
us to investigate any incidents, accidents
or occupational ill-health, and take any
necessary action. We also have a ‘Speak Up’
policy and process, allowing any employee
or contractor to confidentially report any
violation of the Code of Conduct, local
law or regulation, or unethical behaviour.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 11
bettersociety
bettersociety is about how we
meet our responsibilities in
relation to our communities
and our products. We are
known for outperforming in
business and our aim is to also
outperform expectations with
our social impact investment.
See more on pages 20 to 21
Purpose-led brands
Stewardship
Improving health and hygiene through our
products, brand educational programmes
and corporate social investment.
Ensuring our products are safe,
compliant and effective, and reducing
their impacts on the environment.
Human rights
Product innovation
Designing and launching more sustainable
products.
Positively enhancing Human Rights and
Responsible Business practices across our
value chain.
Social impact investment
We recognise the role we must play in
making a positive impact and transforming
the health and lives of communities around
the world. Our social impact investment
strategy focuses on three areas that have a
direct connection with our business: sexual
health and rights, malnutrition and stunting,
and health and hygiene.
Our policies
KPIs and goals
Purpose-led brands
Product innovation
Definition: Total number of people reached with
health and hygiene messaging and campaigns
Definition: Total Net Revenue from more
sustainable products
Target to 2020: 400 million
2014
2015
2016
2017
142m
237m
365m
568m 568m
Target to 2020: 33% of Net Revenue
2014
2015
2016
20171
4.7%
6.0%
13.2%
19.4%
19.4%
Social impact investment
1 As a percentage of RB base business
Definition: Direct contributions made as social
impact investment
See our Sustainability Report at RB.com
Target: Continual increase in social impact
investment
2014
2015
2016
2017
£6.5m
£6.5m
£8.0m
£10.5m
£10.5m
Note: 2014-15 values are Save The Children only; 2016-17
includes broader social impact investment; 2017 also
includes brand contributions.
Human rights
Our policy on human rights and responsible
business sets out our commitment to
upholding the rights expressed in the
International Bill of Human Rights and
the International Labour Organisation’s
Declaration on Fundamental Principles
and Rights at Work. RB is also committed
to following the UN Guiding Principles
on Business and Human Rights and the
Organisation for Economic Co-operation
and Development (OECD) Guidelines
for Multinational Enterprises. We have
established a proactive compliance
monitoring programme to enable us to
identify and remediate any violations
within our operations and supply chain.
Consumer safety policy
RB’s consumer safety policy covers our
commitment to producing products which
are safe for consumers to use. Among
other things, it requires us to comply
with all relevant laws and regulations; to
continually assess our products, packaging,
labelling and ingredients, and potential
consumer safety issues; to apply consistent
global standards; and to freely disclose
consumer safety information. We check
our products comply with our Restricted
Substances List (RSL) and take action
where necessary to ensure compliance.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 12
CASE STUDY
Hackathon
A live 28-hour ‘hackathon’ in June brought together
RB’s R&D and marketing experts with creative and
entrepreneurial minds from other leading organisations
around the world. They formed three teams. Their mission:
to pioneer blockbuster innovations that could protect
children’s health from the devastating effects of air
pollution exposure in China, where levels are among the
highest in the world.
The teams presented their ideas to a judging panel – made
up of esteemed healthcare experts – and a packed
audience at the Cannes Lions festival. The product
solutions proposed were: Dream Cocoon, a dome made of
specially engineered charcoal bamboo fabric, which filters
air while babies sleep peacefully in a cot; GrowAir, a
protective, customisable face shield designed using soft,
transparent plastic to clean the air children breathe in as
they play outside; and the winning solution, StrollAir, a
small, portable and convenient connected air filtering
device that repels polluted air and provides babies in
prams with a clean air ‘bubble’. This product idea is now
being investigated by RB’s global R&D team.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 13
Greenhouse gas (GHG) emissions
Waste
Reducing our GHG emissions in our operations
and across our product lifecycle, through energy
efficiency programmes, investing in renewable
technologies and procuring electricity from
renewable sources, and product innovation.
Reducing our manufacturing waste and ensuring
zero manufacturing waste is sent to landfill.
Water
Responsible sourcing
Reducing the water impacts of our products
throughout their lifecycle, including reducing
water use in our manufacturing operations,
especially in water-scarce regions.
Responsibly sourcing our natural raw materials,
including setting minimum standards for the
materials we use and risk-based compliance
programmes.
betterenvironment
The betterenvironment
element of our strategy
sets out how we minimise
our emissions, water use
and waste, ensure we
source responsibly and
innovate to produce more
sustainable products.
See more on pages 22 to 23
Our policies
KPIs and goals
Responsible sourcing policy
RB’s responsible sourcing policy details
our commitment to ensuring the natural
raw materials we use in our products are
produced in a manner that meets or goes
beyond applicable laws and regulations,
respects human rights, safeguards health
and safety, protects the environment and
generally supports sustainable development.
We have risk-based compliance programmes
in place, including for palm oil where
we are working with our suppliers to
trace our palm oil supply chain and
address the social and environmental
issues associated with the industry.
Environmental policy
Our environmental policy sets out our
objectives for identifying, reducing or
eliminating our environmental impacts. We
ensure compliance with this policy through
our Group Environmental Management
System and rigorous monitoring of
our key environmental impacts, such
as our energy and water use, water
discharge quality and GHG emissions.
GHG emissions per unit of production
Water impact per dose of product
Definition: The percentage reduction in GHG
emissions per unit of production, against our
2012 baseline
Target to 2020: 40% reduction
2014
2015
2016
2017
(7)%
(14)%
(22)%
(31)%
(31)%
Carbon footprint per dose of product
Definition: The percentage reduction in our
total carbon footprint per dose of product
manufactured, against our 2012 baseline
Target to 2020: 33% reduction
2014
2015
2016
2017
(3)%
1%
0%
(2)%
(2)%
Water use per unit of production
Definition: The percentage reduction in total
water consumption per unit of production,
against our 2012 baseline
Target to 2020: 35% reduction
2014
2015
2016
2017
(26)%
(30)%
(32)%
(37)%
Definition: Total water used during the
product’s life cycle, from material sourcing to
disposal or recycling, adjusted to reflect water
scarcity at each stage, and divided by the number
of product doses manufactured
Target to 2020: 33% reduction
2014
2015
2016
2017
(2)%
(9)%
(6)%
(8)%
(8)%
Factories sending waste to landfill
Definition: The percentage of our factories
achieving zero waste to landfill, including both
hazardous and non-hazardous waste
Target to 2020: 100%
2014
2015
2016
2017
74%
89%
97%
100%
100%
Manufacturing waste per unit of production
Definition: The percentage reduction in
manufacturing waste per unit of production,
against our 2012 baseline
(37)%
Target to 2020: 30% reduction
2014
2015
2016
2017
(10)%
(15)%
(20)%
(21)%
(21)%
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements
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betterbusiness
in action
01
02
We said...
Organisation and culture
We delivered...
In 2017, we said we would:
In 2017, we:
Focus on diversity, talent, succession and
performance
Advance our safety, quality and compliance
processes and practices, with the aim of
moving from good to great performance
Launch global standards for health and safety
to set minimum expectations for the highest
risk areas across all our sites
Achieved a further reduction in the Lost
Work Day Accident Rate (LWDAR) on a
like-for-like basis but recorded a 13%
increase following reclassification* and
began to focus on reducing accidents
when employees are travelling to work
Created a new quality compliance
team, which completed 80 quality
audits in 2017
Introduced six new global policies under
our Quality Management System (QMS)
and completed an external audit of
the QMS
Published our tax strategy setting
out our tax principles and approach to
tax risk management, tax transparency,
tax planning and working with tax
authorities. Our tax strategy can be
found on our website www.rb.com
Substantially strengthened our cyber
security, as described in the Chief
Executive’s Statement (see page 6)
Announced our new organisational
structure, effective Q1 2018
Continued our DARE programme, to
Develop, Attract, Retain and Engage
talented women, and our mentoring
programme for female talent
Provided leadership development
programmes to more than 1,500
managers, including unconscious
bias and inclusive leadership training
Continued to focus on making
performance reviews meaningful and
relevant, and rolled out the process
to MJN
Refreshed our core values and
strengthened our committment to our
people and our consumers with the new
value of ‘Responsibility’
Invested significantly in Safety, Quality
and Compliance functions, adding
high-calibre people as we continue to
move from good to great
Created a team to provide health and
safety audits, training and advice (see
case study)
Introduced 11 new health and safety
standards, coupled with training
and advice
Implemented a single health and safety
function across RB and MJN, adopting
best practice from both organisations
Our goals
Like-for-like Net Revenue growth
Definition: Growth in Net Revenue, excluding the
impact of changes in exchange rates, acquisitions
and disposals
Health
Hygiene Home
Category growth rate
3-5%
2-3%
Ambition
Upper end
In line to
upper end
Adjusted Operating Margin expansion
Medium-term target:
Moderate Adjusted Operating Margin
expansion
Gender diversity
Definition: The percentage of women in
our global workforce
Target: Expand our focus on diversity and
talent by improving the retention rates of
women from managers to senior managers.
This is in line with our goal of doubling the
number of women in senior management
roles from a 2016 base line.
At the year end, RB’s gender diversity was as
follows:
Board
Directors:
8 male
3 female
Senior
managers:
392 male
127 female
Other
employees
19,910 male
15,427 female
Lost Work Day Accident Rate (LWDAR)
Definition: The number of workplace
accidents at manufacturing, warehouse,
R&D and commercial locations resulting in at
least one day of lost time per 100,000 hours
worked.
Target to 2020: Continued reduction in
the injury rate.
Increase in our LWDAR since 2012:
13%*
* We have revised the classification of our Lost Work
Day Accident Rate (LWDAR) from 2017 to include
accidents associated with organised travel and
commercial offices. Excluding accidents from
organised travel and commercial offices, there has
been a 36% reduction in LWDAR since 2012.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017
02
Powering performance in China
Greater China is MJN’s largest market but
significant shifts in channels and the products
consumers demand had hit revenues in
recent years. Since the acquisition, we
have reinvigorated the business in China,
focusing on new channels such as mom-
and-baby stores, applying RB’s e-commerce
expertise, improving marketing for MJN’s
exciting innovations and empowering the
team to take fast decisions. The result was
a return to strong revenue growth by Q4.
Advancing health and safety
In 2017, we put a new team in place to assure
ourselves that we have the right health and
safety practices across the business. The
team acts as auditors, trainers and advisors
to all our operations. By the end of the
year, it had completed 163 audits, covering
every location in RB. These audits produced
clear recommendations and documented
actions to drive further health and safety
improvements in the coming year.
15
03
We will...
Our priorities for 2018 are to:
Complete the reorganisation into two new
business units, including the full integration of
MJN into Health, ensuring we deliver the revenue
growth, margins and cost synergies we expect
from the acquisition
Continue to strengthen our cyber security
and our safety and compliance capabilities
Continue to drive improvements in health and
safety, including rolling out a health and safety
culture survey to all sites
Pilot a new system to give us a best-practice
process for managing the product life cycle
Continue to focus on embedding DARE
and driving initiatives to improve gender
balance, including running our Accelerate
leadership programme every quarter for
highly talented women
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements
16
betterbusiness
in action
Living our values
RB has a distinct culture, which comes to
life through our values. These values are
interlinked and together define how we make
decisions, how our people behave, how
we reward people and how our people
grow. Underpinning our culture is our
desire to always act responsibly.
Entrepreneurship
Courage to disrupt
the status quo
Acting like entrepreneurs means having the
courage to disrupt the status quo, by
pursuing big ideas using less money. We
champion new ideas, no matter where they
come from, and are passionate about turning
them into effective business solutions.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 17
Ownership
‘It’s my business,
I own it, I drive it’
Taking ownership means that we treat the
business like it is our own. Our people take
the initiative, without waiting to be asked or
told, and have the freedom to make a
difference.
Achievement
Hungry for
outperformance
RB is hungry for outperformance. We never
rest on our laurels, so when we climb a
mountain we look for the next peak. We
have a bias for action at speed and reward
our people for outperformance.
Responsibility
Doing the right thing
Being responsible means always doing the right
thing, even when it is hard. We always put the
safety of our people and consumers first and
lead and act with integrity.
Partnership
Building trusted relationships
to create value
We build trusted relationships to create value.
We say what we mean and do what we say,
both in the room and outside it. We value
constructive conflict, as it enables us to
reach the best answer. No one has all
the solutions, so we partner with
others to find them.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 18
betterbusiness
in action
01
02
We said...
Powermarkets
We delivered...
In 2017, we said we would:
In 2017, we:
Continue to invest heavily behind our
Powermarkets, to increase penetration
and distribution
Stay at the forefront of e-commerce, as China
and other developing countries go through a
transformation in this channel
Continued to invest in penetration
programmes, for example by visiting
2.8 million new mothers in 13 emerging
markets, to help them understand and
adopt good hygienic practices for when
they bring their babies home
Powerbrands
In 2017, we said we would:
In 2017, we:
Continue to invest heavily behind our
Powerbrands, particularly in Health and Hygiene,
to increase penetration and distribution
Invested 13.4% (base business) of
Net Revenue in brand equity-building
initiatives
Continue to develop innovative solutions,
which target under-served consumer needs
Continued to work on penetration
improvement programmes. For example,
we worked with seven dishwasher
manufacturers globally to drive further
dishwasher penetration in this
underdeveloped category
Launched many consumer-centric
innovations aimed at making our
consumers’ lives healthier and happier
Substantially increased our footprint
in developing markets to 40% on a
pro-forma basis through the acquisition
of MJN
Grew e-commerce to more than 50%
of Net Revenue in China, up from more
than 30% in 2016
Established multi-channel capabilities,
including Offline to Online (O2O) and
Direct to Consumer (D2C) in China and
other markets
For example, we developed a protective
ecosystem against air pollution,
including masks, under the new brand
name, SiTi Shield
Achieved a flat like-for-like (LFL) Net
Revenue performance with broad-
based, mid-single digit growth rates
in health, offset by the impact of a
cyber attack and continued impact
from Scholl/Amopé. The underlying
performance of our consumer health
business remains strong
Virtuous earnings model
In 2017, we said we would:
In 2017, we:
Target LFL Net Revenue growth of 3% and
moderate Operating Margin expansion in the
medium term
Maintain a high Gross Margin by focusing on
higher-margin brands and optimising our cost
of goods sold, an ongoing process we call
Project Fuel
Focus our Brand Equity Investment (BEI) on
consumer education and penetration
programmes, to build long-term brand equity
Invest appropriately in fixed costs (our people
capabilities and infrastructure) while keeping our
organisation lean
Delivered flat LFL Net Revenue growth,
as a result of challenging market
conditions, the effect of the Korea
Humidifier Sanitizer (HS) issue, the
Scholl/Amopé innovation and the cyber
attack
Achieved a stable Adjusted Gross
Margin of 61.1% (-10bps) in a difficult
pricing environment, and with
commodity cost headwinds
Invested 13.4% (base business) of Net
Revenue in BEI
Maintained tight control over fixed costs
in our base business, which reduced by
30bps to 19.5% of Net Revenue. This
was in part helped by reduced annual
bonus incentives following a tough year
Grew Adjusted Operating Margin by
30bps on the base business to 28.1%.
The consolidation of the lower-margin
MJN business for six and a half months
in 2017 caused the Adjusted Group
Operating Margin to decline by -70bps
to 27.1%
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017
02
19
03
We will...
Our priorities for 2018 are to:
Prioritise management and financial resource
towards our Powermarkets, with a particular
focus on China and the US, as these are key
IFCN markets
Expect channel fragmentation to continue, as
technology enables more consumers to access
our products in new ways, and aim to deliver
innovative solutions to our consumers, in
whichever channel they choose to shop
Our priorities for 2018 are to:
Continue to develop innovative solutions,
which target under-served consumer needs
Prioritise investment towards the respective
Powerbrands of our new, focused and
accountable business units of Health and
Hygiene Home
Our priorities for 2018 are to:
Target total Net Revenue growth (at constant
rates) of +13-14%, implying LFL growth of +2-3%
Focus on maintaining a high Gross Margin
through accretive product mix, Project Fuel
and Gross Margin accretive innovation
Continue to invest heavily behind the long-term
strength of our brands, at an appropriate return
on investment, whilst seeking to drive efficiencies
Maintain tight fixed cost discipline, and invest
behind our new platform for growth and
outperformance – RB 2.0
Target moderate margin expansion in the medium
term, while recognising that specific in-year
factors may enhance or dilute margins
Accelerating our online growth
RB’s dedicated e-business unit aims to drive
incremental growth for the Group. It had an
excellent year with strong growth. In addition,
the unit successfully developed its cross-border
business into China, supported by an
e-distributor network.
Increasing penetration for Mucinex in
the US
In 2017, our consumer education programme
supporting Mucinex was highly successful,
driving strong demand. Mucinex offers relief
for 12 hours, giving it a real advantage over
competing four-hour products. With only one
dose to take rather than three over 12 hours,
Mucinex is better value for consumers and they
are less likely to forget to take a dose.
Virtuous earnings model
The virtuous earnings model starts at Gross
Margin, which gives us the room to fund
investment in Fixed Costs and BEI, so we
drive Net Revenue and Operating Margin.
Our unique performance-led culture pushes
us to continually do better.
Gross
Margin
Net
Revenue
UNIQUE
CULTURE
Fixed Cost
BEI
Operating
Margin
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements
20
bettersociety
in action
01
02
We said...
Delivering our purpose
We delivered...
In 2017, we said we would:
In 2017, we:
Continue our brands’ existing educational
programmes, to improve health and hygiene
behaviour
Develop our networks, to scale our health and
hygiene programmes globally
Exceeded our 2020 target of reaching
400 million people with health and
hygiene messaging, by reaching a total
of 568 million, through programmes
linked to brands such as Durex, Mortein
and Dettol
Partnered with Save the Children for
the 14th consecutive year, bringing RB's
overall investment total to £35 million
Launched the Hoga Saaf Pakistan
initiative
Expanded our Dettol Banega Swachh
health and hygiene programme from
India into Sri Lanka and Bangladesh
Expanded our Mortein anti-mosquito
programme from Brazil into other
countries
Piloted a methodology to measure
the impact of our health and hygiene
programmes, as well as their reach
Human rights
In 2017, we said we would:
In 2017, we:
Deliver further improvements to our human
rights due diligence and remediation processes
Increased the scale of our audit
programme, conducting 139 audits.
Particular focus was given to 3rd party
manufacturers in South & North Asia,
Africa and the Middle East
Held supplier capability building
workshops in India and Dubai, to build
supplier awareness and understanding
of our expectations and how to address
specific regional challenges
Launched interactive human rights
training for all management employees,
reaching 11,873 people so far
Published our first Modern Slavery
statement, which can be found on our
website, www.rb.com
Product stewardship
In 2017, we said we would:
In 2017, we:
Complete our review of our Restricted Substances
List (RSL), which is a list of ingredients that
RB has banned or restricted from our global
product portfolio
Continue to increase ingredient transparency
Recruited specialists in the UK and India,
adding significantly to our consumer
safety talent and capability
Completed reviews on over 70% of the
circa 8,900 formulations used across RB,
by the year end
Remediated various RSL compliance
issues that included the cessation of
some formulations, agreement of dates
to phase out formulations, adjustment
of formulations and revision of
packaging labelling
Introduced new processes and
associated training, to ensure safety
reviews are performed for all new or
changed products
Performed an external audit of our
consumer safety systems and processes
with action plans in place to address
areas to strengthen further
Continued to reduce, refine and replace
testing in order to improve animal
welfare in line with our global policy
Sponsored a GC3 Preservative Challenge
Competition to find novel, safe and
effective preservatives
Product innovation
In 2017, we said we would:
Continue to increase revenue from more
sustainable products
In 2017, we:
Increased revenue from more
sustainable products from 13.2% of
Net Revenue in 2016 to 19.4% in 2017
Introduced more sustainable products,
such as Durex's packaging now being
made solely from the Forest Stewardship
Council (FSC) or the Programme for the
Endorsement of Forest Certification
(PEFC) certified cartonboard
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017
02
Hoga Saaf Pakistan
Consistent with RB’s vision of a world where
people are healthier and live better, RB Pakistan
launched the ‘Hoga Saaf Pakistan’ or Clean
Pakistan initiative in 2017.
The programme aims to create a healthier,
cleaner Pakistan and addresses the loss of life
caused there by diarrhoea. Every year 53,000
children in Pakistan die because of diarrhoea.
Together with our local partners in Pakistan,
RB is improving the unclean and unhygienic
conditions that cause diarrhoea.
Our programme focuses on improving health
education, basic hygiene practices and hygiene/
sanitation infrastructure in Pakistan.
Dubai
RB co-sponsored an AIM-Progress supplier
workshop in Dubai focused on the challenges
associated with recruiting and managing migrant
labour. Speakers from FSI Worldwide and Vérité
provided our suppliers with an overview of the
complexity of the challenges faced within the
region, the systemic issues associated with
implementing anti-forced labour standards and
examples of best management practices
supported by local supplier testimonials.
Jontex
RB acquired three new sexual wellbeing brands
in Brazil: Jontex, Olla and Lovetex. A decision
was taken to replace ingredients relating to
fragrance and lubrication that were not
compliant with our global RSL, with safer
alternatives, demonstrating ongoing
commitment to continually improving
our product portfolio.
21
03
We will...
Our priorities for 2018 are to:
Continue our health and hygiene programmes
and extend them to nutrition, following the
acquisition of MJN
Develop a new target for brand programme reach
having achieved our 400 million goal two years
early
Look to scale our methodology for measuring the
impact of our programmes
Our priorities for 2018 are to:
Increase the scope and scale of our audit
programme to include raw and packaging
material suppliers
Enhance supplier grievance mechanisms
Identify a strategic human rights partnership to
enhance the effectiveness and strategic direction
of our human rights programme
Our priorities for 2018 are to:
Complete the review of the remaining
formulations in our product portfolio
Advance our ingredient management strategy
through an updated RSL and how we roll out
ingredient transparency across our global product
portfolio
Make progress towards our goal of having 100%
ingredient transparency
Continue working towards publication of the RSL
by 2020
Our priorities for 2018 are to:
Continue to make our products more sustainable
and drive further increases in revenue from more
sustainable products
Review ways to increase the sustainability of
packaging, as a key area of focus
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements
22
betterenvironment
in action
01
02
We said...
Greenhouse gas
(GHG) emissions
In 2017, we said we would:
Look for further opportunities to reduce GHG
emissions across our manufacturing sites
We delivered...
In 2017, we:
Since 2012 we have reduced our GHG
emissions by 31% in pursuit of our 2020
goal of a 40% reduction
Reduced our carbon footprint per dose,
currently 2% lower than the 2012
baseline
Signed first Power Purchase Agreement
(PPA) for Mysore plant in India, where
100% renewable electricity is now
supplied
Increased our on-site renewable energy
generation, for example by investing in
thermal solar energy to heat water at
our Mira site in Italy
Continued to focus on energy efficiency
in our operations
Water
In 2017, we said we would:
Work across our value chain to further explore
opportunities to reduce the water impact of
our products
Identify ways to reduce, reuse and recycle water
in our manufacturing sites, and invest in waste
water treatment facilities and monitoring systems
Waste
In 2017, we said we would:
Continue to drive towards zero waste to landfill,
with an emphasis on finding new ways to reuse
and recycle waste
In 2017, we:
Further reduced our water use per unit of
production, by investing in water efficiency
in our operations
Achieved zero water discharge at three
sites, meaning all the water they use is
recycled or put back into the production
process
Upgraded waste water discharge facilities
at our Indonesia, India and Bahrain plants,
with improvements and modifications
made at other facilities
Further reduced our water impact per dose:
8% decrease since 2012. This remains a
challenge as the biggest impact is at the
point of consumer use. To tackle this, we
are making products with a lower footprint
at point of use, such as foam or liquid
soaps, and working with third parties to
produce more water-efficient appliances
Assessed water scarcity across our locations
and invested to increase water
replenishment
In 2017, we:
Achieved zero waste to landfill for all
RB sites
Further reduced our manufacturing
waste per unit of production, putting
us on track for our 2020 target of a
30% reduction
Improved recycling and reuse of waste,
for example at our Shangma plant in
China, where installation of more
efficient waste processing machinery
has led to significant waste reductions
Responsible sourcing
In 2017, we said we would:
In 2017, we:
Further develop our palm oil programme, focusing
on increasing traceability within our supply chain
and the implementation of transformation
programmes
Increased human rights due diligence in our palm
oil supply chains
Increased palm oil traceability back
to the mill (excluding India) to 88%
excluding surfactants
For India: Increased palm oil traceability
back to the port of origin from 55%
in 2016 to 90% in 2017, excluding
surfactants.
Worked with The Forest Trust (TFT)
to map our palm oil supply chain
Completed a labour risks mapping
project in our Indonesian supply chain
and carried out focused human rights
training and engagement with selected
processors
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017
02
23
03
We will...
Our priorities for 2018 are to:
Look for further opportunities to reduce
GHG emissions across our sites, in particular
by increasing our use of renewable energy
and through further energy efficiency
Sign up to RE100, a global initiative bringing
together companies who are committed to
using 100% renewable energy
Evaluate and revise new GHG emissions targets,
including MJN
Our priorities for 2018 are to:
Further enhance the water efficiency of
our operations
Review where we have material water impacts,
in light of the MJN acquisition, and determine
the actions we can take to significantly influence
water impacts across the product life cycle
In 2017, our GHG emissions from
our entire operations, including
manufacturing, R&D, offices and
distribution centres, were made up of:
• Scope 1: 63,726 tCO2e (2016:
66,247) – emissions from
combustion of fuel in our facilities
• Scope 2: 164,040 tCO2e (2016:
202,798) – emissions from energy
supplied to us, such as electricity,
heat, steam or cooling
Total GHG emissions from Scope 1
and Scope 2 emissions in 2017 were
227,766 tCO2e (2016: 269,045).
We calculate our emissions intensity
per unit of production, which equated
to 0.00278 tCO2e in 2017 (2016:
0.00313 tCO2e).
See our Detailed Sustainability Report
2017 at RB.com
Note: Our GHG data includes all emissions from operations covered by the Group Financial
Statements for which we have operational control. We include emissions for businesses we acquire
in the first full calendar year of our ownership. We calculated CO2e emissions using internationally
recognised methodologies, for example, the Greenhouse Gas Protocol (as outlined in our Reporting
Criteria) and follow dual reporting requirements in line with the GHG Protocol Scope 2 Guidance.
Our GHG emissions reported above follow the market based methodology. Following a location
based approach, our Scope 2 emissions for 2017 are 213,966 t of CO2e.
Reuse of treated water in processes
RB’s plant in Hosur, India set itself the goal
of becoming a Zero Discharge Plant. Doing
so not only decreases the levels of waste
water generated, it also reduces the amount
of water being withdrawn – an important
consideration in a water-scarce region.
Following engineering and infrastructure
modifications, treated waste water can now be
mixed with raw water within the manufacturing
process. This has led to water savings
averaging over 600,000 litres each month.
Waste reduction through
machinery investment
RB’s Shangma plant in China identified an
opportunity to reduce their waste volumes
by installing more efficient plant machinery.
A new sludge pressing machine meant that
approximately 60% of the water content
could be pressed from their waste water
treatment plant’s sludge residues – a 10%
improvement over the previous equipment.
This has led to a reduction of over 100
tonnes of sludge being disposed of each
year and a 6% reduction in the site's
today waste.
Our priorities for 2018 are to:
Achieve zero waste to landfill for sites acquired
through MJN
Further reduce waste and increase the reuse and
recycling of waste
Mobilise RB's Plastics Task Force to define
programmes, targets and goals to reduce,
reuse and recycle plastic across our portfolio
Human rights monitoring
and partnership
We supported a programme with TFT to
build a constructive working relationship
with a large palm oil mill. Consultations with
employees and subcontracted workers led
to an action plan being agreed to remedy
issues arising – most of which had been
closed out by the end of the year.
As part of a broader study, a survey of all
our palm oil suppliers was initiated with
Impact Consulting, providing a better
insight into the systems in place across our
upstream supply chains to manage human
rights risks. The research will support further
engagement with suppliers, refineries and
mills around human rights.
Our priorities for 2018 are to:
Further increase the scope and effectiveness of
our responsible sourcing programme, in areas
such as palm oil and latex
Integrate MJN into our responsible raw materials
sourcing programme and ensure compliance
programmes are in place for high risk materials.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements
24
Operating review
ENA
Net Revenue
£6,691m
2016:
LFL growth:
Actual growth:
£6,410m
-2%
+4%
Adjusted Operating Profit
% of Net Revenue
58%
£2,040m
2016 (restated)1:
Total growth:
£1,962m
-2% at constant
+4% at actual
1 Restated for the reallocation of
centrally incurred costs following the
disposal of RB Food.
Russia had a strong finish to the
year with double-digit LFL growth.
Durex delivered an excellent
performance following improved
distribution and launch of our
new emoji campaign, aimed at
turning the awkward moments
of introducing condoms to fun
moments. Nurofen and Strepsils
had strong performance, and
Finish benefited from penetration
improvement programmes.
Russia remains a volatile market
and current growth rates
may not be sustainable.
Total Net Revenue was £6,691
million, with like-for-life (LFL)
decline of -2%. North America had
a flat LFL performance. Mucinex
delivered a strong performance,
driven by recent innovations of Fast
Max Clear and Cool and targeted
consumer education surrounding
the benefits of 12-hour relief. Lysol
saw robust growth, following
a very strong Q4, driven by
the launch of our new laundry
sanitizer and Wave ITB (in toilet
bowl) innovations. Finish also
had a strong year, aided by the
launch of our latest generation
Finish Quantum tablets. Air Wick
was negatively impacted by both
challenging category growth and
competitive market conditions.
Scholl/Amopé was also weak due
to the Wet & Dry Pedi innovation.
The rest of ENA had a tough
year, with a LFL decline of -3%,
impacted by the combination
of weakness in Scholl, supply
challenges associated with the
cyber attack in June and pricing
pressures. Despite these issues, a
number of brands displayed good,
innovation-led, growth – including
Strepsils, Veet (with the new
precision trimmer), Finish and Air
Wick (with the launch of VIPoo).
Q4 total Net Revenue was £1,809
million, a LFL increase of +1%.
Within North America (+2% LFL)
Mucinex and Lysol delivered a
strong performance, as did Finish
behind the launch of the new
generation of Quantum tablets.
Russia was very strong, both
lapping a weak comparative and
delivering a strong in-market
performance, helping the rest
of ENA return to growth.
Adjusted Operating Profit was
£2,040 million, a decline of
-2% (constant), and in line with
the decline in Net Revenue; the
Adjusted Operating Margin
decreased -10bps to 30.5%, due
to pricing pressures, negative
product mix and unfavourable
operational leverage.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 25
DvM
Net Revenue
£3,266m
2016:
LFL growth:
Actual growth:
£3,070m
+3%
+6%
Adjusted Operating Profit
£753m
2016 (restated)1:
Total growth:
£674m
+6% at constant
+12% at actual
1 Restated for the reallocation of
centrally incurred costs following the
disposal of RB Food.
% of Net Revenue
28%
Total Net Revenue was £3,266
million, with LFL growth of +3%.
This was a soft result, well below
our medium-term expectations
of these markets as a whole,
which exhibit rising middle class
incomes and the increasing ability
of consumers to afford products
in the categories in which we
operate. Growth was negatively
impacted in the first half by
known issues in South Korea
and had an annual impact on
the area’s growth rate of around
-1.5%. In addition, geopolitical
issues in the Middle East saw
this region decline substantially
during the year, and particularly
in H2. Brazil experienced
challenging market conditions.
There were also successes. China
delivered strong double-digit
growth. This was led by our
Powerbrand, Durex, and supported
well by Dettol, Veet, Move Free
and the recent launch of our
new Finish dishwashing tablets,
specifically designed for compact
(table-top) dishwashers. Online
sales in China now represent
50% of total turnover. India saw
a strong underlying performance,
having been disrupted during
the year by the introduction of
Goods and Services Tax (GST),
exacerbated by cyber attack issues.
These disruptions are now
behind us and the Q4 growth
rate – both in terms of Net
Revenue growth and underlying
in-market sales – was strong.
South Africa and Turkey also had
strong performances in 2017.
Q4 total Net Revenue was £771
million, with LFL growth of +3%.
Trends seen throughout the year
continued in the final quarter.
Strong growth in India and
China was offset by weakness
in the Middle East and Brazil.
Adjusted Operating Profit was
£753 million, an increase of +6%
constant. The Adjusted Operating
Margin was +110bps higher at
23.1%, with some Gross Margin
decline more than offset by
reductions in Selling, General and
Administrative (SG&A) costs.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 26
Operating review
continued
IFCN
% of Net Revenue
14%
Net Revenue
£1,555m
Adjusted Operating Profit
£329m
Highlights 2017
Reported Net Revenue was
£1,555 million, relating to the
period from the acquisition date
of 15 June 2017 through to
year end. In Q4, reported Net
Revenue was £709 million.
Adjusted Gross Profit for the
period, which excludes the
cost of sales adjusting items
as per Note 3 to the Financial
Statements, was £959 million.
Adjusted Operating Profit for
the period was £329 million,
resulting in a reported Adjusted
Operating Margin of 21.2%.
On 15 June 2017, RB completed
the acquisition of Mead Johnson
Nutrition (MJN) and it has been
consolidated into RB’s Group
results since that date. In order to
facilitate an understanding of the
trends in the MJN business, we
have included Net Revenue and
Adjusted Operating Profit of MJN
on a pro-forma basis (see page
39 for definition), consistent with
the presentation of the Group’s
other operating segments.
MJN Net Revenue declined by
-1% in 2017, with a weak start to
the year more than offsetting the
return to growth in H2 (+2%) and a
strong finish to the year (Q4: +3%).
Asia saw Net Revenue growth
in H2 at +4% with a strong
performance in Greater China,
offset by declines in South Asian
markets. The macro trends in
China, which we saw during H1,
continued as expected. Specialist
retail and e-commerce channels
saw strong growth, together with
premiumisation into imported
brands. Offline cross-border
sales between Hong Kong and
China declined, as did locally
manufactured products within
the Enfa range. Market growth
in China is buoyant, benefiting
from both premiumisation and
modest volume growth from the
relaxation of the one-child policy.
ENA, which predominantly
covers the US, declined by
-3% in 2017. We have taken
steps to address market share
loss, through improved focus
on innovation, on consumer
education and strengthening the
new mums programme. We saw
early progress with a flat market
share performance, sequentially,
over the last three months.
LATAM grew +2% for the year,
including a stronger finish to the
year with +6% in Q4. Growth
was led by Mexico, following the
launch of a new Enfamil product
containing DHA and MFGM.
Adjusted Operating Profit margin
for MJN (at actual rates) fell by
-390bps to 20.7% (H1: -500bps,
H2: -270bps). The decline was
driven by a decrease in Adjusted
Gross Margin due to increased
commodity input costs, especially
for full fat milk powder, pricing
corrections taken in a number
of markets and adverse mix.
Advertising and promotion costs
increased due to additional
investment behind brands,
especially in China and the US.
Fixed costs also increased as a
proportion of Net Revenue, largely
as a result of negative operational
leverage. Cost synergies of US$25
million were achieved in H2,
helping to drive the improving
trend in operating margin.
Basis of preparation of MJN’s
pro-forma results
The summary pro-forma financial
information for MJN is presented,
using RB Group accounting
policies, to show the Net Revenue
and Adjusted Operating Profit as
if the acquisition had completed
on 1 January 2016. This allows
a comparison between the
full-year 2016 and 2017 results.
Constant exchange rates are
calculated and presented in
accordance with the methodology
used for the rest of the Group,
as described on page 39.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 Health
Net Revenue
£5,090m
2016:
LFL growth:
Actual growth:
£3,332m
Flat
+53%
27
Market position
Gaviscon is the leading
gastro-intestinal brand
in Europe
Durex is No.1 worldwide in
condoms for both safe and
more pleasurable sex
Strepsils is No.1 worldwide in
medicated sore throat
Mucinex is the No.1 cough
brand in North America
Scholl/Amopé is No.1
worldwide in footcare
Nurofen is No.2 worldwide
in analgesics
Image TBC
Highlights 2017
2017 total Net Revenue was £5,090 million,
with a flat LFL performance for the year. The
performance of this category was significantly
impacted in 2017 by both the failure of the
Scholl/Amopé Wet & Dry Pedi innovation
following an extremely successful initial
product offering (the Velvet Smooth Express
Pedi), and the cyber attack in June. The
underlying Health performance however was
robust with growth excluding Scholl/Amopé, in
the middle of the +4-6% long-term category
growth rates.
We believe we are well positioned
to outperform long-term category
growth within consumer health,
led by our market-leading,
trusted brands, strong consumer-
centric innovation pipeline and
significant investment behind
medical professional and consumer
education programmes. The
acquisition of MJN during 2017
has enabled us to enter a new
category of Infant and Child
Nutrition (IFCN) giving us critical
mass in consumer health. The
creation of a new Health business
unit from Q1 2018 will enable
even greater focus as we continue
our journey as a global leader
in consumer health. IFCN forms
part of the Health category.
Growth was broad-based across
the portfolio, with Mucinex and
Durex as the top performers,
driven by successful innovations of
Durex Air and Mucinex Clear and
Cool. In addition, the local sexual
wellbeing brands acquired in
Brazil of Jontex, Olla and Lovetex
benefited from improved in-market
execution. Our first full year of
ownership of the acquired Bristol-
Myers Squibb (BMS) brands in Latin
America enabled us to leverage the
innovation pipeline of our global
Nurofen brand, with the launch
of Tempra Fen (equivalent to
Nurofen for Children) and Tempra
Forte in Mexico during the year.
Q4 total Net Revenue was £1,704
million, with LFL growth of +5%.
We saw strong innovation-led
growth in Durex, Nurofen,
Mucinex and Strepsils. Scholl/
Amopé remained weak.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 28
Market position
RB is leading worldwide
in lavatory care with Lysol
in North America and
Harpic across Europe and
Developing Markets
Dettol is No.1 worldwide in
antiseptic personal care
Finish is No.1 worldwide in
automatic dishwashing
No.2 worldwide in pest
control with the Powerbrand
Mortein, the Group's
international brand
Veet is No.1 worldwide in
depilatory products
Operating review
continued
Hygiene
Net Revenue
£4,313m
2016:
LFL growth:
Actual growth:
£4,066m
+1%
+6%
Highlights 2017
Total Net Revenue was £4,313
million, with LFL growth of
+1%. Growth was broad-based,
although at more subdued
rates in 2017. Dettol growth
was negatively impacted by the
slowdown in the Middle East,
and disruption in India during the
year. We saw strong growth in a
number of other emerging markets
as we continue to innovate (for
example, the launch of SiTi Shield
– powered by Dettol – a protective
ecosystem against pollution), and
undertake penetration-building
initiatives. Finish had a strong
year, particularly in the US with
the (launch of latest generation
Quantum tablets) and China the
(launch of All-in-1 compact tablets,
specifically designed for table-top
dishwashers). Harpic performed
well as we continue to innovate
and build penetration in emerging
markets, and Veet saw continued
success with its precision trimmer
rolling out in more markets. Our
pest care brands had a weak
year, including Brazil with tough,
Zika-related comparatives.
Q4 delivered a slight improvement
in growth with +2% LFL. Strong
performances from Lysol (the
launch of our best-ever disinfecting
wipes), Finish and Harpic were
offset by weakness in pest care
and a slowdown in Veet as we lap
the successful launch of the
precision trimmer.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 Home
Market position
Vanish is No.1 worldwide in
fabric treatment
Calgon is No.1 worldwide in
water softeners
Air Wick is No.2 worldwide in
air care
Net Revenue
£1,860m
2016:
LFL growth:
Actual growth:
£1,828m
-3%
+2%
29
Highlights 2017
Total Net Revenue was £1,860
million with a LFL decline of -3%.
Air Wick remained challenging
primarily in the US, where we
continued to see increased
competitive pressure. Our Essential
Mist test launch in France has
proven successful and we are now
rolling this out to all markets in Q1
2018. VIPoo is doing well across
several markets and in the US
retailers are now expanding
distribution after the early success.
Vanish had a tough year, partially
impacted by retailer de-listings in
South Korea, impacting H1. We
saw increased competitive pressure
in Brazil.
Q4 saw a decline of -3% on a LFL
basis. Air Wick delivered strong
growth in the UK and a number
of European markets behind the
roll-out of Essential Mist and VIPoo
following a successful test launch
in Belgium. Vanish remained
challenging, particularly in Brazil.
Net Revenue
£249m
2016 (restated)
LFL growth:
Actual growth:
£254m
-9%
-2%
Portfolio (excluding Food)
Q4 declined by 15% with a
stable performance from laundry
detergents but weakness in fabric
softeners and ironing aids.
Highlights 2017
2017 total Net Revenue was £249
million, with a LFL decline of -9%
versus the prior year. Performance
was negatively impacted by
South Korea earlier in the year.
With the disposal of the Food
business, Portfolio brands is a
small part of our business (<2%
on a pro-forma basis) and consists
mainly of laundry detergents,
fabric softeners and ironing aids.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 30
Megatrends
Powerful trends are shaping our
strategy, as consumers, society
and other stakeholders demand
different things from us.
The consumer landscape is
changing
We are living longer
Life expectancy is rising around
the world and the population
aged 60 or over is growing faster
than all younger age groups, at
about 3% per annum. This means
the number of people aged over
60 is expected to increase from
900 million in 2015 to 1.4 billion
in 2030 and 2.1 billion by 2050.
Ageing populations put ever-
greater demands on healthcare
services and motivate people
to find new ways to promote
wellbeing and wellness.
Our incomes are rising
The global middle class currently
numbers around 3.2 billion people.
By 2022, this could surpass 4.2
billion – more than half the world’s
population – with the growth
coming from developing markets.
This means people will have
more money after meeting their
essential needs, spurring demand
for health and hygiene products.
Infrastructure improvements,
such as new sanitation systems,
will further increase demand.
We are more proactive about
health
Living longer does not
automatically mean we will live
better. Longer lives and rising
incomes are therefore encouraging
more of us to look after ourselves
and prevent health issues
before they occur, for example,
through better hygiene and
healthier home environments.
We believe that self-care is the
new frontier of healthcare.
Our lives are busier
The pace of modern life means
many people feel busier than ever.
This encourages consumers to use
easily accessible over-the-counter
health products, rather than wait
for a doctor’s appointment, to
seek out the most effective
hygiene product, and to look for
personal grooming and beauty
treatments they can use at home.
We are always connected
Consumers are making ever-
greater use of online resources and
e-commerce to manage lifestyles
and healthcare. Sites such as
WebMD and Facebook allow us to
learn about health and wellbeing,
interact with brands and exchange
information. Consumers around
the world are increasingly
buying online, giving companies
data about their preferences
that drive tailored offerings
and increase engagement.
RB’s response to the changing
consumer landscape
We create innovative products,
which help consumers to protect
and improve their health and
wellbeing, as they enjoy longer
and more prosperous lives. Our
Powerbrands strategy gives
consumers brands they can
trust to meet these needs.
Our Powermarkets strategy
addresses the countries with the
fastest-growing demand for our
products, while our organisation
strategy helps us to scale our
innovations and get them quickly
to the consumers who need them.
We continue to invest in our
e-business and data capabilities,
to respond to the shift to buying
online. We are also developing
more connected products, such
as our new SiTi Shield pollution
monitor (see page 33).
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 31
Companies such as RB can also
help to tackle easily preventable
deaths and illness. For example,
each year around the world there
are more than 1.2 million deaths
caused by germs and pests, such
as the 0.5 million deaths resulting
from malaria. All these deaths can
be prevented.
environmental stewardship,
patient safety and data protection.
Companies must innovate to meet
changing laws and regulations,
adapting their products to exclude
ingredients that may affect
safety or the environment and
reducing their environmental
footprint. This favours forward-
thinking companies that
strive for transparency and
continuous improvement.
RB’s response to the changing
environment
Our consumer health products
provide a cost-effective way for
consumers to treat a range of
ailments, relieving pressure on
health services. We continue to
develop innovative responses to
new health threats, such as our
SiTi Shield air pollution range and
our pest control products.
A key part of our organisation
strategy is working to comply with
all laws and regulations, through
our Safety, Quality, Regulatory and
Compliance (SQRC) function.
Stakeholder expectations are
changing
Companies’ licence to operate
now encompasses stakeholder
expectations that go beyond the
letter of the law and regulations.
To be truly sustainable, companies
must continuously improve their
environmental and social
performance.
RB’s response to changing
stakeholder expectations
Our betterRB strategy ensures
we work in the way expected of
us by our stakeholders and society
as a whole.
Our environment is changing
Healthcare costs are rising
Access to healthcare is a basic
human right. Current systems are
straining due to rising populations,
longer lives and shortages of
healthcare professionals. Scientific
advances offer more solutions for
health needs but at a higher cost.
Society therefore needs more
cost-effective ways to help
consumers protect and manage
their health.
New health risks are emerging
As populations urbanise, pollution
is becoming an increasing risk to
peoples' health. We are also seeing
diseases emerging, such as the
Zika virus, which is spread by
mosquitoes and other pests.
Regulation is changing
Governments are demanding
responsibility and accountability
from all stakeholders, as the
evolving consumer landscape
exposes gaps in regulations
covering areas such as
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 32
RB 2.0
R EO R G A N I S I N G
F O R G R O W T H
Health
The business
Health has a unique and compelling portfolio,
spanning nutrition, health hygiene, health
wellness and health relief.
With this portfolio, Health can improve
people’s health throughout life’s journey, from
a child’s crucial first 1,000 days, through to
advanced old age. The portfolio underpins the
business unit’s mission: to nourish the best start
in life and to empower people to take health
into their own hands.
On a pro-forma basis, Health had
2017 Net Revenue of £6.4 billion,
equating to 60% of Group Net
Revenue. This makes Health a
global leader in consumer health.
The business unit has a strong
position in developed markets,
which provided around half of
its 2017 Net Revenue.
It also has scale and local expertise
in rapidly growing developing
markets across Asia, Africa and
Latin America, and in particular
China. Together, developing
markets provided around half of
Health’s 2017 Net Revenue.
The opportunity
Growth for Health will be shaped
by several powerful trends. First,
consumers are becoming more
proactive about their health.
They are more health literate and
wanting to self-medicate, with a
focus on prevention rather than
cure. The rising cost of healthcare
is also putting health systems
under strain, pushing governments
to encourage consumers to
protect and manage their health
themselves. Health’s consumer-
centricity and speed to market
are key advantages in this world.
Unlike some of our competitors,
our innovation process begins
with consumer insights rather
than in the laboratory.
Demographic trends are also
important. In developed markets,
ageing populations need solutions
for common problems such as
mobility, pain and nutrition.
In Asia and Africa, growing
numbers of young families
want the best nutrition, family
planning and personal hygiene.
Coupled with rising incomes in
developing markets, this drives
demand for Health’s solutions.
Rising connectivity is also an
important driver of demand for
health products. Consumers
can instantly communicate
with healthcare professionals
and personal health coaches,
and learn more about health
through platforms such as
Facebook, Google and WebMD.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 33
Nutrition
Health hygiene
Health wellness
Health relief
Supporting
health by
Nourishing the
best start in life
Promoting
disease
prevention and
good hygiene
Powerbrands Enfamil,
Nutramigen
Dettol,
Clearasil, Veet
Other key
brands
Enfagrow
Supporting
family
planning,
immune
systems and
mobility
Durex, Scholl
Providing
solutions across
analgesics, sore
throats and
gastrointestinal
Gaviscon,
Mucinex,
Nurofen,
Strepsils
MegaRed,
Airborne, Move
Free, Digestive
Advantage
Core strengths
Global leader in consumer health
Unique portfolio of market-leading and trusted
brands, which support health throughout
people’s lives
Excellent geographic spread, with particular
strength in fast-growing emerging markets
Consumer centric, focused on ‘mums, not
molecules’
Speed to market – FMCG background makes
Health more agile than a traditional
pharmaceutical company
Best of both, combining
RB’s consumer focus
and performance culture
with MJN’s scientific
strength and understanding
of new mothers
Online activity is creating large
and valuable datasets, allowing
companies to identify, track
and respond to emerging
consumer needs. Technology also
increasingly enables consumers
to track data about their bodies
and other factors relevant to their
health, such as air pollution. Health
will benefit from its capabilities in
connected innovation and data.
Ease of access is another key trend
in Health’s market. The pace of
modern life means many people
feel busier than ever, encouraging
them to use over-the-counter
(OTC) health products rather than
wait for a doctor’s appointment.
The ability to buy online, with
same-day delivery, further
encourages this trend. Health’s
products are ideally suited to
these changing buying habits.
In addition to these growth
drivers, Health is a highly regulated
sector. This puts the onus on
companies to be responsible
and accountable, and requires
them to have the appropriate
regulatory and pharmacovigilance
frameworks, making it more
difficult for new entrants to
come into the market. MJN's
expertise bolsters our already
strong regulatory capabilities.
Conclusion
The creation of Health comes
at an exciting inflection point
in the history of our consumer
health business. Its unique and
compelling portfolio enables
healthier lives from the very
beginning. As a global leader
in consumer health, Health has
a stronger platform, capability
and footprint than ever before,
positioning it to take advantage
of the robust long-term growth
we expect in this market.
CASE STUDY
Creating a new Health
category for RB
In 2017, we introduced SiTi Shield – a new brand endorsed by
Dettol. Air pollution is a pressing health issue worldwide, with
existing solutions generally limited to masks. SiTi Shield is
designed to protect consumers against out-of-home pollution.
As pollution is generally invisible, SiTi Shield’s smartphone-
connected monitor measures local pollution and warns users
to take action. To protect health, the range also includes
the most sophisticated mask on the market, containing
a micro-vent for improved breathability, as well as
discreet and effective nasal filters. We launched SiTi
Shield in India and China in a very different way,
using our capabilities in digital and e-commerce.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements
34
RB 2.0
R EO R G A N I S I N G
F O R G R O W T H
Hygiene Home
The business
Hygiene Home has an outstanding portfolio
of leading brands. Its seven top brands –
which account for more than 80% of its 2017
Net Revenue – are number one or number
two in their markets.
These exceptional brands support
Hygiene Home’s vision of creating
a cleaner world. The business is passionate
about eliminating dirt, germs, pests and
odours that affect health and happiness.
Hygiene Home has a substantial
presence in developed markets,
with approximately three-
quarters of its 2017 Net Revenue
in Europe and North America. It
also has a significant opportunity
to accelerate its growth in
developing markets, which
currently provide around one-
quarter of Net Revenue, including
a strong position in Brazil with
its Veja surface cleaning brand.
The opportunity
Hygiene Home’s markets are
rapidly changing, with powerful
trends creating opportunities
for growth. Consumers are
increasingly using newer channels
where we are well placed
to win, such as e-commerce
and discount retailers.
RB has particular strengths in
e-commerce and we will build
on existing strong relationships
with major platforms such as
Amazon, as well as continuing
to develop sales across borders
and through e-distributors.
Focusing on specific products,
channels and media also confers
an advantage and this targeted
approach has allowed smaller
players to outperform global
competitors in recent years. Our
new organisational structure,
with its sharp focus on the
frontline, will enable us to respond
quickly and effectively to the
needs of local consumers and
to prioritise investments in the
areas of greatest opportunity,
making us a more powerful
competitor in our markets. A
leaner back office will free up
funds to invest in the frontline.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 35
Creating a cleaner world
No.1 position
No.2 position
Powerbrands
Other key brands
Lysol,
Air Wick,
Harpic,
Mortein
Finish,
Vanish,
Calgon
Veja
No.1 in Brazil
Other
Powerbrands
Cillit Bang,
Woolite
Core strengths
Strong presence in growing
categories, with the ability to
create and capture inflection
points in the market
Portfolio of exceptional brands,
with untapped potential
Leadership in growth channels
such as digital and e-commerce
Capabilities in consumer-led
innovation and a focused and
accountable team to deliver it
Global presence, with scope for
rapid growth in developing markets
Demographic and societal trends
are also favourable. The global
population is increasing, urbanising
and becoming wealthier, giving
ever more people the disposable
income to spend on their home
and hygiene needs. Infrastructure
improvements in developing
markets, such as new sanitation
systems, will further spur demand.
Conclusion
Hygiene Home has a great
portfolio of brands and the
opportunity to unleash their
full potential, by driving our
frontline culture. Our earnings
model gives us the capacity to
invest in existing and new growth
areas, to drive outperformance
in the medium to long term.
Hygiene Home has leading brands
in its categories but there remains
significant untapped potential. For
example, dishwasher penetration
in Europe and North America is
typically only around 50%, giving
scope for substantial further
growth, while penetration in
markets such as China is as low as
1-2%. Our new dedicated business
units will enable us to prioritise and
focus on opportunities to increase
penetration. We will therefore use
our consumer insights, our ability
to innovate and our investment
in brand equity to create and
capture inflection points in our
categories and drive penetration.
At the same time, we will look
to create new growth platforms
in countries, channels and
categories where we do not
currently have a presence. For
example, subscription and other
e-commerce and mobile models
provide an opportunity to
leapfrog in developing markets.
CASE STUDY
Expanding the
dishwashing category
in China
For the last seven years, Finish has worked with dishwasher
manufacturers in China to grow the category. We believe the
market is nearing an inflection point, as consumer spending
grows. Recognising that many Chinese consumers are buying
compact, table-top dishwashers, we have created a completely
new formulation of Finish to suit their specific needs.
This product is designed to dissolve faster, contains
the right balance of bleach and enzymes and has the
right ingredients to tackle China-specific food soil
challenges. We are now developing a unique
go-to-market proposition, to serve Chinese
consumers using digital and e-commerce.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements
36
Financial review
The RB base business delivered a solid
end to the year with +2% like-for-like
(LFL) Net Revenue growth in Q4,
with +5% growth in Health.
LFL Net Revenue growth
Total Net Revenue
Adjusted Operating Margin
Flat
£11,512m
-70bps
Adrian Hennah
Chief Financial Officer
Total Net Revenue was £11,512
million. This was a flat result on
a LFL basis, and was positively
impacted by a weaker Sterling
and net M&A, resulting in total
reported growth at actual rates of
+21%. The devaluation of Sterling
following the UK referendum
in June 2016 had a significant
positive impact on reported results,
particularly in H1, as the majority
of the Group’s revenue and profits
are earned outside of the UK.
The positive foreign exchange on
translation increased Net Revenue
by +6%. The acquisition of MJN
on 15 June 2017 and disposal of
the Food business on 17 August
2017 had a net positive impact on
reported results, increasing Net
Revenue by approximately +15%.
The base business had a flat
year on a LFL basis, negatively
impacted by a number of issues
during the first three quarters of
2017, including the failure of the
Scholl/Amopé Wet & Dry Pedi
innovation and the unforeseen
cyber attack. Growth returned
in Q4 with our performance for
the base business approximately
in line with underlying market
growth of around +2%. MJN
had a stronger finish to the
year, delivering a relatively flat
revenue growth performance for
the year (on a pro-forma basis)
and +2% constant rate growth
under the ownership of RB.
From a geographic growth
perspective, our developed market
area of ENA delivered a LFL
decline for the year of -2% with
North America delivering a flat
performance and the rest of ENA
-3%, driven to a material extent
by both pricing pressure and
declines in Scholl/Amopé across
many markets. Our emerging
market area (DvM) delivered
+3% LFL growth in mixed market
conditions. India and China
continue to be strong, offset by
challenging market conditions
in the Middle East and Brazil.
On a category basis, consumer
health was flat on a LFL basis.
Broad-based growth across the
majority of our Powerbrands was
offset by a significant decline in
Scholl/Amopé due to our Wet
& Dry Express Pedi innovation,
which failed to deliver against our
expectations. Excluding Scholl/
Amopé, the underlying growth
in consumer health for the year
was in the middle of long-term
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 37
category growth rates of +4-
6%. Hygiene brands grew by
+1% LFL for the year, with good
growth in Finish, Harpic and
Lysol impacted by a slowdown
in a number of Dettol’s major
markets such as India, Goods and
Services Tax (GST), cyber impact
and geopolitical issues in the
Middle East. Home care was weak,
although Air Wick had a strong
finish to the year, driven by the
launch of our new Essential Mist
innovation, and early success of our
recently launched VIPoo product.
Adjusted Gross Margin declined
by 10bps to 61.1% (reported
Gross Margin declined by 150bps
down to 59.7%) with the base
business declining by 20bps. The
consolidation of MJN for half a
year contributed a slightly positive
mix effect. The base business
margin decline was driven by the
combination of a tougher pricing
environment in developed markets,
and input cost headwinds, both
of which we expect to continue
in the near term. MJN Adjusted
Gross Margin declined by -210bps
on a pro-forma basis for 2017.
This was driven by a combination
of channel and product mix issues
in Greater China, and higher
input and logistics costs. We
continue to focus on the drivers
of Gross Margin expansion, such
as positive mix from stronger
consumer health growth, Gross
Margin accretive innovations, and
our cost optimisation programme
(Project Fuel). We expect Gross
Margin accretion to be a key driver
of our medium-term, moderate
operating margin expansion target.
Investment behind our brands
(as defined by our Brand Equity
Investment (BEI) metric), was
14.0% of Net Revenue, a +40bps
increase on a Group basis, and
-20bps decline for the base
business. Investment increased
across the majority of our brands,
with this increase offset by reduced
investment behind the Scholl/
Amopé Wet & Dry Pedi. MJN
BEI increased by approximately
+50bps for the year, driven by
higher investments in key markets.
Our fixed cost base was relatively
stable, as we continue with fixed
cost efficiencies. On a Group
basis, costs were up by +10bps,
impacted by a mix effect from the
consolidation of MJN. We have
made good progress on MJN cost
synergies. Synergies achieved in
2017 were approximately US$25
million and we are now expecting
to achieve in the region of US$300
million in annual cost savings
by the end of the third full year
of ownership, an increase over
our original target of US$250
million (£200 million). For 2018,
we expect MJN cost synergies
to slightly exceed the additional
infrastructure costs associated
with our new business units (BUs),
Health and Hygiene Home.
Operating Profit as reported
was £2,737 million, +21% versus
2016 (+14% constant), reflecting
the margin accretion on the base
business, the acquisition of MJN
and a positive translational FX
impact. Operating Profit adjusting
items were a pre-tax charge of
£385 million (2016: £367 million).
These items relate mainly to the
acquisition of MJN. Further details
of adjusting items are set out in
Note 3 to the Financial Statements.
On an adjusted basis, Operating
Profit was ahead +18% (+12%
constant) to £3,122 million. The
Adjusted Operating Margin for
the Group declined -70bps to
27.1%, due to margin expansion
on the base business of +30bps,
more than offset by a negative mix
impact from the acquisition of MJN
(-100bps). MJN Adjusted Operating
Margin declined on a pro-forma
basis by -390bps to 20.7%, driven
by declining Gross Margin from
mix and input costs, increased
BEI, and higher fixed costs. The
margin decline in H2 was -270bps
(versus -500bps in H1) as progress
was made on cost synergies,
operational improvements and
the lapping of reinvestment
in the business in H2 2016.
Continuing Net Income
attributable to owners of the
parent as reported was £3,376
million, an increase of +95%
(+88% constant) versus 2016.
On an adjusted basis, Net Income
was £2,253 million, +10% (+4%
constant). Diluted Earnings
Per Share from continuing
operations of 474.7 pence was
+96% on a reported basis; on
an adjusted basis, the growth
was +10% to 316.9 pence.
Total Reported Net Income
attributable to owners of the
parent was £6,172 million, an
increase of +237% (+230%
constant) versus 2016. This
included exceptional items in
relation to the profit on sale of
Free cash flow from continuing
operations
31 December
2017
£m
Cash generated from continuing operations
Less: net interest paid
Less: tax paid
Less: purchase of property, plant and
equipment
Less: purchase of intangible assets
Plus: proceeds from the sale of property, plant
3,153
(167)
(543)
(286)
(63)
31 December
2016
(restated)1
£m
2,808
(16)
(490)
(176)
(214)
and equipment
Free cash flow2
35
7
2,129
1,919
1 Restated for the impact of discontinued operations. Refer to Note 28 for further details.
2 Excludes business combinations.
the Food business of £3,024
million, a tax credit relating to
the effect of the US Tax Reform
of £1,421 million, and a charge
of £296 million in respect of
ongoing investigations by the
US Department of Justice (DoJ).
On an adjusted basis, total Net
Income was £2,308 million, +7%
(+1% constant) versus 2016.
Net finance expense
Net finance expense was
£238 million (2016: £16 million)
reflecting the cost of debt
undertaken to finance the
acquisition of MJN. This includes
adjusting items of £65 million
comprising the accelerated
write-off of certain facility fees
(£35 million) and an adjustment to
reclassify finance expense on tax
balances into income tax expense
(£30 million). Refer to Note 3 to
the Financial Statements for
further details of adjusting items.
Tax
The adjusted tax rate was 23%
and in line with our guidance.
The reported tax rate was
-36%. We continue to expect
our adjusted tax rate to be in
the region of 23%. £30 million
of payments to tax authorities
that would previously have been
included within the tax charge
was included within net finance
expense following an International
Financial Reporting Interpretations
Committee (IFRIC) statement
in 2017. We have included this
within adjusted income tax
and the adjusted tax rate.
US Tax Cuts and Jobs Act
The Tax Cuts and Jobs Act (the
Act) in the US was enacted on
22 December 2017. Our analysis
of the Act is ongoing. We have
estimated the economic impact
of this recently enacted legislation
to be broadly as follows:
‘One-off’ impacts:
• A non-cash credit of £1,595
million, principally relating to a
reduction in deferred tax
liabilities in respect of US-held
intangible assets.
• A transitional tax charge and
related movements in uncertain
tax positions, mainly in respect
of MJN undistributed overseas
earnings, of £174 million,
payable over eight years.
The net positive impact of
these one-off items due to the
change in US tax legislation
has been reflected in our 2017
numbers as exceptional items
and excluded from our adjusted
performance measures.
‘Ongoing’ impacts:
The Group will benefit from
the reduction of the US federal
corporate tax rate under the
Act. It will also be impacted by
other provisions eliminating or
reducing some tax deductions
currently available to the Group.
We are currently working through
the detail of these. We are also
seeing a number of other changes
in tax regulations and practice
across the countries in which we
operate. We currently continue
to expect an ongoing adjusted
tax rate of around 23%.
Adjusting items
In 2017, adjusting items includes
£385 million of expenses
recorded in Operating Profit
(2016: £367 million), £65 million
of expenses recorded in net
finance expense (2016: nil), £1,573
million of income recorded in
income tax expense (2016: £42
million income), and £2,741
million of income recorded as
discontinued operations (2016:
nil). Further details of these
items can be found in Note 3
to the Financial Statements.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements Financial review
continued
38
Return on capital employed
20%
15%
10%
5%
0%
2016
Organic
growth, inc. FX
Tax
RB Base
M&A
2017
Discontinued operations
The results of the Food business
are reported as a discontinued
operation. Food Net Income was
£55 million (2016: £103 million)
and the after-tax gain on disposal
was £3,037 million (2016: nil). The
adjusting item in respect of Indivior
PLC of £296 million (2016: nil) is
also reported within discontinued
operations (refer to Note 28 to
the Financial Statements).
Net working capital (NWC)
During the year, inventories
increased to £1,201 million (2016:
£770 million), trade and other
receivables increased to £2,004
million (2016: £1,623 million),
and trade and other payables
increased to £4,629 million (2016:
£3,495 million). These increases
were principally driven by the
acquisition of MJN. There was an
improvement in NWC to minus
£1,424 million (2016: minus £1,102
million). NWC as a percentage
of Net Revenue is -12% (2016:
-12%, restated to exclude Food).
On a pro-forma basis (including
12 months of Net Revenue for
MJN) 2017 NWC as a percentage
of Net Revenue would be -11%.
Cash flow
Cash generated from continuing
operations (excluding interest and
tax) was £3,153 million (2016:
£2,808 million, restated to exclude
RB Food). Net cash generated
from operating activities was
£2,491 million (2016: £2,422
million, restated to exclude RB
Food) after net interest payments
of £167 million (2016: £16
million) and tax payments of
£543 million (2016: £490 million,
restated to exclude Food).
Free cash flow is the amount of
cash generated from operating
activities after capital expenditure
on property, plant and equipment
and intangible assets and any
related disposals. Free cash flow
reflects cash flows that could be
used for payment of dividends,
repayment of debt or to fund
acquisitions or other strategic
objectives. Free cash flow as a
percentage of continuing Adjusted
Net Income was 94% (2016: 93%,
restated for disposal of RB Food).
Net debt
Net debt at the end of the year
was £10,746 million (2016: £1,391
million). This reflected strong
free cash flow generation and
cash inflow from the disposal of
Food, offset by the payment of
dividends totalling £1,145 million
(2016: £1,036 million), net share
purchases of nil (2016: £723
million), net M&A of £11,817
million (2016: £158 million)
and debt acquired of £2,525
million (2016: nil). The Group
regularly reviews its banking
arrangements and currently has
adequate facilities available to it.
Balance Sheet
At the end of 2017, the Group had
total equity of £13,573 million
(2016: £8,426 million), an increase
of 61%. Net debt was £10,746
million (2016: £1,391 million).
This finances non-current assets
of £31,589 million (2016: £14,569
million), of which £1,754 million
(2016: £878 million) is property,
plant and equipment, the
remainder being goodwill, other
intangible assets, deferred tax,
retirement benefit surplus,
available for sale assets and other
receivables. The Group has NWC
of minus £1,424 million (2016:
minus £1,102 million), current
provisions of £517 million (2016:
£251 million) and long-term
liabilities other than borrowings
of £5,349 million (2016: £3,388
million).
The Group continues to focus on
employing capital appropriately,
to drive long-term value creation
for its Shareholders. We continue
to seek to optimise our brand
portfolio and during the year we
sold our French's Food business
and acquired MJN. As a result,
Group ROCE as at 31 December
2017 was 8% using year-end
capital employed (10% on average
capital employed). The acquisition
of MJN is on track to exceed our
weighted average cost of capital
(WACC) by the end of the fifth
year of ownership, as targeted
in our acquisition model and
communicated to Shareholders.
The Group’s financial ratios
remain strong. Return on
Shareholders’ funds (total Net
Income attributable to owners
of the parent divided by total
Shareholders’ funds) was 45.5%
on a reported basis and 17.0%
on an adjusted basis (2016:
21.7% on a reported basis and
25.6% on an adjusted basis).
Dividends
The Board of Directors
recommends a final dividend of
97.7 pence (2016: 95.0 pence),
to give a full-year dividend of
164.3 pence (2016: 153.2 pence).
The dividend, if approved by
Shareholders at the AGM on
3 May 2018, will be paid on
24 May 2018 to Shareholders on
the register at the record date of
13 April 2018. The ex-dividend
date is 12 April 2018. The final
dividend will be accrued once
approved by Shareholders.
Capital returns policy
RB 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.
The Group has net debt of £10,746
million. It is not possible to be
definitive on future needs, but
we consider that this provides the
Group with appropriate liquidity.
We intend to continue our current
policy of paying an ordinary
dividend equivalent to around
50% of total Adjusted Net Income.
Legal provisions
The Group is involved in litigation,
disputes and investigations in
multiple jurisdictions around the
world. It has made provisions
for such matters, where
appropriate. Where it is too early
to determine the likely outcome
of these matters, or to make a
reliable estimate, the Directors
have made no provision for
such potential liabilities. Further
details can be found in Note 17
to the Financial Statements.
Contingent liabilities
The Group is involved in a
number of civil and/or criminal
investigations by government
authorities as well as litigation
proceedings and has made
provisions for such matters where
appropriate. Where it is too early
to determine the likely outcome
of these matters, or to make a
reliable estimate, the Directors
have made no provision for
such potential liabilities. Further
details can be found in Note 19
to the Financial Statements.
Return on capital employed
(ROCE)
A return-based approach is
firmly embedded into both
organic operational activities
and M&A transactions
undertaken by the Group.
Organic activities
Operational activities which utilise
capital employed are undertaken
with the same rigorous and
returns-based approach, which we
adopt for Brand Equity Investment
and other ‘P&L’ based investments:
• Capital expenditure (capex) – all
proposed capex must be
supported by a relevant
business case. We do not set
rigid capex budgets each year,
but allow the organisation to
invest where and when the
case is strong. We assign a high
priority to projects addressing
safety and quality
opportunities. Capex levels are
on average approximately 2-3%
of Net Revenue.
• NWC – tight management of
inventories, payables and
receivables is always required.
The leadership in every market
in which RB operates is
targeted on NWC performance.
It is typically one of the three
multiplicative metrics which
determine the annual bonus.
NWC is on average
approximately minus 8-9% of
Net Revenue.
Inorganic activities
Our principal focus is on organic
growth. However, there is
an inorganic element to our
strategy focused around both
value-accreting acquisitions, and
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 39
Reporting our performance
The following terms are used to describe RB’s financial performance. These non-GAAP measures are used for both internal
planning and external reporting purposes and for management remuneration. Certain terms are considered to be non-GAAP
measures because they are adjusted from comparable IFRS measures in order to provide additional clarity about the underlying
performance of the business. Other terms, which are not themselves non-GAAP measures, are also defined below.
Non-GAAP measures:
• Like-for-like (LFL) growth on Net Revenue excludes the impact of changes in exchange rates, acquisitions, disposals and discontinued
operations. A reconciliation of LFL to reported Net Revenue growth by operating segment and category is shown on page 40.
• Constant exchange rate adjusts the actual consolidated results such that the foreign currency conversion applied is made using the same
exchange rates as was applied in the prior year.
• Adjusted measures exclude the impact of adjusting items. As described in Note 3, the Group has made two refinements to its accounting
policy in respect of its adjusted earnings measures. Firstly, as a consequence of the acquisition of MJN, adjusting items now include the
amortisation of acquired, finite-life intangible assets (‘other adjusting items’). Secondly, adjusting items now include a reclassification of
finance expenses on tax balances into income tax expense.
• All 'adjusted' measures exclude the impact of adjusting items.
• The table shown on page 40 provides a reconciliation of the Group's reported statutory earnings measures to its adjusted measures for the
year ended 31 December 2017. Descriptions of the adjusting items are included in Note 3 to the Financial Statements.
• Adjusted Earnings Per Share is defined as Adjusted Net Income attributable to owners of the parent divided by the weighted average
number of ordinary shares (see Note 8 to the Financial Statements).
• The adjusted tax rate is defined as the adjusted continuing income tax expense as a percentage of adjusted profit before tax.
• Free cash flow is defined as net cash generated from continuing operating activities less net capital expenditure excluding business combinations.
Other measures and terms:
• Actual exchange rates show the statutory performance and position of the Group, which consolidates the results of foreign currency
transactions at year-end closing rates (Balance Sheet) or annual average rates (Income Statement).
• BEI represents our Brand Equity Investment and is the marketing support designed to capture the voice, mind and heart of our consumers
and is presented as a component of distribution costs within Net Operating Expenditure.
• Project Fuel is our ongoing cost optimisation programme within cost of goods sold (COGS).
• Return on capital employed (ROCE) is defined as Net Adjusted Operating Profit after tax (Note 3 to the Financial Statements) divided by
capital employed, where capital employed is measured as total assets less non-interest bearing current liabilities.
• Total Shareholder Return (TSR) measures the return received by a Shareholder, capturing both the increase in share price and the value of
dividend income (assuming dividends are reinvested).
• RB base business pertains to Group results (as reported) excluding MJN results since acquisition date.
• Pro-forma information for MJN is presented, using RB Group accounting policies, to show the Net Revenue and Adjusted Operating Profit
as if the acquisition had completed on 1 January 2016, as shown on page 41.
non-core/tail brand divestitures.
Decision making with respect
to inorganic opportunities is
taken at a Group level. Our
frontline operations play the
leadership role in building the
case for an acquisition, the due
diligence prior to a transaction
and delivering value once a
transaction takes place.
A transaction may reduce the
Group’s ROCE during the years
immediately following the
transaction. Of key importance,
however, is the generation
of an appropriate cash return
on invested capital within a
reasonable time frame. The
Group deliberately sets no return
thresholds for an acquisition,
as transactions vary in nature,
strategic importance, risk and
size. The Group does, however,
undertake a significant amount
of analysis and due diligence prior
to any transaction to review the
return expected to be generated,
compared to the Group’s weighted
average cost of capital (WACC).
As management is required to
hold a significant personal stake
of RB shares, there is a strong
alignment of interest between
management and Shareholders
in seeking to ensure that
transactions deliver an appropriate
return within an appropriate
time frame. Post-investment
reviews of all transactions are
undertaken on a regular basis
and discussed at a Board level.
Review of RB ROCE
The Group’s ROCE declined
following the acquisitions of BHI
(2006), Adams (2008), SSL (2010)
and Schiff (2012) and then
improved as good returns were
subsequently generated. It was
also negatively impacted in 2013
with the demerger of RBP, as RBP
earned a high return on capital
employed.
RB performed well in 2014. ROCE
performed less well, however,
as reported profit was reduced
by significant foreign exchange
headwinds (-10% negative
translational impact on Group
profits), while capital employed
was less impacted as a significant
part of the Group’s net assets
are denominated in stronger
currencies. In 2015 the Group
ROCE increased following a
year of excellent organic growth
and minimal increase in capital
employed. In 2016, the Group
ROCE decreased as a result of
the increased Sterling value of
the Group’s net assets due to
the significant depreciation in
Sterling from mid-2016. The
Group’s reported ROCE for 2016
has been restated for the disposal
of the Food business, reducing
reported ROCE by 70bps to
14.6% as Food earned a higher
return on capital employed.
In 2017, Group ROCE, before
the impact of M&A, improved
by 130bps to 15.9%, driven
by underlying organic growth
(170bps) offset by a higher tax
rate (40bps). The acquisition of
MJN in the year resulted in the
recognition of goodwill and
intangible assets totalling £17,192
million and only contributed
earnings from the period post-
acquisition. Consequently, this had
a negative impact on reported
ROCE, reducing it by 830bps. The
returns generated by MJN since
acquisition are fully in line with
our expectations, and we are
on track to meet our weighted
average cost of capital by the end
of the fifth year of ownership, as
targeted in our business model and
communicated to Shareholders
at the time of acquisition,
exceeding WACC by year five.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 40
Financial review
continued
Summary of % Net Revenue growth by operating segment
North America
Rest of ENA
ENA
DvM
IFCN3
Group
LFL
–
-3%
-2%
+3%
N/A
–
GST1
Net M&A2
FX
Reported
LFL
Net M&A
FX
Reported
FY 2017
FY 2016
–
–
–
-1%
N/A
–
–
–
+1%
N/A
–
+16%
+5%
+7%
+6%
+4%
N/A
+6%
+5%
+4%
+4%
+6%
N/A
+21%
–
+1%
+1%
+8%
N/A
+3%
–
-1%
-1%
–
N/A
-1%
+12%
+9%
+10%
+6%
N/A
+9%
+12%
+8%
+10%
+14%
N/A
+11%
Summary of % Net Revenue growth by category
Health
Hygiene
Home
Portfolio
Group
LFL
–
+1%
-3%
-9%
–
GST1
Net M&A2
FX
Reported
LFL
Net M&A
FX
Reported
FY 2017
FY 2016
–
-1%
–
–
–
+46%
–
–
–
+16%
+7%
+5%
+5%
+7%
+6%
+53%
+6%
+2%
-2%
+21%
+4%
+4%
-1%
–
+3%
–
–
-1%
-5%
-1%
+9%
+9%
+8%
+11%
+9%
+13%
+13%
+7%
+6%
+11%
Impact of the Goods and Service Tax (GST) implemented by the Indian Government from 1 July 2017.
1
2 Reflects the impact of acquisitions and disposals within continuing operations.
3
IFCN is the Infant and Child Nutrition operating segment (the acquired MJN business).
Reconciliation of the Group's reported statutory earnings measures to its adjusted measures for the year ended 31 December 2017
Year ended 31 December 2017
Operating profit
Net finance expense
Profit before income tax
Income tax expense
Net income for the year from continuing operations
Less: Attributable to non-controlling interests
Net income for the year attributable to owners of the parent (continuing)
Net income for the year from discontinued operations
Total net income for the year attributable to owners of the parent
Adjusting:
Exceptional
items
£m
Adjusting:
Other
items
£m
Adjusting:
Finance
expense
reclassification
£m
342
35
377
(1,527)
(1,150)
–
(1,150)
(2,741)
(3,891)
43
–
43
(16)
27
–
27
–
27
–
30
30
(30)
–
–
–
–
–
Reported
£m
2,737
(238)
2,499
894
3,393
(17)
3,376
2,796
6,172
Adjusted
£m
3,122
(173)
2,949
(679)
2,270
(17)
2,253
55
2,308
Reconciliation of the Group's reported statutory earnings measures to its adjusted measures for the year ended 31 December 2016
Year ended 31 December 2016
Operating profit
Net finance expense
Profit before income tax
Income tax expense
Net income for the year from continuing operations
Less: Attributable to non-controlling interests
Net income for the year attributable to owners of the parent (continuing)
Net income for the year from discontinued operations
Total net income for the year attributable to owners of the parent
Adjusting:
Exceptional
items
£m
367
–
367
(42)
325
–
325
–
325
Reported
£m
2,269
(16)
2,253
(520)
1,733
(4)
1,729
103
1,832
Adjusted
£m
2,636
(16)
2,620
(562)
2,058
(4)
2,054
103
2,157
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 41
Net Revenue and Adjusted Operating Profit of MJN on a pro-forma basis
Total Net Revenue
Asia
North America/Europe (ENA)
Latin America
Total
Operating profit – adjusted
Operating margin – adjusted
1 Constant growth has been calculated in accordance with the methodology used for the rest of the Group.
Full year ended 31 December
2017
(pro-forma)
2016
(pro-forma)
% change
exchange rates
£m
£m
Actual
Constant1
1,416
941
500
2,857
1,371
916
475
2,762
+3
+3
+5
+3
591
20.7%
679
-13
24.6% -390bps
–
-3
+2
-1
-16
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 42
Our framework for
risk management
The following table provides a summary
review of the principal strategic risks
and uncertainties that are more likely
to affect the Group, as identified
by management and the Board.
RB operates a major risk assessment process
to periodically identify, assess and mitigate
those risks it considers to be most significant
to the successful execution of our strategy.
The most senior leaders of our
business dedicate time each year,
in a facilitated discussion with
the Group risk team, to consider
the risk environment for their
particular functional or geographic
area of responsibility and how their
emerging or known risks could
impact on the achievement of
the Group’s strategic objectives.
Similar sessions are held with the
Group’s external advisors and also
with each Board member. The
key content from these sessions
is synthesised into the Group’s
principal risks, with an EC owner
being accountable for overseeing
the execution of the current
control strategy and for preparing
and executing a plan of mitigating
actions to properly manage the
Group’s exposure to an acceptable
level for that risk. Progress is
reviewed periodically and the
summary output from the principal
risk assessment process is formally
submitted annually by the EC to
the Board for its consideration
and agreement. Through the
course of each year, the EC, Board
and Board Committees’ agendas
address each of the principal risks
through specific ‘deep dives’ to
ensure proper focus, resourcing
and progress with mitigation.
The following table sets out
the principal strategic risks and
uncertainties facing the Group at
the date of this report. They do
not comprise all of the risks that
the Group may face. Additional
risks and uncertainties not
presently known to management,
or deemed to be less material at
the date of this report, may also
have an effect on the Group.
The Board retains responsibility
for oversight of principal risks
across RB and it considers the
appropriateness of the risk
exposure to its appetite for
risk as laid out in the annual
strategic planning process. The
Board delegates the day-to-day
monitoring of risk to the Executive
Committee (EC) and each principal
risk has an EC owner. Principal
risks are routinely reviewed not
only at EC meetings but also by
the appropriate Board committee
(Audit or CRSEC) or by the Board
itself. The Audit Committee holds
responsibility for oversight of the
principal risk assessment process,
and considering whether it is
appropriate to the needs of the
business and works effectively;
the Audit Committee performs
an annual review of this process.
The principal risk assessment
process is led and facilitated
by the Group Head of Internal
Audit & Risk Management under
the direction of the Group CEO
and CFO. The principal risk
assessment process consists of
the following key elements.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 43
Viability
Statement
The Board conducted a Viability
Review covering a five-year
period. This period was selected
as it is the period covered in the
Group’s long-term forecasting
process, which covers the
introduction to market of the
current new product pipeline.
The five-year Viability Review
first looks at the Group’s ability
to continue in operation if it
performs in line with the Group
forecast. This assumes that normal
market conditions continue
and current trends remain.
The evaluation takes into account
the Group’s cash flow, historical
Group planning accuracy, available
banking facilities and interest cover
ratios in connection with financial
covenants. The analysis concluded
that if RB performs in line with
forecast it would have sufficient
funds to trade, settle its liabilities
as they fall due, and remain
compliant with financial covenants.
The analysis goes on to consider
the viability of the business should
adverse unexpected events arise.
To illustrate this, a sensitised
view of the Group forecast
was produced. The adverse
assumptions are based primarily
upon the realisation of key Group
principal risks, which have the
most relevant potential impact
on viability (see risks marked
‘*’ on the following pages).
The sensitivity assigns each
adverse assumption an estimated
annual monetary value and
estimates the impact on interest
cover ratios and headroom over
available borrowing facilities.
The analysis concludes that
even with the occurrence of key
unexpected scenarios, RB would
still have sufficient funds to
trade, settle its liabilities as they
fall due, and remain compliant
with financial covenants.
The Board has further considered
the occurrence of a ‘Black Swan’
event: an event with sufficient
potential impact to risk the future
of RB as a strong and independent
business operating in its chosen
markets. The occurrence of a major
issue could result in significant
reputational impact, a catastrophic
share price fall, significant loss of
consumer confidence, and inability
to retain and recruit quality people.
Such an event could have an
impact on the viability of the
business.
As there are a number of
mitigating controls in place across
the business, the occurrence of
a Black Swan event is considered
sufficiently unlikely that it has not
been factored into the sensitivity
analysis.
As a result of the Viability Review,
the Board has a reasonable
expectation that the Group will be
able to continue in operation and
meet its liabilities as they fall due
over the five-year period covered
in the Viability Review.
Risk management
framework
Compared with a year ago, the
individual risks have evolved as
follows:
•
‘Delivery of RB 2.0’ will provide
greater risk balance for RB in
the medium term, although
there is shorter-term delivery
risk associated. New and
significant risks are also
associated with ‘Mead Johnson
Nutrition (MJN) Integration’.
These two risks are being
managed through an integrated
change management
programme;
• Strong early progress on the
recently implemented Safety,
Quality, Regulatory and
Compliance (SQRC) governance
structure has driven a reduction
in the exposure for our
consumers to potential ‘Product
Safety’ issues, and of the RB
business to ‘Product Regulatory
Non-Compliance’ risks;
• The ‘South Korea’ risk has
stabilised although significant
risk remains;
• Due to developments during
2017 in the ‘Department of
Justice’ case, this risk is now
actively managed separately
from the ‘Legal Non-
Compliance’ risk;
• RB also suffered ‘Supply and
Logistics’ shortfalls, which were
exacerbated by a significant
cyber security breach just ahead
of the half-year close, with
resultant customer service
impact. Significant management
effort and resources continue to
be applied to reduce these risks
for both the short and longer
terms;
•
• Continuing below-par trading
performance increases the risk
of ‘Loss of Management’; and
‘Reputation’ as a risk has been
removed from the list, as it is
considered that this is most
appropriately managed through
its constituent parts.
As such, the Group risk profile has
slightly increased in aggregate
from a year ago, with three
principal risks (numbers 7, 10 and
12) carrying a higher likelihood
than in the previous year and
one (number 2) carrying a lower
likelihood, per the listing below.
The potential impact assessed
has risen for three risks (again,
numbers 7, 10 and 12) and fallen
for two (2 and 3) based on the
experiences of 2017.
Overall, it is considered that
the Group risk management
framework has been further
strengthened during 2017 through
the combination of greater Board
leadership and oversight with
the embedding of the Corporate
Responsibility, Sustainability,
Ethics and Compliance Committee
(CRSEC Committee) together
with the associated executive
management committees; also,
the impact of the Safety, Quality,
Regulatory and Compliance (SQRC)
function, reporting directly to the
Group CEO, and the channelling of
additional resources to strengthen
compliance assurance across the
Group.
Exchange rate risk
While the foreign exchange risk is
not considered to be a principal risk
to the Group, the means used to
mitigate this risk are considered in
Note 14 to the Financial Statements.
Current Group
principal risks
1. RB 2.0 Delivery
2. Product Safety
3. Non-Compliance with
Product Regulations
4. Non-Compliance with GXP
Regulations
5. South Korea
6. Fatality or Major Employee
Safety Incident
7. Supply and Logistics
8. ERP/IT Systems Failure
9. Cyber Security
10. Legal Non-Compliance
11. Major Tax Disputes
12. Loss of Management
13. MJN Integration
14. Department of Justice
Investigation
BS ‘Black Swan’ Event
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 44
Risk management
framework
Decreased
Increased
No change
New
*Key Group principal risks
Principal risk
Mitigation status
Ongoing 2018 actions
1. RB 2.0 delivery*
Description
Risk that implementation of the new RB 2.0
category-based organisation and accompanying
ways of working causes short-term issues:
• Heavy change programme.
• Potential loss of key management.
• Focus on operating performance.
• Group control and compliance.
Board sign-off of all material aspects. Audit
Committee routinely updated on progress to
ensure proper risk and control maintained.
Personal leadership of Group Chief Executive
with direct Executive Committee (EC) oversight.
RB 2.0 overarching project management team
established and working effectively, with robust
governance framework in place. Programme
teams in place for each business unit and
budgets allotted for end-to-end ownership.
Programme Review Board meetings held
monthly and chaired by Group CFO.
Detailed change programme execution plan
and ongoing governance model maintained
and updated by programme team, including:
• Customer go-live across the world – to
approach customers and manage
relationships as two separate business units.
• Legal entity restructuring – completion
in-year of most critical markets.
• Regulatory compliance plan for products
in line with legal entity changes.
Principal risk
Mitigation status
Ongoing 2018 actions
2. Product safety*
A dedicated vigilance group monitors and
reports as required adverse events and manages
product safety risks.
Ongoing review of Product Safety Evaluation
Records (PSERs) to ensure current availability
for all products.
Description
Risk of not having a robust process for
assessment of product safety; this may result in:
• Consumer safety issues.
• Gaps in the completion of our safety
assessment.
• Reputational damage with consumers,
customers or regulators.
• Significant financial losses arising from
supply disruption, product recalls, delayed
launches, penalties, etc.
• Possible criminal liability for Group
companies and RB management.
Safety team has been further strengthened
during 2017.
Base training for all employees, and advanced
training for relevant employees to fully
understand their role in fulfilling safety, quality
and compliance standards for RB products.
The Compliance Management Committee
(CMC), established in 2016, continues to meet
monthly, chaired by the Group CEO (the Group
CFO since 1 January 2018). The CMC routinely
reviews product safety governance and issues
arising and escalates to the Executive
Committee as necessary.
Quarterly updates of product safety progress
from the CMC to the CRSEC Committee.
Systems review to ensure that all product
changes are satisfactorily tracked, controlled
and updated.
Development and integration of a cross-
functional Product Lifecycle Management (PLM)
system (safety, regulatory, pharmacovigilance,
quality, supply, procurement, etc.) to improve
compliance at source and reduce manual
intervention.
Strengthen processes to ensure product release
from factories is contingent on availability of
a PSER.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 45
Principal risk
Mitigation status
Ongoing 2018 actions
Compliance programme for sexual wellbeing
medical devices has commenced as part of
product integrity reviews.
Improve artwork and label approval process.
PLM system development to replace ageing
system and integrate RB and MJN to enable
compliance management throughout the
product life cycle.
3. Non-compliance with
product regulations*
Description
Risk that non-compliance with regulations of
relevant product classifications (e.g. medicinal
products, medical devices, dietary supplements,
food, cosmetics, general products, etc.)
results in:
• Consumer safety issues.
• Reputational damage with consumers,
customers or regulators.
• Significant financial losses arising from
supply disruption, product recalls, delayed
launches, penalties, etc.
• Possible criminal liability for Group
companies and RB management.
REGEX programme reviewed compliance of
RB’s medicine marketing authorisations.
Ongoing Product Vulnerability programme
(review of ingredients, formulations, stability
data, etc. in Health portfolio).
REACH compliance programme to enhance
systems, processes and data to demonstrate
compliance with REACH and other chemical
control legislation.
Product Integrity review programme (review
product compliance against registration and/or
regulatory requirements).
Change management process optimisation to
maintain product compliance.
A Compliance Management Committee (CMC)
meets monthly, chaired by the Group CEO (the
Group CFO since 1 January 2018). This
committee routinely reviews product regulatory
governance and updates the Board CRSEC
Committee quarterly.
Principal risk
Mitigation status
Ongoing 2018 actions
4. Non-compliance with Good
Manufacturing Practices
(GXP) regulations*
Description
Risk of non-compliance with applicable
regulations, guidelines, internal standards and/
or registrations across the supply chain and
throughout the product life cycle governing
how we produce and supply products.
Non-compliance results in risk to:
• Consumer – safety and efficacy.
• Business disruption including site or business
closures.
• Possible criminal liability for Group
companies and RB management.
The CMC (see principal risk number 2) is now
in place to ensure KPIs are reported from the
top through all levels in the organisation.
Verify compliance with QMS through corporate
quality audits in base businesses and all
supporting functions.
Quarterly updates of quality compliance
progress from the CMC to the CRSEC
Committee.
Independent audit team established and
externally certified; first full-year programme
executed.
Implement initial phases of integrated Global
Consumer Relations function and process/
system to ensure appropriate signal detection
by business unit.
Integrate MJN and RB Quality Management
team, to establish consistent standards globally.
Minimum standards programme in place to
monitor and measure performance.
Establish and report new KPI metrics assessing
compliance risk of QMS elements.
Health business unit compliance regularly
audited by external parties and clear actions
in place.
PLM system development to upgrade system
and integrate RB and MJN to enable compliance
management throughout the product life cycle.
Change management system deployed globally
during 2017 to extend application to Hygiene
Home business unit.
External assessment of Quality Management
System (QMS) and consumer safety completed,
with remediation plans in place.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 46
Risk management
framework
continued
Decreased
Increased
No change
New
*Key Group principal risks
Principal risk
Mitigation status
Ongoing 2018 actions
5. South Korea
Full public apology formally and repeatedly
made by RB Korea to affected parties.
Regular review meetings by RB Group, as owner
of RB Korea, to review settlement progress and
other issues as they arise.
Financial modelling performed and updated to
quantify risk and provide for financial exposure.
Description
The Humidifier Sanitizer (HS) issue in South
Korea is a tragic event. We continue to make
both public and personal apologies to victims.
While an appropriate provision was made at
half year 2016 to cover the one-off costs of
litigation, a compensation programme for
certain victims, as well as some impairment, the
risk of additional exposure remains. See Notes
17 and 19 to the Financial Statements.
RB Korea continues to work closely with
government and other stakeholders to
progress settlement with claimants and
to establish a viable ongoing model
for the local operations. See Notes 17
and 19 to the Financial Statements.
Principal risk
Mitigation status
Ongoing 2018 actions
Global Safety, Quality, Regulatory and
Compliance (SQRC) structure and regional
leadership.
Continue to embed heightened EH&S culture
through rigorous auditing, ongoing cultural
surveys and training.
Policy and enhanced Employee, Health & Safety
(EH&S) standards in place.
EH&S intensive audit compliance programme
in place, including self-assessment, site visits,
assurance of improvement actions and culture
surveys.
Routine progress reporting to CMC, with
quarterly updates of progress with safety
governance and issues to the CRSEC
Committee.
Ongoing EH&S training and deployment of
driver safety standard programme in 2017.
6. Fatality or major
employee safety
incident
Description
Risk of work accidents leading to death, injury
or illness on RB premises or premises under
RB supervision, in the case of outsourced
operations, resulting in risks to:
• Loss of life.
• Company reputation – brand and Company
image damage.
• Operational efficiency – factory closures,
significant supply disruption as issues are
identified and rectified.
• Financial performance – loss of sales,
fines and cost of remediation activities.
• Possible criminal liability for Group
Companies and RB senior management.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 47
Principal risk
Mitigation status
Ongoing 2018 actions
Extend HPR certification to all ex-MJN
manufacturing locations acquired in 2017.
Revisit all BCPs to ensure robust and functional
documentation and mapping for each
significant factory (e.g. by revenue stream) to
confirm that business continuity arrangements
remain sufficient.
7. Supply and logistics
Description
Risk of product supply interruption resulting
from unplanned disruptions in raw material
supply or forced shutdown.
Loss of competitiveness and profitability from
service level deterioration arising from factory
capacity constraints, warehouse or transport
set-up charges or insufficient change capability
in factory and/or supply services.
Risk that our business continuity plans (BCPs),
including mono-sourcing (materials and
products) do not adequately address all risks
facing the Group, resulting in unforeseen
business disruption.
Continued progress in ensuring principal key
single-sourced manufacturing sites (Tier One)
achieve and maintain FM Global certification as
Highly Protected Risk (HPR) sites or otherwise
have fully tested risk mitigation plan.
BCPs in place at other key sites setting out
alternative manufacturing locations, recovery
times, etc.
Continuous review of business interruption
insurance policies to ensure adequate cover
is in place with tested and proven product
recall process.
Raw material mono-sourcing risks and actions
monitored on a bi-monthly basis.
Tested and proven product recall process.
Principal risk
Mitigation status
Ongoing 2018 actions
Execution of RB 2.0, including accelerated roll
out of SAP commercial and factory templates
and upgrading of the commercial functionality
of the newly acquired MJN SAP template.
Perform disaster recovery test for all Global/
critical SAP systems and associated dependent
systems.
8. ERP/IT systems failure
Executive Committee strategically committing
to Group-wide SAP roll out.
SAP commercial and factory templates continue
to be rolled out and are now live in five
countries, 11 factories and two hubs, including
recent deployments in Mexico and India, as well
as across the newly acquired MJN estate;
multiple deployment teams remain fully active
in rapid rollout phase.
Disaster recovery plans for key IT systems
defined, regularly reviewed and tested under
new outsource provider platform, providing
improved systems integrity.
Description
Risk of IT disruption or accounting error, due
to legacy Enterprise Resource Planning (ERP)
and IT systems, impacts business operations in
a number of areas, e.g. through unavailability
of key management information or disruption
to transactional processing.
There is an associated, additional risk that SAP
deployment, to replace the existing legacy ERP,
is delayed due to RB 2.0 project time frames
and integration of MJN into RB.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 48
Risk management
framework
continued
Decreased
Increased
No change
New
*Key Group principal risks
Principal risk
Mitigation status
Ongoing 2018 actions
9. Cyber security*
Description
Risk that RB is subject to increasingly
sophisticated cyber attacks aimed at causing
business disruption, capture of data for financial
gain, and reputational damage.
Note: RB was the collateral victim of the June
2017 virus attack via Ukraine, which disabled
virtually all MS-based systems across RB over a
number of days and including over the half-year
end. Whilst a full recovery was made, an
expert-led review of the incident has extracted
extensive learning points to appropriately
minimise impact from future attacks and
mitigate both the immediate as well as the
longer-term risk.
Transformation of IS hardware environment
completed with security monitoring of key
systems in place.
Ongoing investment in system patching against
cyber threats.
Continuous cyber testing platform (vulnerability
management) to identify cyber weaknesses as
new threats emerge.
Implementation of cyber security
transformation plan and strategy in light of the
learnings from the June 2017 cyber attacks
including:
• 24/7 Cyber Defence Centre.
• Removal of legacy platforms.
•
• New cyber response playbooks and
Increased IT security team headcount.
processes.
• Advanced threat protection.
• Continued improvements to system recovery
Regular cyber security exercises.
speed and capability.
Cyber security awareness training for all staff.
Solution in place for privileged access
management.
Global backup platform in place for data and
systems recovery.
Principal risk
Mitigation status
Ongoing 2018 actions
10. Legal non-compliance*
Group Compliance programme.
Ongoing proactive management of current and
potential litigation.
Delivery of GDPR readiness project ahead of
effective date of new regulation in May 2018.
Develop tool for ongoing monitoring to prevent
potential abuse of significant market positions.
Develop and rollout updated online training.
Global Compliance Passport online training
completed by all employees.
Group Whistleblower Hotline operational,
widely communicated and embedded.
Dedicated compliance personnel in each
business unit; supported by internal compliance
liaisons and external local legal experts as and
when required.
SVP General Counsel and Company Secretary
routine attendance at Board meetings.
IFCN division with new policies for interaction
with Health Care Professionals (HCPs) and
process underway to integrate with Health
business unit.
Global Gift Register and enhanced due
diligence checks developed during 2017.
GDPR readiness project underway.
Description
Risk that we are not fully compliant with
relevant laws and regulation, including
anti-corruption laws and global competition
laws, resulting in damage to RB’s reputation,
significant potential fines and possible criminal
liability for RB senior management (see Notes
17 and 19 to the Financial Statements for
further detail).
Increased risk has arisen from:
• The acquisition and integration of MJN
increasing our exposure with regard to
anti-corruption laws, specifically health
care professional interaction.
• Data privacy exposure is increasing due
to the need to hold Personally Identifiable
Information (PII) and continuing changes
in legislation e.g. General Data Protection
Regulation (GDPR).
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 49
Principal risk
Mitigation status
Ongoing 2018 actions
11. Major tax disputes
Governance Review Board monitors and drives
compliance against operating model.
Description
Risk of significant un-provisioned cash outflows
as a result of tax authority challenge to filed tax
positions (see Note 7 to the Financial
Statements for further detail).
Ongoing review and appropriate provisioning
for anticipated exposures.
Ongoing monitoring of progress of European
Union State Aid investigations and their possible
impact on RB. Also for Base Erosion and Profit
Shifting (BEPS) initiatives.
Ongoing proactive management to progress
formal Advanced Pricing Agreements (APAs)
and proactive management of ongoing
tax audits.
Principal risk
Mitigation status
Ongoing 2018 actions
12. Loss of management
‘People’ discussion is a standard agenda item at
all Executive Committee meetings.
Description
Risk that RB cannot implement its strategies
and meet objectives as a result of management
leaving the business who cannot be readily
replaced by equally high-calibre experienced/
qualified candidates.
Ahead of RB 2.0 there was a concern that
management turnover could rise.
Succession plans for key management positions
are in place.
Retention risk analysis undertaken regularly,
including review of turnover rates.
Continuous review of competitiveness of the
total compensation programmes at RB.
DARE (Develop, Attract, Retain, Engage
talented women) programme continues to be
driven hard; its objective includes the reduction
in drop-off rate of females from manager to
senior management positions.
The Group structures its reward programme to
attract and retain the best people. The formal
succession planning process continues to
evolve with plans being reviewed and updated
regularly for all key positions and individuals.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 50
Risk management
framework
continued
Decreased
Increased
No change
New
*Key Group principal risks
Principal risk
Mitigation status
Ongoing 2018 actions
13. Mead Johnson Nutrition
(MJN) integration
IFCN operated as a separate division through
2017 with a dedicated Executive Leadership
team (80% of which are previous MJN
employees).
Detailed plan of full integration in place and
aligned within RB 2.0 organisation change.
Commercial performance and integration status
progress reviewed monthly by the EC.
Key MJN talent identified and retention
programme in place.
RB has strengthened IFCN commercial rigour
through enhancements to the operating model,
whilst retaining unique strengths of MJN R&D,
Regulatory and Quality functions.
Description
Risk that integration takes longer than expected
and does not deliver the projected benefits
within expected time frames:
• The integration of MJN into RB continues
to divert management attention from
operating and delivering the expected
results from its core business.
• Existing RB management have limited
experience in running and managing the
risks associated with an Infant and Child
Nutrition (IFCN) business.
Principal risk
Mitigation status
Ongoing 2018 actions
14. Department of Justice
(DoJ) investigation
Ongoing close oversight by top management
and Board, with independent advice from
external counsel.
Continuing effort to engage to reach
reasonable resolution of the investigation.
Ongoing preparation of defences to any
criminal indictment or civil action.
Description
Risks deriving from ongoing US DoJ
investigation and related antitrust litigation
relating to legacy pharmaceutical business
include:
• Potential criminal indictment of RB Group
or RB individuals, with reputational impact,
distraction and potential debarment which
could theoretically have wider implications
within the RB business.
• Significant financial liability for RB from
settlement or adverse court decisions in
criminal or civil matters.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 51
Principal risk
Mitigation status
Ongoing 2018 actions
The adequacy of the risk and control
framework, together with Group policies,
is reviewed annually by the Audit and
CRSEC Committees.
Incremental improvements are made each year
to further strengthen RB’s systems of internal
control and risk management.
BS. ‘Black Swan’ event
A full and robust risk and control framework is
in place and operating effectively across RB.
This framework is overseen by the Audit and
CRSEC Committees on behalf of the Board and
is routinely reviewed by an independent Internal
Audit function, which reports directly to the
Audit Committee.
Crisis management training programme and
support tools in place.
Description
Risk of significant reputational impact as a
result of a major product safety issue resulting
in very serious adverse impacts to third parties
or the viability of the business, possibly
compounded by apparently negligent
management behaviour.
Extreme adverse press coverage and viral
social media linking the RB name to consumer
brands, leading to catastrophic share price
fall, accompanied by collapse of consumer
confidence and inability to retain and recruit
highly capable employees.
Principal risk
Mitigation status
Ongoing 2018 actions
Routine risks
Description
We are subject to a range of compliance and
routine risks as part of everyday business.
The adequacy of the risk and control
framework, together with Group policies, is
reviewed annually by the Audit and CRSEC
Committees.
A fundamental element of the MJN acquisition
integration process has been to select the
best combination of risk and control policies,
processes and systems to further improve
robustness for the enlarged RB 2.0 business.
In order to manage the more numerous and
routine risks, the Group maintains a complete
and robust governance framework. This consists
of a full set of policies, processes and systems
covering all aspects of compliance, with
international and local laws as well as with the
Group’s stated minimum control standards.
Management provides primary assurance by
driving risk compliance through their respective
business unit, area, regional or functional
responsibility. This is done through regular and
detailed business and governance reviews.
Secondary assurance is provided independently
through a combination of Internal and External
Audit covering all aspects of the Group’s
operations.
The Strategic Report, as set out on pages 1 to 51, has been approved by the Board.
On behalf of the Board
Rupert Bondy
Company Secretary
19 March 2018
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements
52
Board of Directors
Rakesh Kapoor
Chief Executive Officer
Adrian Bellamy
Chairman
Adrian Hennah
Chief Financial Officer
Nationality
Indian/British
Board tenure
Six years and three months
Committee membership
Nomination
Skills and experience
Rakesh joined RB in 1987 and held a number of
regional and central marketing roles with the
Company. In 2006 he was appointed EVP
Category with responsibility for global category
management, R&D, media, market research and
strategic alliances. Rakesh was appointed CEO
in 2011 and brings to the Board a wealth of
business experience and knowledge developed
through his experience with the Company.
Rakesh holds an MBA from XLRI, Jamshedpur
and a Chemical Engineering degree from the
Birla Institute of Technology and Science.
Nationality
British/American
Board tenure
18 years and one month
Committee membership
Corporate Responsibility, Sustainability, Ethics
and Compliance; Remuneration
Skills and experience
Adrian joined RB as a Non-Executive Director in
1999 and was appointed as Chairman of the
Board in May 2003. He brings extensive
executive experience and was formerly
Chairman of the Body Shop International plc.
His other previous directorships include River
Island, The Gap Inc, Gucci Group NV and The
Robert Mondavi Corporation. Adrian will retire
from the Board at the 2018 AGM and will not
stand for re-election.
Adrian earned his Bachelor of Commerce and
Master of Business Leadership degrees from the
University of South Africa.
Nationality
British
Board tenure
Four years and 11 months
Committee membership
None
Skills and experience
Adrian joined RB in January 2013 as Chief
Financial Officer Designate, before being
appointed CFO in February 2013. Adrian has
valuable financial experience, having spent six
years at Smith & Nephew plc as CFO and four
years as CFO at Invensys plc. He also spent 18
years at GlaxoSmithKline plc where he held a
number of senior management and financial
roles. He started his career with PwC (then Price
Waterhouse) working in audit and consultancy
and worked with Stadtsparkasse Koeln, the
German regional bank.
Adrian has a degree in Law from Cambridge
University and is a Sloan Fellow of the London
Business School.
Other current appointments
None
Other current appointments
Chairman of Williams-Sonoma Inc, and
Chairman of the Supervisory Board of Action
Nederland BV.
Other current appointments
Non-Executive Director of RELX Group plc and
RELX NV.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 53
Nicandro Durante
Non-Executive Director
Mary Harris
Non-Executive Director
Ken Hydon
Non-Executive Director
Nationality
Brazilian/Italian
Nationality
British
Nationality
British
Board tenure
Four years and one month
Board tenure
Two years and 11 months
Board tenure
14 years and one month
Committee membership
Corporate Responsibility, Sustainability, Ethics
and Compliance; Remuneration
Skills and experience
Nicandro was appointed as a Non-Executive
Director in December 2013 and brings strong
leadership skills and international business
experience to the Board. He holds degrees in
Finance, Economics and Business
Administration. He started his career working in
finance in Brazil and joined British American
Tobacco (BAT) in 1981. Whilst at BAT he has
worked in the UK, Hong Kong and Brazil and
has held a number of senior positions, including
Regional Director for Africa and the Middle
East. He was appointed as Chief Operating
Officer prior to being appointed as Chief
Executive Officer of BAT in March 2011.
Committee membership
Chair of Remuneration; Nomination
Committee membership
Audit
Skills and experience
Mary was appointed as a Non-Executive
Director in February 2015. She became the
Chair of the Remuneration Committee in
November 2017. Formerly a Partner at McKinsey
& Company, Mary brings to the Board
substantial experience in consumer and retail
business in China, South East Asia and Europe.
Mary is a graduate of the University of Oxford
(MA Politics, Philosophy and Economics) and
Harvard Business School.
Skills and experience
Ken joined RB as a Non-Executive Director in
December 2003 and was Chairman of the Audit
Committee from November 2006 until May
2017. He also served as Senior Independent
Director between February 2005 and November
2006. Ken has extensive financial and business
experience developed through working in
the electronics, retail, consumer products and
healthcare sectors. He was formerly CFO of
Vodafone Group plc and a former Non-
Executive Director of Tesco plc and Pearson plc.
Ken will retire from the Board following the
2018 AGM and will not stand for re-election.
He is a Fellow of the Chartered Institute of
Management Accountants, the Association of
Chartered Certified Accountants and the
Association of Corporate Treasurers.
Other current appointments
Chief Executive Officer of British American
Tobacco p.l.c.
Other current appointments
Non-Executive Director of ITV plc and a
member of the Supervisory Board of Unibail-
Rodamco SE.
Other current appointments
Non-Executive Director of Merlin
Entertainments plc.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 54
Board of Directors
continued
Dr Pamela Kirby
Non-Executive Director
André Lacroix
Non-Executive Director
Chris Sinclair
Non-Executive Director
Chairman-elect
Nationality
British
Nationality
French
Nationality
American
Board tenure
Two years and 11 months
Board tenure
Nine years and three months
Board tenure
Two years and 11 months
Committee membership
Chair of Corporate Responsibility, Sustainability,
Ethics and Compliance; Audit; Nomination.
Committee membership
Chair of the Audit Committee; Nomination
Committee membership
Chair of the Nomination Committee;
Remuneration
Skills and experience
Pam joined RB as a Non-Executive Director in
February 2015. She was appointed as Chair of
the CRSEC Committee in July 2016. Pam brings
to the Board valuable knowledge of the
healthcare sector. She served as Chairman of
Scynexis Inc until June 2015. She was formerly
CEO of Quintiles Transnational Corporation and
held senior positions at AstraZeneca PLC and
Hoffman-La Roche.
Skills and experience
André was appointed as a Non-Executive
Director in October 2008. He became Senior
Independent Director in June 2013 and Chair of
the Audit Committee from May 2017. He has
wide-ranging experience in executive roles, as
Chief Executive Officer of Inchcape plc from
2006 until March 2015; Chairman and Chief
Executive Officer of Euro Disney S.C.A; and
President of Burger King International
(previously part of Diageo). He has also held
positions at Colgate, PepsiCo and Ernst &
Young LLP.
André is a graduate of ESCP Europe.
Skills and experience
Chris was appointed as a Non-Executive
Director in February 2015. He will be appointed
as Chairman of the RB Board at the May 2018
AGM. Throughout his career he has held a
number of executive positions and brings a
wealth of experience to the role. He was
previously Executive Chairman of Scandent
Holdings, Executive Chairman of Cambridge
Solutions Ltd, Chairman and CEO of Caribiner
International, and President and CEO at Quality
Foods Centers, Inc. Earlier in his career, he held
various senior management positions with
PepsiCo, including Chairman and CEO of Pepsi
Cola Co., and Chairman of PepsiCo
International Foods and Beverages, which gave
him the platform to showcase his strong global
branding skills.
Chris is a graduate of the University of Kansas
(Business Administration) and the Tuck School
at Dartmouth College.
Other current appointments
Non-Executive Director of DCC plc, Victrex plc,
Hikma Pharmaceuticals PLC and a member of
the Supervisory Board of AkzoNobel N.V.
Other current appointments
Chief Executive Officer of Intertek Group plc.
Other current appointments
Chairman of Mattel, Inc.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 55
Judy Sprieser
Non-Executive Director
Warren Tucker
Non-Executive Director
Nationality
American
Board tenure
14 years and four months
Committee membership
Remuneration
Nationality
British
Board tenure
Seven years and 10 months
Committee membership
Audit
Skills and experience
Judy joined the RB Board as a Non-Executive
Director in August 2003. She was Chair of the
Remuneration Committee from June 2004 until
November 2017. She was previously Director
and Vice Chairman at Royal Ahold NV, CEO of
Transora Inc, Executive Vice President of Sara
Lee Corporation and CFO of Sara Lee’s Food
Group. Judy will retire from the Board following
the 2018 AGM and will not stand for re-
election.
Judy has a Bachelor’s and Master’s degree from
Northwestern University.
Skills and experience
Warren was appointed as a Non-Executive
Director in February 2010. He has extensive
Board experience and financial expertise.
He was Executive Director and Chief Finance
Officer of Cobham plc from 2003 to 2013 and
previously Non-Executive Chairman of Paypoint
plc. He has also held various senior finance
positions at Cable & Wireless plc and British
Airways plc.
Warren is a Chartered Accountant and has an
MBA from INSEAD.
Other current appointments
Director of Allstate Corporation, and
InterContinental Exchange Inc.
Other current appointments
Non-Executive Director of Thomas Cook Group
PLC, Survitec Limited and the UK Foreign &
Commonwealth Office.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 56
Executive Committee
Rakesh Kapoor
Chief Executive Officer
Rupert Bondy
Senior Vice President
General Counsel/
Company Secretary
Seth Cohen
Chief Information Officer
Amedeo Fasano
Chief Supply Officer
Nationality
Indian/British
Company tenure
30 years
Nationality
British
Company tenure
One year
Nationality
American
Company tenure
Less than one year
Nationality
Italian
Company tenure
20 years
Experience
Joined Reckitt & Colman in 1987.
Rakesh has held a number of roles
including: Regional Sales Manager,
North India; General Manager,
Indian Southern Region; and
Regional Marketing Director, South
Asia. In 1999, he was appointed
Global Category Director, Pest
Control. Following the merger of
Reckitt & Colman and Benckiser,
he assumed the role of Senior Vice
President, Home Care. He was
appointed SVP, Regional Director,
Northern Europe in 2001 and in
July 2006 he was promoted to
EVP, Category Development.
Rakesh was appointed CEO in
2011.
As part of RB's new strategy for
sustainable outperformance, in
January 2018 Rakesh was also
appointed President of RB's Health
business, headquartered in Slough.
Experience
Joined RB as SVP General Counsel
and Company Secretary in January
2017, and is responsible for
company secretarial and legal
compliance matters across RB.
Rupert began his career as a
lawyer in private practice. In 1989
he joined US law firm Morrison &
Foerster, working in San Francisco
and London, and from 1994 he
worked for Lovells in London.
In 1995 he joined SmithKline
Beecham as Senior Counsel for
mergers and acquisitions and
other corporate matters.
When SmithKline Beecham and
GlaxoWellcome merged to form
GlaxoSmithKline, Rupert was
appointed Senior Vice President
and General Counsel. In 2008,
Rupert became Group General
Counsel of BP plc, holding that
position until he joined RB.
Experience
Joined RB in September 2017 as
Group CIO, and is responsible for
leading the next phase of RB’s
transformation, including the
integration of MJN systems with
RB’s, upgrading and deploying
finance systems and enhancing
the Company’s technological
capabilities.
Seth joined RB from PepsiCo,
where he spent three and a half
years as SVP and Chief Information
Officer, Europe and Sub-Saharan
Africa. Prior to this, Seth spent
12 years in a number of senior IS
roles at Pepsi, including leading
Global Business Solutions and IT
transformation programmes.
Experience
Joined in 1997 as Supply Director,
Italy. Following the merger of
Reckitt & Colman and Benckiser,
Amedeo was appointed
Manufacturing Director for
Central, South Western and
Southern Europe Regions. In 2002
he became Regional Supply
Director, North America and in
2003 SVP Supply, North America,
Australia and New Zealand.
In 2007 he took over the role of
SVP Supply, Developing Markets
and in March 2009 Amedeo was
appointed as EVP, Supply. He
previously worked for Pirelli Tyres
in various supply roles.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 57
Rob de Groot
President, Hygiene Home
Adrian Hennah
Chief Financial Officer
Gurveen Singh
Chief Human Resources
Officer
Nationality
Dutch
Company tenure
29 years
Nationality
British
Company tenure
Four years
Nationality
Indian
Company tenure
24 years
Experience
Joined RB in 1988. After
international roles in marketing
and sales he became General
Manager, The Netherlands, then
SVP, Regional Director, Eastern
Europe and was appointed Global
Category Officer, Surface, Dish
and Home Care before being
appointed EVP, North America &
Australia. From January 2012 to
December 2017, Rob became EVP
of the ENA area, responsible for
North America, Europe, Russia, CIS
and ANZ.
In January 2018, Rob was
appointed President of RB’s
Hygiene Home business,
headquartered in Amsterdam.
Experience
Joined RB in January 2013 as
Chief Financial Officer Designate,
and was appointed CFO in
February 2013. He previously spent
six years at Smith & Nephew plc as
CFO and four years at Invensys, the
international engineering company.
Adrian also spent 18 years at
GlaxoSmithKline plc, one of the
world’s largest pharmaceutical
companies, holding a number of
senior management and financial
roles. He previously worked at
PwC (then Price Waterhouse)
for four years in both audit
and consultancy and also for
Stadtsparkasse Koeln, the
German regional bank. He is
a Non-Executive Director of
RELX Group plc and RELX NV.
Experience
Joined RB in 1993 as HR Director,
India and was promoted to the role
of Manpower Planning Director,
based in the UK. Following the
merger of Reckitt & Colman and
Benckiser, Gurveen returned to
India as HR Director, South Asia.
In 2007, she moved to Regional
HRD East Asia in Singapore and
was promoted to Area HRD DvM
in 2010, based in the UK. In 2012
she moved back to Singapore to
become Area HRD LAPAC before
moving to her role as Area HR
Director DvM, based in Dubai,
in 2015.
In January 2018, Gurveen was
appointed Chief Human Resources
Officer. Before joining RB Gurveen
held various HR roles in the hotel
and consumer goods industries.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 58
Corporate Governance
Chairman’s Statement
As stewards of the Company, the Board
promotes the highest standards of
corporate governance across the Group.
Our betterRB strategy recognises that long-
term success depends as much on good
stewardship of our business and nurturing our
obligations to society, as it does to strong
financial performance.
Adrian Bellamy
Chairman
Introduction
On behalf of the Board, I present the Company’s Corporate Governance
Report for the financial year ended 31 December 2017. This will be my
last report to our Shareholders as I shall not be seeking re-election at
our 2018 Annual General Meeting (AGM), and I will be handing over to
Chris Sinclair as Chairman-elect. I am extremely proud of the Board and
all my RB colleagues for creating so much value for our stakeholders and
contributing wholeheartedly to the good governance and stewardship
of our business during my tenure as Chairman.
We report against the requirements of the UK Corporate Governance
Code 2016 (the Code) issued by the Financial Reporting Council (FRC).
I’m pleased to confirm that our high standards of compliance with the
Code remain.
There have been a significant number of changes in the political and
regulatory landscape affecting the corporate governance agenda over
2017 and in the future. The effects of the Modern Slavery Act, EU Market
Abuse Regulation, the EU Audit Directive as well as the implications for
the business around the Brexit vote were reviewed by the Board during
the year, and we have made good progress in enhancing our high
governance standards. We will be reviewing the outcomes of the FRC’s
consultation on a new UK Corporate Governance Code in the
forthcoming year and considering any steps we should take as a
consequence.
Leadership and culture
We recognise that the world around us is changing. Following our
acquisition of the Mead Johnson Nutrition (MJN) business, and the
divestiture of our non-core Food division, we saw the opportunity
to implement a significant change in our Group. During the latter
half of 2017, the Board took the decision to reorganise the RB Group
into two focused and fully accountable business units: Health and
Hygiene Home, to better serve our consumers and customers, and to
simplify and streamline our business. We have put together a strong
leadership team for each business unit with the appropriate skills
and experience to create a platform for sustainable outperformance.
We refer to this programme of reorganisation as ‘RB 2.0’.
RB values at a glance
Achievement
Hungry for
outperformance
Entrepreneurship
Responsibility
Ownership
Ownership
Courage to disrupt
the status quo
Responsibility
Doing the right thing
Entre-
preneurship
‘It’s my business,
I own it, I drive it’
Partnership
Building trusted relationships
to create value
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 59
Both business units are united by shared values that reflect RB’s
underlying principles and beliefs. These values have recently been
revisited to better define the way that RB will do business in the future.
Our updated Code of Conduct reinforcing our non-negotiable principles
of business conduct was communicated to all employees at the start
of the year with mandatory training. Championed by our CEO, Rakesh
Kapoor, ‘Responsibility’ features as a new core value – reinforcing
RB’s commitment to all its stakeholders. It sits alongside Ownership,
Entrepreneurship, Partnership and Achievement to create our five values
that demonstrate a focus on people, a clear purpose, a passionate
commitment and a track record of outperformance. It’s all about acting
responsibly and doing the right thing – always – even when it is hard.
Board and succession planning
Ken Hydon, Judy Sprieser and myself have each taken the decision to
step down from the Board at the 2018 AGM. We have all served for a
significant length of time, and Ken and Judy have provided invaluable
expertise to the Board with challenging and independent behaviour
over their tenures. Over the past year, we have been committed to
an effective handover of our duties to the Board and its committees.
Following a detailed review of Chairman succession, led by the Senior
Independent Director, the Nomination Committee recommended to
the Board that Chris Sinclair should replace me as Chairman of the
Board (subject also to his re-election as a Director by Shareholders
at the 2018 AGM). He was appointed Chairman of the Nomination
Committee with effect from 19 September 2017, when I stepped
down from that Committee, as part of transitional arrangements. I
am confident he will be a fantastic leader of the Board and will inspire
his RB colleagues to continue to build on the Group’s success.
On the recommendation of the Nomination Committee to the Board,
Mary Harris became the Remuneration Committee Chair on 1 November
2017, replacing Judy Sprieser, who has remained on the Committee to
assist in the handover of her responsibilities. Mary’s report on the
activities of the Remuneration Committee can be found on pages 78
to 94.
Ken Hydon stepped down as Chair of the Audit Committee at the
conclusion of the May 2017 AGM, handing over his responsibilities to
André Lacroix. Ken has remained as a member of the Audit Committee
to support André in his new role. André’s report on the activities of the
Audit Committee throughout the year can be found on pages 71 to 75.
André Lacroix has remained as Senior Independent Director of the
Board, and is available to the other Directors and Shareholders who have
concerns that cannot be addressed through the Chairman, CEO or CFO.
I would like to thank Judy and Ken for their many years of dedicated
service to the RB Group and our Shareholders, and their counsel and
support of the Board, its committees and me. On behalf of the Board,
I wish them the very best for the future.
Biographies of the members of our Board of Directors and Executive
Committee can be found on pages 52 to 57. The strength of the Board
lies in its diversity, with skills and experience from across the business
spectrum and within the industry sectors in which we operate. At all
times, the composition of the Board is kept under review so that it
continues to be best placed to ensure the long-term success of the
business, comprehensively manage risk and deliver on our stakeholders’
expectations.
Directors as at 31 December 2017
Male
Female
Length of tenure of Non-Executive Directors as at 31 December 2017
Under 3 years
3-6 years
6-9 years
9+ years
Directors’ nationalities
as at 31 December 2017
British
American
French
Brazilian
Indian
8
3
3
1
1
4
6
2
1
1
1
2017 has been a year of change as we continued to review the
composition of the Board and the independence and tenure of each
Director, to ensure that the Board operates effectively within its
industry sectors. We recognised the importance of Board renewal as
Ken Hydon and Judy Sprieser intend to step down from the Board at
the AGM, and the growing importance of expertise in areas such as
e-commerce and digital. And I thought it right that Chris Sinclair, as
incoming Chair, should lead the search for new Directors by replacing
me as Chair of the Nomination Committee last September, at the same
time as we announced that he would become the new Chairman.
On the recommendation of the Nomination Committee, Egon
Zehnder, signatory to the Voluntary Code of Conduct for Executive
Search Firms, was retained as recruitment consultant in respect
of the search for suitable candidates to join the Board. Egon
Zehnder is an independent third party executive firm with no
other connection to the Company.Following an extensive search
and thorough recruitment process, I was delighted to announce
on 19 March 2018 that Andrew Bonfield has agreed to join RB
as a Non-Executive Director with effect from 1 July 2018.
As a Board, we collectively continue to place the greatest of importance
on having an experienced, well-balanced and diverse Board with a wide
range of skills and expertise. It is this breadth of experience and diversity
which underpins our decision-making capabilities and this Corporate
Governance Statement serves to present to you our compliance with the
Code during the year and how we have served you, our stakeholders.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 60
Corporate Governance
Chairman’s Statement continued
Accountability and audit
The Board has responsibility for confirming that the Financial
Statements for the Group are fair, balanced and understandable.
It is supported in its decision by the Audit Committee, which
ensures the integrity of the Group’s financial reporting, internal
controls framework and risk management processes. The Audit
Committee works closely with the CRSEC Committee, the
Internal Audit function, as well as the External Auditor.
As I reported last year, together with the Audit Committee, the Board
has considered the requirements of the Competition and Markets
Authority Order in respect of audit tendering, as well as the Code
recommendations and the related FRC guidance. As we announced
on 5 May 2017, following a comprehensive audit tender process and
in compliance with the UK implementation of the EU requirements
on auditor rotation, we have recommended the appointment of
KPMG LLP as External Auditor, replacing PwC, for formal Shareholder
approval at the 2018 AGM. Again, we extend our thanks to PwC for
their significant contribution and for the work they have carried out
to provide assurance to the Board and our stakeholders, including
the audit of RB for the financial year ended 31 December 2017.
Remuneration
Aligning the interests of our Executive Directors and employees with
those of our investors remains the key driver behind our Remuneration
Policy. This approach is further detailed in the Remuneration Report
on pages 78 to 94. We are conscious of the need for a measured
approach to remuneration, whilst offering sufficient reward for
effective performance to maximise our ability to recruit and retain
the very best suited candidates. The Directors’ Remuneration Policy
was approved in 2016 and details are set out on page 82. We will
not be asking Shareholders to make any changes to the policy this
year. However, the Remuneration Committee has made changes
within the approved policy, including adjusting the measurement
of EPS growth to exclude MJN, reducing the LTIP awards made to
the CEO, as well as exercising its discretion to reduce the vesting
outcome for the 2015 LTIP by 50% for the CEO and CFO. Further
details on how the Committee implemented the remuneration
policy in 2017 and plans for 2018 are set out on pages 83 to 89.
Summary
The Board considers compliance with the Code of utmost importance.
Any instances of non-compliance are only allowed through the authority
of the Board, if it can be shown that the spirit of the Code and good
corporate governance within the Company generally continues.
Save for myself, Judy Sprieser and Ken Hydon, all the existing
Directors will be offering themselves for election or re-election
at the 2018 AGM. André Lacroix will have served nine years
from his first election. The Board has taken this into account and
believes that the current mix of tenure is in the best interests of our
Shareholders, and that André continues to challenge appropriately
and act independently, and provides our newly appointed Directors
with a wealth of experience to avail themselves of in respect of
the RB business. We look for your continued support for Directors
standing for re-election to continue to serve the Board on your
behalf and to promote the long-term success of the Company.
The Corporate Governance Statement outlines the Company’s governance
processes in greater detail and is on pages 61 to 68. The Company has
complied with the Code throughout the year ended 31 December 2017.
Adrian Bellamy
Chairman
19 March 2018
Key areas of Board
focus in 2017
The Board considers reports from the
CEO and the CFO on strategic and
business developments as well as
financial performance and forecasts
for the business at every meeting.
In addition, the following areas
formed substantial areas of focus
for the Board in the year:
Strategy and planning
Group budgets, forecasts and key
performance targets, including
assumptions, scenarios and projections
Potential mergers and acquisitions and
post-acquisition reviews, including the
acquisition and integration of MJN,
and the divestiture of our non-core
Food business
Performance relative to key competitors
Risk management and internal control
Results and Financial Statements
RB’s principal risks, emerging risks and
Compliance with reporting requirements
the Group’s risk register, including newly
identified compliance risks and the
impact of Brexit
Annual Report
Results and presentations to analysts
Consideration and approval of the
Viability Statement
The effectiveness of the Group’s
compliance programme
Remediation of the South Korea
Humidifier Sanitizer (HS) issues
The ongoing investigation by the US
Department of Justice (DoJ) into the
Group’s former pharmaceuticals business,
which was demerged at the end of 2014
The management of the cyber attack in
June 2017, and subsequently
strengthening the security and recovery
processes of our IT systems
Remuneration
Oversight of executive remuneration
Leadership and governance
Board and committee evaluation and
effectiveness
Director and senior management
succession planning
Corporate responsibility, sustainability,
ethics and compliance, as we move
further into regulated health-related
sectors
Relations with Shareholders
Promoting the highest standards of
corporate governance and best practice
Other
Independent review of the Group’s
management of the HS and safety-
related issues
Group debt and funding arrangements
Internal controls
RB 2.0 structural reorganisation
External audit tender and evaluation of
Internal and External Auditors
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 Corporate Governance Statement
61
The Company is premium listed on the
London Stock Exchange (LSE) and this
Statement is prepared with reference to the
Financial Reporting Council’s UK Corporate
Governance Code (the Code) in effect for
the financial periods beginning on or after
17 June 2016, and the Disclosure Guidance
and Transparency Rules requirements to
provide a corporate governance statement.
This Statement sets out how the Company
has applied the Main Principles of the Code
throughout the year ended 31 December
2017 and as at the date of this Statement.
Leadership
Board responsibilities
The Board is responsible for the overall leadership of the Group, focusing
on its governance with the highest regard to the principles of the Code.
As part of its responsibility, the Board oversees the development of the
Company’s strategic aims, ensures appropriate processes are in place to
manage risk and monitors the Company’s financial and operational
performance against objectives.
The Board consists of a balance of Executive and Non-Executive Directors
who together have collective accountability to RB’s Shareholders as well
as responsibility for the overriding strategic, financial and operational
objectives and direction of RB.
The Board manages the overall leadership of the Group with reference to
its formal Schedule of Matters Reserved for the Board. This schedule is
reviewed annually, with the last review undertaken in November 2017,
and broadly covers:
• matters which are legally required to be considered or decided by
the Board, such as approval of RB’s Annual Report and Financial
Statements, declaration of dividends and appointment of new
Directors;
• matters recommended by the Code to be considered by the Board,
such as terms of reference for the Board and its committees, review
of internal controls and risk management;
• compliance with regulations governing UK publicly listed companies,
such as the UK Listing Rules, the Disclosure Guidance and
Transparency Rules and the Prospectus Rules; and
• matters relating to developments in, or changes to, the Group’s
strategic direction, material corporate or financial transactions.
The full Schedule of Matters Reserved for the Board is available at
www.rb.com.
The principal activities undertaken by the Board are set out over the
following pages. A summary overview is set out in the table on Board
focus areas in 2017 on page 60.
Board meetings
Board meetings are structured in an open atmosphere conducive to
challenge and debate. Board meetings are held regularly with all Directors
expected to attend, with five scheduled meetings normally held each
year. At least one of these meetings is held in a key Group business
location to provide the Board with the opportunity to meet with local
management and structured to include a formal and comprehensive site
visit to an operating unit. The 2017 meeting was held in Hull, UK and
included a tour of Hull’s new R&D facility World of Inspiring Science,
which is the main R&D centre for seven of RB’s Powerbands, and RB’s
manufacturing facility, which produces 300 million consumer units
per year. Further details can be found on page 65.
Additional meetings, which may be held by phone or consist of written
resolutions, are held throughout the year to consider topics that may
have arisen outside the formal agenda structure, such as the MJN
acquisition and the divestiture of the Food business.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 62
Corporate Governance Statement
continued
Directors receive papers several days in advance of meetings and are
expected to devote sufficient time for review prior to the meeting taking
place, enabling them to fully engage with, challenge and stimulate
productive discussion. In the event that a Director is unable to participate
in a meeting, they are encouraged to provide comments to the Chairman
or CEO on key items of business in advance of the relevant meeting, so
that their views can be shared at the meeting and their opinions taken
into account during discussions.
Nomination Committee
The Nomination Committee’s key objective is to make recommendations
to the Board on suitable candidates for appointment to the Board and its
committees and regularly review and refresh their composition to ensure
that they comprise individuals with the necessary skills, knowledge and
experience to effectively discharge their responsibilities. Membership
during the year and further details are set out in the Nomination
Committee Report on page 69.
On the evening before a full Board meeting, a dinner is held for Directors
to discuss strategic matters, and matters to be covered the next day.
Directors are expected to attend what the Board considers to be an
opportunity for more informal discussion. Executives presenting to the
Board may be invited to attend if appropriate.
At the conclusion of every formal Board meeting, the Chairman holds a
session with the other Non-Executive Directors, without the Executive
Directors present, providing further opportunity for the Non-Executive
Directors to assess the performance of the Executive Directors and help
drive future agenda items.
Operating and financial reports from the Executive Directors are discussed
at each Board meeting, and detailed presentations may be made by
non-Board members on material matters to the Group.
Board governance structure –
Committees of the Board
The Board has established four Board Committees to assist in the
execution of its responsibilities. These are the Nomination Committee,
Audit Committee, Remuneration Committee and the Corporate
Responsibility, Sustainability, Ethics and Compliance Committee. Each
committee operates under terms of reference approved by the Board.
The terms of reference are reviewed regularly, the last review taking
place in November 2017, and can be found on the Company’s website.
The current committee membership of each Director is shown on pages
52 to 55. The Board has also established two supporting management
committees: the Disclosure Committee, which ensures accuracy and
timeliness of disclosure of financial and other public announcements; and
the Executive Committee, which is RB’s key management committee.
Board
Corporate
Responsibility,
Sustainability,
Ethics and
Compliance
Committee
Audit Committee
Remuneration
Committee
Nomination
Committee
See more
on page 71
See more
on page 76
See more
on page 78
See more
on page 69
Executive Committee
Disclosure Committee
Audit Committee
The Audit Committee assists the Board in discharging its responsibilities
in relation to financial reporting, and is responsible for ensuring effective
internal financial control and risk management. Membership of the Audit
Committee and details of its activities during the year are set out in the
Audit Committee Report on pages 71 to 75.
Remuneration Committee
The Remuneration Committee assists the Board in fulfilling its oversight
responsibility by ensuring that Remuneration Policy and practices reward
fairly and responsibly; are linked to corporate and individual performance;
and take account of the generally accepted principles of good
governance. Membership of the Remuneration Committee during the
year is set out in the Annual Report on Remuneration on page 81. The
report details the current policy on remuneration and sets out Executive
Directors’ remuneration, Non-Executive Directors’ fees and share
ownership.
Corporate Responsibility, Sustainability, Ethics and Compliance
Committee
The Corporate Responsibility, Sustainability, Ethics and Compliance
Committee (CRSEC Committee) was established in July 2016 to support
the Board in reviewing, monitoring and assessing the Company’s
approach to responsible, sustainable, ethical and compliant corporate
conduct and to assist the Board in upholding its values of honesty and
respect. Details of the priorities which it has set itself for the coming year
and its achievements to date are set out in the report on pages 76 to 77.
Board attendance at scheduled meetings
In 2017, there were five scheduled Board meetings, plus five additional
meetings principally relating to the M&A transactions in the year. There
were four regular Audit Committee meetings (plus two additional
meetings; one as part of the audit tender process, and one at the
September strategy meeting), four Remuneration Committee meetings,
three Nomination Committee meetings and four meetings of the CRSEC
Committee. The following table sets out the attendance by individual
Directors at the main Board and individual committee meetings which
each Director was eligible to attend. Directors who were not members of
individual Board Committees were also invited to attend one or more
meetings of those committees during the year. Where a Director is
unavoidably absent from a Board or Board Committee meeting, they still
receive and review the papers for the meeting and typically provide verbal
or written input ahead of the meeting, usually through the Chairman of
the Board or the Chairman of the relevant Board Committee, so that their
views are considered at the meeting. Given the nature of the business to
be conducted, some Board meetings are convened at short notice, which
can make it difficult for some Directors to attend due to prior
commitments.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017
63
Board
5 of 5
5 of 5
5 of 5
5 of 5
5 of 5
5 of 5
5 of 5
5 of 5
4 of 54
5 of 5
5 of 5
Audit Remuneration
CRSEC
Nomination
Independence5
–
–
4 of 4
4 of 4
4 of 4
4 of 4
2 of 26
2 of 26
–
4 of 4
4 of 4
–
4 of 4
–
–
4 of 4
–
–
–
–
–
4 of 4
4 of 4
–
–
–
4 of 4
–
–
–
–
–
–
2 of 21
–
1 of 12
–
3 of 3
1 of 13
3 of 3
3 of 3
1 of 12
2 of 21
–
n/a
y
y
n/a
y
y
n/a
y
y
y
y
Adrian Bellamy
Nicandro Durante
Mary Harris
Adrian Hennah
Pamela Kirby
Ken Hydon
Rakesh Kapoor
André Lacroix
Chris Sinclair
Judy Sprieser
Warren Tucker
1 Retired from the Nomination Committee on 19 September 2017.
Joined the Nomination Committee on 19 September 2017.
2
3 Retired from the Nomination Committee on 4 May 2017.
4 Unable to attend in person due to prior standing commitment.
5 As determined by the Board for the purposes of the UK Corporate Governance Code.
6 Retired from the Audit Committee on 4 May 2017 and joined the Remuneration Committee on 4 May 2017.
The Chairman
The roles of the Chairman and the CEO have a clear division of
responsibilities, set out in writing and agreed by the Board. The
Chairman’s principal responsibility is for the effective running of the
Board and chairing Board and Shareholder meetings. Effective leadership
and governance of the Board allows the Directors to focus on the key
strategic, financial and operational issues, to make sound judgements
and be comfortable to challenge any uncertainties, as well as ensuring a
transparent approach in communicating with Shareholders.
The Chairman leads the annual performance evaluation process of the
Board and its committees, which in 2017 was conducted using
questionnaires and analytics software provided by Independent Audit
Limited, in line with good governance. Details of the evaluation follow on
page 65.
The Chief Executive Officer
The CEO is principally responsible for the day-to-day management of RB,
in line with the strategic, financial and operational objectives set by the
Board. He chairs the Executive Committee, consisting of the CEO, the
CFO and senior management executives, who together are responsible
for execution of the Company’s strategy and achieving its commercial
aims. More details about the members of the Executive Committee are
set out on pages 56 to 57.
The CEO has the power delegated to him by the Board to enable him to
carry out his duties efficiently. Such powers include delegation of the
day-to-day management of the business of the Company to each of the
Officers of the Executive Committee, acting individually or as a group or
sub-committee; acquisition and disposal of businesses and unbudgeted
capital expenditure projects subject, in each case, to a £50 million limit;
and instructing advisors and instigating legal proceedings on behalf of
the Company in respect of matters for which no further Board authority
is required.
The Senior Independent Director
The Senior Independent Director provides a sounding board for the
Chairman and is available to the other Directors and Shareholders who
have concerns that cannot be addressed through the Chairman, CEO
or CFO.
The Executive Directors
The Executive Directors have additional responsibilities for the operation
of RB’s business as determined by the CEO. Every Director may request
that any matter not delegated to the CEO should be discussed by the
Board and that no action should be taken before the Board has decided
on the matter.
The Non-Executive Directors
The Non-Executive Directors share full responsibility for the execution
of the Board’s duties, are independent of management and provide
critical input into Board decisions through their contributions to
Board discussions and their roles on, and Chairmanship of, the Board
Committees. With a wealth of experience and skills between them, they
are well placed to help develop the Company’s long-term strategic,
financial and operational goals, as well as constructively challenge and
examine the day-to-day management of the business against the
performance targets and objectives set.
The Non-Executive Directors are responsible for setting appropriate levels
of remuneration for the Executive Directors, and ensuring performance
targets are closely aligned with Shareholder interests. They are also
critical to the development of succession planning and the appointment
and removal of senior executives and management.
The Non-Executive Directors are also responsible for ensuring that
adequate internal controls and risk management systems have been
developed and implemented, that these are continually monitored and
suitably robust and that financial information is complete, accurate and
transparent.
Company Secretary
The Company Secretary takes responsibility for compliance with all
relevant governance requirements and assists the Chairman with ensuring
Board procedures are followed. The Company Secretary in his or her role
further advises the Board on changes to relevant legal and corporate
governance regulations. The Board is collectively responsible for the
appointment and removal of the Company Secretary.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements
64
Corporate Governance Statement
continued
Effectiveness
Board composition and succession planning
The Board regularly reviews its composition to determine whether it has
the right mix of skills and background to effectively perform its duties.
The Board also considers internal executives and senior management
positions to ensure a proper breadth of talent is developed. The Board
has appointed Directors from a wide variety of business backgrounds
to provide it with a strong balance of skills and experience. The Board
is comprised of the Chairman and a majority of Non-Executive Directors
who, together with the Executive Directors, help maintain a solid,
collective understanding of the Company and its daily business.
More details about the current Board members can be found on
pages 52 to 55.
André Lacroix has acted as the Senior Independent Director since
June 2013. All Non-Executive Directors, excluding the Chairman who
was independent on appointment, are determined by the Board to
be independent. The Board has deemed André Lacroix independent,
notwithstanding that he has served more than nine years, by
virtue of his robust challenge of scenarios and decisions, and his
independent and rigorous judgement of issues for Board decision.
We always recruit the best and most suited candidates for any role and
we strive for a well-balanced representation of backgrounds, nations,
cultures, skills and experiences, at all levels across the Group.
We are committed to equality of opportunity in all areas of employment
and business, regardless of personal characteristics. Our diversity policy
can be found at www.rb.com/responsibility/workplace/diversity. Ultimate
responsibility and sponsorship of this policy rests with our Executive
Committee. Senior managers are accountable and all RB employees are
responsible for ensuring that our diversity policies and programmes are
actively followed and implemented.
Board balance and independence
On appointment, Non-Executive Directors are made aware and are
required to confirm they will allocate sufficient time to their role to
discharge their responsibilities effectively. They are also required to seek
agreement from the Chairman before taking on additional commitments,
and to declare any actual or potential conflicts of interest. Non-Executive
Directors are engaged under the terms of a Letter of Appointment. Initial
terms of appointment are for three years with one month’s notice, with
all Directors standing for election or re-election at every AGM of
Shareholders.
The Shareholder agreement between the Company and JAB Holdings
B.V. (JAB) at the time of the merger in 1999 entitled JAB to nominate
Board Directors. A holding in excess of 20% or 10% of the Company’s
ordinary shares entitles JAB to nominate two Directors or one Director
respectively. JAB’s current holding is below this amount and there is
currently no nominated Director on the Board.
The Nomination Committee has principal responsibility delegated to it for
making recommendations to the Board on new appointments as well as
the composition of the Board and its committees. The Board and each
of its members are confident they individually have the expertise and
relevant experience required to perform the functions required of a
Director of a listed company.
In accordance with the Code, every Director submits him or herself for
election/re-election at every AGM of Shareholders.
Board diversity
We meet the recommendations set by the Davies Report on Women
on Boards. We have taken note of the Hampton-Alexander Review
published in November 2017, which identified that RB is on target
for 33% female representation at Board level, but has less than
20% female representation in the combined Executive Committee
and their direct reports. In 2015, we launched our DARE (Develop,
Attract, Retain and Engage talented women) programme to give more
women the chance to compete and succeed at RB. Through focus
groups and a quantitative survey, we have a sound understanding
of the reasons women drop off the talent bench when they reach
a certain level of management. Work-life balance and international
mobility while managing dual careers are some of the key issues that
have been identified. We have implemented several solutions that will
help us improve the retention rates of our women managers, such as
a global maternity leave policy, spouse and dual career support for
international moves and a mentoring programme for our senior female
managers. However, we recognise that there is still work to be done,
and have set ourselves the goal of doubling women in senior roles.
We also meet the recommendations of the Parker Review published in
October 2017, with at least one person from an ethnic minority on
the Board. Our Executive Committee, comprising the most senior
management level in the business, represents five different nationalities
from across the globe, embodying our corporate diversity and inclusion
policy. The Company’s wider global leadership community holds over
50 nationalities between them, representing a broad background of
collective skills, cultures and experience. This widens our understanding
of our consumers, who themselves come from the broadest possible
backgrounds, allowing us to be best placed in serving their needs.
The Company recognises the developmental advantages of an external
non-executive role on a non-competitor board and Executive Directors
are permitted to seek such a role, provided that they do not take on more
than one non-executive directorship in, or become the Chairman of, a
FTSE 100 company. Adrian Hennah is a Non-Executive Director of RELX
Group PLC and RELX NV.
The 2017 evaluation of the Board’s performance during the year
concluded that the Chairman and other Non-Executive Directors continue
to devote sufficient time to carrying out their duties to the Company.
Each Director standing for re-election has individually provided
assurances that they remain committed to their roles and can dedicate
sufficient time to perform their duties. Accordingly, the Board
recommends that all Shareholders vote in favour of the resolutions to
re-elect the Directors at the 2018 AGM.
Director inductions and training
RB has established a comprehensive induction programme for new
Directors. The programme covers RB’s business, legal and regulatory
requirements of Directors and includes one-to-one presentations from
senior executives across the Group covering topics such as strategy,
investor relations, taxation, internal audit, supply and the Company’s two
business units – Health and Hygiene Home. The induction programme
has several aims and serves multiple purposes. It provides new Directors
with an understanding of RB, its businesses and the markets and
regulatory environments in which it operates, provides an overview of the
responsibilities for Non-Executive Directors of RB and builds links to RB’s
people and stakeholders. Incoming Board members will also have legal
due diligence meetings and meet with the Group’s External Auditor.
Site visits are arranged to the Group’s operations to gain an insight into
the business, and also form part of the annual Board meeting cycle, with
at least one meeting held at an off-site business location.
The Chairman has overall responsibility for ensuring that the Directors
receive suitable training to enable them to carry out their duties. As part
of their role, Directors are also expected to personally identify any
additional training requirements they feel would benefit them in
performing their duties to the Company. Ongoing training arranged by
the Company covers a wide variety of sector-specific and business issues,
as well as legal and financial regulatory developments relevant to the
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 65
Company and the Directors. Training is also provided by way of briefing
papers or presentations at each scheduled Board meeting, as well as
meetings with senior executives or other external sources.
Director or Officer if that individual was found to have acted fraudulently
or dishonestly. Additionally, Directors’ and Officers’ liability insurance
cover was maintained throughout the year at the Company’s expense.
Evaluation of the Board
The Board annually reviews its own and its committees’ performance and
effectiveness. In line with the Code requirements, an internal review took
place in the year, with targeted questionnaires and analytics software
provided by Independent Audit Limited. Independent Audit Limited
provides board evaluation services and has no other connection with
the Company.
The questionnaire was based around the themes of strategy and
risk-taking, risk management, line of sight, leadership and accountability,
roles and responsibilities, and the manner of working together with
management. Positive feedback was received in all areas. A report, with
action points and recommendations for the Board to consider, was
distributed to Directors and the results of the assessment subsequently
discussed by the Board at its November meeting.
In addition, the Chairman’s performance was separately considered by
the Senior Independent Director with input from his fellow Non-Executive
Directors and discussed in November.
The Board believes it is an open and collaborative team, and the refresh
of talent and diversity brought by the newer Non-Executive Directors has
worked very well in delivering the acquisition of MJN, the divestiture of
the Food business, remediation of the South Korea Humidifier Sanitizer
(HS) tragedy, and the development of the new organisation structure as
two business units, Health and Hygiene Home.
The principal outcomes for the Board to focus on in the coming year are:
• continuing its focus on succession planning and leadership
development, and renewal of the Board;
• supporting and providing oversight of the reorganisation of the Group
into two business units, including monitoring delivery of the benefits
of that reorganisation and the benefits of the MJN acquisition;
• supporting a culture of safety and responsibility;
• ensuring management presents a thorough and understandable risk
framework and analysis, that the Board considers reputational-related
risks, and that the Board understands the key assumptions and
uncertainties of strategic proposals, through rigorous discussion of
stress-testing and scenarios. The Board should consider the impact
of reward systems on risk attitudes, decision-making and reporting,
and discuss RB’s current attitude to risk and its target culture; and
• September strategy sessions – agreeing the critical issues for
discussion in advance, and subsequently agreeing an agenda for the
following year that addresses the issues identified in the strategy
session.
The 2017 review of the Board’s performance and that of its committees
concluded that the Board, its committees and individual Directors were
continuing to perform effectively. Recommendations have been taken on
board to be addressed and these will be reassessed as part of the 2018
evaluation.
Board support
The Company Secretary is responsible for organising Board meetings, as
well as collating any papers for the Board to review and consider. Board
and committee papers are accessible to all Directors through a secure and
confidential electronic document storage facility. This facility is
maintained by RB’s Secretariat function and additionally holds other
information which the Chairman, the CEO or Company Secretary may
deem useful to the Directors, such as press releases and pertinent
Company information.
All of the Directors have individual access to advice from the Company
Secretary and a procedure exists for Directors to take independent
professional advice at the Company’s expense in furtherance of their
duties.
Conflicts of interest and indemnity
Directors have a duty under the Companies Act 2006 (CA 2006) to avoid
interests, direct or indirect, which might conflict with the interests of the
Group. Under the terms of the Company’s Articles of Association, such
conflicts can be authorised by the Board which at all times takes
responsibility for ensuring compliance with laws and regulations on
corporate governance, and that Directors’ potential conflicts of interest
are regularly reviewed.
The Company indemnifies the Directors and Officers of the Company and
any Group subsidiary to the extent permitted by CA 2006 and the FCA
Listing Rules in respect of the legal defence costs for claims against them
and third-party liabilities. The indemnity would not provide cover for a
Board visit to
Hull, UK – R&D
In September 2017, the RB
Board travelled to Hull, UK
for its annual off-site
strategy session.
The Hull site is home to some
1,300 RB colleagues across
R&D, supply and other global
functions with a consumer
health R&D focus combined
with broad-ranging capabilities
across other categories and
technologies such as aerosols.
Local business insights
Tour of the RB World of
Inspiring Science
Heritage of the Hull site
Visit to assess the progress
of the £105 million Centre
for Scientific Excellence
– the largest single site
investment to date which
will step change RB’s
consumer health
capabilities from its May
2018 completion date
Presentations by local
management experts on
current status, challenges
and future visions,
showcasing a range of
initiatives around
optimising culture,
developing talent, driving
innovation, and leveraging
our supplier partnerships
Discussion and tour of the
RB manufacturing facility
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 66
Corporate Governance Statement
continued
Accountability
Risk management
The Board has ultimate responsibility for preparing the Annual Report
and Financial Statements. RB has implemented robust internal controls
to safeguard the integrity of both the Group and its subsidiary Financial
Statements and ensures that adequate verification processes are in place
to enable it to confirm that the Group’s Financial Statements present
a fair, balanced and understandable assessment of RB’s position and
prospects, in line with Code requirements. The Board considers that
the Annual Report and Financial Statements taken as a whole are fair,
balanced and understandable and provides sufficient information for
Shareholders to be able to assess the Company’s position, performance,
business model and strategy.
RB’s finance function, headed by the CFO, has implemented a number
of policies, processes and controls to enable the Company to review and
fully comply with changes in accounting standards, financial regulations
and recognised practices. These processes are kept under review on
an ongoing basis. Multiple teams including consolidation and financial
accounting, together with technical support, ensure both internal and
external developments are reviewed and responded to. The Group also
maintains a Finance Policy Manual setting out the required standards
of financial reporting and approvals across the Group and its operating
units, including a structured process for the appraisal and authorisation
of any material capital projects.
The basis for the preparation of the Group Financial Statements is set
out on page 113 under Accounting Policies.
The Company’s External Auditors' Report, setting out its work and
reporting responsibilities, can be found on pages 100 to 107. The terms,
areas of responsibility and scope of the External Auditors' work are
agreed by the Board and set out in the Auditors' engagement letter.
More information on the Group’s principal risks and strategy for growth
and achieving targeted goals is detailed in the CEO’s Statement and the
Strategic Report, which can be found on pages 1 to 51.
The Viability Statement can be found on page 43.
The Directors’ Statement of Responsibilities on page 98 details the Going
Concern Statement as required by the Listing Rules and the Code and
the Directors’ responsibility for the Financial Statements, for disclosing
relevant audit information to the Auditor and for ensuring that the
Annual Report is fair, balanced and understandable.
Risk appetite
The Board has overall responsibility for complying with the Code and the
Financial Reporting Council’s Guidance on Risk Management, Internal
Control and Related Financial and Business Reporting. It oversees
the internal controls established, and monitors their effectiveness, in
managing risk. The sectors and environment within which RB operates
are dynamic and fast moving, and the controls are continually kept under
review to minimise the potential exposure to risk. The system is designed
to evolve and manage, rather than eliminate, risks to RB’s business
objectives, and the Board relies on these controls in so far as they are
able to provide reasonable, but not absolute, assurance against material
misstatement or loss. The Group’s major risks and mitigating factors are
detailed on pages 42 to 51.
As part of its risk control, RB regularly evaluates principal risks to
achieving objectives, the likelihood of such risks materialising and
determining the ability of the Group to cope with the circumstances
should they occur. In doing so, it also looks to actions that can be taken,
controls that can be implemented and processes that can be followed to
reduce the chances of risk events taking place, mitigating the potential
impact and ensuring that the cost of doing so is proportionate to the
benefit gained.
Internal control
Internal control processes are implemented through clearly defined roles
and responsibilities, delegated by the policies to the executive team and
senior management.
RB operates three strands in monitoring internal control systems and
managing risk:
• Management ensures the controls, policies and procedures are
followed in dealing with risks in day-to-day business. Such risks are
mitigated at source with controls interwoven into the relevant systems
and processes. Supervisory controls either at management level or
through delegation ensure appropriate checks and verification takes
place, with any failures dealt with promptly and awareness raised
in order to review gaps in existing controls. Throughout RB, a key
responsibility for any line manager is to ensure the achievement of
business objectives with appropriate risk management and internal
control systems.
• Each function and operating unit has its own management which
acts as a second line of oversight and verification. This level sets
the local level policies and procedures, specific to its own business
environment, subject to Group policy and authorisation. They further
act in a supervisory capacity over the lower level management
implementation of controls. The financial performance of each
function and operating unit is monitored on a monthly basis against
pre-approved budgets and set against forecasts, developed higher
up the management chain, and ultimately overseen by the executive
management and the Board.
• The third strand is provided through independent review by both
Internal and External Audit teams, who challenge the information and
assurances provided by the first two strands. This review ultimately
gets reported back to the Board, via the Audit Committee, with
action taken to address matters identified. More details on the Audit
Committee and its duties can be found on pages 71 to 75. The
Group’s compliance controls further include operating an independent
and anonymous whistleblowing facility, annual management reviews
and providing training specific to individual needs within the business.
The Board is also provided with reports on the effectiveness of these
controls to ensure full oversight of the business.
RB has a strong culture of support for its internal controls. Function and
operating management meet to discuss performance measured against
strategic aims and goals, with risks and risk controls incorporated into the
discussions. During the year, the Directors undertook a robust assessment
of the principal risks facing the Company, including those that could
threaten RB’s business model, future performance, solvency and liquidity.
More detail on the Group’s principal strategic risks and uncertainties can
be found in the Strategic Report on pages 42 to 51.
RB has developed a Code of Business Conduct on which employees must
undertake training. In January 2018, a revised Code, which updated and
integrated the existing RB and MJN codes, was issued to all employees
as part of the RB 2.0 launch communication materials. Every employee
is required to complete compliance and conduct training and certify their
commitment to RB’s Responsibility value and to ‘doing the right thing
even when it is hard’. The training consists of five modules, including
Code of Conduct, Anti-Bribery, Competition Law, Data Privacy and
Conflicts of Interest training and testing.
Employee training includes reminding employees of the Group’s
strict policies on the reporting of any adverse events in relation to its
products, as well as the availability of an independent and anonymous
whistleblowing facility. Together they help ensure our employees fully
understand RB’s non-negotiable expectations in terms of ethical and
responsible behaviour.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 67
Annual General Meeting and Shareholder voting
The Board views the AGM as a valuable opportunity to meet with its
private Shareholders, giving them an opportunity to put questions to
the Chairman, Chairs of the committees and the Board.
All Shareholders can vote on the resolutions put to the meeting. In line
with good governance, voting is by way of poll, providing each share with
one vote. Results of the poll are released to the LSE and published on the
Group’s website shortly after the AGM.
The Investment Association (IA) has launched the public register of FTSE
All-Share companies which have received votes of 20% or more against
any shareholder resolution, or which withdrew a resolution prior to
a shareholder vote, along with company statements of actions taken
following the vote. At our AGM in May 2017, all resolutions were passed,
although a high number of votes were received against the re-election
as Directors of Adrian Bellamy, Chairman, and Ken Hydon, Chair of the
Audit Committee. We believe this was related in part to the desire of
Shareholders to ensure Board-level accountability for the tragic events
in South Korea, relating to a humidifier sanitizer product withdrawn in
2011. The Board has formally apologised and taken extensive remediation
action in relation to the HS tragedy and we have engaged fully with our
Shareholders in relation to this. A subsequent statement was published
by the Company and is available at www.rb.com. A link to the statement
can also be found on IA’s public register page on their website.
Website
The Investor Relations section on the RB website provides the Board
with an additional method of communicating to Shareholders. As well
as the latest regulatory disclosures, copies of the latest and previous
years’ Annual Reports, latest share price information and copies of
previous investor presentations, as well as key calendar dates, are
available. The website can be found at www.rb.com/investors.
Shareholders can also access our Sustainability Report, our Modern
Slavery Statement, our Gender Pay Gap Report and associated policies on
the RB website at www.rb.com/responsibility/. We will also be publishing
our first Payment Practices Report in July 2018.
This culture of ethical and responsible conduct has been further
strengthened with the attention of the Corporate Responsibility,
Sustainability, Ethics and Compliance Committee (CRSEC Committee).
The focus of this committee is on the Company’s corporate social
responsibilities, environmental and sustainability issues and overall ethical
conduct and regulatory compliance. More details on its work can be
found on pages 76 and 77.
The Board confirms that reviews and monitoring of the appropriateness
and effectiveness of the system of internal control and risk management
throughout the financial year and up to the date of approval of the
Annual Report and Financial Statements have been satisfactorily
completed with no significant failings or weaknesses identified.
Relations with Shareholders
The Board values effective communication with Shareholders and is
committed to regular, clear and transparent dialogue. This includes formal
presentations of full year and interim results, together with quarterly
statements on the Company’s key performance indicators, with
roadshows to meet with institutional investors following results
announcements.
RB maintains regular dialogue with sector analysts and fund managers
to ensure a widespread understanding and availability of information
regarding developments for the Group, as well as the industry sectors
which RB serves. The CEO, CFO and the Director of Investor Relations
meet regularly with institutional Shareholders and analysts to discuss the
performance of the Group and its strategy. Where appropriate, the views
of Shareholders are also sought in relation to remuneration plans and
governance issues.
Feedback is presented to the Board to ensure all Directors are fully aware
of the views of existing Shareholders, investors and analysts. Analysis of
RB’s Shareholder register is made available to the Board and reports
prepared by the Group’s brokers and public relations advisors are
provided to all Directors after every significant corporate event and on
other relevant occasions.
On a monthly basis, and at each Board Meeting, the Board receives
updates from the CEO on the Company’s share price movements, major
share transactions and the views of both investors and analysts on the
Group’s performance.
All Shareholders may speak with the Company’s Investor Relations team
and the Company Secretary and a section of the RB website is dedicated
to Shareholders. The Chairman is also available to discuss governance
and strategy with major Shareholders and does so regularly, providing
feedback on the meetings to the rest of the Board. In November 2017,
Chris Sinclair spent a number of days meeting with many of the Group’s
major institutional investors individually as part of his induction as
incoming Chairman.
Judy Sprieser, in her then role as Chair of the Remuneration Committee,
met with investors in January 2017, along with RB's Head of Global
Reward, and Deloitte LLP, our remuneration advisors. In November 2017,
Mary Harris, on taking over the Chairmanship of the Remuneration
Committee, and Judy Sprieser carried out a two-day roadshow with
institutional investors focusing on governance, remuneration policy and
the Company’s strategy.
Pam Kirby, as Chair of the CRSEC Committee, and RB’s Chief Safety,
Quality, Compliance & Regulatory Officer also met with investors during
the year to discuss compliance policies.
If required, key executives, along with the Senior Independent Director,
are available to discuss matters of concern.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 68
Corporate Governance Statement
continued
Compliance with the Code
This section of the Annual Report, together with the Audit Committee
Report on pages 71 to 75, the Nomination Committee Report on
pages 69 to 70, the CRSEC Committee Report on pages 76 to 77 and
the Directors’ Remuneration Report on pages 78 to 94, describes how
the Company has applied the main principles contained within the
Code. The Code can be found on the Financial Reporting Council’s
website at www.frc.org.uk.
The Company confirms that, throughout the year ended 31 December
2017, it has complied with the Code.
A. Leadership
A.1 – The role of the Board
• A description of how the Board operates and an overview of the
Matters Reserved for the Board is set out on page 61.
• The Chairman, Chief Executive Officer, Senior Independent
Director and respective Chairs of the committees are set out on
pages 52 to 55.
• The Board held five scheduled meetings during the year, as set out
in the Directors’ attendance table on page 63.
• Appropriate insurance cover is in place in respect of legal action
against the Directors.
A.2 and A.3 – Division of responsibilities and the role of the
Chairman
• The roles of the Chairman and Chief Executive Officer are set out
on page 63 and are set out in writing and agreed by the Board.
• The Chairman and the Chairman-elect were independent on
appointment.
A.4 – Non-Executive Directors
• André Lacroix is the Senior Independent Director.
• Both the Chairman and the Senior Independent Director make
themselves available during the year to attend meetings with major
shareholders.
• The Chairman held five meetings during the year with the
Non-Executive Directors, without the executives being present.
• The Senior Independent Director led the review of the Chairman as
outlined on page 65.
• No unresolved concerns about the running of the Company, or a
proposed action, were raised by any Directors in the reporting
period.
B. Effectiveness
B.1 – The composition of the Board
• The Board considers all Non-Executive Directors to be independent.
Adrian Bellamy, July Sprieser and Ken Hydon have served
significantly more than nine years from their election. They have
each decided to step down from the Board at the Annual General
Meeting on 3 May 2018 and not stand for re-election.
B.2 – Appointments to the Board
• A description of the work of the Nomination Committee is set out
on pages 69 to 70 which includes a description of the process for
Board appointments and the Board’s policy on diversity.
Its terms of reference are available at www.rb.com.
•
B.3 – Commitment
• The Board is satisfied that the external commitments of the
•
Chairman and the Non-Executive Directors set out on pages 52
to 55 do not conflict with their duties and commitments to the
Company and that any new commitments are disclosed to
the Board.
In the reporting period, Adrian Hennah, CFO, continued to serve
as a Non-Executive Director of RELX Group PLC and RELX NV.
• Details of the Executive Directors’ service contracts and Non-
Executive Directors’ letters of appointment are shown in the
Directors’ Remuneration Report on pages 78 to 94 and are
available for inspection at the Company’s registered office and
at our AGM.
B.4 and B.5 – Development and information and support
• A description of the process of induction, training and
development, as well as access to the Company Secretary and
independent professional advice, is set out on pages 64 and 65.
B.6 – Evaluation
• An overview of the Board, its committees and the individual
Director evaluation process is set out on page 65.
B.7 – Re-election and election
•
It is the Board’s practice that all Directors stand for re-election at
the AGM, or election at the first AGM following their
appointment.
C. Accountability
C.1 – Financial and business reporting
• The Directors’ Statement of Responsibilities is set out on page 98.
• The fair, balanced and understandable assessment is set out on
page 98.
• The Auditors' Report is set out on pages 100 to 107.
• The Going Concern statement is set out on page 98.
C.2 – Risk management and internal control
• The assessment of principal risks and how they are being managed
or mitigated is described on pages 42 and 51.
• The Viability Statement is set out on page 43.
• An overview of the Company’s risk management and internal
control systems is described in full on page 66.
C.3 – Audit Committee and Auditors
• A description of the work of the Audit Committee is set out in the
Audit Committee Report on pages 71 to 75.
Its terms of reference are available at www.rb.com.
•
D. Remuneration
D.1 and D.2 – The level of components of remuneration and
procedure
• A description of the work of the Remuneration Committee is set
out in the Directors’ Remuneration Report on pages 78 to 94.
Its terms of reference are available at www.rb.com.
•
E. Relations with Shareholders
E.1 and E.2 – Dialogue with Shareholders and constructive use
of General Meetings
• An overview of engagement with Shareholders and the use of
General Meetings is included on page 67.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 Nomination Committee Report
69
Our focus is on succession planning and
renewal to ensure that the Board continues
to have the right skills and experience to
safeguard the Group’s values and culture
and promote RB’s long-term success.
Chris Sinclair
Chair of the Nomination Committee
Introduction
I am pleased to present the Nomination Committee Report for the year
ended 31 December 2017, which outlines the Committee’s role, focus
and activities during the year. A key part of this related to my own
appointment as Chairman-elect of the Board and Chair of the
Nomination Committee as part of my transition to the role of Chairman.
I shall ensure that we continue to focus on succession planning and
renewal to ensure that the Board continues to have the right skills and
experience to safeguard the Group’s values and culture and promote RB’s
long-term success. I believe that the Board is well balanced and diverse
and any changes proposed to its composition and structure will be
appropriate to deliver on the Group’s strategic objectives.
Role of the Nomination Committee
The role of the Committee is to ensure that there is a formal, rigorous
and transparent procedure for the appointment of new Directors to
the Board, to lead the process for Board appointments and make
recommendations to the Board. The Committee assists the Board in
ensuring its composition is regularly reviewed and refreshed so that it is
effective and able to operate in the best interests of Shareholders. The
Committee also has responsibility for reviewing succession plans for the
Board and key management roles, and for considering and, if
appropriate, authorising conflicts of interest.
The Committee’s terms of reference are available on the Company’s
website. They are reviewed annually to ensure that they continue to
reflect best practice.
Composition
The Nomination Committee is comprised of a majority of Non-Executive
Directors. Its membership consists of the Chairman-elect, Chief Executive
Officer, Senior Independent Director, and Chair of each of the Audit,
CRSEC and Remuneration Committees, together with any other
independent Non-Executive Director who may be invited by the Board
to join.
Rakesh Kapoor, André Lacroix and Pam Kirby were Committee members
throughout the year. Adrian Bellamy was Chair of the Committee until
19 September 2017, when I became Chairman-elect of the Group and
joined the Committee and was appointed Chair as part of transitional
arrangements. Adrian Bellamy ceased to be a member on the same day.
Mary Harris joined the Committee on 19 September 2017 as part of her
transition to Chair of the Remuneration Committee on 1 November 2017.
Ken Hydon and Judy Sprieser stepped down from the Committee on
4 May 2017 and 1 November 2017 respectively when they stepped down
from their positions as Board Committee Chairs.
Biographical details of the members of the Board who held office during
the year and up to the date of this report can be found on pages 52 to 55.
The Company Secretary acted as Secretary to the Committee during
the year.
Activity
The Committee meets at least once each year and on an ‘as needed’
basis. After each meeting, the Committee Chairman reports formally
to the Board. The Committee held three meetings during the year.
In addition, matters within the Committee’s remit were also taken
as specific items at full Board meetings, principally consideration
of succession planning more widely within the Group and talent
identification, management and development. Members of the
Committee also met together informally to discuss senior executive
succession planning.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 70
Nomination Committee Report
continued
The Committee’s focus during 2017 and at the start of this year has been
the composition of the Board, its principal committees and their Chairs,
as well as succession planning for the positions of Chairman, CEO and
senior management; to ensure that the Board has the right balance of
skills, expertise, experience, diversity and independence to enable it to
perform effectively; and that its governance structures are of the highest
standard.
In light of their departures, the Committee began the search for one or
more new Non-Executive Directors. We remain committed to ensuring
that the Board retains the wealth of knowledge and experience on the
Board, as well as stability and to ensure that the size, composition and
structure of the Board is appropriate for the delivery of the Group’s
strategic objectives and that all relevant provisions of the UK Corporate
Governance Code continue to be met.
An extensive search was carried out and a shortlist drawn up. Following
meetings with the Chairman, the Senior Independent Director and the
Executive Directors, Andrew Bonfield was identified as an exceptional
candidate and recommended to the Board for appointment on the basis
that he met the criteria required, which included international experience
in a consumer-facing business, senior leadership experience, a financial
qualification and a strong cultural fit. The Board is delighted that Andrew
has agreed to join RB from 1 July 2018. Andrew brings a wealth of
financial and business experience and I am confident he will make a
strong contribution to RB.
Committee composition
The Committee has also considered membership of Board Committees
following the retirement of Adrian Bellamy, Judy Sprieser and Ken Hydon
at the AGM. I will join the CRSEC Committee with effect from 1 May
2018 and Andrew Bonfield will join the Audit Committee on his
appointment to the Board on 1 July 2018. As other Directors are
appointed, they will be asked to join Committees as appropriate.
I will be available at the 2018 AGM to answer questions relating to the
work of the Committee.
Chris Sinclair
Chair of the Nomination Committee
19 March 2018
On 21 March 2017, we announced changes to the positions of Chair of
the Audit and Remuneration Committees. Following the 2017 AGM,
André Lacroix became the Chair of the Audit Committee and Mary Harris
was appointed as a member of the Remuneration Committee. Following
a transitional period and handover from Judy Sprieser, Mary Harris
became Chair of the Remuneration Committee on 1 November 2017.
During the year, we announced Adrian Bellamy’s decision to retire from
the position of Chairman and from the Board following RB’s AGM on
3 May 2018, and I was confirmed as Adrian’s successor.
The Board Chairman succession planning process was led by André
Lacroix, in his capacity as Senior Independent Director. The process had
commenced in 2013 with the appointment of Egon Zehnder International
Ltd to identify suitable new Board members with Chair potential, in order
that an eventual appointment could be made of someone with
experience on the RB Board. Egon Zehnder is an independent executive
search firm which has no other current connection with RB and is a
signatory of the Voluntary Code of Conduct for Executive Search Firms in
the UK to address diversity and best practice relating to Board
appointments. In addition to leadership experience and international
expertise, commitment to the business, the ability to meet the time
commitment required and director independence were given due
consideration. The process led to me emerging as the preferred candidate
and in September 2017 the Nomination Committee recommended to the
Board that I be appointed as successor to Adrian Bellamy following the
conclusion of RB’s 2018 AGM in May 2018.
Effectiveness
An independent external Board evaluation was carried out in 2016, in line
with the Code requirements and corporate governance best practice. In
2017, an internal evaluation of the Board and its committees was carried
out using a series of questionnaires for the Board to complete, as well as
report analysis software, supplied by Independent Audit Limited. Details
of the process can be found on page 65, together with the outcomes.
Diversity
The Board and Nomination Committee consider diversity, including
gender, amongst its members to be a key factor in steering the Company
to strategic and financial success. RB’s customers are from wide and
diverse backgrounds and so diversity is pivotal to understanding and best
serving our customers. Our diversity policy can be found at www.rb.com/
responsibility/workplace/diversity.
There is a strong commitment to engendering an all-embracing culture of
inclusion throughout the business and the Board recognises the need to
set the tone from the very top. This commitment is clearly demonstrated
in the diverse composition of the Board, which comprises five
nationalities and three women, two of whom are committee Chairs.
Focus for 2018
Adrian Bellamy, Judy Sprieser and Ken Hydon will not stand for re-
election at RB’s 2018 AGM in May 2018.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 Audit Committee Report
71
Maintaining the integrity of our financial
reporting, monitoring the robustness of
internal controls and overseeing risk
management processes continues to be our
primary focus.
Introduction
On behalf of the Board, I am pleased to present the Audit Committee
Report for the financial year ended 31 December 2017. This is my first
statement as Chair of the Audit Committee since I succeeded Ken Hydon.
I look forward to continuing his efforts as Chair in leading the Committee
to review and challenge management on the robustness and
effectiveness of our internal controls and risk management systems and
to continue to provide oversight and reassurance to the Board on the risk
management process and control procedures.
Maintaining the integrity of our financial reporting, monitoring the
robustness of internal controls and overseeing risk management
processes continues to be our primary focus. This enables the Committee
to endorse the results, provide reassurance to the Board and be able to
say that the Annual Report and Financial Statements, taken as a whole,
are fair, balanced and understandable, as well as providing the necessary
information for Shareholders to assess the Group’s position and
performance, business model and strategy.
André Lacroix
Chair of the Audit Committee
Each year the Committee has a detailed standing agenda of matters to be
considered and reviewed. In addition to our regular agenda reviews, we
have carried out focused reviews of: integration of the infant nutrition
business systems following the MJN acquisition on 15 June 2017; the
causes and impact of the June 2017 cyber attack and remedial actions
and control; legal and product non-compliance; taxation issues; and the
progress of the Group’s global SAP programme. The risk and control
challenges around the RB 2.0 reorganisation were reviewed and continue
to be closely monitored, to track implementation of the programme and
mitigate risk. The Committee also met with operational management at
its meetings to consider financial, legal, regulatory and IT risks and
controls. The Committee appreciated the open discussions with local
senior executives from the UK and from China on internal control risk.
During the year, we reviewed the Company’s major risk assessment
process, which identified and prioritised the principal strategic risks and
uncertainties that might affect the Group, how they could be mitigated
and whether they have increased, diminished or remained the same,
compared to the previous year. Looking at the major risks process is a key
element of our review of the effectiveness of RB’s risk management and
control systems and identified risks are clearly and consistently reflected
in our communications to Shareholders in this report. Details are set out
on pages 42 to 51. We also carried out an assurance mapping exercise,
to draw up an assurance map of our second and third line of defence
assurance activities, as a basis to drive and embed a more structural
approach to management of and assurance required on our systemic as
well as our specific (principal) risks.
The Committee has reviewed the 2017 Annual Report and Financial
Statements to provide assurance that they are fair, balanced and
understandable and provide sufficient information to enable the
Shareholders to assess the Group’s position and performance, business
model and strategy. The form and content of the Annual Report and
Financial Statements were reviewed and approved, and consistency of
narrative within the document confirmed. The preparation and
verification processes were determined to be robust. Following our
review, we advised the Board that we were satisfied that the 2017 Annual
Report and Financial Statements, taken as a whole, met its objectives and
supported the Board in making its statement on page 98.
In 2017, the Committee led a rigorous external audit tender process
leading to the Board’s recommendation at the 2018 AGM to appoint
KPMG as auditor for the 2018 financial year. Details of the audit tender
are provided on page 73. I would like to record my thanks to our
outgoing auditor PwC and their partners and staff for their many years of
excellent service to our Shareholders. The Audit Committee has enjoyed
working with them and we have valued their challenge and independent
and robust approach to the audit, as well as the professionalism they
have brought to Audit Committee meetings.
I would like to acknowledge and thank Ken Hydon, who I succeeded in
May 2017 as Audit Chair, for his valued leadership of the Committee for
the last ten years, and the other members of the Audit Committee for
their diligence and support during the year. Ken will stand down from the
Committee and from the Board at the AGM in May 2018, and I wish him
well in his future endeavours. Mary Harris ceased to be a member of the
Audit Committee from May 2017 in order to devote herself to her new
responsibilities as Remuneration Committee Chair from November 2017
and I thank her for her input to date and wish her well in her new role.
André Lacroix
Chair of the Audit Committee
19 March 2018
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 72
Audit Committee Report
continued
Composition
The members of the Audit Committee during the year were:
The Audit Committee’s responsibilities include, but are not limited to, the
following matters:
Name
André Lacroix (Chairman)1
Mary Harris2
Pamela Kirby
Ken Hydon3
Warren Tucker
1 Appointed Chair of the Committee on 4 May 2017.
2 Stepped down from the Committee on 4 May 2017.
3 Stepped down as Chair of the Committee on 4 May 2017.
The Deputy Company Secretary was Secretary to the Committee
throughout the year.
Members of the Committee are appointed by the Board on the
recommendation of the Nomination Committee, which reviews
membership in terms of skills, knowledge and experience. The Board is
satisfied that each member of the Audit Committee is independent and
that Committee members as a whole have competence relevant to the
Company’s sector. All of the members have financial, economics and/or
business management expertise in multinational organisations and they
are expected to have an understanding of the principles of, and recent
developments in, financial reporting and an understanding of the Group’s
internal control systems. The skills and expertise of each Committee
member are summarised on pages 52 to 55.
On joining the Committee and during their tenure, members receive
additional training tailored to their individual requirements. Such training
includes meetings with internal management covering internal audit,
legal, tax, treasury and financial matters as well as meetings with the
External Auditor. All members of the Committee receive regular briefings
from senior executives on matters covering governance and legislative
developments, accounting practices and policies and tax and treasury.
Meetings
During 2017, the Committee held four scheduled meetings at times
related to the Company’s reporting cycle, and the attendance of
members at the meetings is set out in the table on page 63. In addition, a
less formal Committee session with local financial management was held
in September 2017 as part of the Board’s strategy visit to Hull. Senior
representatives of the External Auditor, the Group Head of Internal Audit
and the CFO regularly attend meetings. The Chairman and CEO are also
invited to all meetings and other senior management attend when
deemed appropriate by the Audit Committee. Time is allocated at each
meeting for private discussion with the Head of Internal Audit and the
External Auditor without the other invitees being present, as well as a
private meeting of the Committee members.
Audit Committee meetings take place ahead of Board meetings and the
Audit Committee Chairman provides an update of the key issues
discussed to the Board at each meeting. Copies of Audit Committee
papers are provided to all Board Directors in advance of each meeting
and minutes of each Committee meeting are provided to the Board and
the External Auditor.
Role and responsibilities
The Audit Committee is part of the Group’s governance framework and
supports the Board in fulfilling its responsibilities in ensuring the integrity
of the Group’s financial reporting, internal controls and overall risk
management process. Its role and responsibilities are set out in its terms
of reference which can be found at www.rb.com. In 2017, the Committee
reviewed and updated its terms to take account of the 2016 UK
Corporate Governance Code and the associated Guidance on Audit
Committees, EU Audit Directive and Regulation and recommended best
practice.
Financial reporting
• Monitoring the integrity of the Financial Statements of the Company.
Reviewing and challenging, where necessary, the actions and
judgements of management before submission to the full Board.
• Considering significant legal claims and regulatory issues.
Narrative reporting
• Reviewing the content of the Annual Report and Financial Statements
and advising the Board on whether it is fair, balanced and
understandable and provides the information necessary for
Shareholders to assess the Company’s position and performance,
business model and strategy.
Risk management and internal controls
• Reviewing and monitoring on an ongoing basis the scope and
effectiveness of internal financial, operational and compliance risk
management processes.
• Reviewing and approving the statements to be included in the Annual
Report concerning internal control, risk management and the Viability
Statement.
• Ensuring that procedures are in place for detecting fraud and
prevention of bribery, and secure arrangements are in place by which
staff may raise concerns about possible wrongdoings in matters of
financial reporting and financial controls.
Internal Audit
• Assessing and approving internal audit’s annual work plan to ensure
it is aligned to the key risks of the business and ensuring that the
Internal Audit function has sufficient resources and access to
management to perform its role.
• Reviewing internal audit activities, significant recommendations
and findings and related management actions.
• Monitoring and assessing the effectiveness of the Internal Audit
function.
External Audit
• Considering and making recommendations to the Board to put to
Shareholders for their approval at the AGM regarding the
appointment of the External Auditor.
• Monitoring the rotation of the External Audit partner and managing
the competitive tendering process of the audit services contract.
• Reviewing and monitoring the External Auditor’s independence,
objectivity and effectiveness.
• Developing, implementing and keeping under review policy on
non-audit services, taking into account relevant ethical guidance.
The Committee’s main activities during the financial year were as follows:
Financial reporting
Reviewing and approving the appropriateness of the interim and
annual Financial Statements and related announcements, including:
• recommending that, in the Audit Committee’s view, the Financial
Statements were fair, balanced and understandable. In addition to the
detailed preparation and verification procedures in place for the 2017
Annual Report and Financial Statements, management continued its
focus on narrative reporting and clear written and visual messaging to
communicate the Group’s strategy. The Audit Committee concluded
that the disclosures contained in the Financial Statements and
the underlying processes and controls were appropriate and
recommended to the Board that the Annual Report and Financial
Statements, taken as a whole, were fair, balanced and understandable
and provided the necessary information for Shareholders to assess the
Group’s position and performance, business model and strategy; and
• reviewing the appropriateness of the accounting policies, judgements
and estimates used as set out on pages 113 to 118 and concluding
that the judgements and assumptions used were reasonable.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 73
The significant financial judgement and complexity areas in relation to the
2017 Group Financial Statements considered by the Audit Committee,
together with a summary of the actions taken, were as follows:
The first two years of the Viability Review were used for the purpose
of supporting the going concern assumption.
Impairment assessments
•
Management performed its annual impairment review for goodwill
and other intangible assets with indefinite lives. Key judgements
included the allocation of these assets to cash generating units
(CGUs) and groups of CGUs (Health, Hygiene Home and IFCN) as well
as estimates of future business performance and cash generation,
discount rates and long-term growth rates (see Note 9 to the Group
Financial Statements). The Audit Committee reviewed management’s
analysis, including the appropriateness of specific risk factors applied
to individual and groups of CGUs, as well as the adequacy of
sensitivities applied. As a result of this review, the Audit Committee
confirmed that it was comfortable that no impairment was required
and that the intangible assets with indefinite lives remained
appropriate.
• Legal liability provisioning
At 31 December 2017, a provision of £501 million (2016:
£329 million) was held on the Group’s Balance Sheet in relation
to regulatory, civil and/or criminal investigations by government
authorities as well as litigation proceedings and a provision in respect
of the South Korea HS and DoJ issues. The Committee challenged
management on legal judgments made in determining the level of
provisioning and were satisfied with the level of provisioning.
• Tax provisioning
From time to time the Group may be involved in disputes in relation
to ongoing tax matters in a number of jurisdictions around the
world where the approach of the authorities is particularly difficult
to predict. The level of provisioning for these investigations is an
issue where management and tax judgement are important. The
Committee debated the key judgements made with management,
including relevant professional advice that may have been received in
each case, and considers the tax provisioning levels to be appropriate.
• Adjusting items
The Committee considered the presentation of the Group Financial
Statements and, in particular, the presentation of adjusting items and
the elements included within such measures. The Audit Committee
discussed this with management and agreed that the presentation
provided meaningful information to Shareholders about the
underlying performance of the Group.
• Trade spend
Trade spend remains a significant expense for the Group, and the
main judgements relate to trade accruals, specifically the timing and
extent to which temporary promotional activity occurred. The Audit
Committee reviewed with management its assessment of the control
environment and the findings of Internal Audit relating to trade
spend and considered that management operates an appropriate
control environment which recognises the risks in this area.
• Going concern and Viability Statement
A Viability Review was undertaken by management, encompassing
its going concern review. The Audit Committee reviewed the key
assumptions used by management in its Viability Review and going
concern assessment, as well as the scenarios applied and risks
considered. Based on its review, the Audit Committee considers that
the application of the going concern basis for the preparation of the
Financial Statements was appropriate and confirmed the suitability
of the Viability Statement covering the next five years as set out on
page 43. The use of a five-year period for the Viability Review was
approved by the Board in 2018 as it is the period of the Group’s
long-term forecasting process and covers the various business cycles.
Risk management and internal control matters
In monitoring the adequacy and effectiveness of the system of internal
controls, the Audit Committee reviewed compliance procedures and
RB’s overall risk framework (including the Group’s whistleblowing
arrangements) and considered operational risk and control processes.
There were no significant failings or weaknesses during the year
meriting disclosure in this report and the Audit Committee considers
the internal control framework to be functioning appropriately.
In addition, the Audit Committee also addressed the following matters
during the year:
• Reviewed the Circular and the accounting workstreams and
verification carried out by management and advisors in respect of the
MJN transaction. This included review of the reconciliation process;
synergies; pro forma; risk factors; working capital statement and
financial position and prospects risk assessment, review of bond
financing, as well as provisional purchase price accounting and fair
value adjustments made to the acquired balance sheet.
• Assessed the impact and causes of the cyber attack in June 2017.
• Reviewed the Group’s major risk assessment process. Detailed
consideration was given to principal risks and internal control
processes. In addition, an external assurance mapping exercise was
commissioned to review second and third line of defence assurance as
a basis to identify any gaps and enhance assurance going forward.
• Kept abreast of changes in financial reporting and governance matters
by way of technical updates throughout the year, such as the duty to
report on payment practices and performance from April 2017.
• Engaged with senior executives and local management to receive and
discuss control reviews of the Group’s ENA and DvM areas, and China
and the UK.
• Approved the External Auditor’s annual terms of engagement and
reviewed and updated the provision of non-audit services policy.
• Approved and assessed the deployment of the External Audit plan.
• Conducted the External Audit services retender process.
• Approved the Group’s Internal Audit plan and risk controls and
reviewed Internal Audit reports.
• Reviewed fraudulent activity or reports raised under the
whistleblowing procedure.
• Reviewed tax and treasury matters, including provisioning and
compliance with statutory reporting obligations.
External Auditor and the tender of External Audit
The Audit Committee is responsible for reviewing and monitoring
the independence and objectivity of the External Auditor and the
effectiveness of the External Auditor and the audit process. The Audit
Committee approves the Auditor’s terms of engagement and reviews the
strategy and scope of the audit and the work plan. RB has a formal policy
in place to safeguard the External Auditor’s independence.
The Committee reviews the nature and level of non-audit services
undertaken by the External Auditor during the year to satisfy itself that
there is no impact on its independence and is required to approve all
non-audit services over £250K. The Board recognises that in certain
circumstances the nature of the advice required may make it more timely
and cost effective to appoint an auditor who already has a good
understanding of RB. The total fees paid to PwC for the year ended
31 December 2017 were £7.9 million, of which £4.2 million related to
non-audit work (to which PwC was appointed principally for the above
reasons). Details of non-audit services are set out in Note 4 on page 122.
Following the introduction of EU reforms, the Group’s internal policy on
non-audit fees was revised to reflect prohibited non-audit services,
including all tax services provided to entities within the EU. This policy
became effective as at 1 January 2017. The policy states that, on an
annual basis, non-audit fees should not exceed 50% of the Group’s
External Audit and audit-related fees for the year. The Board confirms
that, for the year ended 31 December 2017, non-audit fees were 54%
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements
74
Audit Committee Report
continued
of the audit and audit-related fees. The Audit Committee exercised its
discretion to appoint PwC to perform audit-related services in connection
with the acquisition of MJN and notes that the non-audit fee remains
below the FRC threshold of 70%. In the opinion of the Audit Committee,
the relationship with the External Auditor works well and remains
satisfied with its independence and effectiveness.
The Audit Committee is exclusively responsible (on behalf of the Board)
for matters relating to the appointment of the Auditor and for the
year ended 31 December 2017 the Company has complied with the
Competition and Markets Authority Order: The Statutory Services for
Large Companies Market Investigation (Mandatory use of Competitive
Tender Processes and Audit Committee Responsibilities) Order 2014.
The Audit Committee is responsible for reviewing and making
recommendations to the Board on the re-appointment of the External
Auditor and tendering of the External Audit contract. The Audit
Committee also monitors the rotation of the lead Audit Partner, who
rotates every five years in accordance with best practice standards. The
current lead Audit Partner, Mark Gill, has just completed the final year
of his five-year term.
PwC was appointed as Auditor of Reckitt Benckiser plc in 2000, the year
after the merger of Reckitt & Colman plc and Benckiser N.V. in 1999. At
the time of the merger, PwC was the auditor of Reckitt & Colman plc and
Deloitte LLP was the auditor of Benckiser N.V. Post-merger, the Audit
Committee at the time undertook a review and subsequently selected
PwC as Auditor for the Group for the December 2000 year end. PwC has
been the Auditor of the Parent Company since the formation of Reckitt
Benckiser Group plc in 2007.
In the Annual Report and Financial Statements for the year ended
31 December 2016, the Committee confirmed its intention to put a
recommendation to Shareholders to appoint a new External Auditor for
the year ending December 2018. A detailed pre-selection process was
carried out in 2016 in preparation for the tender during 2017. Detailed
investigations were carried out during 2016 to identify those firms with
sufficient geographical reach, experience, expertise in the consumer
products industry, that provided a good cultural fit and which were not
conflicted by virtue of substantial ongoing non-audit work. Following
detailed reviews and preliminary meetings with potential firms, a
preliminary shortlist was identified and firms asked to submit proposals
against a detailed invitation to tender.
Following review and agreement on a final shortlist, partners of two firms
met with management and members of the Audit Committee to outline
further the skills and attributes expected of an external audit team. The
selection criteria were developed into a scorecard for the Audit
Committee. The categories were:
• Audit quality
• Audit service
• Capabilities and competencies
• Relationships and past track record
• Behavioural influences during the process
• Fees
The final shortlisted firms met with Area management over several
days in meetings held at the Company’s offices in Slough, Amsterdam
and Dubai. One or more members of the Committee also joined each
meeting. Following feedback received from management, the Chairman,
CEO, CFO and the Audit Committee Chair met with key partners for
one-to-one discussions. In May 2017, each of the two firms presented
to the Audit Committee, CEO, CFO, SVP Corporate Control and Head of
Internal Audit ahead of the Audit Committee making its final decision
for recommendation to the Board.
Following a detailed tender process outlined on the following page,
the Committee recommended to the Board that KPMG be appointed
as External Auditor for the 2018 financial year. The Board concluded
that it was in the best interests of the Shareholders to appoint KPMG
for the year ending 31 December 2018 and, in accordance with section
489 CA 2006, resolutions to propose the appointment of KPMG as
the Company’s External Auditor and to authorise the Audit Committee
to fix its remuneration will be put to the Shareholders at the AGM.
Management and the Committee are working to ensure that there will
be a seamless transition between auditors. KPMG has commenced the
audit transition and attended the Committee’s meeting in February 2018.
Internal Auditor
The Audit Committee is responsible for reviewing and monitoring the
effectiveness of the Internal Audit function. The Head of Internal Audit
reports to the Chairman of the Audit Committee and to the CFO for
administrative matters and updates the Audit Committee at each
meeting. The Internal Audit department is responsible for impartially
assessing the key risks of the organisation and appraising and reporting
on the adequacy and effectiveness of RB’s risk management and internal
controls in financial, information systems and other business and
operational areas to develop and improve the effectiveness of the
Group’s risk management control and governance processes and
strategies. RB’s identified Group major risks and their mitigating controls
are described in detail on pages 42 to 51.
The annual Internal Audit plan is prepared under an agreed cover and
scope policy and reflects a risk-based approach. Designated audit
locations are determined at the start of each year following a risk and
control assessment of each commercial and supply unit. Information
systems and Head Office locations also fall within Internal Audit’s remit
and are subject to audit. Following each audit, findings are reviewed and
reported to management and to the Audit Committee, together with
recommendations and updates. Resulting management actions and
progress are tracked until a report is satisfactorily closed. In 2017, routine
internal audit work covered 57% (by Net Revenue) of RB’s global
commercial business and 36% (by industrial sales) of global
manufacturing facilities.
Governance
During the year, the Committee undertook a self-evaluation of its
performance using a questionnaire. Matters reviewed by Committee
members included effectiveness in the areas of risk strategy and
framework, internal and external audit, external reporting, roles and
responsibilities, and working together with management. In summary,
the results concluded that the effectiveness and performance of the
Committee was good, and that the dynamics and culture of the
Committee were particularly strong. The main improvement area
discussed during the Committee evaluation was the need for the Audit
Committee to spend more time on the Group Risk Assurance mapping.
The Internal Audit effectiveness review was carried out by way of direct
post-audit feedback and questionnaires targeted at Audit Committee
members, Executive Committee members and functional heads. The
evaluation of the Internal Audit function, which covered performance,
plan and resources, indicated that the reviewers appreciated the quality
and capability of the Internal Audit team which assisted with the
improvement of internal controls and processes throughout the Group.
Areas highlighted for improvement were the resourcing of larger audits
as well as the timing of staged audit interventions for change
programmes. The Audit Committee considered the effectiveness review
and the work carried out by the Internal Audit function as reported at
every Committee meeting and concluded that it was an effective
operation.
In light of 2017 being PwC’s final year as auditor, the assessment was
conducted during the Committee’s November 2017 meeting and found
to be satisfactory.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 75
The external audit
tender process
2015
September 2016
March 2017
Pre-selection
process
commenced.
Following detailed
reviews and preliminary
meetings with potential
firms, a preliminary
shortlist was identified
and firms asked to submit
proposals against a
detailed invitation to
tender.
Final shortlisted firms met
with Area management at
Slough, Amsterdam and
Dubai offices.
Year ending
31 December 2017
PwC carried out final
audit in respect of year
ended 31 December 2017.
April/May 2017
Final shortlisted firms met
with the Audit Committee
and key CHQ
management.
August 2016
February 2017
Long-list of firms reviewed
to identify those with
sufficient geographical
reach, experience,
expertise in the consumer
products industry, that
provided a good cultural
fit and which were not
conflicted by virtue of
substantial ongoing
non-audit work.
Shortlisted firms met with
management and members
of the Audit Committee to
outline further the skills
and attributes expected of
an external audit team.
4 May 2017
Recommendation made to
the Board for appointment
of KPMG. Board approved
and announced.
AGM, 3 May 2018
Shareholder approval
sought for the
appointment of KPMG
as External Auditor for
the financial year ending
31 December 2018.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 76
Corporate Responsibility, Sustainability, Ethics
and Compliance Committee Report
We are committed to putting the safety
of our consumers and employees first,
and to ensuring that we conduct business
responsibly.
Pam Kirby
Chair of the Corporate Responsibility, Sustainability, Ethics and
Compliance Committee
Introduction
I am pleased to present the report of the Corporate Responsibility,
Sustainability, Ethics and Compliance Committee (CRSEC Committee) for
the year ended 31 December 2017. The Committee was established in
2016 in the wake of the Humidifier Sanitizer (HS) tragedy to try to prevent
such an event ever happening again. We are committed to putting the
safety of our consumers and employees first, and to ensuring that we
conduct business responsibly and with a sustainability mindset. Since
the establishment of the Committee in July 2016, we have made great
strides. Our initial focus was on getting our governance approach and
framework right and putting in place safety, quality and compliance
remediation and infrastructure programmes. During the last year, we
have worked tirelessly to ensure that these programmes are integrated
throughout the business and that high standards are globally upheld
and continually strengthened. Whilst we are on a journey which will
continually change and evolve, we have made substantial progress to
date and changes have been welcomed by employees.
Composition
The CRSEC Committee is made up entirely of Non-Executive Directors
who are appointed by the Board on the recommendation of the
Nomination Committee. The members of the Committee during the
year were Pam Kirby (Chairman), Adrian Bellamy and Nicandro Durante.
The Deputy Company Secretary was Secretary to the Committee
throughout the year.
Responsibilities
The Committee supports the Board in fulfilling its duty to safeguard
and advance the Company’s reputation for responsible and sustainable
corporate conduct by reviewing, monitoring and assessing its approach
to and management of corporate responsibility, environmental, safety
and sustainability issues and behaviours, ethical conduct and regulatory
compliance. The Committee’s scope includes human rights and product
safety, regulatory and quality risk assurance and restrictive trade practices
and ethical conduct.
The Committee’s responsibilities include overseeing and making
recommendations to executives and the Board for actions to be taken
in respect of these matters, as well as monitoring and reviewing their
implementation.
The Committee meets at least three times per year. The CEO, SVP
General Counsel, Chief Safety, Quality and Compliance Officer (CSQC),
VP General Counsel Group Legal Affairs and Head of Internal Audit
regularly attend meetings and other senior management attend when
deemed appropriate by the Committee. Time is allocated at each meeting
for private discussion between Committee members and with the CSQC
Officer and the Head of Internal Audit without the other invitees being
present. From the beginning of 2018, the CSQC also has responsibility
for regulatory affairs and is now referred to as the Chief Safety, Quality,
Regulatory and Compliance Officer (CSQRC). In addition, the Chief Ethics
and Compliance Officer (CECO) now attends in place of the VP General
Counsel Group Legal Affairs, and will have periodic private discussions
with Committee members.
CRSEC Committee meetings generally take place ahead of Board
meetings and the CRSEC Committee Chair provides an update of the
key issues discussed to the Board at each meeting. Minutes of CRSEC
Committee meetings are provided to the Board.
The Committee’s terms of reference are available on the Company’s
website. They are reviewed annually to ensure that they continue to
reflect best practice.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 77
Data security
In anticipation of the General Data Protection Regulation (GDPR)
legislation which comes into effect on 25 May 2018, we reviewed
the results of an audit to identify compliance gaps, and endorsed a
remediation project to ensure delivery of critical GDPR objectives by
May 2018. A risk-prioritised plan has been adopted, based on a detailed
gap assessment and supported by appropriate resources.
Code of Conduct
A revised Code of Conduct was reviewed by the Committee in November
2017 and updated to combine best practice from both the RB and MJN
codes and to reflect our new structure. The new Code became effective
on 1 January 2018. Our Code of Conduct applies to all RB employees
globally, our Board and RB’s contractors. It explicitly refers to RB’s core
values – responsibility, ownership, achievement, entrepreneurship and
partnership. The revised Code sets the protocol for raising concerns
(via a ‘Speak Up’ hotline), covers fair treatment of employees and
mandatory reporting of violations, among many other matters.
Modern Slavery Act (MSA) statement
Our first MSA statement, which outlines the steps we are taking to
reduce the risk of slavery and human trafficking in our business and
supply chain, was published in March 2017 and is available on our
website at www.rb.com. Our second statement will be published shortly.
Focus for 2018
Looking to the coming year, and following the Committee evaluating it's
performance, we will continue our focus on consumer safety and creating
a consumer experience that builds confidence and trust. We aim to have
safe and compliant products for all our markets, and to maintain safety
and compliance throughout the product life cycle.
We continue to review our sustainability objectives and chart progress
against our targets. RB’s annual Sustainability Report for 2017 is
published separately to this Annual Report and can be found on our
website, www.rb.com.
With RB 2.0 and the reorganisation into two business units, we will be
especially vigilant to ensure that there is no loss in momentum and focus
on delivering the safety, quality and compliance agenda that
management have committed to. We will monitor the progress of a
number of Group-wide initiatives, as well as the establishment of proper
governance and oversight of SQRC issues in each business unit.
I look forward to reporting progress on our accomplishments in next
year’s Annual Report.
Pam Kirby
Chair of the Corporate Responsibility, Sustainability, Ethics and
Compliance Committee
19 March 2018
Activity
During the year, the Committee held four scheduled meetings. Directors’
attendance is set out in the table on page 63. The Committee has a
rolling agenda. At each meeting, it receives reports from the Ethics
Management Committee and the Compliance Management Committee,
which make up the management's governance framework for the Group:
• The Ethics Management Committee meets quarterly and reports on
legal compliance matters, whistleblowing activity, potential bribery,
corruption and fraud and potential Code of Conduct issues.
• The Compliance Management Committee meets monthly and reports
on consumer safety, employee health and safety, product and
substance regulation (including quality, safety and compliance),
environmental strategy and human rights.
The two committees have a direct reporting line to the Executive
Committee. The Committee also meets with the CSQRC Officer and
other senior managers to ensure that progress is being made towards
meeting the Group’s specific Safety, Quality, Regulatory and Compliance
(SQRC) KPIs and in our ongoing corporate responsibility commitments.
In addition, during the year, particular attention was paid to the following
matters:
South Korea Humidifier Sanitizer (HS)
The Committee and the Board reflected further on the tragedy in South
Korea on how to prevent such a tragedy from occurring again and to
ensure that our governance structure and programmes continue to put
safety at their core. Lessons learned were shared with management and a
new RB ‘Responsibility’ value introduced, which has been embedded in
our updated Code of Conduct.
Key learnings for RB include:
• setting the tone from the top and embedding a culture of
responsibility among all RB employees, the Board and RB contractors,
primarily through revision of internal policies, an updated version of
the Code of Conduct, mandatory training and the creation of a new
RB value, Responsibility;
• reviewing product safety systems and policies, including product
approval processes, product development, reformulation or supplier
switching and packaging;
• updating our ‘goods for sale’ release process which all products must
pass before they are marketed and ensures the product is safe for sale
and meets its marketing claims;
• ensuring regular, structured reporting to senior management by the
adaptation of the current SQRC structure; and
• creating new roles within and restructuring the SQRC function, with a
focus on risk functions.
We are pleased to say that we have made great strides in addressing
these learnings, with all of them either work in progress or completed
actions.
Mead Johnson Nutrition (MJN) integration
Following the MJN acquisition during the year, the Committee
undertook a cross-functional in-depth focus on the infant and nutrition
category. As part of the integration of MJN, we reviewed our Code
of Conduct and internal policies. The MJN whistleblower hotline was
integrated into RB’s. We also embarked on a number of sustainability
performance reviews. For example, we looked at how MJN’s past
practices in respect of their greenhouse gas emissions, water, energy
and waste performance impact on RB’s performance in these areas.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 78
Directors’ Remuneration Report
Central to our remuneration philosophy are
the principles of pay for performance,
Shareholder alignment and simplicity.
Remuneration Policy
Letter from the Chair
Remuneration Committee governance
Contents of Directors’ Remuneration Report
78
81
82
83
84
89
90 Other required disclosures
2017 performance and remuneration outcomes
Implementation of commitments made for 2017
Implementation of Policy for 2018
Mary Harris
Chair of the Remuneration Committee
This is my first Directors’ Remuneration Report since being appointed
Chair in November 2017. I would like to thank my predecessor Judy
Sprieser for her contribution and leadership of the Committee and for the
support she has given me since I became Chair.
On the following pages, I have set out our Annual Report on
Remuneration, which explains how we have implemented the
Remuneration Policy previously approved by Shareholders, as well as
additional actions taken. This Report will be subject to a Shareholder vote
at our AGM on 3 May 2018.
Since becoming Chair, I have met with a number of our largest
Shareholders to discuss RB’s remuneration philosophy and the changes
we have made during 2017. I would like to thank the Shareholders for
the time taken and for their feedback, which provides valuable input for
the 2019 Policy review, which will be the main focus for the Committee
in 2018.
Context for executive remuneration at RB
RB strives for leading global performance. Our management team is
multinational and we compete for talent against a peer group of global
companies. Central to our remuneration philosophy are the principles of
pay for performance, Shareholder alignment and simplicity. Combined
with RB’s values and business model, they define how decisions are
made, how people act and how we assess and reward them.
The Committee believes that RB’s approach to remuneration, summarised
on page 82, plays an important part in supporting our performance
culture, reflects the global nature of our business and delivers significant
benefits to Shareholders.
To reinforce this philosophy, the majority of the Executive Directors’
remuneration packages are made up of variable at-risk pay, linked to
stretching financial targets that align with our strategy and Shareholder
value creation, and are largely delivered in RB shares. In addition we have
market leading shareholding requirements for executives. This approach
is cascaded throughout our senior management.
The Committee is aware of the sensitivity around executive pay and has
undertaken a very thorough review of the Company’s absolute and
relative performance in the round, in order to reach its decisions on the
2017 remuneration outcomes.
Further information regarding the composition, role and work of the
Committee during 2017 can be found on page 81.
Business backdrop
2017 has been a transformational, albeit challenging year for RB. There
has been significant strategic progress including the acquisition of MJN,
the successful disposal of the RB Food business and the significant
planned reorganisation of the business into two focused business units,
Health and Hygiene Home.
However, 2017 has also seen a slowdown in overall market growth,
significant pricing pressure and the cyber attack in mid-2017.
Performance was also impacted by the loss of business in South Korea
and the decline in sales of foot-care devices.
Over the three-year period of the 2015 LTIP, RB has created £16 billion of
Shareholder value, delivering a Shareholder return of 42%. This is in the
top quartile of the peer group, double the peer group average (details of
which are on page 81) and 31% above the FTSE100.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 79
Base salary
The CEO’s 2017 salary was £945,209. The Committee has decided that
there will be no increase for 2018.
The Committee reviewed the fixed salary of the CFO, Adrian Hennah, to
reflect the increased scope and responsibilities of his role, which resulted
from the planned re-organisation of RB into two business units, described
earlier in this report. His role now includes Information Systems, with a
newly recruited CIO reporting directly to him. The Committee decided
that his salary be increased to £660,000 (an 8% increase) with no change
to his incentive opportunities.
The average salary increase for our UK employee base was 3%.
Annual Bonus in respect of 2017 performance
As described earlier, 2017 has been a transformational, albeit challenging
year for RB. There has been significant strategic progress but the 2017
outcome saw flat like-for-like Net Revenue growth and Net Income
growth that was below the stretching threshold targets set, excluding the
MJN contribution. This has resulted in zero bonus payment for 2017.
Vesting of the 2015-2017 LTIP and decision to reduce payout
All outstanding LTIP awards are subject to an earnings per share (EPS)
growth performance measure over the three-year performance period of
the awards. In 2016, the EPS growth targets were set at 6% per annum
for threshold performance and 10% per annum for maximum vesting. At
threshold this represents 2x peer average, with maximum vesting
requiring more than 3x our peer average performance.
The Remuneration Committee made previous commitments to
Shareholders to exclude the MJN acquisition and related transactions for
measuring performance in order to ensure that the LTIP targets remain as
stretching as prior to any major acquisition/disposal. This is to ensure that
management’s and Shareholders’ interests remain fully aligned.
Management should not be rewarded due to an increase in EPS deriving
simply from a material gearing of the Balance Sheet.
The Committee considered it appropriate to exercise its discretion to
reduce the vesting outcome for the 2015 LTIP by 50% for the CEO and
CFO. This decision is based on the Committee’s evaluation of
performance in the round and alignment of pay outcomes with the
Shareholder experience.
2017 single figure
The impact of this is to reduce the 2017 single figure for the CEO from
£23.7m to £12.5m and to reduce that for the CFO from £5.2m to £3m.
This compares to 2016 single figures of £15.3m and £6.8m, respectively.
CEO
CFO
0.0
2.5
5.0
7.5
10.0
Fixed remuneration
Value of LTIP at award
Share price increase of LTIP award
£12.5m
£3.0m
12.5
£million
Reduction in future LTIP awards
The Remuneration Committee keeps the LTIP awards made to Executive
Directors under regular review.
As previously committed to Shareholders, for 2018 the Committee made
a one-third reduction in the number of shares and options awarded to
the CEO for the performance period 2018-2020. This follows the
reduction last year, such that the 2018 LTIP award is less than half that
of the 2016 LTIP, in respect of the 2016–2018 performance period.
For the CFO the LTIP award for the 2018-2020 period is unchanged from
that for 2017-2019.
The charts on page 83 set out the potential impact on the future single
figure for the CEO as a result of these reductions in LTIP awards.
The total effect of the acquisition and the £3bn profit from the sale of RB
Food, as well as the gain in respect of US tax reform have been excluded
from performance for determining remuneration outcomes.
The Committee will continue to assess overall performance going forward
to ensure that the remuneration outcomes are justified.
Further, the Committee reviewed the results of MJN between completion
and year-end to ensure they were not materially below the acquisition
plan. We are satisfied that this is not the case. The return on capital of
the MJN acquisition is also on track.
Share ownership requirements
RB’s share ownership requirements remain unchanged as a fixed number
of shares, and are equivalent to more than 4,000% of salary for the CEO
and 2,000% of salary for the CFO.
Earnings per share over the three-year period from 2015 to 2017,
measured on an adjusted, diluted basis, grew by 44%, equivalent to
compound average annual growth of 13% per annum. With the direct
and indirect effects of the MJN acquisition being totally removed, this
reduces to 11.5% per annum but still exceeds maximum vesting by 1.5%
per annum. This EPS growth is above the upper quartile of our peer
group over the last three years and is more than 3x the peer average. This
EPS growth performance results in vesting of 100% being achieved when
measured against the vesting schedule approved by Shareholders.
EPS growth for the purposes of the LTIP is based on actual exchange rates
which has been our consistent practice, as this is aligned to the
Shareholder experience. Whilst over the 2015-17 period the EPS growth
measured on a constant currency basis would have been lower, it should
be noted that this is the first occasion in the last five performance periods
that LTIP vesting has been higher than if calculated on constant currency
basis. The Committee remains satisfied that measuring EPS growth on an
actual currency basis is appropriate.
While the performance over the 2015 LTIP period has exceeded all
pre-agreed EPS growth targets under the Remuneration Policy, the CEO
volunteered a cut to the vesting outcomes as the Committee deemed fit.
These are the most demanding in the market; the highest share
ownership requirement in our peer group is 800% and the highest in the
FTSE 100 is 700% of salary. Amongst the FTSE 30 the median is 400% of
salary, with an upper quartile of 500%.
The chart below sets out the current shareholding of the Executive
Directors compared to requirements.
Shareholding of Executive Directors vs requirement
CEO
CFO2
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
Shareholding requirement
Current shareholding
2017 vesting1
1
‘2017 vesting’ shows the estimated number of performance shares which will vest in
respect of performance to 2017, after tax.
2 Adrian Hennah was appointed CFO in February 2013 and is making good progress
towards achieving his shareholding requirement by 2021.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 80
Directors' Remuneration Report
continued
Board changes
During 2017, RB announced that Chris Sinclair would succeed Adrian
Bellamy as Company Chair at the 2018 AGM and the Committee has
reviewed the fees for the role of Chairman in the light of this new
appointment.
As the Chairman fee had not been reviewed for a number of years it had
fallen behind market practice. Therefore the Committee, with approval
of the Board, has increased the total fees to £500,000, and increased
the proportion paid in shares from 18% to 25%. This new fee level is
reflective of the role of the Chairman in a Company of RB’s size and
the required time commitment.
Conclusion
I hope that you find that this report demonstrates RB’s commitment
to pay for performance, Shareholder alignment and consideration of
remuneration outcomes within the context of overall performance.
The main focus of the Committee during 2018 will be to undertake a
comprehensive review of our existing Remuneration Policy and I look
forward to engaging fully with Shareholders and their representatives
this year.
Mary Harris
Chair of the Remuneration Committee
19 March 2018
This Directors’ Remuneration Report has been prepared in accordance with the provisions
of the Companies Act 2006 and Schedule 8 of the Large and Medium-sized Companies
and Groups (Accounts and Reports) (Amendment) Regulations 2013. The Report meets
the requirements of the FCA Listing Authority’s Listing Rules and the Disclosure Guidance
and Transparency Rules. In this Report we describe how the principles of good
governance relating to Directors’ remuneration, as set out in the UK Corporate
Governance Code (April 2016) (the Code), are applied in practice. The Remuneration
Committee confirms that throughout the financial year the Company has complied with
these governance rules and best practice provisions.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 81
Remuneration Committee governance
Who’s on the Committee
The Remuneration Committee is made up
entirely of Non-Executive Directors who are
appointed by the Board on the recommendation
of the Nomination Committee. Membership of
the Remuneration Committee during the year
was as follows:
Mary Harris1 (Chair)
Judy Sprieser
Nicandro Durante
Chris Sinclair
Adrian Bellamy
1 Appointed to the Committee May 2017,
appointed Chair November 2017.
Our role
The Committee’s purpose is to assist the Board of Directors in fulfilling its oversight responsibility by
ensuring that Remuneration Policy and practices reward fairly and responsibly; are linked to corporate
and individual performance; and take account of the generally accepted principles of good
governance.
On behalf of, and subject to approval by, the Board of Directors, the Committee primarily:
• sets and regularly reviews the Company’s overall remuneration strategy;
• determines the general Remuneration Policy for senior executives; and
•
in respect of the Chairman, the Executive Directors and members of the Executive Committee,
sets, reviews and approves:
– remuneration policies, including annual bonuses and long-term incentives;
– individual remuneration and compensation arrangements;
– individual benefits including pension and superannuation arrangements;
– terms and conditions of employment including the Executive Directors’ service agreements;
– participation in any of the Company’s bonus and long-term incentive plans (LTIPs); and
– the targets for any of the Company’s performance-related bonus and LTIPs.
The Executive Directors are responsible for evaluating and making recommendations to the Board of
Directors on the remuneration of the Non-Executive Directors.
Shareholders approved RB’s Directors’ Remuneration Policy at the AGM on 5 May 2016. This was set
out in full in the 2015 Annual Report and can also be found in the Corporate Governance section of
our website at www.rb.com
Meetings
During the year the Committee held four scheduled meetings. The attendance of members at
meetings is set out in the table on page 63.
The SVP, Human Resources was Secretary to the Committee throughout the year. Meetings were also
attended by the CEO, CFO and the Group Head of Reward by invitation.
Members of the Remuneration Committee and any person attending its meetings do not participate
in any discussion or decision on their own remuneration.
Peer group
The Remuneration Committee has determined a peer group of international companies, which is
referred to within the report. This peer group is used for benchmarking remuneration packages and
also used as a reference point in ensuring that performance targets are appropriately stretching and
when reviewing the Company’s relative performance. The companies included are:
Avon
Bayer
Campbell Soup
Church and Dwight
Clorox
Coca-Cola
Colgate
Danone
GSK
Henkel
Johnson & Johnson
Kellogg
Kimberly-Clark
Novartis
PepsiCo
Pfizer
Procter & Gamble
Sanofi
Unilever
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements Remuneration Policy
at a glance
82
RB’s Remuneration
Policy at a glance
Shareholders approved RB’s Directors’ Remuneration Policy at the AGM on 5 May 2016, which is summarised below. The Policy was set out in full in
the 2015 Annual Report and can also be found in the Corporate Governance section of our website.
RB’s
values
RB’s virtuous
earnings model
Gross
Margin
RB’s remuneration
philosophy
Achievement
Ownership
Responsibility
Doing the
right thing
Hungry for
outperformance
Entrepreneurship
Courage to disrupt
the status quo
‘It’s my business,
I own it, I drive it’
Net
Revenue
UNIQUE
CULTURE
Fixed Cost
Partnership
Building trusted
relationships to
create value
BEI
Operating
Margin
Pay for
performance
Shareholder
alignment
Simplicity
1 High proportion of long-term variable pay
RB’s propo(cid:23)ion
of variable pay
(CEO)
16%
19%
Fixed pay
Annual bonus
65%
LTIP
3 Significant share ownership policy
Executive
CEO
CFO
Value of
No. of shares
shares1 % of salary
600,000
200,000
£40m
£13m
4232%
2020%
1 Based on £66.67 share price (three-month average to year end)
2 Attract and retain the best global talent
Engage highly performance-driven individuals
4 Ensure simplicity and transparency
Simplicity and transparency for both management and Shareholders
Reflect global competitive practice across our industry peer group
Alignment across the business of metrics and ownership
RB’s Remuneration Policy
Remuneration Policy reflects the philosophy of pay for performance, Shareholder alignment and simplicity over the short, medium and long term.
8
1
0
2
9
1
0
2
0
2
0
2
1
2
0
2
2
2
0
2
3
2
0
2
KEY FEATURES OF POLICY
HOW WE IMPLEMENT POLICY
LINK TO STRATEGY
Base salary
Annual bonus
LTIP
Performance
shares
Share
options
Shareholding
requirements
• Salaries at median of peers
• 2017 salary increases of 3%
• Based on Net Revenue and Adjusted Net
Income growth
• Target bonus of 120% for CEO and 90%
for CFO
• Clawback provisions apply
• Based on adjusted, diluted EPS growth
over a three-year performance period
• Two-year malus and clawback provisions
• Two-year post-retirement holding period
• Options have seven years to exercise post
vesting
• 2018 salary increases of zero for CEO and
8% for the CFO to reflect increased role
• Stretching Net Revenue and Adjusted Net
Income growth targets, in excess of peer
performance
• Threshold performance results in zero
payout, with maximum of 3.57x target
level
• Vesting linked to stretching adjusted,
diluted EPS growth conditions requiring
significant outperformance of our peers
• Growth of 33% needed for full vesting
• Supports recruitment and
retention
• Drives short-term overachievement
in KPIs which leads to creation of
Shareholder value
• Incentivises long-term financial
outperformance of EPS and
sustained Shareholder value
creation
• CEO: 600,000 shares (c.4232% salary)
• Period of eight years from appointment to
• Promotes long-term alignment
• CFO: 200,000 shares (c.2020% salary)
achieve
with Shareholders
• Promotes focus on management
of corporate risks
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017
Implementation of specific commitments
made to Shareholders for 2017
83
1. Exclude MJN (and related transactions) for LTIP vesting
What we said…
What we have done…
In calculating EPS growth from 2016 to 2017, 2017
EPS will be adjusted to exclude the contribution of
MJN on a pro-forma basis.
The Remuneration Committee will also make
corresponding adjustments for any other transactions
linked to the financing or other aspects of the
proposed MJN acquisition.
In calculating 2017 EPS growth for purposes of LTIP vesting:
• Excluded adjusted post-tax Operating Profit, pre-synergies, attributable to MJN from 2017
• Excluded adjusted post-tax Operating Profit attributable to RB Food from 2016 and 2017
• Excluded profit of £3 billion from disposal of RB Food
• Adjusted all financing impacts to be consistent with our pre-MJN acquisition policy of
maintaining net debt of c.£1.5 billion. This requires removing interest attributable to the
MJN acquisition, adding back interest saved due to sale of RB Food and replicating the
impact of share buybacks associated with prior policy
Impact/decision
2017
Adjusted diluted EPS
as reported
EPS growth excluding
MJN
2015-17 (used for
vesting purposes)
10%
6%
13%
11.5%
2. Assess MJN performance post-completion versus plan
What we said…
What we have done…
The Committee reserved the right to exercise
downward discretion in the event that the
results of MJN between completion of
the transaction and the end of 2017 are
materially below the acquisition plan.
The Remuneration Committee will also
exercise downward discretion on LTIP vesting
if the return on capital in respect of the
proposed acquisition of MJN does not meet
the expectations agreed by the Board, at the
time of the approval of the acquisition.
The Committee thoroughly reviewed the performance from completion of the acquisition
to the end of 2017 versus the acquisition plan, having regard to:
• MJN Net Revenue growth of -1% (pro-forma constant). A weak start to the year (before
RB ownership) offset by the return to growth under RB ownership with growth of +2%
in H2 and +3% in Q4
Improving trend in Operating Margin (H1 -500bps, H2 -270bps)
•
• Full year Adjusted Operating Profit of £591 million (20.7% of NR) of which H2 under RB
ownership was £310 million (21.7% of NR)
• Acquisition completed in H1, allowing saving of an MJN dividend payment and US$25
million of synergies delivered earlier than planned
• Future synergy expectations raised from US$250 million at time of acquisition to around
US$300 million
• Over the half year of ownership, return on capital has been in line with the expectations
agreed by the Board
Impact/decision
Having undertaken a thorough review of MJN performance post completion compared to the acquisition plan, the Committee is satisfied that the
contribution of MJN to the Group is in line with the plan agreed by the Board at the time of acquisition and therefore no downward discretion is required.
3. Reduction in CEO awards
The Remuneration Committee
has reduced the size of the LTIP
awards made to the CEO for
2017 and 2018 such that future
vesting values will reduce
correspondingly:
Target: assumes target bonus and LTIP
vests at threshold (20%).
Maximum: assumes maximum bonus
and LTIP vests in full.
Share price: scenarios assume share
price at vesting is in line with average
over Q4 2017 of £66.67, and as with
the basis prescribed by the reporting
regulations, we have excluded any
future share price growth.
Year of
award
2016
Awards
400,000
240,000
2017
300,000
150,000
Vests
end of
2018 Target
2018 Maximum
2019 Target
2019 Maximum
2018
200,000
100,000
Options
Shares
2020 Target
2020 Maximum
Potential single figure (£m)
5.9
4.4
3.8
22.7
Fixed pay
Bonus
LTIP
15.3
12.3
£0.0m £5.0m £10.0m £15.0m £20.0m £25.0m
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 84
2017 performance and remuneration outcomes
Base salary
Base salaries are reviewed taking into account the salary increases for the
wider workforce and individual performance.
During 2017 the Remuneration Committee reviewed salaries and
determined that the CEO would have no salary increase for 2018.
For additional context, the Remuneration Committee also reviews market
practice for similar roles in the Company’s remuneration peer group,
comprising 19 international companies and listed on page 81.
As disclosed in last year’s report, following the review of salary levels in
late 2016, the Committee approved the base salary increases of 3% with
effect from 1 January 2017.
As part of the re-organisation of RB, the scope and responsibilities of the
role of CFO increased, which now includes Information Systems, with a
newly recruited CIO reporting to CFO. To reflect this increase in the scope
of the role, in line with the terms of the Remuneration Policy, the
Committee increased the CFO’s salary to £660,000.
The table below sets out base salaries with effect from 1 January 2018:
Executive Director
Rakesh Kapoor
Adrian Hennah
Base salary at
1 January
2017
Base salary
from
1 January
2018
£945,209 £945,209
£613,020 £660,000
Percentage
increase
0%
8%
The average salary increase for our UK employees was c.3%, effective
1 January 2018.
2017 bonus targets
The chart below illustrates the performance ranges set by the Committee
prior to the start of the year.
Performance measure1
Threshold
(zero bonus)
Maximum
(3.57x target)
Net Revenue growth
0%
6%
Adjusted Net Income growth
2%
10%
Achieved
Below
threshold
Below
threshold
Performance range
1. At constant fx rates
2017 bonus outcome
As set out elsewhere in the report, 2017 was a challenging year for RB.
The 2017 performance outcome saw flat like-for-like Net Revenue growth
and Net Income Growth that was below the threshold, excluding the
MJN contribution.
Decision
Due to actual results being below the stretching performance targets set,
no bonus will be paid to the Executive Directors for 2017.
Annual bonus in respect of 2017 performance: Zero payout
Prior to the start of the year, the Remuneration Committee set stretching
performance targets for the Executive Directors in 2017. As set out in last
year’s report, these were based on Net Revenue growth and Adjusted
Net Income growth, both measured in GBP at a constant exchange rate.
In line with the Remuneration Policy, the CEO and CFO had target bonus
opportunities of 120% of salary and 90% of salary respectively. Actual
payments can range from zero to 3.57x target depending on
performance against the stretching performance ranges as follows:
• For each performance measure a range is set.
• A performance multiplier is calculated for each measure, calculated by
the extent to which the performance for that measure is achieved.
These multipliers can be up to 1.89 for outperformance of the
stretching range set by the Committee.
• The two individual multipliers are then multiplied together to provide
the total performance multiplier.
Net Revenue
multiplier
(up to 1.89x)
x
Adjusted Net
Income
multiplier
(up to 1.89x)
=
Performance
multiplier
(Threshold = 0x
Target = 1.0x
Max = 3.57x)
• The performance multiplier can range from zero for performance at
threshold or below, to 3.57 for truly exceptional performance on both
metrics (i.e. 1.89 x 1.89).
• This total performance multiplier is then applied to the target bonus
opportunity to calculate the overall bonus outcome.
Performance
multiplier
x
Target bonus
=
Final bonus
outcome
• The effect of the multiplicative approach means that a high
performance multiplier can only be achieved for outperformance on
both top-line and bottom-line growth.
• Similarly, underperformance in one of the performance metrics will
reduce the overall bonus payout, despite outperformance of the other.
• For example, if we grow Net Revenue above the stretching
requirement for maximum performance but fail to convert it into
profit growth, the bonus payout will be zero (i.e. 1.89 x 0).
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 85
Vesting of the 2015 LTIP – Performance versus targets
In determining the LTIP vesting, the Committee undertook a thorough review to ensure that the payout was appropriate in light of the overall
Company performance and in line with the Remuneration Policy. A summary of this review is below:
Stretching performance targets set at time of awards
December 2014
EPS growth
Vesting
Threshold
Maximum
6%
20%
10%
100%
Peer group
average
Peer group
upper quartile
0%
6%
• EPS represents the key metric to measure our strategic and growth
performance.
• Targets set significantly above the peer group average at the time of
the award, with threshold vesting at RB requiring EPS performance in
line with upper quartile of the peer group.
Performance achieved over the three-year performance period
EPS growth 2015–2017
50%
40%
30%
20%
10%
0%
12%
2015
£9bn
17%
2016
£5.5bn
Including MJN 10%
Excluding MJN 6%
11.5% p.a.
10% p.a.
6% p.a.
3% p.a.
7% p.a.
2017
£1.5bn
EPS CAGR for vesting
2015–2017
LTIP vesting
schedule
Average
Upper qua ile
£16bn
Peer group performance1
EPS CAGR 2015–2017
Shareholder value created
1 Analysis of company disclosures of adjusted diluted EPS growth
Overall Company performance taken into consideration
Significant strategic delivery
• Supercharge
• Sale of RB Food (£3 billion gain)
• MJN acquisition
• Creation of two business units
to drive long-term growth –
Health and Hygiene and Home
Challenges
• Flat LFL Net Revenue in 2017,
following slowing market
growth
• Cyber attack
• Decline in Scholl/Amopé
Earnings from MJN acquisition and
£3 billion profit from RB Food sale
excluded from calculation of
performance for incentive
outcomes
All of the above are fully
accounted for in performance
outcomes of bonus and LTIP
Total Shareholder Return over 2015-2017
45%
40%
35%
30%
25%
20%
15%
RB
Peer group upper qua(cid:14)ile
FTSE 100 index
Peer group median
MJN
• MJN performance and related transactions have been excluded from the calculation of EPS growth for the purpose of this LTIP vesting.
• MJN performance and ROCE since completion is in line with acquisition plan, with more details set out on page 83.
Summary
In considering performance over the period the Committee took
into account:
• EPS performance compared to the vesting schedule.
• The strong strategic performance, £16 billion of value to Shareholders,
and excluded exceptional gains, including the more than £1 billion
gain in respect of US tax reform.
• The challenging 2017 performance and Shareholder experience.
The Committee also considered the impact of exchange rate movements
on vesting and is satisfied that the consistent application of policy using
EPS calculated on actual rates is aligned with Shareholders over time. This
is the first LTIP period that exchange rates have been in favour of
participants. There were three occasions in the last five years that vesting
was lower than if EPS growth was calculated on constant currency basis.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 86
2017 performance and remuneration outcomes
continued
Decision on 2015 LTIP vesting
While the performance over the 2015 LTIP period has exceeded all
pre-agreed EPS growth targets under the Remuneration Policy, the
CEO volunteered a cut to the vesting outcomes as the Committee
deemed fit.
The Committee considered it appropriate to exercise its discretion to
reduce the vesting outcome for the 2015 LTIP by 50% for the CEO and
CFO. This decision is based on the Committee’s evaluation of
performance in the round and alignment of pay outcomes with the
Shareholder experience
Period
2011–13
2012–14
2013–15
2014–16
2015–17
CAGR EPS p.a.
CEO LTIP vesting
6%
6%
8%
11%
11.5%
40%
40%
80%
50%1
50%2
For awards made from December 2013 onwards, the threshold vesting level reduced from
40% to 20% and the growth required for maximum vesting increased from 9% to 10%.
1 Committee exercised discretion to reduce CEO LTIP vesting.
2 Committee exercised discretion to reduce CEO and CFO LTIP vesting.
2017 single figure
The chart shows the single figures for the CEO and CFO for 2017 as
a result of the decision taken.
c.40% of the single figure total is due to share price growth over
the period.
CEO
CFO
£12.5m
£3.0m
£0m
£2.5m
£5.0m
£7.5m
£10.0m
£12.5m
Fixed pay
Value of LTIP at award
Share price increase of LTIP award
Looking forward
• As previously committed to Shareholders, for future LTIP vesting the 2016 to 2017 EPS growth continues to exclude MJN and related transactions,
•
as set out above.
In addition, in calculating EPS growth from 2017 to 2018, the 2017 EPS figure will be adjusted on a pro-forma basis to include MJN results for the
full year, including notional interest and tax.
• Award sizes have been significantly reduced (see page 83).
• The Remuneration Policy will be reviewed during 2018 and put to Shareholders at the 2019 AGM.
Further details on LTIP vesting (Audited)
Based on the performance assessment above, the 2015 LTIP awards to the CEO and CFO may vest to the following extent on 3 May 2018 for
performance over the completed three-year period:
CEO awards
Shares
Options
CFO awards
Shares
Options
Interests held
Exercise price
Vesting%
Interests vesting
Share price1
Estimated value
240,000
400,000
n/a
50.57
50%
50%
120,000
200,000
£66.67
£66.67
8,000,400
3,220,000
Interests held
Exercise price
Vesting%
Interests vesting
Share price1
Estimated value
45,000
90,000
n/a
50.57
50%
50%
22,500
45,000
£66.67
£66.67
1,500,075
724,500
1 As the share price on the date of vesting is unknown at the time of reporting, the value is estimated using the average market value over the last quarter of 2017 of £66.67.
The actual value at vesting will be disclosed in the 2018 Annual Report.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 87
Single total figure of remuneration for Executive Directors (Audited)
The table below sets out a single figure for the total remuneration received by each Executive Director for the year ended 31 December 2017, based on
the information set out in the previous sections. This is compared to the prior year figure:
Base salary
Taxable benefits1
Annual bonus2
LTIP3,4
Pension benefit5
Total
Rakesh Kapoor
Adrian Hennah
2017
£
2016
£
2017
£
2016
£
£945,209
£33,585
£0
£11,220,400
£281,163
£917,679
£53,991
£0
£14,006,128
£272,904
£613,020
£22,278
£0
£2,224,575
£151,255
£595,165
£21,872
£348,172
£5,640,313
£146,791
£12,480,357
£15,250,702
£3,011,128
£6,752,313
1 Taxable benefits consist primarily of car allowance and healthcare.
2 No bonus paid in respect of 2017 performance.
3 Reflects the estimated value of LTIP shares and options granted in December 2014, which are due to vest on 3 May 2018 at 50%. Valued using an average share price over Q4 of
£66.67. £5.2 million and £1.1 million of the total LTIP value for Rakesh Kapoor and Adrian Hennah respectively is directly attributable to the share price growth over the period
since award. See the relevant section on pages 85 to 86 for more details.
4 These values have been restated from last year, which used an average share price of £69.69 over Q4 2016 to estimate the value the vesting. The actual values shown above are
based on the share price on the date of vesting of £71.64 on 4 May 2017.
5 The Company paid the Executive Directors a cash allowance in respect of pension provision to the value shown in the table above. These payments reflect the full pension provision
outlined in the Policy table. Directors are only entitled to prospective pension on defined contribution basis, with no defined benefit accrual.
Review of past performance
The chart below shows the Total Shareholder Return (TSR) of the Company compared to the UK FTSE 100 Index over the six-year period from
1 January 2012 to 31 December 2017. We have also shown how this translates into creation of value for our Shareholders.
This period represents the full financial years of the tenure of Rakesh Kapoor as CEO.
Relative Total Shareholder Return since 1 January 2012
Creation of Shareholder value since 1 January 2012
2
1
0
2
y
r
a
u
n
a
J
1
t
a
d
e
t
s
e
v
n
i
0
0
1
£
f
o
e
u
a
v
l
£
280
260
240
220
200
180
160
140
120
100
£260
Creation of Shareholder value since 1 January 2012
£172
Market capitalisation at 1 January 2012 (£bn)
Shareholder value at 31 December 2017 (£bn)
£23.2bn
£56.1bn
2012
2013
2014
2015
2016
2017
2018
RB
FTSE 100
£0bn
£10bn
£20bn
£30bn
£40bn
£50bn
£60bn
£70bn
Market capitalisation (1 Jan 2012)
Dividends paid
Increase in market capitalisation
Indivior demerger 1
1 Average market cap of Indivior over the six months following demerger.
The table below sets out the single figure of total remuneration for Rakesh Kapoor in his tenure as Chief Executive. It should be noted that the LTIP
vesting included in the single figure for 2011 to 2013 are in respect of awards made to him prior to his appointment as CEO.
CEO single figure of remuneration (£000)
2011
2012
2013
2014
2015
2016
2017
Rakesh Kapoor
Annual bonus (as a percentage of maximum)
LTIP vesting
£4,497
31%
100%
£8,411
53%
100%
£6,840
100%
40%
£12,777
72%
40%
£25,486
100%
80%
£15,251
0%
50%1
£12,480
0%
50%1
1 The Remuneration Committee exercised discretion to reduce vesting.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements
88
2017 performance and remuneration outcomes
continued
Executive Directors’ shareholding requirements (Audited)
Executive Directors are expected to acquire significant numbers of shares over eight years and retain these until retirement from the Board. The table
below shows the shareholding of each Executive Director against their respective shareholding requirement as of 31 December 2017:
Rakesh Kapoor
Adrian Hennah
Other interests in shares and options under the LTIP
Performance shares
Options held
Shareholding
requirement
(number of
shares)
Shares
owned
outright
To vest in
May 2018
Unvested,
subject to
performance
Vested but
not exercised
To vest in
May 2018
Unvested,
subject to
performance
600,000
200,000
628,054
92,166
120,000
22,500
490,000
121,500
699,176
166,556
200,000
45,000
900,000
243,000
Rakesh Kapoor has exceeded his target and Adrian Hennah has made good progress towards his target to the satisfaction of the Committee. Further
details of the scheme interests contained in the table above are provided in the table on page 93.
The Executive Directors also participate in the all employee sharesave scheme. Details of options held under this plan are set out on page 93.
Shareholding of Executive Directors vs requirement
CEO
CFO2
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
Shareholding requirement
Current shareholding
2017 vesting1
1 2017 vesting shows the estimated number of performance shares which will vest in respect of performance to 2017, after tax.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 Implementation of Executive Director
Remuneration Policy for 2018
89
Salary
As set out earlier in this report, the CEO’s salary for 2018 is unchanged from 2017 at £945,209. With effect from 1 January 2018 the salary for the CFO
is £660,000.
Pension
The CEO and CFO are eligible to receive pension contributions, or equivalent cash allowances, of 30% and 25% of pensionable salary, respectively.
Annual bonus in respect of 2018 performance
For 2018, there will be no changes to the annual bonus opportunities for Executive Directors. Bonuses will continue to be based on RB’s Net Revenue
growth and Adjusted Net Income growth, measured in GBP at a constant exchange rate, with the outcome under each of the measures combined
multiplicatively to give a maximum bonus outcome of 3.57x the target bonus opportunity if both stretch targets are met, as described on page 84.
We have not disclosed the performance target ranges for 2018 as we consider them to be commercially sensitive. However, we commit to
retrospectively disclosing the performance ranges in the Directors’ Remuneration Report for the year ending December 2018.
LTIP (Audited)
The Remuneration Policy approved by Shareholders at the AGM in May 2016 sets out the operation of the LTIP. Whilst the structure for the awards
made to Executive Directors remained in line with the approved Policy, the Committee made a significant reduction in the size of the awards granted
to the CEO for 2018. The number of shares and share options are a third lower than those awarded for 2017.
The table below sets out the 2018 LTIP awards made to Executive Directors on 30 November 2017. These awards do not accrue dividends during the
vesting period. Vesting of these awards in full requires achievement of stretching performance conditions over the three-year period.
Shares over
which awards
granted
Market price
at date of
award1
Date of grant
Exercise price2
Face value3
Performance period
Exercise/vesting period
Performance shares
Rakesh Kapoor
Adrian Hennah
Share options
Rakesh Kapoor
Adrian Hennah
30 Nov 2017
100,000
£64.86
30 Nov 2017
38,250
£64.86
n/a
n/a
£6,486,000 1 Jan 2018-31 Dec 2020
£2,480,895 1 Jan 2018-31 Dec 2020
May 2021
May 2021
30 Nov 2017
200,000
£64.86
£64.99
– 1 Jan 2018-31 Dec 2020 May 2021–Nov 2027
30 Nov 2017
76,500
£64.86
£64.99
– 1 Jan 2018-31 Dec 2020 May 2021–Nov 2027
1 The market price on the date of award is the closing share price on the date of grant.
2 The exercise price is based on the average closing share price over the five business days prior to the date of grant.
3
For performance shares based on the market price at the date of award and assumes the stretching performance criteria are met in order to achieve full vesting. For share options,
the face value at award was zero as the exercise price is higher than the market price at time of award. The face value of shares under option is £12.97 million for Rakesh Kapoor
and £4.96 million for Adrian Hennah if calculated as the number of shares multiplied by the market price at date of award.
In line with RB’s Directors’ Remuneration Policy, vesting of the LTIP awards is dependent on the achievement of stretching targets relating to growth in
EPS over a three-year period, which requires outperformance of peer benchmarks. EPS is measured on an adjusted diluted basis, as shown in the
Group’s Financial Statements, as this provides an independently verifiable measure of performance. However, the Remuneration Committee maintains
the discretion to make adjustments to the measure if this is considered to be appropriate. Any adjustments will be disclosed in the Annual Report on
Remuneration.
There is no retesting. Awards granted in November 2017 will vest on the following schedule, which requires significant compound annual growth in
EPS in order for the awards to vest, as follows:
EPS CAGR
Equivalent to three-year EPS growth of
<6%
6%
<19.1%
19.1%
Between 6% and 10%
≥10%
≥33.1%
Proportion of awards vesting (%)
Nil
20%
Straight-line vesting between 20% and 100%
100%
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements
90
Other required disclosures
Percentage change in CEO remuneration
The table below shows the percentage change in CEO remuneration from the prior year compared to the average percentage change in remuneration
for all UK employees who form part of the management team (‘Top400’). This group has been chosen as it represents the most appropriate
comparator group for reward purposes for our UK-based Group Chief Executive.
The analysis excludes part-time employees and is based on a consistent set of employees, i.e. the same individuals appear in the 2016 and 2017 populations.
Base salary
Taxable benefits
Annual bonus
CEO
Other
employees
% change
2016-2017
% change
2016-2017
3%
-38%
n/a
3%
2%
-81%
The percentage change in taxable benefits for other employees excludes international transfer benefits as this is volatile from year to year based on
each individual’s circumstances.
Relative importance of spend on pay
The table below shows Shareholder distributions (i.e. dividends and share buybacks) and total employee pay expenditure for 2016 and 2017, along
with the percentage change in both.
2017
£
2016
£
% change
2016-2017
Dividends
Share buyback
Total Shareholder distribution (dividends and share buyback)
Total employee expenditure
1,134m 1,035m
10%
–
802m
-100%
1,134m 1,837m
1,597m 1,222m
-38%
31%
Details of employee expenditure are set out in Note 5 to Financial Statements and for 2017 include addition of MJN employees.
Exit payments made in the year (Audited)
No exit payments were made to Executive Directors during the year.
Payments to past Directors (Audited)
No payments were made to past Directors in the year.
Performance graph
The graph below shows the TSR of the Company and the UK FTSE 100 Index over the period since 1 January 2000, representing the period of full
financial years since the merger of Reckitt & Colman plc and Benckiser N.V. and the listing on the London Stock Exchange of Reckitt Benckiser Group
plc. This shows the growth in the value of a hypothetical holding of £100 invested on 31 December 1999. We have also shown the growth in value of
a holding of £100 invested on 31 December 2008, as required by disclosure regulations. The FTSE 100 Index was selected on the basis of companies of
a comparable size in the absence of an appropriate industry peer group in the UK.
Total Shareholder Return since 1 January 2000
Total Shareholder Return since 1 January 2009
2,000
0
0
0
2
1,750
1,500
y
r
a
u
n
a
J
1,250
1
t
a
d
e
t
s
e
v
n
1,000
i
0
0
1
£
f
o
e
u
a
V
l
750
500
250
0
1 Jan 00
1 Jan 01
1 Jan 02
1 Jan 03
1 Jan 04
1 Jan 05
1 Jan 06
1 Jan 07
1 Jan 08
1 Jan 09
1 Jan 10
1 Jan 11
1 Jan 12
1 Jan 13
1 Jan 14
1 Jan 15
1 Jan 16
1 Jan 17
£1,977
£207
1 Jan 18
9
0
0
2
y
r
a
u
n
a
J
1
t
a
d
e
t
s
e
v
n
i
0
0
1
£
f
o
e
u
a
V
l
375
350
325
300
275
250
225
200
175
150
125
100
£355
£242
1 Jan 09
1 Jan 10
1 Jan 11
1 Jan 12
1 Jan 13
1 Jan 14
1 Jan 15
1 Jan 16
1 Jan 17
1 Jan 18
RB
FTSE 100
RB
FTSE 100
The table below sets out the single figure of total remuneration received by the previous CEO (Bart Becht) between 2009 and 2011:
Year
2009
2010
2011
Single figure
(£000)
£28,881
£17,150
£18,076
Annual
bonus (% of
max)
100%
76%
31%
LTIP
vesting
100%
100%
100%
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017
91
Single total figure of 2017 remuneration for Non-Executive Directors and implementation for 2018 (Audited)
The following Non-Executive Director fee policy was in place for the year ended 31 December 2017. The table also sets out the fees that will apply
from 1 January 2018. It should be noted that the increased fee for the Chairman will only apply with effect from the May 2018 AGM.
Role
Base fees
Chairman
Non-Executive Director
Additional fees
Chair of Committee
Member of Committee
Senior Independent Director
2017 fees
2018 fees
Cash fee
Fee delivered
in RB shares
Cash fee
Fee delivered
in RB shares
£324,000
£71,000 £375,000 £125,000
£73,750
£16,250
£75,250
£16,750
£30,000
£15,000
£20,000
–
–
–
£30,000
£15,000
£20,000
–
–
–
The table below sets out a single figure for the total remuneration received by each Non-Executive Director for the year ended 31 December 2017 and
the prior year:
Adrian Bellamy
Jaspal Bindra
Nicandro Durante
Mary Harris
Ken Hydon
Pamela Kirby
André Lacroix
Sue Shim
Chris Sinclair
Judy Sprieser
Doug Tough
Warren Tucker
2017 fees
2016 fees
Cash
Shares
2017
Total
Cash
Shares
2016
Total
£324,000
£71,000 £395,000 £324,000
£71,000 £395,000
–
–
–
£30,928
£5,625
£36,553
£103,750
£16,250 £120,000
£95,119
£16,250 £111,369
£91,250
£16,250 £107,500
£85,652
£16,250 £101,902
£93,750
£16,250 £110,000 £103,750
£16,250 £120,000
£118,750
£16,250 £135,000
£98,390
£16,250 £114,640
£118,750
£16,250 £135,000 £108,750
£16,250 £125,000
–
–
–
£30,928
£5,625
£36,553
£88,750
£16,250 £105,000
£85,652
£16,250 £101,902
£101,250
£16,250 £117,500 £103,750
£16,250 £120,000
–
–
–
£30,928
£5,625
£36,553
£88,750
£16,250 £105,000
£88,750
£16,250 £105,000
Travel and expenses for Non-Executive Directors are incurred in the normal course of business, for example in relation to attendance at Board and
Committee meetings. The costs associated with these are all met by the Company.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements
92
Other required disclosures
continued
Summary of Shareholder voting at the 2017 AGM
The following table shows the results of the voting on the 2016 Directors’ Remuneration Report, at the 2017 AGM, and of the Directors’ Remuneration
Policy at the 2016 AGM:
Approve the 2016 Directors’ Remuneration
Report
452,280,484
87% 65,301,720
13% 517,582,204
3,295,372
Approve the Directors' Remuneration Policy
377,323,671
76% 117,846,630
24% 495,170,301
30,453,974
Votes for
For %
Votes against
Against %
Total
Votes withheld
The Committee continues to have ongoing dialogue with Shareholders with a view to obtaining Shareholder support for our remuneration
arrangements. In particular, over recent years, following consultation with our major Shareholders, we made a number of changes to the
Remuneration Policy, to further align executives with Shareholders. This resulted in Shareholders supporting the 2016 Directors' Remuneration Report.
The Committee has made further changes to the implementation of the Remuneration Policy during 2017 and 2018, which are set out in more detail
earlier in this report. We discussed our proposals with Shareholders and the Committee is grateful for the feedback provided by Shareholders
throughout our engagement on these matters.
Directors’ service contracts
Non-Executive Directors have letters of engagement which set out their duties and time commitment expected. They are appointed for an initial
three-year term, subject to election and annual re-election by Shareholders. Appointments are renewable for subsequent three-year terms by mutual
consent. Details are set out below:
Name
Adrian Bellamy
Nicandro Durante
Mary Harris
Ken Hydon
Pamela Kirby
André Lacroix
Chris Sinclair
Judy Sprieser
Warren Tucker
Date of appointment
Years
Months
Length of service as at 31 Dec 2017
3 December 1999
(Chairman from 7 May 2003)
1 December 2013
10 February 2015
1 December 2003
10 February 2015
1 October 2008
10 February 2015
21 August 2003
24 February 2010
18
4
2
14
2
9
2
14
7
1
1
11
1
11
3
11
4
10
Executive Directors’ service contracts contain a 12-month notice period, as set out in the Directors’ Remuneration Policy. The date of appointment to
the Board for Rakesh Kapoor was 1 September 2011 and for Adrian Hennah was 12 February 2013.
Directors’ service contracts and letters of engagement are available for inspection at the registered office.
External appointments
Adrian Hennah was paid £90,000 in respect of his directorships of RELX PLC, RELX NV and RELX Group plc. He additionally received a notional tax
benefit of £780 related to the preparation of a tax return filed in the Netherlands, required as a result of his directorship of RELX NV.
Advisors
Deloitte LLP (Deloitte) was appointed by the Remuneration Committee as independent advisor effective from 1 January 2014 following a review of the
advisor in late 2013. The Committee undertakes due diligence periodically to ensure that Deloitte remains independent of the Company and that the
advice provided is impartial and objective. Deloitte is a founding member and signatory of the Code of Conduct for Remuneration Consultants, details
of which can be found at www.remunerationconsultantsgroup.com. During 2017, Deloitte LLP also provided the Group with tax services, advice on
employment/share schemes matters, support in relation to the HS issue in South Korea, transaction-related services and analytics and information
management services. These services were provided under separate engagement terms and the Committee is satisfied that the provision of these
services did not impair Deloitte's ability to advise the Committee independently. Their total fees for the provision of remuneration services to the
Committee in 2017 were £255,350 on the basis of time and materials.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 93
Market
price at
date of
award (£)
Market price
at date of
exercise/
vesting (£)
Exercise/
vesting
period
–
–
–
–
–
–
–
– May 16–Feb 23
– May 16–Feb 23
– May 17–Dec 23
– May 18–Dec 24
– May 19–Dec 25
– May 20–Dec 26
– May 21–Nov 27
Option
price (£)
42.61
41.44
46.51
50.57
63.25
67.68
64.99
–
–
–
–
–
46.69
52.40
64.15
66.28
64.86
71.64
–
–
–
–
May 17
May 18
May 19
May 20
May 21
At 31.12.17
704
73,312
92,540
90,000
90,000
76,500
76,500
–
45,000
45,000
38,250
38,250
Directors’ interests in shares and options under the LTIP (Audited)
LTIP
Notes
Grant date
At 1.1.17
Granted
during the
year
Exercised/
vested
during
the year
Lapsed
during the
year
13.2.13
13.2.13
11.12.13
1.12.14
2.12.15
1.12.16
30.11.17
11.12.13
1.12.14
2.12.15
1.12.16
30.11.17
704
73,312
92,540
90,000
90,000
76,500
–
46,270
45,000
45,000
38,250
–
–
–
–
–
–
–
76,500
–
–
–
–
38,250
–
–
–
–
–
–
–
46,270
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Adrian Hennah
Options
Performance-based
restricted shares
Rakesh Kapoor
Options
Performance-based
restricted shares
1
2
2
2
2
1
2
2
2
2
1
1
2
2
2
2
1
2
2
2
2
164,514
5.12.11
329,028
3.12.12
627
11.12.13
11.12.13
410,642
1.12.14 400,000
2.12.15 400,000
1.12.16 300,000
–
–
–
–
–
–
–
– 200,000
30.11.17
164,514
–
–
329,028
–
–
627
–
–
– 205,635 205,007
– 400,000
–
– 400,000
–
– 300,000
–
– 200,000
–
31.20
38.06
47.83
46.51
50.57
63.25
67.68
64.99
–
–
–
–
–
–
–
– May 15–Dec 21
– May 16–Dec 22
– May 17–Dec 23
– May 17–Dec 23
– May 18–Dec 24
– May 19–Dec 25
– May 20–Dec 26
May 21–Nov 27
11.12.13 246,772
1.12.14 240,000
2.12.15 240,000
1.12.16 150,000
30.11.17
– 123,386 123,386
–
–
–
–
–
–
–
– 100,000
–
– 240,000
– 240,000
– 150,000
– 100,000
–
–
–
–
–
46.69
52.40
64.15
66.28
64.86
71.64
–
–
–
–
May 17
May 18
May 19
May 20
May 21
Notes
1 As disclosed in last year’s report, vesting of the award made in December 2013 was 50% for the CEO and 100% for the CFO. This vested following the AGM in 2017 and any
unvested award lapsed.
2 Vesting of the LTIP is subject to the achievement of the following compound average annual growth (CAGR) in adjusted EPS over a three-year period.
EPS CAGR for awards granted in December 2013–2017
Proportion of awards vesting (%)
<6%
Nil
6%
20%
Between 6% and 10%
Straight-line vesting between 20% and 100%
≥10%
100%
Executive employees also participate in the all employee Sharesave Scheme on the same basis as all other employees. The table below details
options held.
Sharesave Scheme
Rakesh Kapoor
Adrian Hennah
Grant date
At 1.1.17
2.9.16
4.9.13
1.9.15
509
403
307
Granted
during the
year
Exercised
during the
year
Lapsed
during the
year
At 31.12.17
Option price
(£)
Market price
at exercise
(£)
Exercise period
–
–
–
–
–
–
–
–
–
509
403
307
58.86
37.20
48.71
– Feb 22–Jul 22
– Feb 19–Jul 19
– Feb 21–Jul 21
There have been no changes to the Directors’ interests as set out in the above tables between 31 December 2017 and 19 March 2018.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements
94
Other required disclosures
continued
Directors’ interests in the share capital of the Company (Audited)
The Directors in office at the end of the year and those in office at 19 March 2018 had the following beneficial interests in the ordinary shares of
the Company:
Adrian Bellamy
Nicandro Durante
Adrian Hennah
Mary Harris
Ken Hydon
Rakesh Kapoor
Pamela Kirby
André Lacroix
Chris Sinclair
Judy Sprieser
Warren Tucker
19 March
2018
31 December
2017
31 December
2016
25,469
434
92,166
1,902
6,062
628,054
3,301
2,786
3,246
4,384
2,318
25,469
434
92,166
1,902
6,062
628,054
3,301
2,786
3,246
4,384
2,318
24,915
323
65,397
1,744
5,946
562,762
3,190
2,672
324
4,264
2,200
Notes
1 No person who was a Director (or a Director’s connected person) on 31 December 2017 and at 19 March 2018 had any notifiable share interests in any subsidiary.
2 The Company’s Register of Directors’ Interests (which is open to inspection) contains full details of Directors’ shareholdings and options to subscribe for shares.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 Report of the Directors
95
The Directors present their Annual Report and audited Financial
Statements of the Group for the year ended 31 December 2017 to the
members of the Company.
Unless expressly specified to the contrary in the Articles, the Company’s
Articles may be amended by a special resolution of the Company’s
Shareholders.
Directors
The Directors who held office during the year and those serving at the
date of this report are:
Adrian Bellamy
Nicandro Durante
Mary Harris
Adrian Hennah
Ken Hydon
Rakesh Kapoor
Pamela Kirby
André Lacroix
Chris Sinclair
Judy Sprieser
Warren Tucker
The biographical details of the current Directors are listed on pages 52 to
55. In September 2017, we announced that Adrian Bellamy will retire as
Chairman at the 2018 AGM on 3 May 2018 and Chris Sinclair will take on
the role of Non-Executive Chairman.
On 19 March 2018, we announced that Judy Sprieser and Ken Hydon will
also retire as Non-Executive Directors at the 2018 AGM.
On 19 March 2018, we also announced that Andrew Bonfield has been
appointed to the Board with effect from 1 July 2018.
Directors’ interests
A statement of Directors’ interests in the share capital of the Company is
shown on page 94.
Details of Executive Directors’ options to subscribe for shares in the
Company are included on page 93 in the audited part of the Directors’
Remuneration Report.
During the year, none of the Directors had a material interest in any
derivative or financial instrument relating to the Company’s shares.
Details of the Directors’ remuneration and service agreements are
disclosed in the Directors’ Remuneration Report on pages 78 to 94.
There are a number of agreements that take effect, alter or terminate
upon a change of control of the Company following a takeover, such as
commercial contracts, bank agreements, property lease arrangements
and employee share plans. None of these are deemed to be significant in
terms of their potential impact on the business of the Group as a whole.
There are no significant agreements between the Company and its
Directors or employees providing for compensation for loss of office or
employment that occurs because of a takeover bid, except that provisions
of the Company’s share plans may cause options and awards granted
under such plans to vest on a takeover.
There is no information that the Company would be required to disclose
about persons with whom it has contractual or other arrangements
which are essential to the business of the Company.
Dividend
In July 2017, the Directors resolved to pay an interim dividend of 66.6
pence per ordinary share (2016: 58.2 pence), which was paid to
Shareholders on 28 September 2017. The Directors recommend a final
dividend for the year of 97.7 pence per share (2016: 95.0 pence) which,
together with the interim dividend, makes a total for the year of 164.3
pence per share (2017: 153.2 pence). The final dividend, if approved by
the Shareholders, will be paid on 24 May 2018 to Shareholders on the
register at the close of business on 13 April 2018.
Share capital
As at 31 December 2017, the Company’s issued share capital consisted of
736,535,179 ordinary shares of 10p each, of which 703,804,573 were
with voting rights and 32,730,606 ordinary shares were held in Treasury.
Details of changes to the ordinary shares issued and of options and
awards granted during the year are set out in Notes 23 and 24 to the
Financial Statements.
No Director has a material interest in any ‘contract of significance’ (as that
term is defined by the FCA) to which the Company, or any of its
subsidiary undertakings, is a party.
The Articles contain the rights and obligations attached to the Company’s
ordinary shares.
Takeover directive
The Company is required to disclose certain additional information
required by s.992 of the Companies Act 2006 (CA 2006) which
implemented the EU Takeover Directive. The following sets out disclosures
not covered elsewhere in this Annual Report.
There are no restrictions on the voting rights attached to the Company’s
ordinary shares or the transfer of securities other than certain restrictions
which may from time to time be imposed by laws, for example, insider
trading law, in accordance with the EU Market Abuse Regulation, certain
employees require the approval of the Company to deal in the Company’s
ordinary shares.
The Board’s power to appoint Directors is contained in the Company’s
Articles of Association (the Articles). The Articles stipulate an appointed
Director must submit themselves for election at the first AGM following
their appointment. In addition, all Directors are required to offer
themselves for re-election every three years. However, in accordance with
the principles of the UK Corporate Governance Code (the Code),
Directors submit themselves annually and will re-submit themselves at the
forthcoming AGM.
There are no restrictions on the voting rights attached to the Company’s
ordinary shares or the transfer of securities in the Company except, in the
case of transfers of securities:
• that certain restrictions may from time to time be imposed by laws
and regulations (for example, insider trading laws); and
• pursuant to the Listing Rules of the United Kingdom Listing Authority
whereby certain employees of the Company require the approval of
the Company to deal in the Company’s ordinary shares.
The Board is responsible for the management of the business of the
Company and may exercise all the powers of the Company subject to the
provisions of the Company’s Articles and with regard to their statutory
duties as Directors under the CA 2006.
No person holds securities in the Company which carry special voting
rights with regard to control of the Company. The Company is not aware
of any agreements between holders of securities that may result in
restrictions on the transfer of securities or on voting rights.
The Articles contain specific provisions and restrictions regarding the
Company’s power to borrow money. Powers relating to the alteration of
share capital are also included in the Articles and Shareholders are asked
to renew such authorities each year at the AGM. A copy of the Articles is
available from the Company’s website at www.rb.com or can be obtained
upon written request from the Company Secretary or from the UK
Registrar of Companies.
Allotment of shares
In accordance with the CA 2006, Directors may only allot shares or grant
rights to subscribe for, or convert any security into, shares if authorised to
do so by Shareholders at a general meeting. The authority granted to the
Directors at the 2017 AGM under s.551 CA 2006 will expire at the
conclusion of this year’s AGM. At the 2018 AGM, a resolution will be
proposed to the Shareholders to renew the Directors’ authority to allot
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 96
Report of the Directors
continued
equity shares representing approximately one-third of the Company’s
issued share capital as at the latest practicable date prior to the
publication of the Notice of AGM. In accordance with the Investment
Association Share Capital Management Guidelines, Directors will once
again seek authority to allot further ordinary shares, in connection with a
pre-emptive offer by way of a rights issue, up to a further one-third of
the Company’s existing issued share capital on the same date. The
authorities sought would, if granted, expire at the earlier of six months
after the Company’s next accounting reference date, or at the conclusion
of the AGM of the Company held in 2019, whichever is the sooner.
Under s.561 CA 2006, Shareholders have a right of first refusal in relation
to certain issues of new shares. A special resolution will also be proposed
to renew the Directors’ power to make non-pre-emptive issues for cash
up to a nominal amount representing less than 10% of the Company’s
issued share capital as at the latest practicable date prior to the
publication of the Notice of AGM. The resolution would also permit
Directors, within the same aggregate limit, to sell for cash, shares that
may be held by the Company in Treasury. In accordance with the
Pre-Emption Group’s Statement of Principles and the Investment
Association and the Pensions and Lifetime Savings Associations’
supporting guidelines, the Directors confirm their intention that, other
than in relation to a rights issue, no more than 5% of the issued ordinary
share capital of the Company, exclusive of treasury shares, will be issued
for cash on a non-pre-emptive basis and no more than 7.5% of the share
capital of the Company, exclusive of treasury shares, will be allotted for
cash under a non-pre-emptive basis over a rolling three-year period
without prior consultation with Shareholders, in each case other than in
connection with an acquisition or specified capital investment which is
announced contemporaneously with the allotment or which has taken
place in the preceding six-month period and is disclosed in the
announcement of the allotment. At the 2017 AGM, the Company
decided in line with best practice recommendations to split the section
561 resolution into two separate resolutions. At this year’s AGM the
resolution will again be proposed as two separate resolutions. The first
resolution seeks authorisation for 5% of the issued ordinary share capital
to be issued on an unrestricted basis, whilst the second resolution seeks
authority for the additional 5% of the issued ordinary share capital to be
used for an acquisition or a specified capital investment. This authority
will maintain the Company’s flexibility in relation to future share issues,
including issues required to finance business opportunities, should
appropriate circumstances arise.
Authority to purchase own shares
Authority was granted to Directors at the 2017 AGM to repurchase shares
in the market and this authority remains valid until the conclusion of this
year’s AGM. There were no share repurchases during 2017.
At the 2018 AGM, the Directors will seek to renew the authority granted
to them. Such authority, if approved, will be limited to a maximum of
69 million ordinary shares, representing less than 10% of the Company’s
issued ordinary share capital (excluding treasury shares) calculated as at
the latest practicable date prior to publication of the Notice of AGM, and
sets the minimum and maximum prices which may be paid. The
Company’s present intention is to hold shares acquired under such
authority in Treasury to satisfy outstanding awards under employee share
incentive plans.
Employees
During 2017, the Group employed an average of 40,400 (2016: 34,700)
employees worldwide, of whom 3,431 (2016: 3,384) were employed in
the UK. The Group is committed to the principle of equal opportunity in
employment: no applicant or employee receives less favourable treatment
on the grounds of nationality, age, gender, religion, race, ethnicity or
disability. The Group recognises its responsibilities to disabled persons
and endeavours to assist them to make their full contribution at work.
Where employees become disabled, every practical effort is made to
allow them to continue in their jobs or to provide retraining in suitable
alternative work. It is essential to the continued improvement in efficiency
and productivity throughout the Group that each employee understands
the Group’s strategies, policies and procedures. Open and regular
communication with employees at all levels is an essential part of the
management process. A continuing programme of training and
development reinforces the Group’s commitment to employee
development.
Regular departmental meetings are held where opinions of employees
are sought on a variety of issues. The Group operates multi-dimensional
internal communications programmes which include the provision of a
Group intranet and the publication of regular Group newsletters.
Group incentive schemes reinforce financial and economic factors
affecting the performance of the business. Employees typically have three
to five performance objectives which are directly linked to their job and
their specific contribution to the overall performance of the Group. In
addition, presentations and videos are given to employees around the
Group on publication of the Group’s financial results.
The Board encourages employees to become Shareholders and to
participate in the Group’s employee share ownership schemes, should
they so wish. Savings-related share plans covering most of the world give
employees the opportunity to acquire shares in the Company by means of
regular savings.
Political donations
Authority is sought each year from Shareholders, on a precautionary
basis, to approve political donations and incur political expenditures in
accordance with the requirements of Part 14 CA 2006 as the definitions
in the Act are broad. No political donations or expenditure of the type
requiring disclosure under s.366 and s.367 of the CA 2006 were made in
the year ended 31 December 2017 nor are any contemplated.
Independent Auditor
A resolution recommending to the Company’s Shareholders that KPMG
LLP be appointed as External Auditor for the financial year ending
31 December 2018 will be proposed at the AGM.
Further disclosures
Further information, including information fulfilling the further disclosure
requirements contained in the CA 2006, Schedule 7 of the Large and
Medium-sized Companies and Groups (Accounts and Reports)
Regulations 2008 and the FCA’s Listing Rules and Disclosure Guidance
and Transparency Rules can be found in the following sections of the
Annual Report for the period ended 31 December 2017 which are
incorporated into the Report of the Directors by reference:
Acquisitions and disposals
Awards under employee share schemes
Corporate Governance Statement including internal control
and risk management statements
Directors’ interests in the share capital of the Company
Directors’ Statement of Responsibilities, including disclosure
of information to the Auditor
Disclosure of greenhouse gas (GHG) emissions
Employment policy and employee involvement
Environmental, social and governance (ESG) matters
Financial risk management and financial instruments
Future developments in the business
Post Balance Sheet events
Research and development activities
Shareholder information
Sustainability and corporate responsibility
Viability Statement
Page
152-153
147-151
61-68
94
98
22
96
13-23
132-137
1-51
153
13-23
176-178
76-77
43
There is no additional information requiring disclosure under Listing Rule
9.8.4R.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 97
Substantial shareholdings
As at 31 December 2017 and as at 19 March 2018, pursuant to DTR5 of
the FCA’s Disclosure Guidance and Transparency Rules, the Company had
received the following notices of substantial interests (3% or more) in the
total voting rights of the Company:
Holder
Date of last TR-1 notification
Nature of
interest
% of voting
rights
JAB Holdings B.V.
Massachusetts Financial
Services Company and/
or its subsidiaries
7 November 2017
Direct
5.99
16 January 20131
Indirect
5.00
1 Under a s.793 CA 2006 request Massachusetts Financial Services Company confirmed
on 5 February 2018 that their aggregate holding had increased to 59,476,148 shares
and 2,239,909 American Depositary Receipts (ADRs), of which they had the ability to
vote 7.36% and 0.28%, respectively.
Corporate Governance Statement
In compliance with the Disclosure Guidance and Transparency Rules 7.2.1,
the disclosures required by DTR 7.2.2 to 7.2.7 and 7.2.8A are set out in
this Report of the Directors and in the Corporate Governance Statement
on pages 61 to 68 which together with the Directors’ Statement of
Responsibilities are incorporated by reference into this Report of the
Directors.
Annual General Meeting
The forthcoming AGM of Reckitt Benckiser Group plc will be held on
3 May 2018 at 11.15am at the London Heathrow Marriott Hotel, Bath
Road, Hayes, Middlesex UB3 5AN. A separate Notice of Meeting, setting
out the resolutions to be proposed to Shareholders, is available at
www.rb.com. The Board considers that each of the resolutions is in the
best interests of the Company and the Shareholders as a whole. The
Directors unanimously recommend that Shareholders vote in favour of all
the resolutions as they intend to do in respect of their own beneficial
holdings.
By Order of the Board
Rupert Bondy / Company Secretary
Reckitt Benckiser Group plc
103-105 Bath Road
Slough, Berkshire SL1 3UH
Company registration number: 6270876
Legal Entity Identifier: 5493003JFSMOJG48V108
19 March 2018
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 98
Directors’ Statement
of Responsibilities
Going concern
The Group’s business activities, together with the factors likely to affect
its future development, performance and position, are set out in the
Strategic Report on pages 1 to 51. The financial position of the Group
and Parent Company, its cash flows, liquidity position and borrowing
facilities, as well as the Group’s objectives, policies and processes for
managing its capital; its financial risk management objectives; details of
its financial instruments and hedging activities; and its exposure to credit
risk and liquidity risk, are described in the Strategic Report on pages 1 to
51 and in Note 14 to the Group Financial Statements.
The Group has considerable financial resources together with a diverse
customer and supplier base across different geographical areas and
categories. As a consequence, the Directors believe that the Group and
Parent Company are well placed to manage their business risks
successfully despite the current uncertain economic outlook.
The Directors have a reasonable expectation that the Group and Parent
Company have adequate resources to continue in operational existence
for at least 12 months. Thus, they continue to adopt the going concern
basis of accounting in preparing the annual Financial Statements in
accordance with the FRC’s ‘Guidance on risk management, internal
control and related financial business reporting’. This statement is also
made to fulfil the requirements of Listing Rules 9.8.6R(3) and 9.8.10R(1)
and C.1.3 of the Code.
Disclosure of information to Auditor
The Directors, having made appropriate enquiries, state that:
1) so far as each Director is aware, there is no relevant audit information
of which the Auditor is unaware; and
2) each Director has taken all the steps that he/she ought to have taken
as a Director to make him/herself aware of any relevant audit
information and to establish that the Group and Parent Company’s
Auditor is aware of that information.
By Order of the Board
Rupert Bondy / Company Secretary
Reckitt Benckiser Group plc
103-105 Bath Road
Slough, Berkshire SL1 3UH
Company registration number: 6270876
19 March 2018
The Directors are responsible for preparing the Annual Report and the
Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Financial Statements for
each financial year. Under that law the Directors have prepared the Group
Financial Statements in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union and Parent Company
Financial Statements in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting Standards,
comprising FRS 102 ‘The Financial Reporting Standard applicable in the
UK and Republic of Ireland’, and applicable law). In preparing the Group
Financial Statements, the Directors have also elected to comply with
IFRSs, issued by the International Accounting Standards Board (IASB).
Under company law the Directors must not approve the Financial
Statements unless they are satisfied that they give a true and fair view of
the state of affairs of the Group and Parent Company and of the profit or
loss of the Group and Parent Company for that period. In preparing the
Financial Statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• state whether applicable IFRSs as adopted by the European Union and
IFRSs issued by IASB have been followed for the Group Financial
Statements and United Kingdom Accounting Standards, comprising
FRS 102, have been followed for the Parent Company Financial
Statements, subject to any material departures disclosed and
explained in the Financial Statements;
• make judgements and accounting estimates that are reasonable and
prudent; and
• prepare the Financial Statements on the going concern basis unless it
is inappropriate to presume that the Group and Parent Company will
continue in business.
The Directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Group and Parent Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Parent Company and the Group and enable them
to ensure that the Financial Statements and the Directors’ Remuneration
Report comply with the Companies Act 2006 and, as regards the Group
Financial Statements, Article 4 of the IAS Regulation. They are also
responsible for safeguarding the assets of the Parent Company and the
Group and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the
Parent Company’s website. Legislation in the United Kingdom governing
the preparation and dissemination of Financial Statements may differ
from legislation in other jurisdictions.
The Directors consider that the Annual Report and Financial Statements,
taken as a whole, are fair, balanced and understandable and provide the
information necessary for Shareholders to assess the Group and Parent
Company’s position and performance, business model and strategy.
Each of the Directors, whose names and functions are listed on pages 52
to 55, confirm that, to the best of his/her knowledge:
• the Parent Company Financial Statements, which have been prepared
in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, comprising FRS 102
‘The Financial Reporting Standard applicable in the UK and Republic
of Ireland’, and applicable law), give a true and fair view of the assets,
liabilities, financial position and profit of the Company;
• the Group Financial Statements, which have been prepared in
accordance with IFRSs as adopted by the EU and IFRSs as issued by the
IASB, give a true and fair view of the assets, liabilities, financial
position and profit of the Group; and
• the Strategic Report includes a fair review of the development and
performance of the business and the position of the Group and Parent
Company, together with a description of the principal risks and
uncertainties that it faces.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 Contents
99
Financial Statements
100
Independent Auditors’ Report to the
Members of Reckitt Benckiser Group plc
108 Group Income Statement
109 Group Statement of Comprehensive Income
110 Group Balance Sheet
111 Group Statement of Changes in Equity
112 Group Cash Flow Statement
113
154
155 Parent Company Balance Sheet
156 Parent Company Statement of Changes in Equity
160 Notes to the Parent Company Financial Statements
Notes to the Financial Statements
Five Year Summary
Other Information
176
Shareholder Information
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 100
Independent Auditors’ Report
to the Members of Reckitt Benckiser Group plc
Report on the audit of the Financial Statements
Opinion
In our opinion:
• Reckitt Benckiser Group plc’s Group Financial Statements and Parent Company Financial Statements (the “Financial Statements”) give a true and fair
view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2017 and of the Group’s profit and cash flows for the year
then ended;
• the Group Financial Statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
• the Parent Company Financial Statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, comprising FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of
Ireland”, and applicable law); and
• the Financial Statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group Financial
Statements, Article 4 of the IAS Regulation.
We have audited the Financial Statements, included within the Annual Report and Financial Statements (the “Annual Report”), which comprise:
the Group and Parent Company Balance Sheets as at 31 December 2017; the Group Income Statement and Statement of Comprehensive Income,
the Group Cash Flow Statement, and the Group and Parent Company Statements of Changes in Equity for the year then ended; and the Notes
to the Financial Statements, which include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
Separate opinion in relation to IFRSs as issued by the IASB
As explained in Note 1 to the Financial Statements, the Group, in addition to applying IFRSs as adopted by the European Union, has also applied IFRSs
as issued by the International Accounting Standards Board (IASB).
In our opinion, the Group Financial Statements have been properly prepared in accordance with IFRSs as issued by the IASB.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under ISAs
(UK) are further described in the Auditors’ responsibilities for the audit of the Financial Statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the Financial Statements in the
UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group
or the Parent Company.
Other than those disclosed in the Audit Committee Report and Note 4 to the Financial Statements, we have provided no non-audit services to the
Group or the Parent Company in the period from 1 January 2017 to 31 December 2017.
Our audit approach
Overview
• Overall Group materiality: £145 million (2016: £138 million), based on 5% of profit before tax from continuing
operations, adjusted for exceptional items.
• Overall Parent Company materiality: £72 million (2016: £72 million), based on 0.5% of total assets.
Materiality
• We conducted audit work over 57 reporting units across 18 countries in which the Group has significant
Audit scope
Key audit
matters
operations.
• The reporting units where we performed an audit of their complete financial information accounted for 74% of
Group revenue and 78% of Group profit before income tax, adjusted for non-recurring exceptional items.
• The Group engagement team visited, in person, 12 of the 19 component audit teams to attend audit clearance
meetings and discuss the audit approach and findings with those local teams.
• For those countries not visited in person we attended their clearance meetings via phone call or video
conferencing.
• We maintained regular contact with the local team and evaluated the outcome of their audit work.
• We reviewed the working papers of Deloitte & Touche LLP (“Deloitte”) who performed the audit of the
Mead Johnson Nutrition sub-group.
• Accounting for customer trade spend (Group).
• Provision for uncertain tax positions (Group).
• Valuation of provisions from liabilities arising from legal investigations (Group and Parent Company).
• Accounting for the Mead Johnson acquisition (Group).
• The classification of adjusting items (Group).
• Goodwill and intangible asset impairment assessment (Group).
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017
101
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the Financial Statements. In particular, we
looked at where the directors made subjective judgements, for example in respect of significant accounting estimates that involved making
assumptions and considering future events that are inherently uncertain.
We gained an understanding of the legal and regulatory framework applicable to the Group and the industry in which it operates, and considered the
risk of acts by the Group which were contrary to applicable laws and regulations, including fraud. We designed audit procedures at Group and
significant component level to respond to the risk, recognising that the risk of not detecting a material misstatement due to fraud is higher than the
risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations,
or through collusion. We focused on laws and regulations that could give rise to a material misstatement in the Group and Parent Company Financial
Statements, including, but not limited to, the Companies Act 2006, the Listing Rules, UK tax legislation and equivalent local laws and regulations
applicable to significant component teams. Our tests included, but were not limited to, review of the financial statement disclosures to underlying
supporting documentation, review of correspondence with legal advisors, enquiries of management, review of significant component auditors' work
and review of internal audit reports in so far as they related to the Financial Statements. There are inherent limitations in the audit procedures
described above and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the Financial
Statements, the less likely we would become aware of it.
We did not identify any key audit matters relating to irregularities, including fraud. As in all of our audits we also addressed the risk of management
override of internal controls, including testing journals and evaluating whether there was evidence of bias by the directors that represented a risk of
material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the Financial Statements of
the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors,
including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the
engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit
of the Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This is not a
complete list of all risks identified by our audit.
Key audit matter
How our audit addressed the key audit matter
Accounting for customer trade spend
Refer to page 73 (Audit Committee review of areas of significant
judgement) and page 114 (Accounting Policies).
As is industry practice, in a number of countries in which the Group
operates there are numerous types of complex commercial arrangements
with retailers and other customers that have a range of terms (for example
promotions, rebates and discounts).
Trade spend arrangements have varying terms, some of which are
supported by annual contracts or joint business plans, whilst others
are based on shorter term agreements entered into during the year. In
addition, the level and timing of promotions for individual products or
ranges varies from period to period, and activity can span over a year end.
These judgements impact the reported results of the country, segment
and the Group and in particular influence the calculation of net revenue
and country operating profit, both of which are key performance
indicators for management incentive schemes.
We consider there to be a specific risk associated with the accuracy of the
trade spend that has been incurred in the year as this is material and can be
complex and judgemental. In particular we focused on the approval of the
arrangements, the period to which the spend relates and whether balances
had been settled. In addition, we focused on estimates of the obligations
at the reporting date in respect of all trade spend arrangements ("trade
spend accruals"). We focused on this area due to the complexity and level
of judgement required in making the key assumptions underpinning the
estimates. For example:
• The date of shipment to the retailer and the period over which the
promotion will run may differ;
• Details of the retailers’ EPOS data may be required to determine the
accuracy of trade spend committed at the reporting date: and
• Promotions may span over the year end and therefore estimation of the
future volume or margin levels of the retailer must be forecast to
determine the level of the accrual required.
Therefore, our areas of focus included whether the accruals were misstated
and appropriately valued, whether trade spend was recorded in the correct
period and whether the significant one-off transactions had been
accurately recorded in the Income Statement.
Our audit procedures included understanding and evaluating the controls
and systems related to the trade spend process, and where appropriate
obtaining audit evidence through testing operating effectiveness of
relevant controls together with substantive audit procedures.
Testing of controls included examining appropriate authorisation for trade
spend agreements and contracts, considering segregation of duties over
the creation and approval of the accruals and testing the resolution of
variations between actual and expected trade spend.
The substantive audit procedures performed for each individual
component varied depending upon the component team and the nature
of the trade spend and type of agreement but included the following
tests, on a sample basis:
• Agreeing costs incurred during the year to invoices and other
correspondence from the customers and subsequent settlement;
• Agreeing key elements of the estimates to supporting documentation
such as joint business plans, contracts and EPOS data;
• Circularising external confirmations to the customers to confirm the
existence of specific promotions and the underlying key assumptions
of the accrual calculation;
• Recalculating management’s estimates;
• Evaluating the accuracy of the prior year trade spend balance by
comparing the historic accruals to actual spend incurred; and
• Testing trade spend transactions around the year end to determine
whether they had been recognised in the appropriate period.
As the Group engagement team, we were specifically involved in
determining and assessing the appropriateness of the audit approach for
each component in this area. This satisfied us that sufficient focus was
placed on the more judgemental areas and that, whilst complex, the area
was well understood and sufficient focus was placed on the risk area.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 102
Independent Auditors’ Report
to the Members of Reckitt Benckiser Group plc
continued
Key audit matter
How our audit addressed the key audit matter
Provision for uncertain tax positions
Refer to page 49 (Principal risks) and page 73 (Audit Committee review of
areas of significant judgement), Note 7 (Income Tax Benefit/Expense) and
Note 21 (Current and Non-current Tax Liabilities).
Due to the Group operating across a number of different tax jurisdictions it
is subject to periodic challenges by local tax authorities on a range of tax
matters during the normal course of business. These challenges include
transaction related tax matters, financing and transfer pricing
arrangements arising from centralised functions that drive value across a
number of different countries.
Where the amount of tax payable is uncertain, the Group establishes
provisions based on management’s judgement of the probable amount of
the liability.
We updated our detailed understanding of the Group’s tax strategy and
Group transfer pricing policy, particularly in relation to any changes
implemented during 2017 and we assessed key technical tax issues and
risks related to business and legislative developments using, where
applicable, our local and international tax specialists.
We obtained explanations from management and corroborative evidence
including, communication with local tax authorities, details of progress
with Advanced Pricing Agreements and copies of external tax advice
reports relating to tax treatments applied and the corresponding
provisions recorded.
We challenged management’s key assumptions, in particular on cases
where there had been significant developments with local tax authorities,
noting no significant deviations from our expectations.
We focused on the judgements made by management in assessing the
quantification and likelihood of certain potential exposures and therefore
the level of provision required for specific cases. We also considered the
impact of changes in country tax environments across the Group, which
could materially impact the amounts recorded in the Financial Statements.
We also evaluated whether the liabilities and potential exposures were
appropriately disclosed in the Financial Statements, which included the
classification of interest and tax penalties in line with the recent
clarification by the IFRS Interpretations Committee.
Valuation of provisions from liabilities arising from legal investigations
Refer to page 46 and 50 (Principal risks), Note 17 (Provisions for liabilities
and Charges) and Note 19 (Contingent Liabilities and Assets).
Our audit procedures focused on the assumptions and judgements made
by management in determining the recognition and valuation of
associated provisions and contingent liabilities.
In 2017 the Group has been subject to legal investigations in respect of the
Humidifier Santizer (HS) issue and the Group is involved in ongoing
investigations by the US Department of Justice (‘DOJ’). As at the balance
sheet date the Group has recorded provisions for both of these issues.
There is a high level of management judgement associated with
determining the need for, and the magnitude of, provisions for any
liabilities arising from these investigations. The Group has not made a
public commitment to compensate Round 4 applicants in the HS issue case
and hence have not recorded a provision for Round 4 compensation.
Therefore, we consider there to be a risk that the provisions may be held at
the incorrect value on the Balance Sheet and that disclosure within the
Annual Report in respect of these cases and their potential impact on the
Financial Statements may not be sufficient.
With regards to the provisions recorded for the HS issue, we obtained
and read relevant legal documents and reports from the Korean Ministry
of the Environment. In addition, we obtained legal confirmation from the
Group’s external legal counsel. We audited management’s provisions
recorded using underlying information on the number of individuals
classified in Rounds 1 - 3 and the payments made to date.
We challenged management on the need to provide for Round 4 victims
in the HS issue and have obtained copies of the correspondence with
local authorities on the consistency of the categorisation of victims. We
have performed our own sensitivities based on categorisation and
payments made in previous Rounds and have noted that based on an
expected number of Category I and II RB users the additional provision
required would not be material.
We have obtained management’s expert’s calculation for the future
medical provision and have used our actuarial experts to confirm the
appropriateness of the assumptions used by management’s expert. No
material issues were noted.
In respect of the DOJ matter, we obtained confirmations from the
Group’s external legal counsel on the status of discussions, and compared
its description and assessment of the facts and circumstances of the cases
and, where applicable the potential outcome against management’s and
the internal legal team’s assessment. We did not identify any significant
inconsistencies.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 103
Key audit matter
How our audit addressed the key audit matter
Accounting for the Mead Johnson Nutrition acquisition
Refer to page 50 (Principal Risks) and Note 27 (Acquisitions)
On 15 June 2017 the Group acquired Mead Johnson Nutrition (‘MJN’). Due
to the size of the acquisition and the complexity and reliance on
management’s estimates and judgements, the acquisition accounting has
been an area of focus for us. The Group has calculated the provisional
purchase price allocation and has identified fair value adjustments to
property, plant and equipment, inventories and identified intangible assets.
The identification and valuation of intangibles is a judgemental area and
involves a number of management assumptions around synergies, cash
flow growth rates and the value that certain contracts may add to the
business.
The classification of adjusting items
Refer to page 114 (accounting policies) and Note 3 (Analysis of Net
Operating Expenses).
In the past few years the Group has had significant levels of ‘exceptional
items’ which were disclosed separately within the Income Statement and
excluded from management’s reporting of the underlying results of the
business. This year the Group has redefined its accounting policy to identify
adjusting items which comprise ‘exceptional adjusting items’ and ‘other
adjusting items’.
These ‘adjusting items’ are differentiated by whether they are one -off
(‘exceptional’) or recurring (‘other’) in nature.
The Group has identified £3,864 million of net adjusting items which relate
primarily to the gain on the disposal of the Food business, tax credits
resulting from the US tax reforms, costs associated with the acquisition of
Mead Johnson Nutrition, the recognition of a provision in relation to the
DoJ investigation and ‘Group-led’ restructuring programmes.
Our specific area of focus was to assess whether the items identified by
management met the definition within the Group’s accounting policy and
have been treated consistently, as the identification of such items required
judgement by management. Consistency in the identification and
presentation of these items is important to ensure comparability of
year-on-year reporting within the Annual Report and Financial Statements.
We have obtained the purchase price allocation performed by
management’s experts and considered their methodology and
assumptions using our own valuation experts.
We have assessed the cash flows for each of the brands and the
associated synergies, and considered the accounting with respect to the
incremental value derived from the Special Supplemental Nutrition
Program for Women, Infants and Children, including the finite period of
these contracts.
We have understood management’s opening balance sheet adjustments
and obtained supporting evidence to corroborate these. We note that
measurement period adjustments posted since June 2017 are not
material.
In addition, we instructed the component auditor, Deloitte, to audit the
opening balance sheet.
No material issues were noted from the procedures performed.
We obtained corroborative evidence for the items presented within
‘adjusting items’.
We challenged management’s rationale for the designation of certain
items as ‘adjusting’ and assessed such items against the Group’s
accounting policy and the consistency of treatment with prior periods.
We considered the new ‘adjusting’ items in 2017 and whether these had
been appropriately classified as ‘exceptional’ or recurring. We did not find
any issues with the classifications and nature of the items.
We also considered whether there were items that were recorded within
underlying profit that we determined to be ‘adjusting’ in nature and
should have been included within ‘adjusting items’. No such items were
identified.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 104
Independent Auditors’ Report
to the Members of Reckitt Benckiser Group plc
continued
Key audit matter
How our audit addressed the key audit matter
Goodwill and intangible asset impairment assessment
Refer to page 73 (Audit Committee review of areas of significant
judgement) and Note 9 (Goodwill and Other Intangible Assets)
The Group has goodwill of £11,501 million and other indefinite lived
intangible assets of £17,198 million as at 31 December 2017 which are
required to be tested for impairment on an annual basis. Management has
allocated these assets to individual cash generating units (CGUs) and
groups of CGUs (GCGUs) and there is judgement around how these are
determined, specifically in respect of changes in the year.
In 2017 the Group acquired Mead Johnson Nutrition and as a result
recognised goodwill valued at £7,730 million and indefinite lived intangible
assets of £8,138 million at the balance sheet date. The Group has created a
new GCGU for IFCN. In line with requirements an impairment assessment
has been performed in the year of acquisition.
There is further judgement around the determination of the recoverable
amount, being the higher of value in use and fair value less costs of
disposal. Recoverable amounts are based on management’s view of the
future results and prospects of the business, the appropriate discount rates
to be applied and specific risk factors applied to the GCGUs and CGUs.
Due to BMS and Oriental Pharma being relatively recent acquisitions, and
the regulatory changes within the Chinese healthcare market which
impacted Oriental Pharma’s current year trading, these CGUs remain
sensitive to changes in key assumptions. The key judgements in
determining the recoverable amount of these CGUs relate to the forecast
cash flows, long-term growth rates and product contribution.
We evaluated the process by which management prepared its cash flow
forecasts and compared them against the latest Board approved plans
and management approved forecasts. We evaluated the historical
accuracy of the plans and forecasts, for example by comparing the
forecasts used in the prior year model to the actual performance of the
business in the current year. These procedures enabled us to determine
the accuracy of the forecasting process and apply appropriate sensitivities
to the cash flows.
We assessed the appropriateness of management’s discount rates, future
cash flows and long-term growth rates, specifically focusing on the CGUs
identified opposite. We benchmarked assumptions against industry and
peer group comparators and metrics such as country inflation rates.
Based upon our assessments described above, we challenged
management on the appropriateness of its sensitivity calculations by
applying our own sensitivity analysis to the forecast cash flows, long-term
growth rates and discount rates to ascertain the extent to which
reasonable adverse changes would, either individually or in aggregate,
require an impairment of either the goodwill or indefinite life assets.
Following these assessments we concluded that sensitivity disclosures
were only required for the BMS and Oriental Pharma CGUs.
We determined that no impairment charges were required, based on the
results of our work. Management has described the key sensitivities
applied in the ‘Goodwill and other intangible assets’ note to the Financial
Statements.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the Financial Statements as a whole,
taking into account the structure of the Group and the Parent Company, the accounting processes and controls, and the industry in which they
operate.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the Financial Statements as a whole,
taking into account the geographic structure of the Group, the accounting processes and controls, and the industry in which the Group operates.
The Group is organised into two geographical regions being DvM (Developing Markets including North Africa, Middle East (excluding Israel), North
Africa and Turkey, Africa, South Asia, North Asia, Latin America and ASEAN) and ENA (Europe (including Russia and Israel), North America and
Australia and New Zealand). There is also a separate segment for the IFCN business which the Group acquired in June 2017. In addition, the previously
reported Food segment is no longer reported following the disposal of the business in the year and its classification as a discontinued operation.
Each country within the aforementioned geographical regions and IFCN consists of a number of management reporting entities which are consolidated
by Group management. The Group Financial Statements are a consolidation of 777 reporting units representing the operating businesses within these
geographical-based divisions and the centralised functions.
The reporting units vary in size and we identified 42 components from across the two geographic regions and IFCN business that required an audit of
their complete financial information due to their individual size or risk characteristics. The components where we performed an audit of their complete
financial information accounted for 78% of the Group’s profit before income tax for continuing operations, adjusted for exceptional items and 74% of
the Group’s revenue. Included within these 42 components were three components that were audited by the Group engagement team, including the
Group’s treasury company and the Parent Company. One of our components was the sub-consolidated MJN group which was audited by Deloitte.
Audits of the revenue financial statement line item were performed in a further two reporting units.
The 39 components, excluding those audited by the Group engagement team, are audited by 19 component auditor teams. The Group engagement
team visited 12 of the 19 local component teams to meet with local management, attend audit clearance meetings and discuss the audit approach and
findings with the local audit teams. Of the seven components not visited we attended their clearance meetings either via phone or video call. For those
countries not visited we had regular communication with the local teams, both before and after their audit. Our attendance at the clearance meetings,
review and discussion of the audit results at overseas locations, together with the additional procedures performed at a Group level described below,
gave us the evidence we needed for our opinion on the Group Financial Statements as a whole. In addition, we visited eight components not in scope
for the Group audit, to further enhance our understanding of both the RB and MJN businesses.
Our audit procedures at the Group level included the audit of the consolidation, the UK pension schemes (due to their size) and certain tax procedures.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017
105
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with
qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual
financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the Financial
Statements as a whole.
Based on our professional judgement, we determined materiality for the Financial Statements as a whole as follows:
Overall
materiality
Group Financial Statements
£145 million (2016: £138 million).
Parent company Financial Statements
£72 million (2016: £72 million).
How we
determined it
5% of profit before tax from continuing operations, adjusted for non-
recurring adjusting items.
0.5% of total assets.
Rationale for
benchmark
applied
Profit before income tax from continuing operations, adjusted for the
impact of non-recurring exceptional items, provides us with a consistent
year-on-year basis for determining materiality and is, we believe, the metric
most commonly used by the Shareholders as a body in assessing the
Group’s performance.
We believe that total assets is the primary measure
used by the shareholders in assessing the
performance of a holding company, and is a
generally accepted auditing benchmark.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range of materiality
allocated across components was between £8 million and £70 million. Certain components were audited to a local statutory audit materiality that was
also less than our overall Group materiality.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £6 million (Group audit)
(2016: £6 million) and £4 million (Parent Company audit) (2016: £4 million) as well as misstatements below those amounts that, in our view,
warranted reporting for qualitative reasons.
Going concern
In accordance with ISAs (UK) we report as follows:
Reporting obligation
Outcome
We are required to report if we have anything material to add or draw
attention to in respect of the directors’ statement in the Financial
Statements about whether the directors considered it appropriate to
adopt the going concern basis of accounting in preparing the Financial
Statements and the directors’ identification of any material uncertainties
to the Group’s and the Parent Company’s ability to continue as a going
concern over a period of at least twelve months from the date of
approval of the Financial Statements.
We are required to report if the directors’ statement relating to going
concern in accordance with Listing Rule 9.8.6R(3) is materially inconsistent
with our knowledge obtained in the audit.
We have nothing material to add or to draw attention to. However,
because not all future events or conditions can be predicted, this
statement is not a guarantee as to the Group’s and Parent Company’s
ability to continue as a going concern.
We have nothing to report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the Financial Statements and our auditors’ report thereon. The
directors are responsible for the other information. Our opinion on the Financial Statements does not cover the other information and, accordingly, we
do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the Financial Statements, our responsibility is to read the other information and, in doing so, consider whether the
other information is materially inconsistent with the Financial Statements or our knowledge obtained in the audit, or otherwise appears to be
materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude
whether there is a material misstatement of the Financial Statements or a material misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to
report based on these responsibilities.
With respect to the Strategic Report and Report of the Directors, we also considered whether the disclosures required by the UK Companies Act 2006
have been included.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements
106
Independent Auditors’ Report
to the Members of Reckitt Benckiser Group plc
continued
Based on the responsibilities described above and our work undertaken in the course of the audit, the Companies Act 2006, (CA06), ISAs (UK) and the
Listing Rules of the Financial Conduct Authority (FCA) require us also to report certain opinions and matters as described below (required by ISAs (UK)
unless otherwise stated).
Strategic Report and Report of the Directors
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Report of the Directors for
the year ended 31 December 2017 is consistent with the Financial Statements and has been prepared in accordance with applicable legal requirements.
(CA06)
In light of the knowledge and understanding of the Group and Parent Company and their environment obtained in the course of the audit, we did not
identify any material misstatements in the Strategic Report and Report of the Directors. (CA06)
The directors’ assessment of the prospects of the Group and of the principal risks that would threaten the solvency
or liquidity of the Group
We have nothing material to add or draw attention to regarding:
• The directors’ confirmation on page 42 of the Annual Report that they have carried out a robust assessment of the principal risks facing the Group,
including those that would threaten its business model, future performance, solvency or liquidity.
• The disclosures in the Annual Report that describe those risks and explain how they are being managed or mitigated.
• The directors’ explanation on page 43 of the Annual Report as to how they have assessed the prospects of the Group, over what period they have
done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Group
will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures
drawing attention to any necessary qualifications or assumptions.
We have nothing to report having performed a review of the directors’ statement that they have carried out a robust assessment of the principal risks
facing the Group and statement in relation to the longer-term viability of the Group. Our review was substantially less in scope than an audit and only
consisted of making inquiries and considering the directors’ process supporting their statements; checking that the statements are in alignment with
the relevant provisions of the UK Corporate Governance Code (the “Code”); and considering whether the statements are consistent with the
knowledge and understanding of the Group and Parent Company and their environment obtained in the course of the audit. (Listing Rules)
Other Code Provisions
We have nothing to report in respect of our responsibility to report when:
• The statement given by the directors, on page 98, that they consider the Annual Report taken as a whole to be fair, balanced and understandable,
and provides the information necessary for the members to assess the Group’s and Parent Company’s position and performance, business model
and strategy is materially inconsistent with our knowledge of the Group and Parent Company obtained in the course of performing our audit.
• The section of the Annual Report on page 73 describing the work of the Audit Committee does not appropriately address matters communicated
by us to the Audit Committee.
• The directors’ statement relating to the Parent Company’s compliance with the Code does not properly disclose a departure from a relevant
provision of the Code specified, under the Listing Rules, for review by the auditors.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006.
(CA06)
Responsibilities for the Financial Statements and the audit
Responsibilities of the directors for the Financial Statements
As explained more fully in the Directors’ Statement of Responsibilities set out on page 98, the directors are responsible for the preparation of the
Financial Statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are also
responsible for such internal control as they determine is necessary to enable the preparation of Financial Statements that are free from material
misstatement, whether due to fraud or error.
In preparing the Financial Statements, the directors are responsible for assessing the Group’s and the Parent Company’s ability to continue as a going
concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend
to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 107
Auditors’ responsibilities for the audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement, whether
due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these Financial Statements.
A further description of our responsibilities for the audit of the Financial Statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the Parent 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.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches
not visited by us; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• the Parent Company Financial Statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the
accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were appointed by the members on 12 May 2000 to audit the Financial Statements for
the year ended 31 December 2000 and subsequent financial periods. The period of total uninterrupted engagement is 18 years, covering the years
ended 31 December 2000 to 31 December 2017.
Mark Gill (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
19 March 2018
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 108
Group Income Statement
For the year ended 31 December
CONTINUING OPERATIONS
Net Revenue
Cost of sales
Gross profit
Net operating expenses
Operating profit
Adjusted operating profit
Adjusting items
Operating profit
Finance income
Finance expense
Net finance expense
Profit before income tax
Income tax benefit/(expense)
Net income from continuing operations
Net income from discontinued operations
Net income
Attributable to non-controlling interests
Attributable to owners of the parent
Net income
Basic earnings per ordinary share (pence)
From continuing operations
From discontinued operations
From total operations
Diluted earnings per ordinary share (pence)
From continuing operations
From discontinued operations
From total operations
1. Restated for the impact of discontinued operations. Refer to Note 28 for details.
Note
2017
£m
2
3
2
3
6
6
7
28
8
8
8
8
8
8
11,512
(4,642)
6,870
(4,133)
2,737
3,122
(385)
2,737
60
(298)
(238)
2,499
894
3,393
2,796
6,189
17
6,172
6,189
480.6
398.1
878.7
474.7
393.2
867.9
Restated1
2016
£m
9,480
(3,679)
5,801
(3,532)
2,269
2,636
(367)
2,269
42
(58)
(16)
2,253
(520)
1,733
103
1,836
4
1,832
1,836
245.6
14.6
260.2
242.1
14.4
256.5
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017
Group Statement of Comprehensive Income
109
For the year ended 31 December
Net income
Other comprehensive (expense)/income
Items that may be reclassified to profit or loss in subsequent years
Net exchange (losses)/gains on foreign currency translation, net of tax
Gains/(losses) on net investment hedges, net of tax
Gains/(losses) on cash flow hedges, net of tax
Revaluation of available for sale financial assets
Reclassification of foreign currency translation reserves on disposal of foreign operations, net of tax
Items that will not be reclassified to profit or loss in subsequent years
Remeasurements of defined benefit pension plans, net of tax
Other comprehensive (expense)/income, net of tax
Total comprehensive income
Attributable to non-controlling interests
Attributable to owners of the parent
Total comprehensive income
Total comprehensive income attributable to owners of the parent arising from:
Continuing operations
Discontinued operations
1. Restated for the impact of discontinued operations. Refer to Note 28 for details.
Note
7
7
7
7
7
7
2017
£m
6,189
Restated1
2016
£m
1,836
(310)
44
3
6
145
(112)
12
(100)
6,089
15
6,074
6,089
3,133
2,941
6,074
1,618
(128)
(22)
(2)
–
1,466
(138)
1,328
3,164
4
3,160
3,164
3,052
108
3,160
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements
110
Group Balance Sheet
As at 31 December
ASSETS
Non-current assets
Goodwill and other intangible assets
Property, plant and equipment
Available for sale financial assets
Deferred tax assets
Retirement benefit surplus
Other non-current receivables
Current assets
Inventories
Trade and other receivables
Derivative financial instruments
Current tax recoverable
Short-term investments
Cash and cash equivalents
Assets classified as held for sale
Total assets
LIABILITIES
Current liabilities
Short-term borrowings
Provisions for liabilities and charges
Trade and other payables
Derivative financial instruments
Current tax liabilities
Non-current liabilities
Long-term borrowings
Deferred tax liabilities
Retirement benefit obligations
Provisions for liabilities and charges
Derivative financial instruments
Non-current tax liabilities
Other non-current liabilities
Total liabilities
Net assets
EQUITY
Capital and reserves
Share capital
Share premium
Merger reserve
Hedging reserve
Foreign currency translation reserve
Retained earnings
Attributable to owners of the parent
Attributable to non-controlling interests
Total equity
Note
2017
£m
2016
£m
9
10
14
11
22
13
12
13
14
14
15
16
17
20
14
21
16
11
22
17
14
21
20
23
25
25
29,487
1,754
41
118
90
99
13,454
878
39
81
36
81
31,589
14,569
1,201
2,004
18
58
–
2,125
5,406
18
5,424
770
1,623
158
14
3
882
3,450
–
3,450
37,013
18,019
(1,346)
(517)
(4,629)
(19)
(65)
(1,585)
(251)
(3,495)
(58)
(12)
(6,576)
(5,401)
(11,515)
(3,443)
(393)
(81)
(12)
(1,012)
(408)
(804)
(1,983)
(361)
(174)
–
(740)
(130)
(16,864)
(4,192)
(23,440)
(9,593)
13,573
8,426
74
243
(14,229)
(1)
407
27,039
13,533
40
13,573
74
243
(14,229)
(4)
526
21,811
8,421
5
8,426
The Financial Statements on pages 108 to 153 were approved by the Board of Directors and signed on its behalf on 19 March 2018 by:
ADRIAN BELLAMY
Director
RAKESH KAPOOR
Director
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017
Group Statement of Changes in Equity
Balance at 1 January 2016
Comprehensive income
Net income
Other comprehensive income/(expense)
Total comprehensive income
Transactions with owners
Treasury shares re-issued
Share-based payments
Current tax on share awards
Deferred tax on share awards
Shares repurchased and held in Treasury
Cash dividends
Transactions with non-controlling interests
Total transactions with owners
Notes
Share
capital
£m
74
–
–
–
–
–
–
–
–
–
–
–
23
24
7
7
23
29
Share
premium
£m
Merger
reserves
£m
Other
reserves
£m
Retained
earnings
£m
Total
attributable
to owners
of the
parent
£m
Non-
controlling
interests
£m
243
(14,229)
(946)
21,762
6,904
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,468
1,468
–
–
–
–
–
–
–
–
1,832
(140)
1,692
79
66
14
(4)
(702)
(1,035)
(61)
1,832
1,328
3,160
79
66
14
(4)
(702)
(1,035)
(61)
(1,643)
(1,643)
Balance at 31 December 2016
74
243
(14,229)
522
21,811
8,421
Comprehensive income
Net income
Other comprehensive (expense)/income
Total comprehensive (expense)/income
Transactions with owners
Treasury shares re-issued
Share-based payments
Current tax on share awards
Deferred tax on share awards
Cash dividends
Arising on business combinations
Total transactions with owners
–
–
–
–
–
–
–
–
–
–
23
24
7
7
29
27
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(116)
(116)
–
–
–
–
–
–
–
6,172
18
6,190
94
72
20
(14)
(1,134)
–
6,172
(98)
6,074
94
72
20
(14)
(1,134)
–
(962)
(962)
Balance at 31 December 2017
74
243
(14,229)
406
27,039
13,533
The merger reserve relates to the 1999 combination of Reckitt & Colman plc and Benckiser N.V. and a Group reconstruction in 2007 treated as a
merger under Part 27 of the Companies Act 2006.
Refer to Note 25 for an explanation of other reserves.
111
Total
equity
£m
6,906
1,836
1,328
3,164
79
66
14
(4)
(702)
(1,036)
(61)
(1,644)
8,426
6,189
(100)
6,089
94
72
20
(14)
(1,145)
31
(942)
13,573
2
4
–
4
–
–
–
–
–
(1)
–
(1)
5
17
(2)
15
–
–
–
–
(11)
31
20
40
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements
112
Group Cash Flow Statement
For the year ended 31 December
CASH FLOWS FROM OPERATING ACTIVITIES
Operating profit from continuing operations
Depreciation, amortisation and impairment
(Increase)/decrease in inventories
Increase in trade and other receivables
Increase/(decrease) in payables and provisions
Non-cash adjusting items
Share-based payments
Cash generated from continuing operations
Interest paid
Interest received
Tax paid
Net cash flows attributable to discontinued operations
Net cash generated from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment
Purchase of intangible assets
Proceeds from the sale of property, plant and equipment
Acquisition of businesses, net of cash acquired
Purchase of available for sale financial assets
Reduction in/(purchase of) short-term investments
Net cash flows attributable to discontinued operations
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Shares repurchased and held in Treasury
Treasury shares re-issued
Proceeds from borrowings
Repayment of borrowings
Dividends paid to owners of the parent
Dividends paid to non-controlling interests
Other financing activities
Net cash generated from/(used in) financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Exchange (losses)/gains
Cash and cash equivalents at end of the year
Cash and cash equivalents comprise:
Cash and cash equivalents
Overdrafts
1. Restated for the impact of discontinued operations. Refer to Note 28 for further details.
Note
2017
£m
2,737
223
(108)
(210)
192
247
72
3,153
(226)
59
(543)
48
2,491
(286)
(63)
35
(11,817)
–
3
3,232
(8,896)
–
94
19,523
(10,723)
(1,134)
(11)
(12)
7,737
1,332
873
(88)
2,117
2,125
(8)
2,117
28
28
23
23
29
15
16
Restated1
2016
£m
2,269
177
12
(25)
(9)
318
66
2,808
(56)
40
(490)
120
2,422
(176)
(214)
7
(158)
(36)
(3)
(3)
(583)
(802)
79
469
(695)
(1,035)
(1)
219
(1,766)
73
737
63
873
882
(9)
873
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017
Notes to the Financial Statements
113
1 Accounting Policies
The principal accounting policies adopted in the preparation of these
Financial Statements are set out below. Unless otherwise stated, these
policies have been consistently applied to all the years presented.
Basis of Preparation
These Financial Statements have been prepared in accordance with EU
endorsed International Financial Reporting Standards (IFRSs), IFRS
Interpretations Committee (IFRS IC) interpretations, and with those parts
of the Companies Act 2006 applicable to companies reporting under
IFRS. The Financial Statements are also in compliance with IFRSs as issued
by the International Accounting Standards Board.
These Financial Statements have been prepared under the historical cost
convention, as modified by the revaluation of certain financial assets and
liabilities (including derivative instruments) at fair value through profit or
loss. A summary of the Group’s more important accounting policies is set
out below. Historical cost is generally based on the fair value of the
consideration given in exchange for goods and services.
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants
at the measurement date, regardless of whether that price is directly
observable or estimated using another valuation technique. In estimating
the fair value of an asset or a liability, the Group takes into account the
characteristics of the asset or liability if market participants would take
those characteristics into account when pricing the asset or liability at the
measurement date. Fair value for measurement and/or disclosure
purposes in these consolidated Financial Statements is determined on
such a basis, except for share-based payment transactions that are within
the scope of IFRS 2, leasing transactions that are within the scope of IAS
17, and measurements that have some similarities to fair value but are not
fair value, such as net realisable value in IAS 2 or value in use in IAS 36.
The preparation of Financial Statements that conform to IFRSs requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the Balance Sheet date and revenue
and expenses during the reporting period. Although these estimates are
based on management’s best knowledge at the time, actual amounts
may ultimately differ from those estimates.
Adoption of New and Revised Standards
In September 2017, the IFRS Interpretations Committee clarified that
finance expenses on income tax balances should be reported within
interest expense and certain penalties arising on settlements with tax
authorities within administrative expenses. The Group had previously
reported finance expenses and penalties on income tax balances as part
of income tax expense. With effect from 2017, the Group has updated its
treatment of these balances in accordance with this new guidance. The
impact of this change on the opening Balance Sheet and prior year
Income Statement is not material and a restatement to the carrying
values at 31 December 2016 has not been made. The impact on the
Balance Sheet at 31 December 2017 inclusive of those tax liabilities
assumed on the acquisition of Mead Johnson Nutrition (“MJN”) is a
reclassification of £189 million from tax liabilities to other liabilities.
The Group has applied amendments to IAS 7: Statement of Cash Flows.
The impact has been to revise the disclosure of net debt to separately
identify cash flows relating to financing liabilities (Note 16).
In these Financial Statements, the Group has not applied the following
new and revised IFRSs that have been issued but are not yet effective:
•
IFRS 15: Revenue from Contracts with Customers will be effective for
annual periods beginning on or after 1 January 2018. The standard
deals with revenue recognition and establishes principles for reporting
useful information about the nature, amount, timing and uncertainty
of revenues and cash flows arising from the Group’s contracts with its
customers. The standard provides clarification about when control of
goods is passed to customers and contains more guidance about the
measurement of revenue contracts which have discounts, rebates and
other payments to customers. During 2017, the Group completed a
detailed review of the requirements of IFRS 15 against current
accounting policies. The areas the Group considered included
payments to customers, the timing of revenue recognition based on
control of goods, principal and agent relationships and consignment
inventories. The Group has concluded that there will be no material
impact of adopting IFRS 15. Taken together, the items above would
have reduced reported 2017 Net Revenue by less than 1%, most of
which is a reclassification of payments to customers recorded
elsewhere in the Income Statement. The impact on profit would not
have been material.
IFRS 9: Financial Instruments will be effective for annual periods
beginning on or after 1 January 2018. The standard includes
requirements for classification and measurement, impairment and
hedge accounting. The Group has evaluated the impact of IFRS 9 and
concluded that it does not expect a material impact on the
recognition and measurement of income and costs in the Income
Statement or of assets and liabilities in the Balance Sheet. The Group
has assessed the classification and measurement of certain financial
assets on the Balance Sheet and concluded that whilst there will be
changes in classification, such as money market funds there is no
expected material impact on results. Further, the nature of the
Group’s current hedging activities and the quantum of its bad debt
risk means that the impact of IFRS 9 will be immaterial in respect of
these items. IFRS 9 mandates certain additional disclosures, which the
Group will make in the future.
IFRS 16: Leases will be effective for annual periods beginning on or
after 1 January 2019. The standard changes the principles for the
recognition, measurement, presentation and disclosure of leases. It
eliminates the classification of leases as either operating leases or
finance leases and introduces a single lessee accounting model where
the lessee is required to recognise lease liabilities and ‘right of use’
assets on the Balance Sheet, with exemptions for low value and
short-term leases. The Group is in the process of evaluating the
impact of IFRS 16 on its current lease arrangements, which mainly
consists of office and warehouse properties.
•
•
A number of other new standards, amendments and interpretations are
effective for annual periods beginning on or after 1 January 2018 and
have not yet been applied in preparing these Financial Statements. None
of these are expected to have a significant effect on the Financial
Statements of the Group.
Going Concern
Having assessed the principal risks and other matters discussed in
connection with the Viability Statement, the Directors considered it
appropriate to adopt the going concern basis of accounting in preparing
the consolidated Financial Statements. Further detail is contained in the
Strategic Report on pages 1 to 51.
Basis of Consolidation
The consolidated Financial Statements include the results of Reckitt
Benckiser Group plc, a company registered in the UK, and all its
subsidiary undertakings made up to the same accounting date. Subsidiary
undertakings are those entities controlled by Reckitt Benckiser Group plc.
Control exists where the Group is exposed to, or has the rights to variable
returns from its involvement with, the investee and has the ability to use
its power over the investee to affect its returns.
Intercompany transactions, balances and unrealised gains on transactions
between Group companies have been eliminated on consolidation.
Unrealised losses have also been eliminated to the extent that they do not
represent an impairment of a transferred asset. Subsidiaries’ accounting
policies have been changed where necessary to ensure consistency with
the policies adopted by the Group.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 114
Notes to the Financial Statements
continued
1 Accounting Policies continued
Foreign Currency Translation
Items included in the Financial Statements of each of the Group’s entities
are measured using the currency of the primary economic environment in
which the entity operates (the functional currency). The consolidated
Financial Statements are presented in Sterling, which is the Group’s
presentational currency.
Foreign currency transactions are translated into the functional currency
using exchange rates prevailing at the dates of the transactions. Foreign
exchange gains and losses resulting from the settlement of foreign
currency transactions and from the translation at year end exchange rates
of monetary assets and liabilities denominated in foreign currencies are
recognised in the Income Statement, except where hedge accounting
is applied.
The Financial Statements of overseas subsidiary undertakings are
translated into Sterling on the following basis:
• Assets and liabilities at the rate of exchange ruling at the year
end date.
• Profit and loss account items at the average rate of exchange for
the year.
Exchange differences arising from the translation of the net investment in
foreign entities, and of borrowings and other currency instruments
designated as hedges of such investments, are taken to equity on
consolidation.
Business Combinations
The acquisition method is used to account for the acquisition of
subsidiaries. Identifiable net assets acquired (including intangibles) in a
business combination are measured initially at their fair values at the
acquisition date.
Where the measurement of the fair value of identifiable net assets
acquired is incomplete at the end of the reporting period in which the
combination occurs, the Group will report provisional fair values. Final fair
values are determined within a year of the acquisition date and
retrospectively applied.
The excess of the consideration transferred and the amount of any
non-controlling interest over the fair value of the identifiable assets
(including intangibles), liabilities and contingent liabilities acquired is
recorded as goodwill.
The consideration transferred is measured as the fair value of the assets
given, equity instruments issued (if any), and liabilities assumed or
incurred at the date of acquisition.
Acquisition related costs are expensed as incurred.
The results of the subsidiaries acquired are included in the consolidated
Financial Statements from the acquisition date.
Disposal of Subsidiaries
The financial performance of subsidiaries is included in the Group results
up to the point the Group ceases to have control over that subsidiary. Any
amounts previously recognised in other comprehensive income in respect
of that entity are accounted for as if the Group had directly disposed of
related assets and liabilities. This may mean amounts previously recognised
in other comprehensive income are reclassified to profit or loss.
Revenue
Revenue from the sale of products is recognised in the Income Statement
when the risks and rewards of ownership of the products are passed to
the customer.
Net Revenue is defined as the amount invoiced to external customers
during the year and comprises gross sales net of trade spend, customer
allowances for credit notes, returns and consumer coupons. The
methodology and assumptions used to estimate credit notes, returns and
consumer coupons are monitored and adjusted regularly in the light of
contractual and legal obligations, historical trends, past experience and
projected market conditions.
Trade spend, which consists primarily of customer pricing allowances,
placement/listing fees and promotional allowances, are governed by sales
agreements with our trade customers (retailers and distributors). Trade
spend also includes reimbursement arrangements under the Special
Supplemental Nutrition Program for Women, Infants and Children
("WIC"), payable to the respective US State WIC agencies.
Accruals are recognised under the terms of these agreements to reflect
the expected activity level and our historical experience. These accruals
are reported within Trade and other payables.
Net Revenue also includes royalty income arising from the licensed use of
our brands recognised on an accruals basis.
Value added tax and other sales taxes are excluded from Net Revenue.
Operating Segments
Operating segments are reported in a manner consistent with the internal
reporting provided to the Chief Operating Decision Maker (CODM). The
CODM, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the
Executive Committee.
Adjusting items, including exceptional items
The Group has refined its accounting policy to make reference to
adjusting items in presenting its principal adjusted earnings measures.
Adjusting items are significant items included in operating profit, net
finance expense or income tax expense, which are relevant to an
understanding of the underlying performance of the business. These
comprise exceptional items, other adjusting items, and the reclassification
of finance expenses on tax balances.
Exceptional items are material, non-recurring items of expense or income
incurred during a period. Examples of exceptional items include the
following:
• Restructuring and other expenses relating to the integration of an
acquired business and related expenses for reconfiguration of the
Group’s activities;
Impairments of current and non-current assets;
•
• Gains/losses on disposals of businesses;
• Acquisition-related costs, including advisor fees incurred for significant
transactions, and adjustments to the fair values of assets and liabilities
that result in non-recurring charges to the income statement;
• Costs arising because of material and non-recurring regulatory and
litigation matters; and
• The income statement impact of unwinding fair value adjustments for
inventory recorded as the result of a business combination.
Non-Controlling Interests
On an acquisition-by-acquisition basis the non-controlling interest is
measured at either fair value or a proportionate share of the acquiree’s
net assets.
Other adjusting items are not classified as exceptional items because of
their recurring nature. They include the following:
• Amortisation of acquired brands, trademarks and similar assets; and
• Amortisation of certain other intangible assets recorded as the result
of a business combination.
Purchases from non-controlling interests are accounted for as
transactions with the owners and therefore no goodwill is recognised as
a result of such transactions.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 115
1 Accounting Policies continued
Adjusting items now include a reclassification of finance expenses on tax
balances into income tax, to align with previous guidance that focused on
the pre-exceptional tax rate, and the way that the expenses are managed
by the Group. Therefore, these expenses are presented as part of income
tax in the adjusted profit before income tax measure.
The Group also presents an Adjusted Earnings Per Share calculation to
exclude the impact of adjusting items.
Management believes that the use of adjusted measures such as Adjusted
Operating Profit, Adjusted Net Income and Adjusted Earnings Per Share
provides additional useful information about underlying trends to
Shareholders.
Research and Development
Research expenditure is expensed in the year in which it is incurred.
Development expenditure is expensed in the year in which it is incurred,
unless it meets the requirements of IAS 38 to be capitalised and then
amortised over the useful life of the developed product.
Income tax
Income tax on the profit for the year comprises current and deferred tax.
Income tax is recognised in the Income Statement except to the extent
that it relates to items recognised in other comprehensive income or
directly in equity. In this case the tax is also recognised in other
comprehensive income or directly in equity, respectively.
Current tax is the expected tax payable on the taxable income for the
year, using tax rates enacted in each jurisdiction, or substantively enacted,
at the Balance Sheet date, and any adjustment to tax payable in respect
of previous years.
Deferred tax is provided in full, using the liability method, on temporary
differences arising between the tax bases of assets and liabilities and their
carrying amounts in the consolidated Financial Statements. Deferred tax
is not accounted for if it arises from the initial recognition of an asset or
liability in a transaction (other than a business combination) that affects
neither accounting nor taxable profit or loss at that time. Deferred tax is
determined using tax rates (and laws) that have been enacted or
substantively enacted by the Balance Sheet date and are expected to
apply when the deferred tax asset or liability is settled. Deferred tax
assets are recognised to the extent that it is probable that future taxable
profit will be available against which the temporary differences can
be utilised.
Deferred tax is provided on temporary differences arising on investments
in subsidiaries except where the investor is able to control the timing of
temporary differences and it is probable that the temporary difference
will not reverse in the foreseeable future.
Deferred tax assets and liabilities within the same tax jurisdiction are
offset where there is a legally enforceable right to offset current tax
assets against current tax liabilities and where there is an intention to
settle these balances on a net basis.
Goodwill and Other Intangible Assets
(i) Goodwill
Goodwill is allocated to the cash generating unit (CGU), or group of
CGUs, to which it relates and is tested annually for impairment. Goodwill
is carried at cost less accumulated impairment losses.
(ii) Brands
Separately acquired brands are shown at cost less accumulated
amortisation and impairment. Brands acquired as part of a business
combination are recognised at fair value at the acquisition date, where
they are separately identifiable. Brands are amortised over their useful
economic life (no more than 10 years), except when their life is
determined as being indefinite.
Applying indefinite lives to certain acquired brands is appropriate due to
the stable long-term nature of the business and the enduring nature of
the brands. A core element of the Group’s strategy is to invest in building
its brands through an ongoing programme of product innovation and
increasing marketing investment. Within the Group, a brand typically
comprises an assortment of base products and more innovative products.
Both contribute to the enduring nature of the brand. The base products
establish the long-term positioning of the brand while a succession of
innovations attracts ongoing consumer interest and attention. Indefinite
life brands are allocated to the CGUs to which they relate and are tested
annually for impairment.
The Directors also review the useful economic life of brands annually, to
ensure that these lives are still appropriate. If a brand is considered to
have a finite life, its carrying value is amortised over that period.
(iii) Distribution Rights
Payments made in respect of product registration, acquired and
re-acquired distribution rights are capitalised where the rights comply
with the above requirements for recognition of acquired brands. If the
registration or distribution rights are for a defined time period, the
intangible asset is amortised over that period. If no time period is
defined, the intangible asset is treated in the same way as
acquired brands.
(iv) Software
Acquired computer software licences are capitalised at cost. These costs
are amortised on a straight-line basis over a period of seven years for
Enterprise Resource Planning systems and five years or less for all other
software licences.
(v) Customer contracts
Acquired customer contracts are capitalised at cost. These costs are
amortised on a straight-line basis over the period of the contract.
Property, Plant and Equipment
Property, plant and equipment is stated at cost less accumulated
depreciation and impairment, with the exception of freehold land, which
is shown at cost less impairment. Cost includes expenditure that is
directly attributable to the acquisition of the asset. Except for freehold
land and assets under construction, the cost of property, plant and
equipment is written off on a straight-line basis over the period of the
expected useful life of the asset. For this purpose, expected lives are
determined within the following limits:
• Freehold buildings: not more than 50 years;
• Leasehold land and buildings: the lesser of 50 years or the life of the
lease; and
• Owned plant and equipment: not more than 15 years (except for
environmental assets and spray dryers which are not more than 20
years).
In general, production plant and equipment and office equipment are
written off over ten years or less; motor vehicles and computer
equipment over five years or less.
Assets’ residual values and useful lives are reviewed, and adjusted if
necessary, at each Balance Sheet date. Property, plant and equipment is
reviewed for impairment if events or changes in circumstances indicate
that the carrying amount may not be appropriate. Freehold land is
reviewed for impairment on an annual basis.
Gains and losses on the disposal of property, plant and equipment are
determined by comparing the asset’s carrying value with any sale
proceeds, and are included in the Income Statement.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 116
Notes to the Financial Statements
continued
1 Accounting Policies continued
Leases
Leases of property, plant and equipment where the Group has
substantially all the risks and rewards of ownership are classified as
finance leases. Assets held under finance leases are capitalised at lease
inception at the lower of the asset’s fair value and the present value of
the minimum lease payments. Obligations related to finance leases, net
of finance charges in respect of future periods, are included as
appropriate within borrowings. The interest element of the finance cost is
charged to the Income Statement over the life of the lease so as to
produce a constant periodic rate of interest on the remaining balance of
the liability for each period. Leased property, plant and equipment are
depreciated on the same basis as owned plant and equipment or over the
life of the lease, if shorter.
Leases where the lessor retains substantially all the risks and rewards of
ownership are classified as operating leases. Operating lease rentals (net
of any related lease incentives) are charged against profit on a straight-
line basis over the period of the lease.
Impairment of Assets
Assets that have indefinite lives, including goodwill, are tested annually
for impairment at the level where cash flows are considered to be largely
independent. This is at either a CGU level, or as a group of CGUs. All
assets are tested for impairment if there is an event or circumstance that
indicates that their carrying value may not be recoverable. If an asset’s
carrying value exceeds its recoverable amount an impairment loss is
recognised in the Income Statement. The recoverable amount is the
higher of the asset’s fair value less costs of disposal and its value in use.
Value in use is calculated with reference to the future cash flows
expected to be generated by an asset (or group of assets where cash
flows are not identifiable to specific assets). The pre-tax discount rate
used in asset impairment reviews is based on a weighted average cost of
capital for comparable companies operating in similar markets and
geographies as the Group including, where appropriate, an adjustment
for the specific risks associated with the relevant CGU.
Fair value less costs of disposal is calculated using a discounted cash flow
approach, with a post-tax discount rate applied to projected risk-adjusted
post-tax cash flows and terminal value.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost
comprises materials, direct labour and an appropriate portion of
overhead expenses (based on normal operating capacity) required to get
the inventory to its present location and condition. Inventory valuation is
determined on a first in, first out (FIFO) basis. Net realisable value
represents the estimated selling price less applicable selling expenses.
Trade Receivables
Trade receivables are initially recognised at fair value and subsequently
held at amortised cost, less provision for impairment. If there is objective
evidence that the Group will not be able to collect the full amount of the
receivable, an impairment is recognised through the Income Statement.
Significant financial difficulties of the debtor, probability that a debtor will
enter bankruptcy or financial reorganisation, and default or delinquency
in payments are considered indicators that the trade receivable is
impaired. The impairment is calculated as the difference between the
carrying value of the receivable and the present value of the related
estimated future cash flows, discounted at the original interest rate.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash balances and other deposits
with a maturity of less than three months when deposited.
For the purpose of the cash flow statement, bank overdrafts that form an
integral part of the Group’s cash management, and are repayable on
demand, are included as a component of cash and cash equivalents.
Bank overdrafts are included within short-term borrowings in the
Balance Sheet.
Borrowings
Interest-bearing borrowings are recognised initially at fair value less
attributable transaction costs. Subsequent to initial recognition,
interest-bearing borrowings are stated at amortised cost with any
difference between cost and redemption value being recognised in the
Income Statement over the period of the borrowings on an effective
interest basis.
Derivative Financial Instruments and Hedging Activity
The Group may use derivatives to manage its exposures to fluctuating
interest and foreign exchange rates. These instruments are initially
recognised at fair value on the date the contract is entered into and are
subsequently remeasured at their fair value. The method of recognising
the resulting gain or loss depends on whether the derivative is designated
as a hedging instrument and if so, the nature of the item being hedged.
Derivatives that qualify for hedge accounting are treated as a hedge of a
highly probable forecast transaction (cash flow hedge).
At inception, the relationship between the hedging instrument and the
hedged item is documented, as is an assessment of the effectiveness of
the derivative instrument used in the hedging transaction in offsetting
changes in the cash flow of the hedged item. This effectiveness
assessment is repeated on an ongoing basis during the life of the hedging
instrument to ensure that the instrument remains an effective hedge of
the transaction.
• Derivatives classified as cash flow hedges: the effective portion of
changes in the fair value is recognised in other comprehensive income.
Any gain or loss relating to the ineffective portion is recognised
immediately in the Income Statement. Amounts recognised in other
comprehensive income are recycled to the Income Statement in the
period when the hedged item will affect profit or loss. If the hedging
instrument expires or is sold, or no longer meets the criteria for hedge
accounting, any cumulative gain or loss existing in other
comprehensive income at that time remains in other comprehensive
income, and is recognised when the forecast transaction is ultimately
recognised in the Income Statement. If the forecast transaction is no
longer expected to occur, the cumulative gain or loss in other
comprehensive income is immediately transferred to the Income
Statement.
• Derivatives that do not qualify for hedge accounting: these are
classified at fair value through profit or loss. All changes in fair value
of derivative instruments that do not qualify for hedge accounting are
recognised immediately in the Income Statement.
Net Investment Hedges
Gains and losses on those hedging instruments designated as hedges of
the net investments in foreign operations are recognised in other
comprehensive income to the extent that the hedging relationship is
effective. Gains and losses accumulated in the foreign currency
translation reserve are recycled to the Income Statement when the
foreign operation is disposed of.
Employee Share Schemes
Incentives in the form of shares are provided to employees under share
option and restricted share schemes vested in accordance with non-
market conditions.
The fair value determined at the grant date of the equity-settled
share-based payments is expensed on a straight-line basis over the
vesting period, based on the Group’s estimate of equity instruments that
will eventually vest. At each Balance Sheet date, the Group revises its
estimate of the number of equity instruments expected to vest. The
impact of the revision of the original estimates, if any, is recognised in
profit or loss such that the cumulative expense reflects the revised
estimate, with a corresponding adjustment to equity reserves.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 117
1 Accounting Policies continued
Additional employer costs in respect of options and awards are charged,
including social security taxes, to the Income Statement over the same
period with a corresponding liability recognised.
The proceeds received from the exercise of share options, net of any
directly attributable transaction costs, are credited to share capital and
share premium when the options are exercised.
Pension Commitments
Group companies operate defined contribution and (funded and
unfunded) defined benefit pension plans.
The cost of providing pensions to employees who are members of
defined contribution plans is charged to the Income Statement as
contributions are made. The Group has no further payment obligations
once the contributions have been paid.
The deficit or surplus recognised in the Balance Sheet in respect of
defined benefit pension plans is the present value of the defined benefit
obligation at the Balance Sheet date, less the fair value of the plan assets.
The defined benefit obligation is calculated annually by independent
actuaries using the projected unit credit method. The present value of the
defined benefit obligation is determined by discounting the estimated
future cash flows by the yield on high quality corporate bonds
denominated in the currency in which the benefits will be paid, and that
have a maturity approximating to the terms of the pension obligations.
The costs of providing these defined benefit plans are accrued over the
period of employment. Actuarial gains and losses are recognised
immediately in other comprehensive income.
Past-service costs are recognised immediately in profit or loss.
The net interest amount is calculated by applying the discounted rate
used to measure the defined benefit obligation at the beginning of the
period to the net defined benefit liability/asset.
The net pension plan interest is presented as finance income/expense.
Post-Retirement Benefits Other than Pensions
Some Group companies provide post-retirement medical care to their
retirees. The costs of providing these benefits are accrued over the period
of employment and the liability recognised in the Balance Sheet is
calculated using the projected unit credit method and is discounted to its
present value and the fair value of any related asset is deducted.
Provisions
Provisions are recognised when the Group has a present legal or
constructive obligation as a result of past events; it is more likely than not
that there will be an outflow of resources to settle that obligation; and
the amount can be reliably estimated. Provisions are valued at the present
value of the Directors’ best estimate of the expenditure required to settle
the obligation at the Balance Sheet date.
Share Capital Transactions
When the Group purchases equity share capital, the amount of the
consideration paid, including directly attributable costs, is recognised as a
change in equity. Purchased 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 would
be transferred from retained earnings to the capital redemption reserve.
Dividend Distribution
Dividends to owners of the parent are recognised as a liability in the
period in which the dividends are approved by the Company’s
Shareholders. Interim dividends are recorded in the period in which they
are approved and paid.
Dividend payments are recorded at fair value. Where non-cash dividend
payments are made, gains arising as a result of fair value remeasurements
are recognised in profit or loss in the same period.
Accounting Estimates and Judgements
In the application of the Group’s accounting policies the Directors are
required to make a number of estimates and assumptions about the
carrying amounts of assets and liabilities that are not readily apparent
from other sources. The estimates and associated assumptions are based
on historical experience and other factors that are considered to be
relevant. Actual results may differ from these estimates.
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.
Critical judgements in applying the Group’s accounting policies
The following are the critical judgements, that the Directors have made in
the process of applying the Group’s accounting policies, that have the
most significant effect on the amounts recognised in the Group’s
Financial Statements.
• The Group has identified matters which may incur liabilities in the
future, but do not recognise these where it is too early to determine
the likely outcome or make a reliable estimate (Note 19).
• The continuing enduring nature of the Group’s brands supports the
indefinite life assumption of these assets (Note 9).
• Assumptions are made as to the recoverability of tax assets especially
as to whether there will be sufficient future taxable profits in the same
jurisdictions to fully utilise losses in future years (Note 11).
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of
estimation uncertainty at the Balance Sheet date, that may have a
significant risk of causing a material adjustment to the carrying amounts
of assets and liabilities within the next financial year, are discussed below:
• The actual tax paid on profits is determined based on tax laws and
regulations that differ across the numerous jurisdictions in which the
Group operates. Assumptions are made in applying these laws to the
taxable profits in any given period in order to calculate the tax charge
for that period. Where the eventual tax paid or reclaimed is different
to the amounts originally estimated, the difference will be charged or
credited to the Income Statement in the period in which it is
determined (Note 7).
• The Group is subject to tax audits and uncertainties in a number of
jurisdictions. The issues involved can be complex and disputes may
take a number of years to resolve. Each uncertainty is separately
assessed and the provision recognised depends on the specific context
of each case. The accounting estimates and judgements
considered include:
– Status of the unresolved matter;
– Strength of technical argument and clarity of legislation;
– External advice;
– Resolution process, past experience and precedents set with the
particular taxing authority;
– Agreements previously reached in other jurisdictions on
comparable issues; and
– Statute of limitations.
Management is of the opinion that the carrying values of the
provisions made in respect of these matters represent the most
accurate measurement once all facts and circumstances have been
taken into account. Nevertheless, the final amounts paid to discharge
the liabilities arising (either through negotiated settlement or
litigation) will in all likelihood be different from the provision
recognised. The net liabilities are included in amounts disclosed in
Note 21.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 118
Notes to the Financial Statements
continued
1 Accounting Policies continued
• The Group recognises legal and regulatory provisions in line with the Group’s provisions policy. The level of provisioning for regulatory civil and/or
criminal investigation is an issue where management and legal judgement is important (Note 17). These are valued based on the Directors’ best
estimates taking into account all available information, external advice and historical experience.
• Estimates of future business performance and cash generation, discount rates and long-term growth rates supporting the net book amount of
indefinite life intangible assets at the Balance Sheet date (Note 9). If the actual results should differ, or changes in expectations arise, impairment
charges may be required which would adversely impact operating results.
• Measurement of intangible assets both in business combinations and other asset acquisitions requires the Group to value such assets. Assumptions
and estimates are made about future cash flows and appropriate discount rates to value identified intangible assets (Note 27).
• The Group provides for amounts payable to our trade customers for promotional activity and Government reimbursement arrangements. Where an
activity spans across the year end, an accrual is reflected in the consolidated Financial Statements based on our estimation of customer and
consumer uptake during the relevant period and the extent to which temporary funded activity has occurred. Details of trade spend accrued as at
year end are provided in Note 20.
• The value of the Group’s defined benefit pension plan obligations are dependent on a number of key assumptions. These include assumptions over
the rate of increase in pensionable salaries, the discount rate to be applied, the level of inflation and the life expectancy of the schemes members.
Details of the key assumptions and the sensitivity of the principal schemes' carrying value to changes in the assumptions are set out in Note 22.
2 Operating Segments
The Executive Committee is the Group’s Chief Operating Decision Maker (CODM). The Group’s operating segments are reported based on the
segmental information reviewed by the Executive Committee for the purposes of making strategic decisions and assessing performance. As a result of
the acquisition of MJN, the Group has created a new operating segment, Infant and Child Nutrition (IFCN). In addition, because of its classification as a
discontinued operation, the previously reported operating segment for Food is no longer presented and the comparatives have been restated.
The Group’s geographical segments comprise ENA and DvM. ENA comprises Europe, Russia/CIS, Israel, North America, Australia and New Zealand.
DvM principally comprises North Africa, Middle East (excluding Israel) and Turkey, Africa, South Asia, North Asia, Latin America, Japan, South Korea
and ASEAN.
ENA and DvM derive their revenue primarily from the sale of branded products in the Health, Hygiene and Home categories. IFCN forms part of the
Health category.
The Executive Committee assesses the performance of the operating segments based on Net Revenue from external customers and Adjusted
Operating Profit. Intercompany transactions between operating segments are eliminated. Finance income and expense are not allocated to segments,
as they are managed on a central Group basis.
The segment information provided to the Executive Committee for the operating segments for the year ended 31 December is as follows:
Year ended 31 December 2017
Net Revenue
Depreciation, amortisation and impairment
Adjusted Operating Profit
Adjusting items
Operating Profit
Net finance expense
Profit before income tax
Year ended 31 December 2016 (restated)
Net Revenue
Depreciation, amortisation and impairment
Adjusted Operating Profit
Reallocation of central costs
Adjusted operating profit1
Adjusting items
Operating Profit
Net finance expense
Profit before income tax
1. Restated for reallocation of centrally incurred costs following the disposal of RB Food.
ENA
£m
6,691
109
2,040
DvM
£m
3,266
63
753
IFCN
£m
1,555
51
329
ENA
£m
6,410
117
1,978
(16)
1,962
DvM
£m
3,070
60
681
(7)
674
IFCN
£m
–
–
–
–
Total
£m
11,512
223
3,122
(385)
2,737
(238)
2,499
Total
£m
9,480
177
2,659
(23)
2,636
(367)
2,269
(16)
2,253
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017
119
2 Operating Segments continued
The Executive Committee reviews Net Working Capital by segment and other assets and liabilities on a Group basis. The split of assets and liabilities by
segment provided to the Executive Committee is shown below. Assets and liabilities not presented to the Executive Committee are shown below as a
reconciling item.
2017
Inventories
Trade and other receivables
Total segment assets
Trade and other payables
2016
Inventories
Trade and other receivables
Total segment assets
Trade and other payables
ENA
£m
556
999
1,555
DvM
£m
286
661
947
IFCN
£m
392
316
708
Total
£m
1,234
1,976
3,210
(2,247)
(1,114)
(981)
(4,342)
ENA
£m
516
930
1,446
DvM
£m
272
624
896
(2,050)
(1,118)
IFCN
£m
–
–
–
–
Total
(restated)1
£m
788
1,554
2,342
(3,168)
1. Restated to exclude RB Food from operating segments. RB Food is a discontinued operation (Note 28).
The assets and liabilities are reported based upon the operations of the segment and the physical location of the asset or liability. There are a number
of Group assets and liabilities that are not specifically attributable to one segment. Reconciliation of these assets and liabilities to total assets or
liabilities in the Balance Sheet is shown below:
Inventories for operating segments
Unallocated:
RB Food
Group adjustments
Total inventories per the Balance Sheet
Trade and other receivables for operating segments
Unallocated:
RB Food
Group items
Total trade and other receivables per the Balance Sheet
Total inventories and trade and other receivables per the Balance Sheet
Other unallocated assets
Total assets per the Balance Sheet
Trade and other payables for operating segments
Unallocated:
RB Food
Group items
Total trade and other payables per the Balance Sheet
Other unallocated liabilities
Total liabilities per the Balance Sheet
2017
£m
1,234
–
(33)
1,201
Restated1
2016
£m
788
24
(42)
770
1,976
1,554
–
28
48
21
2,004
1,623
3,205
33,808
2,393
15,626
37,013
18,019
(4,342)
(3,168)
–
(287)
(4,629)
(18,811)
(78)
(249)
(3,495)
(6,098)
(23,440)
(9,593)
1. Restated to exclude RB Food from operating segments. RB Food is a discontinued operation (Note 28).
Group adjustments to inventory predominantly relate to the elimination of intercompany profit in inventory.
Unallocated assets include goodwill and intangible assets, property, plant and equipment, deferred and current tax, available for sale assets, retirement
benefit surplus, other receivables, derivative financial assets, cash and cash equivalents, and assets classified as held for sale. Unallocated liabilities
include borrowings, derivative financial liabilities, provisions for liabilities and charges, current and deferred tax liabilities, other liabilities and retirement
benefit obligations.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements
120
Notes to the Financial Statements
continued
2 Operating Segments continued
The Company is domiciled in the UK. The split of Net Revenue from external customers and Non-Current Assets (other than available for sale financial
assets, deferred tax assets and retirement benefit surplus assets) between the UK, the US and China (US and China being the two biggest countries
outside the country of domicile) and that from all other countries is:
2017
Net Revenue
Goodwill and other intangible assets
Property, plant and equipment
Other non-current receivables
2016
Net Revenue2
Goodwill and other intangible assets
Property, plant and equipment
Other non-current receivables
UK
£m
716
1,937
207
15
US
£m
2,817
10,470
461
61
UK
£m
739
1,927
154
12
Greater
China1
£m
818
8,164
49
1
US
£m
2,279
5,624
183
53
All other
countries
£m
7,161
8,916
1,037
22
All other
countries
£m
6,462
5,903
541
16
Total
£m
11,512
29,487
1,754
99
Total
£m
9,480
13,454
878
81
1. Greater China represents Mainland China, Hong Kong and Taiwan. Following the acquisition of MJN, Greater China has become the second largest country in the Group, and is
therefore disclosed separately.
2. Restated for the impact of discontinued operations. Refer to Note 28 for further details.
The Net Revenue from external customers reported on a geographical basis above is measured consistently with that in the operating segments. Major
customers are typically large grocery chains, mass markets and multiple retailers. The Group’s customer base is diverse with only one customer (2016:
none) accounting for more than 10% of Net Revenue.
Analysis of Categories
The primary analysis within the information provided to the Executive Committee is based on the geographical areas above. An analysis of Net
Revenue by category is given below.
Health
Hygiene
Home
Portfolio Brands
1. Portfolio Brands is restated following the disposal of RB Food.
3 Analysis of Net Operating Expenses
Distribution costs
Administrative expenses:
Research and development
Other
Total administrative expenses
Other net operating income
Adjusting items included in net operating expenses
Net operating expenses
Net Revenue
2017
£m
5,090
4,313
1,860
249
11,512
Restated1
2016
£m
3,332
4,066
1,828
254
9,480
2017
£m
Restated1
2016
£m
(2,995)
(2,385)
(187)
(728)
(915)
3
(226)
(149)
(636)
(785)
5
(367)
(4,133)
(3,532)
1. Restated for the impact of discontinued operations. Refer to Note 28 for further details.
A net foreign exchange loss of £20 million (2016: £9 million loss, excluding RB Food) has been recognised through the Income Statement.
Adjusting Items
The Group uses certain adjusted earnings measures, including Adjusted Operating Profit and Adjusted Net Income, to provide additional clarity about
the underlying performance of the business.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017
121
3 Analysis of Net Operating Expenses continued
The Group has refined its accounting policy to make reference to adjusting items in presenting the Group's principal adjusted earnings measures.
Adjusting items are significant items included in operating profit, net finance expense or income tax expense, which are relevant to an understanding
of the underlying performance of the business. These comprise exceptional items, other adjusting items, and the reclassification of finance expenses
on tax balances:
• Exceptional items, which remain as previously defined, are material, non-recurring items of expense or income incurred during a year.
• Other adjusting items comprise the amortisation of certain fair value adjustments recorded in respect of finite-life intangible assets recognised in
the provisional purchase price allocation for the acquisition of MJN (refer to Note 27). These are not classified as exceptional items because of their
recurring nature.
• As explained in Note 1, the Group has changed its treatment of finance expenses on income tax balances. These were previously treated as income
tax but are now presented as finance expenses. There was no material impact resulting from the change in accounting for penalties. Adjusting
items now include a reclassification of finance expenses on tax balances into income tax, to align with previous guidance that focused on the
pre-exceptional tax rate, and with the way the expenses are managed by the Group. Therefore, these expenses are presented as part of income tax
in the adjusted profit before income tax measure.
The table below provides a reconciliation of the Group's reported statutory earnings measures to its adjusted measures for the year ended
31 December 2017:
Year ended 31 December 2017
Operating Profit
Net finance expense
Profit before income tax
Income tax expense
Net income for the year from continuing operations
Less: Attributable to non-controlling interests
Net income for the year attributable to owners of the parent (continuing)
Net income for the year from discontinued operations
Total net income for the year attributable to owners of the parent
Adjusting:
Exceptional
items
£m
Adjusting:
Other
items
£m
Adjusting:
Finance
expense
reclassification
£m
3421
352
377
(1,527)3
(1,150)
–
(1,150)
(2,741)4
(3,891)
435
–
43
(16)5
27
–
27
–
27
–
306
30
(30)6
–
–
–
–
–
Reported
£m
2,737
(238)
2,499
894
3,393
(17)
3,376
2,796
6,172
Adjusted
£m
3,122
(173)
2,949
(679)
2,270
(17)
2,253
55
2,308
1. Exceptional items within Operating Profit of £342 million include £219 million relating to the acquisition of MJN, which comprise the following:
transaction fees of £60 million
•
• unwinding of fair value adjustment made to inventories recorded on the purchase price allocation of £159 million, recorded in cost of sales in the Group Income Statement.
The remaining exceptional costs within operating profit relate to previously announced restructuring projects, including:
• MJN integration/RB 2.0 of £90 million
• Restructuring and other projects of £33 million.
2. Exceptional costs included within net finance expense comprises £23 million for the accelerated write-off of facility fees as a result of the acquisition of MJN in June 2017, when
short-term bridge facilities were replaced with the issuance of $7,750 million of fixed and floating rate loan notes, and £12 million for the accelerated write-off of facility fees as a
result of the early repayment of certain term loans using the proceeds from the disposal of RB Food.
Included within income tax credit is a £1,421 million tax credit resulting from the US Tax Reform and £106 million, representing the tax credit for the exceptional costs noted above.
3.
4. Adjusting items included in discontinued operations comprise the gain on the disposal of RB Food of £3,024 million, a tax credit of £13 million on this gain, and a charge of £296
million in respect of provision for settlement of the ongoing investigations by the US Department of Justice ("DoJ”) arising from certain matters relating to the RB Pharmaceuticals
business prior to its demerger in December 2014.
5. Other adjusting items of £43 million relate to the amortisation of certain intangible assets recognised as a result of the acquisition of MJN, charged over the period since the
acquisition up to 31 December 2017. In addition, there is a £16 million income tax credit in respect of these costs.
6. Adjusting items of £30 million relate to the reclassification of interest on income tax balances from finance expense to income tax in the adjusting measure (Note 1).
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 122
Notes to the Financial Statements
continued
3 Analysis of Net Operating Expenses continued
The table below provides a reconciliation of the Group’s reported statutory earnings measures to its adjusted measures for the year ended
31 December 2016:
Year ended 31 December 2016
Operating Profit
Net finance expense
Profit before income tax
Income tax expense
Net income for the year from continuing operations
Less: Attributable to non-controlling interests
Net income for the year attributable to owners of the parent (continuing)
Net income for the year from discontinued operations
Total net income for the year attributable to owners of the parent
Adjusting:
Exceptional
items
£m
3671
–
367
(42)2
325
–
325
–
325
Reported
£m
2,269
(16)
2,253
(520)
1,733
(4)
1,729
103
1,832
Adjusted
£m
2,636
(16)
2,620
(562)
2,058
(4)
2,054
103
2,157
1. Exceptional items in the year ended 31 December 2016 comprised £300 million of costs related to the HS issue in South Korea (primarily compensation for Rounds 1, 2 and 3,
commitments to the Humanitarian Fund, and legal costs directly linked to this issue) and £67 million related to restructuring and integration costs.
Included within income tax expense is a £42 million tax credit on the exceptional items.
2.
4 Auditor’s Remuneration
During the year, the Group (including its overseas subsidiaries) obtained the following services from the Company’s Auditors and its associates.
Audit services pursuant to legislation
Audit of the Group’s Annual Report and Financial Statements
Audit of the Financial Statements of the Group’s subsidiaries
Audit related assurance services
Total audit and audit-related services
Fees payable to the Company’s Auditors and its associates for other services:
Corporate finance services
Taxation compliance services
Taxation advisory services
Other assurance services
Total non-audit services
5 Employees
Staff Costs
The total employment costs, including Directors, were:
Wages and salaries
Social security costs
Other pension costs
Share-based payments
2017
£m
2016
£m
2.3
4.3
1.3
7.9
2.7
0.4
0.3
0.8
4.2
12.1
2017
£m
1,252
204
63
78
1,597
2.0
3.9
0.2
6.1
–
0.2
1.0
0.1
1.3
7.4
2016
£m
969
179
8
66
1,222
Note
22
24
Included within staff costs is £26 million (2016: £39 million) incurred in respect of RB Food. These amounts are included within Net Income from
discontinued operations in the Group Income Statement.
Executive Directors' aggregate emoluments were £2,046,510 (2016: £2,356,574).
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017
5 Employees continued
Compensation awarded to key management (the Executive Committee) was:
Short-term employee benefits
Post-employment benefits
Share-based payments
Termination benefits
123
2017
£m
7
1
26
1
35
2016
£m
7
1
29
–
37
Termination benefits and share-based payments include contractual commitments made to key management in 2017, comprising cash payments and
share awards.
Staff Numbers
The monthly average number of people employed by the Group, including Directors, during the year was:
Continuing operations
ENA
DvM
IFCN
Other
Discontinued operations
RB Food
6 Net Finance Expense
Finance income
Interest income on cash and cash equivalents
Total finance income
Finance expense
Interest payable on borrowings
Net pension plan interest
Amortisation of issue costs of bank loans1
Finance expense on tax balances
Other finance expense
Total finance expense
Net finance expense
2017
‘000
14.5
20.4
3.9
1.3
40.1
0.3
40.4
2017
£m
60
60
(205)
(9)
(42)
(30)
(12)
(298)
(238)
2016
‘000
14.2
18.8
–
1.2
34.2
0.5
34.7
2016
£m
42
42
(47)
(6)
(4)
–
(1)
(58)
(16)
1. Amortisation of issue costs of bank loans includes accelerated write off of facility fees in relation to the acquisition of MJN and the disposal of RB Food, which have been treated as
exceptional items (Note 3).
All net finance expense relates to continuing operations only.
7 Income Tax Benefit/Expense
Current tax
Adjustment in respect of prior periods
Total current tax
Origination and reversal of temporary differences
Impact of changes in tax rates
Total deferred tax
Income tax (benefit)/expense
2017
£m
760
(52)
708
(38)
(1,564)
(1,602)
(894)
Restated1
2016
£m
492
16
508
48
(36)
12
520
1. Restated for the impact of discontinued operations. Refer to Note 28 for further details.
Included in the income tax benefit of £894 million is an exceptional tax credit relating to the effect of US tax reform of £1,421 million (Note 3).
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements
124
Notes to the Financial Statements
continued
7 Income Tax Benefit/Expense continued
Current tax includes tax incurred by UK entities of £53 million (2016: £81 million). This is comprised of UK corporation tax of £25 million (2016: £61
million) and overseas tax suffered of £28 million (2016: £20 million). UK current tax is calculated at 19.25% (2016: 20%) of the estimated assessable
profit for the year, net of relief for overseas taxes where available. Taxation in other jurisdictions is calculated at the rates prevailing in the
relevant jurisdictions.
The variance between the current year tax charge of £760 million and cash tax paid of £543 million is attributable to movements on non-current tax
liabilities (shown in Note 21 and including US transition tax referenced in the Financial Review on page 36) and other timing differences arising
between accrual and payment of income tax liabilities.
The deferred tax impact of changes in tax rates of £1,564 million (2016: £36 million) primarily relates to the enactment of a reduction in the US federal
corporation rate from 35% to 21%, applicable from 1 January 2018. This results in a reduction in closing deferred tax assets and liabilities.
Original income and reversal of temporary differences includes adjustments in respect of prior periods of £23 million income (2016: £12 million
expense).
The total tax charge on the Group’s profits for the year can be reconciled to the notional tax charge calculated at the UK tax rate as follows:
Continuing operations
Profit before income tax
Tax at the notional UK corporation tax rate of 19.25% (2016: 20%)
Effect of:
Overseas tax rates
Movement in provision related to uncertain tax positions
Unrecognised tax losses and other unrecognised tax assets
Withholding and local taxes
US tax reform – transition tax and cost of repatriation
Reassessment of prior year estimates
Impact of changes in tax rates
Adjusting items
Other permanent differences
Income tax (benefit)/expense
1. Restated for the impact of discontinued operations. Refer to Note 28 for further details.
2017
£m
2,499
481
(66)
122
(17)
29
208
(75)
(1,564)
(11)
(1)
(894)
Restated1
2016
£m
2,253
451
(51)
31
54
22
–
28
(36)
9
12
520
The effect of overseas tax rates represents the impact of profits arising outside the UK that are taxed at different rates to the UK rate.
Amounts recognised in the Income Statement in respect of tax contingencies (Note 21) are shown in the movement in provision related to uncertain
tax positions.
The unrecognised tax loss arising in 2016 predominantly relates to the tax value of losses arising in South Korea from the HS issue, for which recovery
is not anticipated in the foreseeable future.
Reassessment of prior year estimates arose as a result of revised tax filings and differences between final tax return submissions and liabilities accrued
in these Financial Statements.
We conduct business operations in a number of countries, and are therefore subject to tax and intercompany pricing laws in multiple jurisdictions,
including those relating to the flow of funds between RB and its subsidiaries. Our effective tax rate in any given financial year reflects a variety of
factors that may not be present in succeeding financial years, and may be affected by variations in profit mix, challenges brought by tax authorities,
changes in tax laws, regulations and related interpretations, including those arising as a result of the OECD’s base erosion and profit shifting project
and from the EU’s investigations into potential breach of state aid rules in respect of tax rulings. In particular, on 24 November 2017, the European
Commission published an opening decision asserting that the United Kingdom controlled foreign company group financing exemption constitutes
state aid. The Group may be impacted by this, but no final decision has yet been published by the EU and management believes that no provision is
currently required.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 7 Income Tax Benefit/Expense continued
The tax (charge)/credit relating to components of other comprehensive income is as follows:
2017
Tax (charge)/
credit
£m
Before tax
£m
2016
After tax
£m
Before tax
£m
Tax credit
£m
Net exchange (losses)/gains on foreign currency translation
Gains/(losses) on cash flow and net investment hedges
Reclassification of foreign currency translation reserves on disposal of
foreign operations
Remeasurement of defined benefit pension plans (Note 22)
Revaluation of available for sale financial assets
Other comprehensive income
Current tax
Deferred tax (Note 11)
(310)
47
1,618
(158)
145
12
6
–
(176)
(2)
(100)
1,282
(310)
55
145
34
6
(70)
–
(8)
–
(22)
–
(30)
1
(31)
(30)
The tax credited/(charged) directly to the Statement of Changes in Equity during the year is as follows:
Current tax
Deferred tax (Note 11)
8 Earnings per Share
Basic earnings per share
From continuing operations
From discontinued operations
Total basic earnings per share
Diluted earnings per share
From continuing operations
From discontinued operations
Total diluted earnings per share
Adjusted basic earnings per share
From continuing operations
From discontinued operations
Total adjusted basic earnings per share
Adjusted diluted earnings per share
From continuing operations
From discontinued operations
Total adjusted diluted earnings per share
1. Restated for the impact of discontinued operations.
–
8
–
38
–
46
10
36
46
2017
£m
20
(14)
6
2017
pence
480.6
398.1
878.7
474.7
393.2
867.9
320.8
7.8
328.6
316.9
7.7
324.6
125
After tax
£m
1,618
(150)
–
(138)
(2)
1,328
2016
£m
14
(4)
10
Restated1
2016
pence
245.6
14.6
260.2
242.1
14.4
256.5
291.7
14.6
306.3
287.6
14.4
302.0
Basic
Basic earnings per share is calculated by dividing the net income attributable to owners of the parent from continuing operations (2017: £3,376 million;
2016: £1,729 million) and discontinued operations (2017: £2,796 million; 2016: £103 million) by the weighted average number of ordinary shares in
issue during the year (2017: 702,379,197; 2016: 704,164,106).
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
31 December 2017 there were 69,200 (2016: nil) Executive Share Awards excluded from the dilution because the exercise price for the options was
greater than the average share price for the year.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 126
Notes to the Financial Statements
continued
8 Earnings per Share continued
On a basic basis
Dilution for Executive Share Awards
Dilution for Employee Sharesave Scheme Options outstanding
On a diluted basis
Adjusted earnings
Details of the adjusted net income attributable to owners of the parent are as follows:
Continuing operations
Net income attributable to owners of the parent
Exceptional items, net of tax (Note 3)
Other Adjusting items, net of tax (Note 3)
Adjusted net income attributable to owners of the parent
1. Restated for the impact of discontinued operations. Refer to Note 28 for further details.
Discontinued operations
Net income attributable to owners of the parent
Exceptional items, net of tax (Note 3)
Adjusted net income attributable to owners of the parent
9 Goodwill and Other Intangible Assets
Cost
At 1 January 2016
Additions
Arising on business combinations
Disposals
Exchange adjustments
At 31 December 2016
Additions
Arising on business combinations
Disposals
Exchange adjustments
At 31 December 2017
Accumulated amortisation and impairment
At 1 January 2016
Amortisation and impairment charge
Disposals
Exchange adjustments
At 31 December 2016
Amortisation and impairment charge
Disposals
Exchange adjustments
At 31 December 2017
Net book value
At 31 December 2016
At 31 December 2017
2017
Average
number of
shares
2016
Average
number of
shares
702,379,197
8,054,213
691,174
704,164,106
9,405,777
730,750
711,124,584
714,300,633
2017
£m
3,376
(1,150)
27
2,253
2017
£m
2,796
(2,741)
55
Restated1
2016
£m
1,729
325
–
2,054
2016
£m
103
–
103
Brands
£m
Goodwill
£m
Software
£m
Other
£m
Total
£m
7,969
359
24
–
1,197
9,549
–
9,043
(52)
(652)
3,303
–
148
–
491
3,942
–
8,020
–
(443)
121
25
–
(12)
3
137
63
19
(2)
(2)
17,888
11,519
215
92
59
–
5
156
35
–
(3)
188
21
–
–
1
22
–
–
(4)
18
37
14
(12)
2
41
23
(1)
–
63
107
–
–
(44)
2
11,500
384
172
(56)
1,693
65
13,693
–
107
–
(7)
165
54
6
(41)
1
20
12
–
(1)
31
63
17,189
(54)
(1,104)
29,787
204
79
(53)
9
239
70
(1)
(8)
300
9,393
3,920
17,700
11,501
96
152
45
134
13,454
29,487
The amount stated for brands represents the fair value of brands acquired since 1985 at the date of acquisition. Other includes product registration,
distribution rights, capitalised product development costs and customer contracts.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017
127
9 Goodwill and Other Intangible Assets continued
Software includes intangible assets under construction of £54 million (2016: £26 million).
The majority of brands, all of goodwill and certain other intangibles are considered to have indefinite lives for the reasons noted in the Accounting
Policies and therefore are subject to an annual impairment review. The MJN global brand and a number of small non-core brands are deemed to have
a finite life and are amortised accordingly.
In 2016, the Group exercised its option to acquire the legal title to intellectual property associated with the collaboration agreement with Bristol Myers
Squibb (BMS), as described in the Annual Report and Financial Statements 2013. The amount capitalised reflects a cash payment of £189 million and a
prepayment made in 2013 of £170 million (at 2016 exchange rates).
Goodwill and brands arising on business combinations during the year primarily relate to the MJN acquisition discussed in Note 27.
The net book amounts of indefinite and finite life intangible assets are as follows:
Net book amount
Indefinite life assets:
Brands
Goodwill
Other
Total indefinite life assets
Finite life assets:
Brands
Software
Other
Total finite life assets
Total net book amount of intangible assets
2017
£m
2016
£m
17,153
11,501
45
9,383
3,920
45
28,699
13,348
547
152
89
788
10
96
–
106
29,487
13,454
Goodwill and other intangible assets with indefinite lives are allocated to either individual cash generating units (CGUs), or groups of cash generating
units (together ‘GCGUs’). The goodwill and intangible assets with indefinite lives are tested for impairment at the level at which identifiable cash
inflows are largely independent. Generally this is at a GCGU level, but for certain intangible assets this is at a CGU level.
Cash Generating Units
After considering all the evidence available, including how brand and production assets generate cash inflows and how management monitors the
business, the Directors have concluded that for the purpose of impairment testing of goodwill and intangible assets, the Group’s GCGUs are as
follows: Health, Hygiene, Home and IFCN.
An analysis of the net book value of indefinite life assets and goodwill by GCGU is shown below:
GCGU
Powerbrands
Health1
Hygiene
Home
IFCN
Food2
Durex, Gaviscon, Mucinex, Nurofen, Scholl, Strepsils
Bang, Clearasil, Dettol, Finish, Harpic, Lysol, Mortein, Veet
Air Wick, Calgon, Vanish, Woolite
Enfamil, Nutramigen
French’s
Indefinite
life assets
£m
6,946
1,305
809
8,138
–
2017
Goodwill
£m
3,567
159
45
7,730
–
Total
£m
10,513
1,464
854
15,868
–
17,198
11,501
28,699
Indefinite
life assets
£m
7,182
1,371
835
–
40
9,428
2016
Goodwill
£m
3,713
162
45
–
–
Total
£m
10,895
1,533
880
–
40
3,920
13,348
1 Within the Health GCGU, the cash flows in relation to certain groups of brands are separately identifiable. As a result, the carrying value of these brand-related intangible assets, in
conjunction with associated property, plant and equipment, have been tested for impairment as CGUs. This is in addition to the impairment testing over goodwill and indefinite life
assets for the wider GCGU. The CGUs tested separately are shown below, all of which fall under the Health GCGU in the above table.
2 The Food GCGU was disposed of during 2017.
Carrying Value of CGU
Sexual Wellbeing
Brazillian Sexual Wellbeing
Oriental Pharma
BMS
VMS
2017
£m
2,201
47
142
396
1,003
2016
£m
2,124
–
127
355
914
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements
128
Notes to the Financial Statements
continued
9 Goodwill and Other Intangible Assets continued
Annual Impairment Review
The annual impairment review of goodwill and indefinite life assets is based on an assessment of each GCGU’s or CGU’s recoverable amount, being
the higher of value in use or fair value less costs of disposal. Both valuation models are calculated from cash flow projections, based on historical
operating results, short-term budgets and medium-term business plans, which have each been approved by management and cover a five-year period.
These projections exclude any estimated future cash inflows or outflows expected to arise from restructuring not yet implemented.
The recoverable amount calculation is based on the following key assumptions used in the cash flow projections:
• Net Revenue growth based upon forecast future sales volumes and prices, which take account of the expected impact from committed new
product initiatives, geographical expansion and the maturity of the markets in which each GCGU or CGU operates;
• Gross Margin based on historical experience adjusted for the impact of forecast production costs, cost optimisation initiatives and changes in
product mix; and
• Marketing and other expenditure, reflecting historical experience, expected levels of cost inflation, committed cost saving initiatives and future
levels of marketing support required to sustain, grow and further innovate brands.
Cash flows beyond the five-year period are extrapolated using the estimated long-term growth rates stated below. The long-term growth rates applied
do not exceed the long-term average growth rate for the products and markets in which the GCGU or CGU operates.
Management has assessed the appropriate discount rate for each individual GCGU and CGU. This has been done using a Weighted Average Cost of
Capital (WACC) for comparable companies operating in similar markets and geographies as the Group, adjusted for risks specific to each GCGU
and CGU.
Due to the wide geographic and product diversification of their respective markets, and the diverse risks associated with a number of GCGUs and
CGUs, a pre-tax discount rate of 10% was determined for each of the Health, Hygiene and Home GCGUs as well as the Sexual Wellbeing CGU (2016:
10%). The IFCN recoverable amount was calculated on a fair value less costs of disposal basis and a post-tax discount rate of 8% was determined for
IFCN based on the geographic spread and product portfolio. The fair value measurement of IFCN is categorised within Level 3 of the fair value
hierarchy.
The VMS and Oriental Pharma CGUs are predominantly concentrated in single markets, being the US and China respectively. BMS is predominantly
concentrated in the Mexican and Brazilian markets. A pre-tax discount rate of 13% was therefore applied to VMS (2016: 13%), 12% (2016: 12%) was
applied to Oriental Pharma and 13% was applied to BMS and Brazilian Sexual Wellbeing, to reflect the risks specific to these businesses.
GCGU/CGU
Health
Hygiene
Home
IFCN
Oriental Pharma
Sexual Wellbeing
Brazilian Sexual Wellbeing
BMS
VMS
2017
2016
Terminal
growth
rate %
Discount
rate %*
Terminal
growth
rate %
Discount
rate %
4
2
1
3
4
4
4
4
2
10
10
10
8
12
10
13
13
13
4
2
1
–
4
4
–
4
2
10
10
10
–
12
10
–
13
13
Following the Group’s annual impairment review, no impairments have been identified.
Any reasonably possible change in the key assumptions on which the recoverable amounts of the Health, Hygiene, Home and IFCN GCGUs, and the
Sexual Wellbeing, Brazilian Sexual Wellbeing and VMS CGUs, are based would not imply possible impairments.
With a value in use exceeding its carrying value by £97 million (24%), the BMS CGU is sensitive to reasonably possible changes in key assumptions. The
sensitivity of the recoverable amount has been assessed to identify the impact of reasonably possible changes in assumptions. If all other assumptions
were held constant, a reduction in assumed growth rates in the first five years by 20% of those forecast would lead to a reduction in the value in use
of this CGU of £62 million. In addition, a reduction of 100 bps in the terminal growth rate would result in a reduction in the value in use of £38 million.
Applying these sensitivities together would result in the value in use of this CGU exceeding its carrying value by £2 million. Management considers the
likelihood of all sensitivities occurring together to be remote.
The value in use of the Oriental Pharma CGU exceeds its carrying value by £20 million (14%), and as such is also sensitive to changes in key
assumptions. If all other assumptions were held constant, a reduction in assumed growth rates in the first five years by 20% of that forecast would
lead to a reduction in the value in use of this CGU of £20 million. In addition, a reduction of 100 bps in the terminal growth rate would result in a
reduction in the value in use of £15 million. Applying these sensitivities together would result in an impairment of £13 million. Management considers
the likelihood of all sensitivities occurring together to be remote.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 10 Property, Plant and Equipment
Cost
At 1 January 2016
Additions
Arising on business combinations
Disposals
Reclassifications
Exchange adjustments
At 31 December 2016
Additions
Arising on business combinations
Disposals
Transferred to assets classified as held for sale
Reclassifications
Exchange adjustments
At 31 December 2017
Accumulated depreciation and impairment
At 1 January 2016
Charge for the year
Disposals
Impairment losses
Exchange adjustments
At 31 December 2016
Charge for the year
Disposals
Impairment losses
Transferred to assets classified as held for sale
Exchange adjustments
At 31 December 2017
Net book value
As at 31 December 2016
As at 31 December 2017
129
Land and
buildings
£m
Plant and
equipment
£m
558
6
30
(14)
16
80
676
42
399
(42)
(30)
50
(33)
1,166
173
8
(50)
(16)
154
1,435
247
521
(173)
(5)
(50)
(43)
Total
£m
1,724
179
38
(64)
–
234
2,111
289
920
(215)
(35)
–
(76)
1,062
1,932
2,994
210
32
(12)
11
29
270
48
(24)
3
(14)
(1)
282
406
780
784
116
(47)
10
100
963
150
(150)
–
(4)
(1)
958
472
974
994
148
(59)
21
129
1,233
198
(174)
3
(18)
(2)
1,240
878
1,754
The net book amount of assets under construction is £236 million (2016: £109 million). Assets under construction are included within plant and
equipment and are not depreciated.
The reclassification from plant and equipment to land and buildings of £50 million (2016: £16 million) shows the transfer of completed assets.
Impairment losses of £nil (2016: £9 million) have been charged to exceptional items (Note 3).
Capital expenditure which was contracted but not capitalised at 31 December 2017 was £90 million (2016: £103 million).
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements
130
Notes to the Financial Statements
continued
11 Deferred Tax
Deferred tax assets
At 1 January 2017
(Charged)/credited to the Income Statement
Credited/(charged) to other comprehensive income
Arising on business combinations
Exchange differences
At 31 December 2017
Deferred tax liabilities
At 1 January 2017
(Credited)/charged to the Income Statement
Charged to other comprehensive income
Charged directly to equity
Arising on business combinations
Divestment of discontinued operations
Exchange differences
At 31 December 2017
Accelerated
capital
allowances
£m
Intangible
assets
£m
Short-term
temporary
differences
£m
Retirement
benefit
obligations
£m
Tax losses
£m
9
(2)
1
3
(1)
10
(32)
6
(1)
2
1
(24)
88
(7)
(5)
37
(5)
108
–
(2)
–
7
(1)
4
16
–
–
4
–
20
Accelerated
capital
allowances
£m
Intangible
assets
£m
Short-term
temporary
differences
£m
Retirement
benefit
obligations
£m
Tax losses
£m
14
(15)
–
–
48
(3)
(5)
39
2,303
(1,670)
–
–
3,399
(17)
(228)
3,787
(261)
68
–
14
(175)
–
16
(338)
(8)
2
–
–
(2)
–
1
(7)
(65)
13
26
–
(23)
6
5
(38)
3,443
Total
£m
81
(5)
(5)
53
(6)
118
Total
£m
1,983
(1,602)
26
14
3,247
(14)
(211)
Deferred tax assets and liabilities have been offset where they relate to income taxes levied by the same taxation authority.
Certain deferred tax assets in respect of corporation tax losses and other gross temporary differences totalling £1,139 million (2016: £326 million) have
not been recognised at 31 December 2017 as the likelihood of future economic benefit is not sufficiently assured. These assets will be recognised if
utilisation of the losses and other temporary differences becomes sufficiently probable.
No deferred tax liability has been recognised on the unremitted earnings of overseas subsidiaries as no tax is expected to be payable on them in the
foreseeable future based on the current repatriation policy of the Group.
12 Inventories
Raw materials and consumables
Work in progress
Finished goods and goods held for resale
Total inventories
2017
£m
269
120
812
1,201
2016
£m
168
29
573
770
The total cost of inventories recognised as an expense and included in cost of sales amounted to £4,426 million (2016: £3,497 million, restated to
exclude RB Food). This includes inventory write-offs and losses of £73 million (2016: £91 million, restated to exclude RB Food).
The Group inventory provision at 31 December 2017 was £95 million (2016: £84 million).
13 Trade and Other Receivables
Amounts falling due within one year
Trade receivables
Less: Provision for impairment of receivables
Trade receivables – net
Other receivables
Prepayments and accrued income
2017
£m
1,778
(55)
1,723
215
66
2,004
2016
£m
1,501
(45)
1,456
127
40
1,623
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 13 Trade and Other Receivables continued
The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies:
US dollar
Euro
Brazil real
Sterling
Other currencies
131
2017
£m
547
317
119
112
909
2016
£m
442
287
141
97
656
2,004
1,623
The maximum exposure to credit risk at the year end is the carrying value of each class of receivable mentioned above. The Group does not hold any
collateral as security.
a Trade Receivables
Trade receivables consist of amounts due from customers. The Group’s customer base is large and diverse and therefore there is limited concentration
of credit risk. Credit risk is assessed at a subsidiary and Group level, taking into account their financial positions, past experiences and other relevant
factors. Individual credit limits are imposed based on those factors. Balances are considered for impairment on an individual basis in addition by
reference to the extent that they become overdue.
As at 31 December 2017, trade receivables of £172 million (2016: £160 million) were past due but not impaired. The ageing analysis of trade
receivables past due but not impaired is as follows:
Amounts past due but not impaired
Up to 3 months
2017
£m
172
2016
£m
160
At 31 December 2017, a provision for impairment of £55 million (2016: £45 million) was recorded against certain trade receivables. The total amount of
receivables against which this provision was recorded is included in the table below. The total amount of these receivables was not impaired because
having given consideration to the nature of the receivables and their historical collection, recovery of the unprovided amount is expected in due
course. The ageing analysis of these receivables is as follows:
Ageing analysis
Up to 3 months
Over 3 months
2017
£m
45
59
104
2016
£m
26
31
57
The movement in the provision for impaired receivables consists of increases for additional provisions, offset by receivables written-off and unused
provision released back to the Income Statement. The gross movements in the provision are considered to be insignificant.
b Other Receivables
Other Receivables includes recoverable sales tax of £151 million (2016: £74 million). This contains £3 million (2016: £5 million) of impaired assets all
aged over three months from a broad range of countries within the Group.
Other non-current receivables
Non-current other receivables at 31 December 2017 were £99 million (2016: £81 million). This includes non-current derivative financial instruments of
£2 million (2016: £3 million).
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 132
Notes to the Financial Statements
continued
14 Financial Instruments and Financial Risk Management
Financial Instruments by Category
At 31 December 2017
Assets as per the Balance Sheet
Trade and other receivables1
Derivative financial instruments – FX forward exchange contracts
Available for sale financial assets2
Cash and cash equivalents
Liabilities as per the Balance Sheet
Borrowings (commercial paper, bank loans and overdrafts)3
Bonds4
Senior notes4
Term loans4
Derivative financial instruments – FX forward exchange contracts
Derivative financial instruments – Interest rate swaps
Trade and other payables5
Other non-current liabilities5,6
At 31 December 2016
Assets as per the Balance Sheet
Short-term deposits7
Trade and other receivables1
Derivative financial instruments – FX forward exchange contracts
Available for sale financial assets2
Cash and cash equivalents
Liabilities as per the Balance Sheet
Borrowings (commercial paper, bank loans and overdrafts)3
US$1 billion bond (two tranches of US$500 million at 2.125% and 3.625%)4
Finance lease obligations3
Derivative financial instruments – FX forward exchange contracts
Trade and other payables5
Other non-current liabilities5,6
Loans and
receivables
£m
Derivatives
used for
hedging
£m
Fair value
through
the P&L
£m
Available
for sale
£m
1,998
–
–
2,125
–
15
–
–
–
5
–
–
–
–
41
–
Derivatives
used for
hedging
£m
Fair value
through
the P&L
£m
–
–
–
–
16
12
–
–
–
–
–
–
3
–
–
–
Other
financial
liabilities at
amortised
cost
£m
976
6,443
2,350
3,092
–
–
4,410
196
Carrying
value
total
£m
1,998
20
41
2,125
Carrying
value
total
£m
976
6,443
2,350
3,092
19
12
4,410
196
Loans and
receivables
£m
Derivatives
used for
hedging
£m
Fair value
through
the P&L
£m
Available
for sale
£m
Carrying
value total
£m
3
1,627
–
–
882
–
–
36
–
–
–
–
125
–
–
–
–
–
39
–
3
1,627
161
39
882
Derivatives
used for
hedging
£m
Fair value
through
the P&L
£m
–
–
–
47
–
–
–
–
–
11
–
–
Other
financial
liabilities at
amortised
cost
£m
1,584
804
1
–
3,317
97
Carrying
value total
£m
1,584
804
1
58
3,317
97
1. Prepayments and employee benefit assets are excluded from the trade and other receivables balance as they are out of scope of IFRS 7.
2. Available for sale financial assets relates to an investment of less than 1% of the shares in issue of China Resources Pharmaceutical Group Limited (CRP).
3. The categories in this disclosure are determined by IAS 39. Borrowings largely relate to Commercial Paper. As at 31 December 2017, the Group had Commercial Paper in issue
amounting to $80 million (nominal values) at a rate of 1.52% maturing on 16 January 2018, and €1,000 million (nominal values) at the rate of between negative 0.24% and
negative 0.33% with maturities ranging from 22 January 2018 to 13 June 2018. Finance leases are outside the scope of IAS 39, but they remain within the scope of IFRS 7.
Therefore finance leases have been shown separately.
4. The fair value of bonds at 31 December 2017 is a liability of £6,375 million (2016: £821 million). The fair value of the Senior notes at 31 December is a liability of £2,391 million
(2016: nil). This value is derived using a quoted market rate in an active market (level 1 classification). The term loan carrying value at 31 December 2017 is a liability of £3,092
million (2016: nil). The fair value approximates to carrying value and is calculated discounted future cash flows at floating market rates (level 2 classification).
5. Social security liabilities, other employee benefit liabilities, and interest accrued on tax balances are excluded as they are out of scope of IFRS 7.
6. Other non-current liabilities principally comprises a put option over the non-controlling interests of certain Group subsidiaries in China of £105 million (2016: £94 million). This
option was written in 2016 and has a minimum term of six years.
7. These short-term deposits do not meet the requirements to be classified as cash equivalents as they have maturities greater than three months. They are however highly
liquid assets.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017
133
14 Financial Instruments and Financial Risk Management continued
Except for the bonds and senior notes, the fair values of other financial assets and liabilities at amortised cost approximate their carrying values.
Within the IFRS 13 fair value hierarchy, the bonds, senior notes and available for sale financial assets are classified as level 1. The term loans and the
derivative financial instruments are classified as level 2. Fair value for financial instruments held at amortised cost has been estimated by discounting
cash flows at prevailing interest rates and by applying year end exchange rates. The fair value measurement hierarchy levels have been defined
as follows:
• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
•
Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly
(i.e. derived from prices) (level 2). If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
Inputs for the asset or liability that are not based on observable market data (i.e. unobservable inputs) (level 3).
•
The fair value of forward foreign exchange contracts at 31 December 2017 is a liability of £19 million (2016: liability £58 million) and an asset of
£20 million (2016: asset £161 million). This value is determined using forward exchange rates derived from market sourced data at the Balance Sheet
date, with the resulting value discounted back to present value (level 2 classification). The fair value of interest rate swap contracts at 31 December
2017 is a liability of £12 million (2016: nil) and was calculated by discounting future cash flows at floating market rates (level 2 classification).
Offsetting financial assets and financial liabilities
The Group has forward foreign exchange contracts and cash that are subject to enforceable master netting arrangements.
(a) Financial assets
At 31 December 2017
Forward foreign exchange contracts
Cash and cash equivalents
As at 31 December 2016
Forward foreign exchange contracts
Cash and cash equivalents
(b) Financial liabilities
As at 31 December 2017
Forward foreign exchange contracts
Interest rate swaps
Bank overdrafts
As at 31 December 2016
Forward foreign exchange contracts
Bank overdrafts
Gross
amounts of
recognised
financial
assets
£m
20
2,125
2,145
Gross
amounts of
recognised
financial
assets
£m
161
882
1,043
Gross amounts
of recognised
financial
liabilities set off
in the Balance
Sheet
£m
Net amounts of
financial assets
presented in the
Balance Sheet
£m
Financial
instruments not
set off in the
Balance Sheet
£m
–
–
–
20
2,125
2,145
(13)
–
(13)
Gross amounts of
recognised
financial
liabilities set off in
the Balance Sheet
£m
Net amounts of
financial assets
presented in the
Balance Sheet
£m
Financial
instruments not
set off in the
Balance Sheet
£m
–
–
–
161
882
1,043
(58)
–
(58)
Gross
amounts of
recognised
financial
liabilities
£m
Gross amounts
of recognised
financial assets
set off in the
Balance Sheet
£m
Net amounts
of financial
liabilities
presented in the
Balance Sheet
£m
Financial
instruments not
set off in the
Balance Sheet
£m
(19)
(12)
(8)
(39)
–
–
–
–
(19)
(12)
(8)
(39)
13
–
–
13
Gross
amounts of
recognised
financial
liabilities
£m
Gross amounts
of recognised
financial assets
set off in the
Balance Sheet
£m
Net amounts of
financial liabilities
presented in the
Balance Sheet
£m
Financial
instruments not
set off in the
Balance Sheet
£m
(58)
(9)
(67)
–
–
–
(58)
(9)
(67)
58
–
58
Net
amount
£m
7
2,125
2,132
Net
amount
£m
103
882
985
Net
amount
£m
(6)
(12)
(8)
(26)
Net
amount
£m
–
(9)
(9)
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 134
Notes to the Financial Statements
continued
14 Financial Instruments and Financial Risk Management continued
Financial Risk Management
The Group’s multinational operations expose it to a variety of financial risks that include the effects of changes in foreign currency exchange rates
(foreign exchange risk), market prices, interest rates, credit risks and liquidity. The Group has in place a risk management programme that uses foreign
currency financial instruments, including debt, and other instruments, to limit the impact of these risks on the financial performance of the Group.
The Group’s financing and financial risk management activities are centralised into Group Treasury (‘GT’) to achieve benefits of scale and control. GT
manages financial exposures of the Group centrally in a manner consistent with underlying business risks. GT 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. GT operates under the close control of the CFO 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 GT to manage these exposures where practical and allowed by local
regulations. GT matches the Group exposures, and hedges the position where possible, using spot and forward foreign currency exchange contracts.
The Group’s strategy is to minimise Income Statement volatility by monitoring foreign currency balances, external financing, and external hedging
arrangements. The Group’s hedging profile is regularly reviewed to ensure it is appropriate and to mitigate these risks as far as possible.
The notional principal amount of the outstanding forward foreign exchange contracts at 31 December 2017 was £2,760 million payable (2016:
£4,614 million payable).
As at 31 December 2017, the Group had designated bonds totalling $1,000 million (2016: $1,000 million) as the hedging instrument in a net
investment hedge relationship. The hedged risk is the foreign exchange currency risk on the value of the Group’s net investment in assets and liabilities
denominated in US dollars.
As at 31 December 2017, the Group had designated commercial paper totalling €1,000 million (2016: €500 million) as the hedging instrument in a net
investment hedge relationship. This is to hedge the risk of loss in value of the Group's Euro denominated intangible brand assets due to exchange rate
fluctuations.
The net gain or loss under these arrangements is recognised in other comprehensive income. The net effect on other comprehensive income for the
year ended 31 December 2017 was a £44 million gain (2016: £128 million loss). If sterling strengthens/weakens by 5% against the US dollar and Euro,
the maximum impact on Shareholders’ equity due to net investment hedging by US dollar bond and Euro commercial paper would be £39 million and
£47 million respectively.
The Group held forward foreign exchange contracts denominated as cash flow hedges primarily in Sterling, Euro, US dollar, Canadian dollar, Saudi riyal
and Australian dollar. The national value of the payable leg resulting from these financial instruments was as follows:
Cash Flow Hedge Profile
Sterling
Euro
US dollar
Canadian dollar
Saudi riyal
Australian dollar
Other
2017
£m
383
221
115
105
98
63
327
2016
£m
259
368
260
70
–
87
397
1,312
1,441
These forward foreign exchange contracts are expected to mature over the period January 2018 to December 2020 (2016: January 2017 to
December 2020).
The ineffective portion recognised in the income statement arising from cash flow hedges is immaterial (2016: immaterial).
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017
135
14 Financial Instruments and Financial Risk Management continued
Gains and losses recognised in the hedging reserve in other comprehensive income on forward exchange contracts in 2017 of £12 million gain (2016:
£29 million loss) are recognised in the Income Statement in the year or years during which the hedged forecast transaction affects the Income
Statement, which is generally within 36 months from the Balance Sheet date.
At 31 December 2017, the Group had forward contracts used for cash flow hedging with total fair value of £1 million liability (2016: £11 million
liability). These contracts are denominated in a diverse range of currency pairings, where a fluctuation of 5% in any one of the contract pairings, with
all others remaining constant, would have a maximum effect of £13 million (2016: £33 million) on Shareholder Equity, until the point at which the
contracts mature and the forecast transaction occurs. The four largest contract pairings in order of nominal value were US dollar/sterling, US dollar/
Saudi riyal, US dollar/Canadian dollar and Euro/Polish Zloty.
The remaining major monetary financial instruments (liquid assets, receivables, interest and non-interest-bearing liabilities) are directly denominated in
the functional currency of the Group or are transferred to the functional currency of the local entity through the use of derivatives.
The gains and losses from fair value movements on derivatives held at fair value through the profit or loss, recognised in the Income Statement in 2017
was a £61 million loss (2016: £537 million gain).
(b) 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, such as 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 assets and liabilities. The Group monitors its interest income and expense rate exposure
on a regular basis. The Group manages its interest income rate exposure on its gross financial assets by using a combination of fixed rate
term deposits.
Under the Group’s interest rate management strategy a percentage of fixed interest rate borrowings have been swapped to floating interest rate. The
Group’s debt is obtained on a fixed or floating basis to align with fixed to floating debt requirements and in some cases fixed rate debt is swapped to
floating rate debt to maintain an appropriate level of fixed to floating rate debt.
Interest rate swaps are held to hedge the interest rate risk associated with the $700 million 2019 Senior Note and $750 million 2020 Senior Note. The
interest rate swaps convert the fixed rate of 4.9% on the 2019 Senior Note and 3% on the 2020 Senior Note to floating and have been designated as
a fair value hedge. As at 31 December 2017 interest rate swaps held at fair value totalled £12 million payable. The fair value adjustment applied to the
bonds due to the hedge designation totalled £12 million receivable.
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 £18 million (2016: £7 million) or decrease of £18 million
(2016: £7 million), respectively for the liabilities covered. The simulation is done on a periodic basis to verify that the maximum loss simulated 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 Group uses BBB and higher rated counterparties to manage risk and only uses sub BBB rated
counterparties by exception. 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 of Directors. Derivative financial instruments are only traded with counterparties approved in accordance
with the approved policy. Derivative risk is measured using a risk weighting method.
The Group has counterparty risk from asset positions held with financial institutions. This is comprised of short-term investments, cash and cash
equivalents and derivatives positions as stated on the face of the Balance Sheet. For risk management purposes the Group assesses the exposure to
major financial institutions by looking at the deposits, cash and cash equivalents and 5% of derivative notional position. The following table
summarises the Group’s assessment of its exposure:
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 136
Notes to the Financial Statements
continued
14 Financial Instruments and Financial Risk Management continued
Counterparty
Bank A
Bank B
Bank C
Bank D
Bank E
Bank F
Bank G
Bank H
Bank I
Bank J
Credit
rating
AAA
AAA
AAA
AAA
A+
AA-
AAA
A
A
AA-
2017
2016
Limit
£m
300
250
300
200
150
200
300
125
125
100
Exposure
£m
266
193
189
182
179
163
115
97
93
90
Credit
rating
n/a*
n/a*
n/a*
n/a*
A+
AA-
n/a*
A
A
AA-
Limit
£m
n/a*
n/a*
n/a*
n/a*
150
200
n/a*
125
125
100
Exposure
£m
n/a*
n/a*
n/a*
n/a*
127
191
n/a*
17
90
13
*As a result of business combination with Mead Johnson Nutrition no prior year comparative is shown.
3. Liquidity Risk
Cash flow forecasting is performed by the local business units and on an aggregated basis by GT. GT 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 local businesses are generally remitted to GT. 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.
The Group has various borrowing facilities available to it. The Group has bilateral credit facilities with high-quality international banks and has a
financial covenant, which is not expected to restrict the Group’s future operations.
At the end of 2017, the Group had long-term debt of £11,515 million (2016: £804 million), of which £10,979 million (2016: £402 million) is repayable in
more than two years. In addition, the Group has undrawn committed borrowing facilities totalling £4,500 million (2016: £3,500 million), which expire
after more than two years. The committed borrowing facilities (both drawn and undrawn), together with 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:
Undrawn committed borrowing facilities:
Expiring within one year
Expiring between one and two years
Expiring after more than two years
All borrowing facilities are at floating rates of interest.
2017
£m
2016
£m
–
–
4,500
4,500
–
–
3,500
3,500
The facilities have been arranged to cover general corporate purposes, including support for commercial paper issuance. All facilities incur commitment
fees at market rates.
The Group’s borrowing limit at 31 December 2017 calculated in accordance with the Articles of Association was £40,599 million (2016 restated:
£25,263 million).
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017
137
14 Financial Instruments and Financial Risk Management continued
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.
At 31 December 2017
Commercial paper
Bonds
Term loans
Senior notes
Other borrowings
Interest rate swaps
Trade payables
Other payables
At 31 December 2016
Commercial paper
Bonds
Other borrowings
Trade payables
Other payables
Total
£m
(948)
(7,631)
(3,343)
(3,243)
(28)
(16)
(1,770)
(2,844)
Total
£m
(1,570)
(930)
(25)
(1,243)
(2,170)
Less than
1 year
£m
Between 1
and 2 years
£m
Between 2
and 5 years
£m
(948)
(546)
(65)
(95)
(28)
(2)
(1,770)
(2,640)
Less than
1 year
£m
(1,570)
(23)
(25)
(1,243)
(2,073)
–
(171)
(65)
(613)
–
(8)
–
(91)
–
(2,890)
(3,213)
(731)
–
(6)
–
(113)
Between 1
and 2 years
£m
Between 2
and 5 years
£m
–
(428)
–
–
(97)
–
(44)
–
–
–
Over
5 years
£m
–
(4,024)
–
(1,804)
–
–
–
–
Over
5 years
£m
–
(435)
–
–
–
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.
At 31 December 2017
Forward exchange contracts
Outflow
Inflow
At 31 December 2016
Forward exchange contracts
Outflow
Inflow
Less than
1 year
£m
Between 1
and 2 years
£m
Between 2
and 5 years
£m
Over
5 years
£m
(2,749)
2,763
(6)
8
(3)
5
–
–
Less than
1 year
£m
Between 1
and 2 years
£m
Between 2
and 5 years
£m
Over
5 years
£m
(4,598)
4,690
(6)
8
(10)
14
–
–
4. Capital Management
The Group considers capital to be net debt plus total equity. Net debt is calculated as total borrowings less cash and cash equivalents, short-term
available for sale financial assets and financing derivative financial instruments (Note 16). Total equity includes share capital, reserves and retained
earnings as shown in the Group Balance Sheet.
Net debt (Note 16)
Total equity
2017
£m
10,746
13,573
24,319
2016
£m
1,391
8,426
9,817
The objectives for managing capital are to safeguard the Group’s ability to continue as a going concern, in order to provide returns for Shareholders
and benefits for other stakeholders and to maintain an efficient capital structure to optimise the cost of capital.
In 2017, the Group provided returns to Shareholders in the form of dividends. Refer to Note 29 for further details.
The Group monitors net debt and at year end the Group had net debt of £10,746 million (2016: £1,391 million). The Group seeks to pay down net
debt using cash generated by the business to maintain an appropriate level of financial flexibility.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements Notes to the Financial Statements
continued
138
15 Cash and Cash Equivalents
Cash at bank and in hand
Short-term bank deposits
Cash and cash equivalents
2017
£m
1,355
770
2,125
2016
£m
316
566
882
The Group operates in a number of territories where there are either foreign currency exchange restrictions, or where it is difficult for the Group to
extract cash readily and easily in the short-term. As a result, £10 million (2016: £120 million) of cash included in cash and cash equivalents is restricted
for use by the Group, yet available for use in the relevant subsidiary’s day-to-day operations.
16 Financial Liabilities – Borrowings
Current
Bank loans and overdrafts1
Commercial paper2
Bonds
Finance lease obligations
Non-current
Bonds
Senior notes
Term loans
1. Bank loans are denominated in a number of currencies: all are unsecured and bear interest based on the relevant LIBOR equivalent.
2. Commercial paper was issued in US dollars and Euros, is unsecured and bears interest based on the relevant LIBOR equivalent.
Maturity of debt
Bank loans and overdrafts repayable:
Within one year or on demand
Other borrowings repayable:
Within one year:
Commercial paper
Finance leases
Bonds
After one year and in less than five years:
Bonds
Senior notes
Term loans
After five years or longer:
Bonds
Senior notes
Term loans
Gross borrowings (unsecured)
Analysis of net debt
Cash and cash equivalents
Overdrafts
Cash and cash equivalents
Borrowings (excluding overdrafts)
Derivative financial instruments (debt)
Financing liabilities
Short-term investments
Net debt at end of year
2017
£m
28
948
370
–
1,346
2017
£m
6,073
2,350
3,092
11,515
2017
£m
28
948
–
370
2,399
1,095
1,324
3,674
1,255
1,768
12,833
12,861
2017
£m
2,125
(8)
2,117
(12,853)
(10)
(12,863)
–
2016
£m
25
1,559
–
1
1,585
2016
£m
804
–
–
804
2016
£m
25
1,559
1
–
402
–
–
402
–
–
2,364
2,389
2016
£m
882
(9)
873
(2,380)
113
(2,267)
3
(10,746)
(1,391)
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017
139
16 Financial Liabilities – Borrowings continued
The Group uses derivative financial instruments to hedge certain elements of interest rate and exchange risk on its net debt. The split between these
items and other derivatives on the Balance Sheet is shown below:
Derivative financial instruments (debt)
Derivative financial instruments (non-debt)
At 31 December 2017
Assets
Liabilities
Current Non-Current
Current Non-Current
5
13
18
–
2
2
(3)
(16)
(19)
(12)
–
(12)
Note that non-current derivative assets are presented within other non-current other receivables on the Balance Sheet.
At 1 January 2017
Net increase in cash and cash equivalents
Proceeds from borrowings
Repayment of borrowings
Arising on business combinations
Other financing cash flows
(Reduction in)/purchase of short-term investments
Exchange, fair value and other movements
At 31 December 2017
1. 2016 is presented in line with the new requirements of IAS 7 (Note 1).
17 Provisions for Liabilities and Charges
At 1 January 2016
Charged to the Income Statement
Charged to equity
Utilised during the year
Released to the Income Statement
Exchange adjustments
At 31 December 2016
Charged to the Income Statement
Arising on business combinations
Utilised during the year
Released to the Income Statement
Exchange adjustments
At 31 December 2017
Provisions have been analysed between current and non-current as follows:
Current
Non-current
Cash
and cash
equivalents
£m
Financing
liabilities
£m
Short term
investments
£m
873
1,332
–
–
–
–
–
(88)
(2,267)
–
(19,523)
10,723
(2,525)
(12)
–
741
2,117
(12,863)
3
–
–
–
–
–
(3)
–
–
Net Debt
£m
(1,391)
1,332
(19,523)
10,723
(2,525)
(12)
(3)
653
20161
Net Debt
£m
(1,620)
73
(469)
695
–
219
3
(292)
(10,746)
(1,391)
Legal
provisions
£m
Restructuring
provisions
£m
Other
provisions
£m
Total
provisions
£m
141
264
–
(90)
–
14
329
352
–
(142)
(44)
6
501
33
23
–
(33)
(2)
1
22
17
7
(20)
–
–
26
170
12
702
(806)
(8)
4
74
15
–
(9)
(9)
–
71
2017
£m
517
81
598
344
299
702
(929)
(10)
19
425
384
7
(171)
(53)
6
598
2016
£m
251
174
425
Provisions are recognised when the Group has a present or constructive obligation as a result of past events, it is more likely than not that there will be
an outflow of resources to settle that obligation, and the amount can be reliably estimated.
Legal provisions of £501 million (2016: £329 million) include exceptional legal provisions of £465 million (2016: £277 million) in relation to a number of
historic regulatory matters in a number of markets, predominantly the DoJ investigation referenced in Note 19 (£296 million) and the HS issue in South
Korea. The HS issue is a tragic event. The Group continues to make both public and personal apologies to victims. During the year, a number of
payments were made to victims in respect of Rounds 1, 2 and 3 of the HS issue, partially utilising the provision held for this matter.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements
140
Notes to the Financial Statements
continued
17 Provisions for Liabilities and Charges continued
The restructuring provision relates principally to business integration costs associated with the acquisition of MJN and subsequent RB 2.0
reorganisation, the majority of which is expected to be utilised within one year.
Other provisions include environmental and other obligations throughout the Group, the majority of which are expected to be used within five years.
18 Operating Lease Commitments
Future minimum lease payments under non-cancellable operating leases due
Within one year
Later than one and less than five years
After five years
2017
£m
76
178
86
340
2016
£m
48
124
29
201
Operating lease rentals charged to the Income Statement in 2017 were £77 million (2016: £64 million).
As at 31 December 2017, total amounts expected to be received under non-cancellable sub-lease arrangements were £6 million (2016: £nil).
Amounts credited to the Income Statement in respect of sub-lease arrangements were £2 million (2016: £1 million).
19 Contingent Liabilities and Assets
As noted in Note 3, the Group remains involved in ongoing investigations by the DoJ and the US Federal Trade Commission and related litigation
proceedings in the US arising from certain matters relating to the RB Pharmaceuticals (“RBP”) business prior to its demerger in December 2014 to form
Indivior PLC, and may incur liabilities in relation to such matters. On 4 September 2017, the Group received notice of a further investigation by the
State of California Department of Insurance in relation to similar matters.
These investigations and related proceedings are continuing and the Group has been in discussions with the DoJ. As a consequence of these
discussions the Group recorded a charge of £296 million at 31 December 2017 within discontinued operations.
The Group remains committed to ensuring these issues are concluded or resolved satisfactorily but we cannot predict with any certainty whether we
will be able to reach any agreement with the DoJ or other parties who are involved in any other investigation or related proceedings. The final cost for
the Group may be materially higher than this provision.
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.
HS South Korea
The HS issue in South Korea is a tragic event. The Group continues to make both public and personal apologies to victims. There are a number of
further expected costs and income relating to the HS issue that either cannot be reliably estimated or which are not considered probable at the current
time. In particular:
1. Round 4 lung injury, asthma-related injury and other potential lung or non-lung injuries: The South Korean government opened Round 4 to new
applicants on 22 April 2016 for an indefinite period. It has received 4,701 applications to participate in Round 4 as at 2 February 2018 and continues
to receive applications. Additionally, a damage relief committee set up by the Ministry of Environment (“MOE”) announced a recognition standard
for asthma caused by HS, based on the increased incidence of asthma in HS users. The Group is currently unable to reliably determine how many
applicants may be eligible for compensation in respect of these items because:
a. The total number of applicants, and therefore total number of potential victims, has not been assessed for Round 4 lung injuries, potential
asthma injuries for all rounds or for any other injuries that the MOE may decide to recognise.
b. No detailed underlying data has yet been made available in respect of general causation of asthma injuries by HS, although six victims have been
announced by the MOE as at 28 December 2017.
2. The Group continues to assess and, where appropriate, pursue rights which Oxy RB may have to recover sums from other involved parties.
3. On 9 August 2017, the Humidifier Sanitizer Injury Special Relief Act became effective. Further, amendments to that Act were introduced in October
2017 and are currently being considered by the Korean government. Given the high profile and complex nature of this issue, the amendments to this
Act, the rules and regulations issued pursuant to this Act and other legal or governmental proposals or developments in South Korea may give rise
to further financial liability for RB.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 20 Trade and Other Payables
Trade payables
Other payables
Other tax and social security payable
Accruals
141
2017
£m
1,770
139
165
2,555
4,629
2016
£m
1,243
128
121
2,003
3,495
Included within accruals is £905 million (2016: £624 million) in respect of amounts payable to trade customers and government bodies for trade spend.
Within other non-current liabilities of £408 million (2016: £130 million) is a financial liability of £105 million (2016: £94 million). This liability is in
respect of the present value of the expected redemption amount of a written put option granted to the non-controlling interest of certain Group
subsidiaries in China (Note 26). The amortised cost of the liability is subject to estimation of the future performance of certain Group products. Future
changes in estimation would result in the remeasurement of the liability through the income statement. In addition, other non-current liabilities
includes US employee related payables of £34 million (2016: £33 million), and interest accrued on tax balances of £189 million (2016: not applicable).
21 Current and Non-current Tax Liabilities
Current tax liabilities
Non-current tax liabilities
Total current and non-current tax liabilities
2017
£m
(65)
(1,012)
(1,077)
2016
£m
(12)
(740)
(752)
Included in total current and non-current tax liabilities is an amount of £1,014 million (2016: £756 million) relating to tax contingencies primarily arising
in relation to transfer pricing and financing. The closing balance is stated after the reclassification of interest on income tax balances of £189 million to
other non-current liabilities (Note 1). The 2016 comparative has not been restated as the balance is not material.
Certain tax positions taken by us are based on industry practice, tax advice and drawing similarities from our facts and circumstances to those in case
law and involve a significant degree of judgement. Tax assets and liabilities are offset where there is a legally enforceable right to do so.
The Accounting Estimates and Judgements on pages 117 to 118 describe the significant judgements made in estimating the impact of uncertain tax
provisions.
22 Pension and Post-Retirement Commitments
Plan Details
The Group operates a number of defined benefit and defined contribution pension plans around the world covering many of its employees, which are
principally funded. The Group’s most significant defined benefit pension plan (UK) is a final salary plan, which closed to new entrants in 2005. Trustees
of the plan are appointed by the Group, active members and pensioner membership, and are responsible for the governance of the plan, including
paying all administrative costs and compliance with regulations. The plan is funded by the payment of contributions to the plan’s trust, which is a
separate entity from the rest of the Group.
The Group also operates a number of other post-retirement plans in certain countries. The two major plans are the US Retiree Health Care Plan and the
Mead Johnson & Company, LLC Medical Plan (together, the “US (Medical)” plans). In the US Retiree Health Care Plan, salaried participants become
eligible for retiree health care benefits after they reach a combined ‘age and years of service rendered’ figure of 70, although the age must be a
minimum of 55. This plan closed to new members in 2009. In the Mead Johnson & Company, LLC Medical Plan, acquired as part of the acquisition of
MJN on 15 June 2017, participants become eligible for retiree health care benefits if they leave employment after the age of 65, leave after the age of
55 and have completed ten years of service, or have their employment involuntarily terminated after the age of 55. A Benefits Committee is appointed
by the Group for both of these plans, responsible for the governance of the plans, including paying all administrative costs and compliance with
regulations. Both of these plans are unfunded.
For the principal UK plan, a full independent actuarial valuation is carried out on a triennial basis. The most recent valuation was carried out at 5 April
2016. The Group has agreed that it will aim to eliminate the pension plan Technical Provisions deficit in the UK and Ireland by the end of 2020. Funding
levels are monitored on an annual basis and the current agreed annual deficit reduction contributions are £25 million p.a. It is expected that
contributions to the UK defined benefit plan in 2018 will be £30 million (2016: £33 million). The funding agreement has given rise to an additional
liability on the Balance Sheet for the principal plan of £55 million (2016: £36 million), which forms part of an irrecoverable surplus of £89 million (2016:
£63 million) for all UK plans. This has been recognised after considering the Pension Scheme Trust Deed and Rules and the requirements of IFRIC 14
“The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction”. As these schemes are closed to future accrual, a
funding liability and limitation of the accounting surplus has been applied where the Group does not have an unconditional right to return of any
surplus once member benefits has been secured. The Group considers that the contribution rates set, and any future further contributions in excess of
the contribution rate, will be sufficient to eliminate the deficit over the agreed period.
On 1 January 2018, following consultation, the principal UK plan was closed to further accrual. There is no impact on the Group’s results for the year
ended 31 December 2017 and no curtailment gain or loss will be recognised in 2018 as a result of this closure.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements
142
Notes to the Financial Statements
continued
22 Pension and Post-Retirement Commitments continued
For the US Retiree Health Care Plan, a full independent actuarial valuation is carried out on an annual basis. The most recent valuation was carried out
on 1 January 2017. For the Mead Johnson & Company, LLC Medical Plan, acquired as part of the MJN acquisition on 15 June 2017, the most recent
valuation was carried out at 31 December 2017. For both of these plans, funding levels are monitored on an annual basis with contributions made
equal to the claims made each year. It is expected that the combined contributions in 2018 will be £10 million (2016: £7 million) to these plans.
For the purpose of IAS 19 the projected unit valuation method was used for the UK and US plans, as per the principal UK plan triennial valuation
results (at 5 April 2016) and the US Medical plan valuations to 31 December 2017. The UK plans have a weighted average duration of the deferred
benefit obligation of 18.5 years (2016: 18.6 years).
Significant Actuarial Assumptions
The significant actuarial assumptions used in determining the Group’s net liability for the UK and US (Medical) plans as at 31 December were:
Rate of increase in pensionable salaries
Rate of increase in deferred pensions during deferment
Rate of increase in pension payments
Discount rate
Inflation assumption – RPI
Annual medical cost inflation
2017
2016
UK
%
5.4
3.2
3.0
2.4
3.4
–
US
(Medical)
%
–
–
–
3.5
–
5.0-8.5
UK
%
5.6
3.4
3.2
2.6
3.6
–
US
(Medical)
%
–
–
–
4.0
–
5.0-8.5
Assumptions regarding future mortality experience are set in accordance with published statistics and experience in each territory. The expected
lifetime of a participant aged 60 and the expected lifetime of a participant who will be aged 60 in 15 years (20 years in the US) are detailed below:
Number of years a current pensioner is expected to live beyond 60:
Male
Female
Number of years a future pensioner is expected to live beyond 60:
Male
Female
2017
2016
UK
years
29.1
29.9
30.8
31.7
US
years
25.1
27.3
26.8
29.0
UK
years
29.0
29.9
30.7
31.6
US
years
25.2
27.4
27.0
29.2
For the principal UK plan, the mortality assumptions were based on the standard SAPS mortality table 2NMA for males (scaled by 85%) and table
2NFA for females (scaled by 100%). Allowance for future improvements is made by adopting the 2015 edition of the CMI series with a long-term trend
of 1.5% per annum from 2007 onwards. For the US plan the mortality assumptions were determined using the RP-2014 Total Employee and Health
Annuitant Mortality Tables rolled back to 2006 and projected with Mortality Improvement Scale MP-2017.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017
22 Pension and Post-Retirement Commitments continued
Amounts Recognised on the Balance Sheet
The amounts recognised on the Balance Sheet are as follows:
Balance Sheet obligations for:
UK
US (Medical)
Other
Liability on Balance Sheet
Balance Sheet assets for:
UK
Other
Asset on Balance Sheet
Net pension liability
The funded and unfunded amounts recognised on the Balance Sheet are determined as follows:
Present value of funded obligations
Fair value of plan assets
Surplus/(deficit) of funded plans
Present value of unfunded obligations
Irrecoverable surplus1
Net pension liability
2017
UK
£m
US (Medical)
£m
(1,635)
1,702
67
–
(89)
(22)
–
–
–
(137)
–
(137)
Other
£m
(569)
574
5
(149)
–
(144)
Total
£m
UK
£m
US (Medical)
£m
2016
(2,204)
2,276
(1,642)
1,621
72
(286)
(89)
(303)
(21)
–
(63)
(84)
–
–
–
(108)
–
(108)
1. The movement in irrecoverable surplus since prior year comprises an underlying liability increase of £24 million and a finance expense of £2 million.
Group plan assets are comprised as follows:
Equities – quoted
Government bonds
Corporate bonds
Real Estate/property – unquoted
Other assets – unquoted
Fair value of plan assets
2017
UK
£m
US (Medical)
£m
374
841
325
148
14
1,702
–
–
–
–
–
–
Other
£m
264
124
143
19
24
574
Total
£m
638
965
468
167
38
382
772
316
141
10
2,276
1,621
2016
UK
£m
US (Medical)
£m
–
–
–
–
–
–
143
2017
£m
(55)
(137)
(201)
(393)
33
57
90
2016
£m
(84)
(108)
(169)
(361)
–
36
36
(303)
(325)
Other
£m
(373)
381
8
(141)
–
(133)
Other
£m
217
77
61
16
10
381
Total
£m
(2,015)
2,002
(13)
(249)
(63)
(325)
Total
£m
599
849
377
157
20
2,002
The present value of obligations for the principal UK plan and the US Medical plans at last valuation date is attributable to participants as follows:
Active participants
Participants with deferred benefits
Participants receiving benefits
Present value of obligation
2017
UK
£m
US (Medical)
£m
2016
UK
£m
US (Medical)
£m
(211)
(632)
(792)
(50)
(2)
(85)
(196)
(615)
(831)
(28)
(2)
(78)
(1,635)
(137)
(1,642)
(108)
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements
144
Notes to the Financial Statements
continued
22 Pension and Post-Retirement Commitments continued
The movement in the Group’s net deficit is as follows:
Present value of obligation
Fair value of plan assets
UK
£m
US (Medical)
£m
UK
£m
US (Medical)
£m
At 1 January 2016
Current service cost
Curtailment gains
Interest expense/(income)
Remeasurements:
Return on plan assets, excluding amounts
included in interest income
(Gain)/loss from changes in demographic
assumptions
Loss from change in financial assumptions
Experience (gains)/losses
Exchange differences
Contributions – employees
Contributions – employers
Payments from plans:
Benefit payments
At 31 December 2016
Arising on business combinations
Current service cost
Curtailment gains
Interest expense/(income)
Remeasurements:
Return on plan assets, excluding amounts
included in interest income
(Gain)/loss from changes in demographic
assumptions
Loss from change in financial assumptions
Experience (gains)/losses
Exchange differences
Contributions – employees
Contributions – employers
Payments from plans:
Benefit payments
Disposal of RB Food
As at 31 December 2017
1,322
6
–
49
55
–
(3)
384
(53)
328
–
–
–
(63)
1,642
–
10
–
42
52
–
–
12
–
12
–
1
–
Other
£m
426
11
(1)
16
26
–
7
5
6
18
62
–
–
(18)
514
262
11
(1)
22
32
–
2
24
6
32
122
2
(37)
6
(29)
–
(2)
1
3
2
20
–
–
(7)
108
36
2
–
5
7
–
(1)
7
(1)
5
Total
£m
1,870
19
(38)
71
52
(1,355)
–
–
(51)
(51)
–
(226)
2
390
(44)
348
82
–
–
(88)
–
–
–
(226)
–
–
(52)
63
2,264
(1,621)
298
23
(1)
69
91
–
1
43
5
49
–
–
–
(42)
(42)
(71)
–
–
–
(71)
–
–
(40)
72
–
(11)
(33)
(44)
–
–
–
–
1
–
(72)
(8)
(51)
(131)
–
1,635
–
137
(38)
718
(38)
2,490
(1,702)
Other
£m
(321)
–
–
(14)
(14)
Total
£m
(1,676)
–
–
(65)
(65)
(9)
(235)
–
–
–
(9)
(51)
–
(4)
18
–
–
–
(235)
(51)
–
(63)
88
(381)
(221)
(2,002)
(221)
–
–
(20)
(20)
–
–
(62)
(62)
(36)
(107)
–
–
–
(36)
34
–
(23)
51
22
–
–
–
(107)
34
–
(71)
131
22
(574)
(2,276)
–
–
–
–
–
–
–
–
–
–
–
–
(7)
7
–
–
–
–
–
–
–
–
–
–
–
–
–
(8)
8
–
–
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017
22 Pension and Post-Retirement Commitments continued
Amounts Recognised in the Income Statement
The charge for the year ended 31 December is shown below:
Income Statement charge/(credit) included in operating profit for:
Defined contribution plans
Defined benefit plans (net charge/(credit) excluding interest)
UK
US (Medical)
Other
Total pension costs included in operating profit (Note 5)1
Income Statement charge included in finance expense (Note 6)2
Income Statement charge included in profit before income tax
Remeasurement (gains)/losses for3:
UK
US (Medical)
Other
145
2016
£m
27
6
(35)
10
8
6
14
102
2
9
113
2017
£m
41
10
2
10
63
9
72
(59)
5
(4)
(58)
1. The Income Statement charge recognised in operating profit includes current service cost, past service costs and gains and losses on settlement and curtailment.
2. The Income Statement charge recognised in finance expense includes £2 million interest on the irrecoverable surplus (not shown in the net deficit movement table shown
previously).
3. Remeasurement (gains)/losses excludes £24 million loss (2016: £63 million loss) recognised in OCI for irrecoverable surplus.
Sensitivity of Significant Actuarial Assumptions
The sensitivity of the UK defined benefit obligation to changes in the principal assumptions is shown below:
2017
Discount rate
RPI increase
Life expectancy
2016
Discount rate
RPI increase
Life expectancy
Change in assumption
Change in defined benefit obligation
Increase 0.1%
Increase 0.1%
Members live 1 year longer
Decrease by 1.9%
Increase by 0.5%
Increase by 4.5%
Change in assumption
Change in defined benefit obligation
Increase 0.1%
Increase 0.1%
Members live 1 year longer
Decrease by 1.9%
Increase by 0.5%
Increase by 4.5%
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to
occur, and changes in some of the assumptions may be correlated.
Impact of Medical Cost Trend Rates
A one percent change in the assumed health care cost trend rates would have an immaterial impact on the service cost, interest cost and post-
retirement benefit obligation.
Risk and Risk Management
Through its defined benefit pension plans and post-employment medical plans, the Group is exposed to a number of risks, the most significant of
which are detailed as follows:
Asset Volatility: The plan liabilities are calculated using a discount rate set with reference to corporate bond yields. If plan assets underperform this
yield, this will create a deficit. Both the UK and US plans hold a significant proportion of equities, which are expected to outperform corporate bonds
in the long-term while providing volatility and risk in the short-term. As the plans mature, the Group intends to reduce the level of investment risk by
investing more in assets that better match the liabilities. All the UK plans have agreed with the Company a plan to de-risk the investment strategy of
the plans at a pace that is commensurate with a planned return to full funding over a reasonable timescale.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements
146
Notes to the Financial Statements
continued
22 Pension and Post-Retirement Commitments continued
The de-risking plan provides for a proportion of the investment portfolio to move from equity holdings to government and corporate bonds over time.
The corporate bonds are global securities with an emphasis on the UK and US. However, the Group believes that due to the long-term nature of the
plan liabilities and the strength of the supporting group, a level of continuing equity investment is an appropriate element of the Group’s long-term
strategy to manage the plans efficiently.
Changes in Bond Yields: A decrease in government and corporate bond yields will increase plan liabilities, although this will be partially offset by an
increase in the value of the plans’ bond holdings.
Inflation Risk: Some of the Group’s pension obligations are linked to inflation, and higher inflation will lead to higher liabilities (although, in most
cases, caps on the level of inflationary increases are in place to protect the plan against extreme inflation). The majority of the plans’ assets are either
unaffected by (fixed interest bonds) or loosely correlated with (equities) inflation, meaning that an increase in inflation will also increase the deficit. In
the US plans, the pensions in payment are not linked to inflation, so this is a less material risk.
Life Expectancy: The majority of the plans’ obligations are to provide benefits for the life of the member. Whilst the plans allow for an increase in life
expectancy, increases above this assumption will result in an increase in the plans’ liabilities. This is particularly significant in the UK plan, where
inflationary increases result in higher sensitivity to changes in life expectancy.
Change in Regulations: The Group is aware that future changes to the regulatory framework may impact the funding basis of the various plans in
the future. The Group’s pensions department monitors the changes in legislation and analyses the risks as and when they occur.
Investments are well diversified, such that the failure of any single investment would not have a material impact on the overall level of assets. A large
portion of assets consists of quoted equities and quoted bonds, although the Group also invests in property and cash. The Group believes that quoted
equities offer the best returns over the long-term with an acceptable level of risk. The trustees of all the UK funds have moved the overwhelming
majority of their assets to low cost investment funds in consultation with the Group whilst maintaining a prudent diversification.
23 Share Capital
Issued and fully paid
At 1 January 2016
At 31 December 2016
At 1 January 2017
At 31 December 2017
Equity
ordinary
shares
number
736,535,179
736,535,179
736,535,179
736,535,179
Nominal
value
£m
74
74
74
74
The holders of ordinary shares (par value 10p) 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.
Allotment of Ordinary Shares and Release of Treasury Shares
During the year nil ordinary shares (2016: nil ordinary shares) were allotted and 3,728,361 ordinary shares were released from Treasury (2016:
3,662,122) to satisfy vestings/exercises under the Group’s various share schemes as follows:
Ordinary shares of 10p
Executive Share Options – exercises
Restricted Shares Awards – vesting
Total under Executive Share Option and Restricted Share Schemes
Senior Executives Share Ownership Policy Plan – vesting
Savings-Related Share Option Schemes – exercises
Total
2017
2016
Number
of shares
Consideration
£m
Number
of shares
Consideration
£m
2,145,152
1,328,980
3,474,132
31,000
223,229
3,728,361
85
–
85
–
9
94
2,139,330
1,261,616
3,400,946
9,216
251,960
3,662,122
72
–
72
–
7
79
Market Purchases of Shares
During 2017 the Company ceased its share buyback programme. In 2016, the Company bought back 11,658,939 shares, all of which were held as
Treasury shares. In 2016, the total amount paid to acquire the shares was £798 million (£802 million including stamp duty), which was deducted from
Shareholders’ equity.
In 2017, 3,728,361 Treasury shares were released (2016: 3,662,122), leaving a balance held at 31 December 2017 of 32,730,606 (2016: 36,458,967).
Proceeds received from the reissuance of Treasury shares to exercise share options were £94 million (2016: £79 million).
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 147
24 Share-Based Payments
The Group operates a number of incentive schemes, including a share option scheme, a restricted share scheme, and other share award schemes.
During 2017, as part of a transitional scheme for MJN employees, a cash-settled scheme replaced an MJN equity-settled scheme. All other schemes
within the Group are equity-settled. The total charge for share-based payments for the year was £78 million (2016: £66 million).
Executive Share Awards
Executive share awards, comprising both Executive Share Options and Restricted Share Awards, are awarded to the Top400 Management Group.
Executive Share Options are awarded at an exercise price determined on grant date and become payable on exercise – following satisfaction of
performance criteria. Restricted Share Awards entitle the recipient to receive shares at no cost following satisfaction of the following
performance criteria.
For awards granted before December 2012:
Adjusted earnings per share growth over three years (%)
Proportion of awards vesting (%)
For awards granted in December 2013 and thereafter:
<6%
Nil
6%
40%
7%
60%
8%
80%
≥9%
100%
Adjusted earnings per share growth over three years (%)
Proportion of awards vesting (%)
<6%
Nil
6% Between 6% and 10%
20% Straight-line vesting between 20% and 100%
≥10%
100%
The cost is spread over the three years of the performance period. For Executive Committee and “Top40” members, vesting conditions must be met
over the three-year period and are not retested. For remaining Top400 members the targets can be retested after four or five years. If any target has
not been met any remaining shares or options which have not vested will lapse.
Other Share Awards
Other share awards represent SAYE Schemes (offered to all staff within the relevant geographic area) and a number of Senior Executive Share
Ownership Policy Plan (SOPP) awards. Other share awards have contractual lives of between three and eight years and are generally not subject to any
vesting criteria other than the employee’s continued employment.
Individual tranches of these other share awards are not material for detailed disclosure and therefore have been aggregated in the tables following.
Modifications to Share Awards
The Remuneration Committee approved modifications to all unexercised share schemes in December 2014 following the demerger of RB
Pharmaceuticals to compensate for the loss of scheme value. For SAYE schemes this was in the form of a one-off payment. For executive share awards
this included an adjustment to shares under the amount of each grant, and the lowering of exercise price, where applicable. There is no change to the
IFRS fair value charge as a result of these modifications.
Summary of Shares Outstanding
All outstanding Executive and Other share awards as at 31 December 2017 and 31 December 2016 are included in the tables following which analyse
the charge for 2017 and 2016. The Group has used the Black-Scholes model to calculate the fair value of one award on the date of the grant of
the award.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 148
Notes to the Financial Statements
continued
24 Share-Based Payments continued
Table 1: Fair value
The most significant awards are share options and restricted shares, details of which have been provided below.
Black-Scholes model assumptions
Award
Grant date
Exercise
price at
grant
£
Modified
exercise
price
£
Performance
period
Share options
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Restricted shares
2010
2011
2012
2013
2014
2015
2016
2017
2018
11 December 2007
08 December 2008
07 December 2009
01 December 2010
05 December 2011
03 December 2012
11 December 2013
01 December 2014
02 December 2015
01 December 2016
30 November 2017
07 December 2009
01 December 2010
05 December 2011
03 December 2012
11 December 2013
01 December 2014
02 December 2015
01 December 2016
30 November 2017
29.44
27.29
31.65
34.64
32.09
39.14
47.83
50.57
63.25
67.68
64.99
–
–
–
–
–
–
–
–
–
28.63
26.54
30.78
33.68
31.20
38.06
46.51
50.57
63.25
67.68
64.99
–
–
–
–
–
–
–
–
–
2008–10
2009–11
2010–12
2011–13
2012–14
2013–15
2014–16
2015–17
2016–18
2017–19
2018–20
2010–12
2011–13
2012–14
2013–15
2014–16
2015–17
2016–18
2017–19
2018–20
Share
price
on grant
date
£
29.72
27.80
31.80
34.08
32.19
39.66
46.69
52.40
64.15
66.28
64.86
31.80
34.08
32.19
39.66
46.69
52.40
64.15
66.28
64.86
Volatility
%
Dividend
yield
%
Life
years
Risk-free
interest
rate
%
Fair value
of one
award
£
20
25
26
26
25
20
19
17
18
18
18
26
26
25
20
19
17
18
18
18
1.8
3.1
3.5
4.3
5.4
4.3
3.7
4.0
2.9
3.0
3.4
3.5
4.3
5.4
4.3
3.7
4.0
2.9
3.0
3.4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
5.53
2.78
1.69
2.16
1.00
0.61
0.76
1.03
1.07
0.46
0.68
1.69
2.16
1.00
0.61
0.76
1.03
1.07
0.46
0.68
5.99
4.69
4.70
4.49
3.18
3.29
3.85
4.34
6.75
5.54
5.58
27.23
28.22
25.30
32.76
39.80
43.93
57.13
58.85
56.71
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017
149
24 Share-Based Payments continued
Table 2: Share awards movements 2017
Award
Share options1
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Restricted shares1
2012
2013
2014
2015
2016
2017
2018
Other share awards
UK SAYE
US SAYE
Overseas SAYE
SOPP
Weighted average exercise price (share options)
1. Grant date and exercise price for each of the awards are shown in Table 1.
Movement in number of options
Options
outstanding
at 1 January 2017
number
137,912
171,273
245,510
330,337
923,895
1,701,230
2,617,899
2,732,980
3,027,586
3,200,000
–
74,401
91,766
1,225,888
1,300,409
1,396,196
1,600,000
–
687,635
323,495
944,934
170,000
£52.28
Granted/
adjustments
number
–
–
–
–
1,441
–
7,850
5,153
–
69,200
3,200,000
–
–
1,029
3,000
–
89,417
1,600,000
223,131
94,231
1,273,468
12,800
£64.97
Lapsed
number
Exercised
number
(3,079)
–
–
–
(7,657)
(10,725)
(220,327)
(90,098)
(296,761)
(904,316)
–
(2,595)
(3,808)
(128,490)
(40,138)
(121,068)
(571,983)
–
(62,218)
(45,032)
(59,620)
(5,000)
£62.31
(134,833)
(66,676)
(44,565)
(54,108)
(321,372)
(613,943)
(833,390)
(59,774)
(16,491)
–
–
(71,806)
(87,958)
(1,098,427)
(52,698)
(17,091)
(1,000)
–
(98,642)
(78,260)
(46,327)
(31,000)
£39.64
Options
outstanding
at 31 December
2017
number
–
104,597
200,945
276,229
596,307
1,076,562
1,572,032
2,588,261
2,714,334
2,364,884
3,200,000
–
–
–
1,210,573
1,258,037
1,116,434
1,600,000
749,906
294,434
2,112,455
146,800
£55.91
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements
150
Notes to the Financial Statements
continued
24 Share-Based Payments continued
Table 3: Share awards movements 2016
Award
Share options
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Restricted shares
2011
2012
2013
2014
2015
2016
2017
Other share awards
UK SAYE
US SAYE
Overseas SAYE
SOPP
Weighted average exercise price (share options)
Movement in number of options
Options
outstanding
at 1 January 2016
number
113,346
282,213
319,343
537,644
831,561
1,363,209
2,753,968
2,899,975
2,893,271
4,020,400
–
75,836
259,471
1,270,172
1,389,865
1,386,771
1,985,200
–
687,953
382,185
1,058,195
166,000
£46.61
Granted/
adjustments
number
–
–
–
–
–
–
–
883
–
–
3,200,000
–
–
–
–
–
23,150
1,600,000
178,122
94,583
2,461
24,000
£67.67
Lapsed
number
Exercised
number
(2,544)
(4,114)
(4,114)
(7,254)
(194,817)
(71,179)
(360,057)
(197,898)
(153,070)
(992,814)
–
(75,836)
(21,926)
(161,594)
(96,648)
(72,031)
(612,154)
–
(66,981)
(45,486)
(83,008)
(10,784)
£51.68
(110,802)
(140,187)
(143,956)
(284,880)
(306,407)
(368,135)
(692,681)
(85,061)
(7,221)
–
–
–
(163,144)
(1,016,812)
(67,329)
(14,331)
–
–
(111,459)
(107,787)
(32,714)
(9,216)
£33.43
Options
outstanding
at 31 December
2016
number
–
137,912
171,273
245,510
330,337
923,895
1,701,230
2,617,899
2,732,980
3,027,586
3,200,000
–
74,401
91,766
1,225,888
1,300,409
1,396,196
1,600,000
687,635
323,495
944,934
170,000
£52.28
For options outstanding at the year end the weighted average remaining contractual life is 6.92 years (2016: 6.53 years). Options outstanding at
31 December 2017 that could have been exercised at that date were 3,897,913 (2016: 3,727,376) with a weighted average exercise price of £38.82
(2016: £32.49).
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 schemes, early exercise may only be granted in exceptional circumstances 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 these calculations in
2017 or 2016 for the purposes of the valuation.
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.
National Insurance contributions are payable in respect of certain share-based payment transactions and are treated as cash-settled transactions. The
contribution in 2017 was £43 million (2016: £51 million).
The weighted average share price for the year was £71.70 (2016: £68.77).
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017
151
24 Share-Based Payments continued
Options and Restricted Shares Granted During the Year
Options and restricted shares granted during the year which may vest or become exercisable at various dates between 2018 and 2023 are as follows:
Executive share option and restricted share schemes
Reckitt Benckiser 2018 Long-term Incentive Plan – share options
Reckitt Benckiser Long-term Incentive Plan – restricted shares
Reckitt Benckiser Group Senior Executive Share Ownership Policy Plan
Total
Savings-related share option schemes
UK Scheme
US Scheme
Overseas Scheme
Total
Price to be
paid
£
64.99
–
–
58.95
58.95
58.95
Number of
shares under
option
3,200,000
1,600,000
12,800
4,812,800
223,131
94,231
1,273,468
1,590,830
Options and Restricted Shares Outstanding at 31 December 2017
Options and restricted shares which have vested or may vest at various dates between 2018 and 2022 are as follows:
Executive share option and restricted share schemes
Reckitt Benckiser Long-term Incentive Plan 2007 – Annual Grant – options
Reckitt Benckiser Long-term Incentive Plan 2007 – Annual Grant – restricted
shares
Reckitt Benckiser Senior Executives Share Ownership Policy Plan
Total
Savings-related share option schemes
UK Scheme
US Scheme
Overseas Scheme
Total
25 Other Reserves
Price to be paid £
Number of shares under option
From
26.54
–
–
16.90
22.88
21.95
To
2017
2016
71.80
14,695,054
15,088,622
–
–
5,185,044
146,800
5,688,660
170,000
20,026,898
20,947,282
58.95
58.95
58.95
749,003
294,434
2,112,455
687,635
323,495
944,934
3,155,892
1,956,064
Balance at 1 January 2016
Other comprehensive (expense)/income
Losses on cash flow hedges, net of tax
Net exchange gains on foreign currency translation, net of tax
Losses on net investment hedges
Total other comprehensive (expense)/income for the year
Balance at 31 December 2016
Other comprehensive income/(expense)
Gains on cash flow hedges, net of tax
Net exchange losses on foreign currency translation, net of tax
Gains on net investment hedges
Reclassification of foreign currency translation reserves on disposal of foreign operations net of tax
Total other comprehensive income/(expense) for the year
Balance at 31 December 2017
Foreign
currency
translation
reserve
£m
Hedging
reserve
£m
Total other
reserves
£m
18
(964)
(946)
(22)
–
–
(22)
(4)
3
–
–
–
3
(1)
–
1,618
(128)
(22)
1,618
(128)
1,490
1,468
526
522
–
(308)
44
145
(119)
407
3
(308)
44
145
(116)
406
The hedging reserve comprises the effective portion of the cumulative net change in fair value of cash flow hedging instruments related to hedge
transactions that are extant at year end.
The foreign currency translation reserve contains the accumulated foreign exchange differences from the translation of the Financial Statements of the
Group’s foreign operations arising when the Group’s entities are consolidated. The reserve also contains the translation of liabilities that hedge the
Group’s net exposure in a foreign currency.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements
152
Notes to the Financial Statements
continued
26 Related Party Transactions
RB & Manon Business Co. Ltd (Manon)
As part of the arrangements with the non-controlling shareholders of Manon, the parties are subject to symmetrical put and call options over the
non-controlling Shareholdings, exercisable together after a period of six years, with possible extensions available at the agreement of the parties. The
present value of the put option at year end was a liability of £105 million (2016: £94 million liability).
Indivior PLC
Indivior PLC is no longer considered to be a related party for the year ended 31 December 2017 following the resignations of Adrian Hennah (Reckitt
Benckiser Group plc CFO) and Rupert Bondy (Reckitt Benckiser Group plc SVP General Counsel and Company Secretary) from the Indivior Board of
Directors in May and September 2016 respectively.
For the year ended 31 December 2016, the Group recognised £5 million in other operating income in respect of operational services provided to
Indivior PLC. Certain outstanding balances totalling £6 million relating to adjustments in the final UK corporation tax liabilities were also settled on
behalf of Indivior PLC by Reckitt Benckiser plc in 2016.
Other
The Group has related party relationships with its Directors and key management personnel (Note 5) and pension schemes (Note 22).
27 Acquisitions
On 15 June 2017, the Group acquired 100% of the issued share capital of MJN for cash consideration of £13,044 million ($16,642 million).
MJN is a global leader in infant and children’s nutrition. The acquisition of MJN is aligned with the Group’s well-established strategic focus on growing
in consumer health and on investing in Powerbrands with attractive growth prospects. Provisional goodwill of £8,023 million arises on the acquisition,
of which £3,194 million is a consequence of the requirement to record deferred tax liabilities for certain acquired assets. Goodwill represents the
potential for further synergies arising from combining the acquired business with the Group’s existing businesses, together with the value of the
workforce acquired. None of the goodwill is expected to be deductible for income tax purposes.
The following table summarises the consideration paid and the fair values of assets acquired and liabilities assumed. The amount of consideration
transferred in excess of the value of total identifiable net assets is recorded as goodwill.
Recognised amounts of identifiable assets acquired and liabilities assumed
Intangible assets
Property, plant and equipment
Inventories
Trade and other receivables
Cash and cash equivalents
Borrowings
Retirement benefit obligations
Deferred tax liabilities, net
Trade and other payables
Provisions
Current tax liabilities
Total identifiable net assets
Non-controlling interest
Goodwill
Total
Cash consideration
Total consideration transferred
£m
9,169
921
547
354
1,224
(2,525)
(77)
(3,194)
(1,018)
(7)
(342)
5,052
(31)
8,023
13,044
13,044
13,044
Acquisition-related transaction costs of £60 million have been included in net operating expenses and disclosed as exceptional items in the Group
Income Statement (Note 3).
Included within intangible assets are brands of £9,169 million, substantially comprising Enfamil (£6,328 million) and Nutramigen (£1,718 million). The
fair values of current tax liabilities and provisions are stated at provisional amounts, which will be finalised within the twelve-month measurement
period following the acquisition.
From the date of acquisition to 31 December 2017, the acquisition contributed £1,555 million to Net Revenue and £329 million to adjusted operating
profit. Had the acquisition taken place at 1 January 2017, the enlarged Group consolidated Net Revenue would have been £12,814 million and
Adjusted Operating Profit would have been £3,384 million.
The provisional fair values relating to the acquisition of Nances Holdings S.A. in 2016 were revised during 2017, following a £3 million refund of the
cash consideration. This reduced goodwill by £3 million.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 153
28 Discontinued Operations
On 17 August 2017, the Group sold the RB Food business to McCormick & Company, Inc. for $4.2 billion (£3.2 billion) in cash. This transaction
disposed of current assets of £99 million, non-current assets of £66 million, current liabilities of £65 million and non-current liabilities of £34 million.
RB Food was a major line of business and therefore meets the definition of a discontinued operation.
Gain on sale of RB Food
Sale proceeds and related costs
Net assets disposed
Net realised gain in other comprehensive income reclassified to the Income Statement
Other
Gain on disposal, before tax
2017
£m
3,236
(66)
(145)
(1)
3,024
In addition, and as described in Note 3, the Group has recorded an exceptional charge of £296 million in respect of its legacy RB Pharmaceuticals
business which was demerged to form Indivior PLC in 2014.
Financial information relating to the operations of RB Food and RB Pharmaceuticals for the year is set out below. The Group Income Statement and
Group Cash Flow Statement distinguish discontinued operations from continued operations. Comparative figures have been restated.
For the year ended 31 December
Revenue
Expenses
Profit before tax of discontinued operations
Tax
Profit after tax of discontinued operations
Pre-tax gain recognised on disposal of RB Food
Tax credit
After tax gain recognised on disposal of RB Food
Profit for the year from discontinued operations
The major classes of cash flows related to RB Food are as follows:
For the year ended 31 December
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Net increase in cash and cash equivalents from discontinued operations
29 Dividends
Cash dividends on equity ordinary shares:
2016 Final paid: 95.0p (2015: Final 88.7p) per share
2017 Interim paid: 66.6p (2016: Interim 58.2p) per share
Total dividends for the year
2017
RB Food
£m
249
(175)
74
(19)
55
3,024
13
3,037
3,092
2017
RBP
£m
–
(296)
(296)
–
(296)
–
–
–
(296)
2017
Total
£m
249
(471)
(222)
(19)
(241)
3,024
13
3,037
2,796
2017
£m
48
3,232
–
3,280
2017
£m
666
468
2016
£m
411
(270)
141
(38)
103
–
–
–
103
2016
£m
120
(3)
–
117
2016
£m
625
410
1,134
1,035
The Directors are proposing a final dividend in respect of the financial year ended 31 December 2017 of 97.7p per share which will absorb an estimated
£688 million of Shareholders’ funds. If approved by Shareholders it will be paid on 24 May 2018 to Shareholders who are on the register on 13 April
2018, with an ex-dividend date of 12 April 2018.
30 Post Balance Sheet Events
As at 19 March 2018, there are no post-balance sheet events requiring disclosure.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 154
Five Year Summary
The five year summary below is presented on a statutory basis. The year ending 31 December 2016 and 31 December 2017 show the results for
continuing operations and exclude the impact of RB Food. The years ending 31 December 2013, 31 December 2014 and 31 December 2015 show the
results for continuing operations including RB Food. All years exclude the impact of RB Pharmaceuticals.
The Balance Sheet has not been restated for the impact of discontinued operations.
Income Statement
Net Revenue
Operating Profit
Adjusted Operating Profit
Adjusting items
Operating Profit
Net finance expense
Profit before income tax
Income tax benefit/(expense)
Attributable to non-controlling interests
Net income attributable to owners of the parent from continuing
2017
£m
11,512
2,737
3,122
(385)
2,737
(238)
2,499
894
(17)
Restated3
2016
£m
9,480
2,269
2,636
(367)
2,269
(16)
2,253
(520)
(4)
2015
£m
8,874
2,241
2,374
(133)
2,241
(33)
2,208
(463)
(2)
2014
£m
8,836
2,164
2,185
(21)
2,164
(38)
2,126
(462)
(1)
2013
£m
9,266
1,887
2,143
(256)
1,887
(31)
1,856
(453)
(1)
operations
3,376
1,729
1,743
1,663
1,402
Balance Sheet
Net assets
Net Working Capital
Statistics
Reported basis
Operating margin
Total interest to Operating Profit (times covered)
Tax rate
Diluted earnings per share, continuing
Dividend cover1
Declared total dividends per ordinary share
Adjusted basis2
Operating margin
Total interest to operating profit (times covered)
Diluted earnings per share, continuing
Dividend cover1
13,573
(1,424)
8,426
(1,102)
6,906
(936)
6,834
(831)
6,336
(863)
23.8%
11.5x
-35.8%
474.7p
2.9x
164.3p
27.1%
13.1x
316.9p
1.9x
23.9%
141.8x
23.1%
242.1p
1.6x
153.2p
27.8%
164.8x
287.6p
1.9x
25.3%
67.9x
21.0%
240.9p
1.7x
139p
26.8%
71.9x
258.6p
1.9x
24.5%
56.9x
21.7%
227.6p
1.6x
139p
24.7%
57.5x
230.5p
1.7x
20.4%
60.9x
24.4%
192.3p
1.4x
137p
23.1%
69.1x
222.1p
1.6x
1. Dividend cover is calculated by dividing adjusted diluted earnings/adjusted earnings per share by total ordinary dividends per share relating to the year.
2. Adjusted basis is calculated by excluding the adjusting items for the year (Note 3).
3. Restated for the impact of discontinued operations.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 Parent Company Balance Sheet
155
As at 31 December
Fixed Assets
Investments
Current Assets
Debtors due within one year
Debtors due after more than one year
Cash and cash equivalents
Current Liabilities
Creditors due within one year
Net Current Liabilities
Total Assets less Current Liabilities
Provisions for liabilities and charges
Net Assets
EQUITY
Capital and Reserves
Share capital
Share premium
Retained earnings
At 1 January
Profit for the financial year
Other changes in retained earnings
At 31 December
Total Equity
Notes
2017
£m
2016
£m
2
14,925
14,861
3,6
4
6
39
8
2
49
42
7
1
50
5,6
(6,697)
(6,484)
(6,648)
(6,434)
8,277
8,427
7
(356)
(62)
7,921
8,365
8
74
243
8,048
522
(966)
7,604
74
243
5,735
3,906
(1,593)
8,048
7,921
8,365
The Financial Statements on pages 155 to 175 were approved by the Board of Directors on 19 March 2018 and signed on its behalf by:
ADRIAN BELLAMY
Director
RAKESH KAPOOR
Director
Company Number: 06270876
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements
156
Parent Company Statement of Changes in Equity
for the year ended 31 December 2017
Balance at 1 January 2016
Comprehensive income
Profit for the financial year
Total comprehensive income
Transactions with owners
Treasury shares re-issued
Share-based payments
Shares repurchased and held in Treasury
Capital contribution in respect of share-based payments
Cash dividends
Total transactions with owners
Balance at 31 December 2016
Comprehensive income
Profit for the financial year
Total comprehensive income
Transactions with owners
Treasury shares re-issued
Share-based payments
Capital contribution in respect of share-based payments
Cash dividends
Total transactions with owners
Balance at 31 December 2017
Share
capital
£m
74
Share
premium
£m
243
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Retained
earnings
£m
5,735
3,906
3,906
79
14
(702)
51
(1,035)
Total
equity
£m
6,052
3,906
3,906
79
14
(702)
51
(1,035)
(1,593)
(1,593)
74
243
8,048
8,365
–
–
–
–
–
–
–
–
–
–
–
–
–
–
522
522
94
10
64
(1,134)
522
522
94
10
64
(1,134)
(966)
(966)
74
243
7,604
7,921
Reckitt Benckiser Group plc has £7,011 million (2016: £7,529 million) of its retained earnings available for distribution.
Details of Treasury shares and other equity transactions are included in Note 23 of the Group Financial Statements.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017
Notes to the Parent Company
Financial Statements
157
1 Parent Company Accounting Policies
The principal accounting policies are summarised below. They have all been applied consistently throughout the year and the preceding year.
General Information and Basis of Accounting
Reckitt Benckiser Group plc is a company incorporated in the United Kingdom, registered in England and Wales under the Companies Act 2006, and is
limited by shares. The address of the registered office is given on page 177. The nature of the Group’s operations and its principal activities are set out
in the Strategic Report on pages 1 to 51.
Statement of Compliance
The Financial Statements have been prepared under the historical cost convention and in compliance with United Kingdom Accounting Standards,
including Financial Reporting Standard 102, “The Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland”
(‘FRS 102’) and the Companies Act 2006.
The functional currency of Reckitt Benckiser Group plc is considered to be Pounds Sterling because that is the currency of the primary economic
environment in which the Company operates.
As permitted by s.408 of the Companies Act 2006, a Statement of Comprehensive Income is not presented for Reckitt Benckiser Group plc.
Going Concern
The Directors considered it appropriate to adopt the going concern basis of accounting in preparing the Company Financial Statements.
Financial Reporting Standard 102 – Reduced Disclosure Exemptions
FRS 102 allows a qualifying entity certain disclosure exemptions, subject to certain conditions, which have been complied with.
The Company has taken advantage of the following exemptions:
(i) from preparing a Statement of Cash Flows, on the basis that it is a qualifying entity and the Group Cash Flow Statement, included in these Financial
Statements, includes the Company’s cash flows;
(ii) from disclosing the Company key management personnel compensation, as required by FRS 102 paragraph 33.7.
The Company’s results are included in the publicly available consolidated Financial Statements of Reckitt Benckiser Group plc and these Financial
Statements may be obtained from 103-105 Bath Road, Slough, Berkshire SL1 3UH.
Foreign Currency Translation
Transactions denominated in foreign currencies are translated using exchange rates prevailing at the dates of the transactions. Foreign exchange gains
and losses resulting from the settlement of foreign currency transactions and from the translation at year end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in the Statement of Comprehensive Income.
Taxation
The tax charge/credit is based on the result for the year 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.
A net deferred tax asset is considered recoverable if it can be regarded as more likely than not that there will be suitable taxable profits against which
to recover carried forward tax losses and from which the future reversal of underlying timing differences can be deducted.
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the Balance Sheet date, where transactions or
events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the Balance Sheet date.
Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the timing differences are expected to reverse,
based on tax rates and laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax is measured on an
undiscounted basis.
Fixed Asset Investments
Fixed asset investments are stated at the lower of cost or their recoverable amount, which is determined as the higher of net realisable value and value
in use. A review of the potential impairment of an investment is carried out by the Directors if events or changes in circumstances indicate that the
carrying value of the investment may not be recoverable. Such impairment reviews are performed in accordance with FRS 102 Section 27 'Impairment
of assets'.
Employee Share Schemes
Incentives in the form of shares are provided to employees under share option and restricted share schemes which vest in accordance with
non-market conditions.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period,
based on the Group’s estimate of equity instruments that will eventually vest. At each Balance Sheet date, the Group revises its estimate of the number
of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in comprehensive income or expense
such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to equity reserves.
Additional employer costs in respect of options and awards are charged, including social security taxes, to the Statement of Comprehensive Income
over the same period with a corresponding liability recognised.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 158
Notes to the Parent Company Financial Statements
continued
1 Parent Company Accounting Policies continued
The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the Group is treated as a capital
contribution. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as
an increase to investment in subsidiary undertakings, with a corresponding credit to equity in the Company Financial Statements.
Financial Instruments
The Company only enters into basic financial instrument transactions that result in the recognition of basic financial assets and liabilities, including
trade and other receivables and payables and loans to and from related parties. These transactions are initially recorded at transaction price, unless the
arrangement constitutes a financing transaction where the transaction is measured at the present value of the future receipt discounted at a market
rate of interest, and subsequently recognised at amortised cost.
(i) Financial Assets
At the end of each reporting period financial assets measured at amortised cost are assessed for objective evidence of impairment. If an asset is
impaired the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the
asset’s original effective interest rate. The impairment loss is recognised in comprehensive income or expense.
Financial assets are derecognised when (a) the contractual rights to the cash flows from the asset expire or are settled, or (b) substantially all the risks
and rewards of the ownership of the asset are transferred to another party or (c) control of the asset has been transferred to another party who has
the practical ability to unilaterally sell the asset to an unrelated third party without imposing additional restrictions.
(ii) Financial Liabilities
Financial liabilities are derecognised when the liability is extinguished, that is when the contractual obligation is discharged, cancelled or expired.
Provisions
Provisions are recognised when the Company has a present or constructive obligation as a result of past events, it is more likely than not that there will
be an outflow of resources to settle that obligation, and the amount can be reliably estimated.
Share Capital Transactions
When the Company purchases equity share capital, the amount of the consideration paid, including directly attributable costs, is recognised as a
charge to equity. Purchased 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.
Dividends
Dividends payable are recognised when they meet the criteria for a present obligation (i.e. when they have been approved).
Accounting Estimates and Judgements
In the application of the Company’s accounting policies the Directors are required to make a number of estimates and assumptions about the carrying
amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
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 following are the significant estimates and judgements made in applying the Company’s accounting policies.
Estimates:
• The Company recognises legal and regulatory provisions in line with the Group’s provisions policy. The level of provisioning for regulatory, civil and/
or criminal investigation is an issue where management and legal judgement is important. These are valued based on the Directors' best estimates
taking into account all available information, external advice and historical experience.
Judgements:
• Determine whether there are indicators of impairment of the Company’s fixed asset investments.
The Company’s Directors are of the opinion that there are no further judgements and no key sources of estimation uncertainty that have a significant
risk of causing a material adjustment to the carrying value of assets and liabilities for the Company within the next financial year.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 2 Investments
Cost
At 1 January 2016
Additions during the year
At 31 December 2016
Additions during the year
At 31 December 2017
Provision for impairment
At 1 January 2016
Provided for during the year
At 31 December 2016
Provided for during the year
At 31 December 2017
Net book amounts
At 31 December 2016
At 31 December 2017
159
Shares in subsidiary
undertakings £m
14,810
51
14,861
64
14,925
–
–
–
–
–
14,861
14,925
The Directors believe that the carrying value of the investments is supported by their underlying net assets.
The subsidiary undertakings as at 31 December 2017, all of which are included in the Group Financial Statements, are shown in Note 15 of the
Company Financial Statements.
With the exception of Reckitt Benckiser plc, none of the subsidiaries are directly held by Reckitt Benckiser Group plc. All subsidiaries have a financial
year ending 31 December with the exception of Reckitt Benckiser (India) Private Limited, Reckitt Benckiser Healthcare India Private Limited, Reckitt
Benckiser Scholl India Private Limited and Reckitt & Colman Management Services (Ireland) Limited which have a year ending 31 March; Lloyds
Pharmaceuticals which has a year ending 24 August; Crookes Healthcare Limited which has a year ending 31 January and Reckitt Benckiser Healthcare
(Ireland) Limited which has a year ending 30 November.
Additions during the year relate to the grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the Group.
3 Debtors due within one year
Amounts owed by Group undertakings
Amounts owed by Group undertakings are unsecured, interest free and are repayable on demand (2016: same).
4 Debtors due after more than one year
Deferred tax assets
Deferred tax assets consist of short-term timing differences.
5 Creditors due within one year
Amounts owed to Group undertakings
Taxation and social security
2017
£m
39
2017
£m
8
2016
£m
42
2016
£m
7
2017
£m
6,687
10
6,697
2016
£m
6,473
11
6,484
Included in the amounts owed to Group undertakings is an amount of £6,675 million (2016: £6,434 million) which is unsecured, carries interest at
3-month LIBOR and is repayable on demand (2016: same). All other amounts owed to Group undertakings are unsecured, non-interest bearing and
are repayable on demand (2016: same).
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements
160
Notes to the Parent Company Financial Statements
continued
6 Financial Instruments
Financial Assets
Financial assets that are debt instruments measured at amortised cost
Cash and cash equivalents
Financial Liabilities
Financial liabilities at amortised cost
7 Provisions for Liabilities and Charges
At 1 January 2016
Charged to the Statement of Comprehensive Income
Charged to equity
Utilised during the year
Released to the Statement of Comprehensive Income
At 31 December 2016
Charged to the Statement of Comprehensive Income
Utilised during the year
Released to the Statement of Comprehensive Income
At 31 December 2017
Provisions have been analysed between current and non-current as follows:
Current
Non-current
2017
£m
39
2
2016
£m
42
1
6,687
6,473
Share
buyback
provisions
£m
100
–
702
(802)
–
–
–
–
–
–
2017
£m
356
–
356
Total
provisions
£m
211
12
702
(807)
(56)
62
306
(11)
(1)
356
2016
£m
62
–
62
Legal
provisions
£m
111
12
–
(5)
(56)
62
306
(11)
(1)
356
Provisions are recognised when the Company has a present or constructive obligation as a result of past events, it is more likely than not that there will
be an outflow of resources to settle that obligation, and the amount can be reliably estimated.
Legal provisions include indemnities provided by the Company. Legal provisions released during the prior year relate to those for which an indemnity is
no longer required.
The utilisation of legal provisions during the year relates to legal costs for ongoing litigation proceedings.
The Group remains involved in ongoing investigations by the DoJ and the US Federal Trade Commission and related litigation proceedings in the US
arising from certain matters relating to the RBP business prior to its demerger in December 2014 to form Indivior PLC, and may incur liabilities in
relation to such matters. On 4 September 2017, the Group received notice of a further investigation by the State of California Department of Insurance
in relation to similar matters.
These investigations and related proceedings are continuing and we have been in discussions with the DoJ. As a consequence of these discussions the
Company recorded a charge of £296 million at 31 December 2017.
The Group remains committed to ensuring these issues are concluded or resolved satisfactorily but we cannot predict with any certainty whether we
will be able to reach any agreement with the DoJ or other parties who are involved in any other investigation or related proceedings. The final cost for
the Company may be materially higher than this reserve.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017
8 Share Capital
Issued and fully paid
At 1 January 2017
Allotments
At 31 December 2017
At 31 December 2017
161
Equity
ordinary
shares
736,535,179
–
736,535,179
736,535,179
Nominal
value
£m
74
–
74
74
For details of the share buyback programme and allotment of ordinary shares during the prior year refer to Note 23 of the Group Financial Statements.
The holders of ordinary shares (par value 10p) 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.
9 Employees and Executive Directors
Employees
The average monthly number of persons (including Executive Directors) employed by the Company during the year was:
By Activity
Administration
The Executive Directors’ aggregate emoluments were £2 million (2016: £2 million).
Employee costs
The total employment costs were:
Wages, salaries and other pension costs
Social security costs
Share-based payments
2017
No.
2
2017
£m
2
2
10
14
2016
No.
2
2016
£m
2
3
14
19
10 Share-Based Payments
Reckitt Benckiser Group plc has two employees, the Group’s CEO and CFO. The following tables include details of the share awards granted to
individuals whilst holding these roles, and those for any individuals previously holding these roles. Details of the share awards that are not fully vested
are set out in the Directors’ Remuneration Report on pages 78 to 94. The charge for share-based payments for the year was £10 million (2016:
£14 million) and National Insurance contributions were £10 million (2016: £11 million).
The Company is unable to directly measure the fair value of employee services received. Instead the fair value of the share options granted during the
year is determined using the Black-Scholes model. The model is internationally recognised as being appropriate to value employee share schemes
similar to the All employee and Key employee schemes.
The fair value of awards with options outstanding at 31 December 2017 is shown in Note 24 of the Group Financial Statements.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements
162
Notes to the Parent Company Financial Statements
continued
10 Share-Based Payments continued
Table 1: Share awards movements 2017
Award
Share options
2012
2013
2014
2015
2016
2017
2018
Restricted shares
2014
2015
2016
2017
2018
Other share awards
UK SAYE
UK SAYE
UK SAYE
Options
outstanding
at 1 January
2017
number
164,514
403,044
503,809
490,000
490,000
376,500
–
293,042
285,000
285,000
188,250
–
403
307
509
Fair value of
one award
£
3.18
3.29
3.85
4.34
6.75
5.54
5.78
39.80
43.93
57.13
58.85
56.71
7.53
10.70
14.16
Movement in number of options
Granted/
adjustments
number
–
–
–
–
–
–
276,500
–
–
–
–
138,250
Lapsed
number
Exercised
number
–
–
(205,635)
–
–
–
–
–
–
–
–
–
–
–
(123,386)
–
–
–
–
(169,656)
–
–
–
–
Options
outstanding at
31 December
2017
number
164,514
403,044
298,174
490,000
490,000
376,500
276,500
–
285,000
285,000
188,250
138,250
–
–
–
–
–
–
–
–
–
403
307
509
Grant date
05 December 2011
03 December 2012
11 December 2013
01 December 2014
02 December 2015
01 December 2016
30 November 2017
11 December 2013
01 December 2014
02 December 2015
01 December 2016
30 November 2017
04 September 2013
01 September 2015
01 December 2016
Weighted average exercise price (share options)
£51.55
£64.99
£46.51
£0.00
£53.45
Table 2: Share awards movements 2016
Award
Share options
2012
2013
2014
2015
2016
2017
Restricted shares
2013
2014
2015
2016
2017
Other share awards
UK SAYE
UK SAYE
UK SAYE
UK SAYE
Options
outstanding
at 1 January
2016
number
164,514
503,806
503,809
490,000
490,000
–
251,913
293,042
285,000
285,000
–
Movement in number of options
Granted/
adjustments
number
–
–
–
–
–
376,500
–
–
–
–
188,250
Lapsed
number
Exercised
number
–
(100,762)
–
–
–
–
–
–
–
–
–
–
(50,383)
–
–
–
–
(201,530)
–
–
–
–
Options
outstanding at
31 December
2016
number
164,514
403,044
503,809
490,000
490,000
376,500
–
293,042
285,000
285,000
188,250
796
403
307
–
–
–
–
509
–
–
–
–
(796)
–
–
–
–
403
307
509
Fair value of
one award
£
3.18
3.29
3.85
4.34
6.75
5.54
32.76
39.80
43.93
57.13
58.85
6.71
7.53
10.70
14.16
Grant date
05 December 2011
03 December 2012
11 December 2013
01 December 2014
02 December 2015
01 December 2016
03 December 2012
11 December 2013
01 December 2014
02 December 2015
01 December 2016
08 September 2008
04 September 2013
01 September 2015
01 December 2016
Weighted average exercise price (share options)
£48.10
£67.68
£38.06
£0.00
£51.55
Further details of the share awards relating to the relevant Directors are set out in the Directors’ Remuneration Report on pages 78 to 94. For details of
the contractual life, performance criteria, valuation assumptions and volatility of the share awards, please refer to Note 24 of the Group
Financial Statements.
For options outstanding at the Balance Sheet date the weighted average remaining contractual life of the outstanding options is 6.57 years (2016: 6.78
years). The weighted average share price for the year was £71.70 (2016: £68.77).
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017
163
11 Auditors’ Remuneration
The fee charged for the statutory audit of the Company was £0.05 million (2016: £0.05 million).
12 Related Party Transactions
Reckitt Benckiser Group plc has related party relationships with its pension schemes as disclosed in Note 26 of the Group Financial Statements.
In the prior year certain outstanding balances, totalling £6 million, were settled with Indivior PLC. These related to adjustments to final UK corporation
tax liabilities settled on behalf of Indivior PLC by Reckitt Benckiser plc.
There were no other transactions with related parties other than wholly-owned companies within the Group.
13 Contingent Liabilities
The Company has issued a guarantee to the Trustees of the Reckitt Benckiser Pension Fund covering the obligations of certain UK subsidiaries of the
Group who are the sponsoring employers of the UK defined benefit pension fund. The guarantee covers any amounts due to the pension fund from
these subsidiaries if they fail to meet their pension obligations.
As referred to in Note 7, the Group remains involved in ongoing investigations by the DoJ and the US Federal Trade Commission and related litigation
proceedings in the US arising from certain matters relating to the RBP business prior to its demerger in December 2014 to form Indivior PLC, and may
incur liabilities in relation to such matters. On 4 September 2017, the Group received notice of a further investigation by the State of California
Department of Insurance in relation to similar matters.
These investigations and related proceedings are continuing and we have been in discussions with the DoJ. As a consequence of these discussions the
Company recorded a charge of £296 million at 31 December 2017.
The Group remains committed to ensuring these issues are concluded or resolved satisfactorily but we cannot predict with any certainty whether we
will be able to reach any agreement with the DoJ or other parties who are involved in any other investigation or related proceedings. The final cost for
the Company may be materially higher than this reserve.
The Company has also issued a guarantee on behalf of Reckitt Benckiser Treasury Services plc in relation to the issuance of a US$8,750 million bond
(two tranches of US$2,500 million, one tranche of US$2,000 million, one tranche of US$750 million and two tranches of US$500 million). Details are
included in Note 14 of the Group Financial Statements.
The Company has also issued a guarantee on behalf of Mead Johnson Nutrition Company in relation to outstanding senior notes of US$3,000 million
issued by Mead Johnson Nutrition Company prior to acquisition (two tranches of US$750 million, one tranche of US$700 million, one tranche of
US$500 million and one tranche of US$300 million).
Other contingent liabilities are discussed in Note 19 of the Group Financial Statements.
14 Dividends
During 2017, the Directors declared an interim cash dividend of 66.6p (2016: 58.2p) and proposed a final cash dividend of 97.7p (2016: 95.0p).
For further details, refer to Note 29 of the Group Financial Statements.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 164
Notes to the Parent Company Financial Statements
continued
15 Subsidiary Undertakings
Reckitt Benckiser Group plc holds 100% of the ordinary share capital of Reckitt Benckiser plc, a Company incorporated in England and Wales with its
registered office at 103-105 Bath Road, Slough, SL1 3UH United Kingdom. The Company has no further direct shareholdings.
All subsidiary undertakings of Reckitt Benckiser Group plc are included in the consolidated Financial Statements of the Group.
Name
0730033 BC Ltd
103-105 Bath Road Limited
2309 Realty Corporation
Airwick Industrie SAS
Anhui Guilong Pharmaceutical Trading
Company Ltd
Country of
Incorporation
Canada
UK
Philippines
France
China
Registered office
Share Class
Proportion
of shares held
Suite 2300, 550 Burard Street, Vancouver BC V6C 2BS
COMMON
100.00%
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
ORD
100.00%
2309 Don Chino Roces Avenue, Makati City, PH 1321,
Philippines
38 rue Victor Basch, 91300 Massy, France
Dangtu Economic Development Zone, Maanshan City, Anhui
Province, China
Beleggingsmaatschappij Lemore BV
Netherlands
Siriusdreef 14, 2132 WT Hoofddorp, The Netherlands
Benckiser
Blisa, LLC
Brevet Hospital Products (UK) Limited
British Surgical Industries Limited
UK
USA
UK
UK
4th Floor, 115, George Street, Edinburgh, EH2 4JN, Scotland
Corporation Service Company, 251 Little Falls Drive, Wilmington,
DE 19808, New Castle County
Membership
Shares
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
ORD
100.00%
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
ORD/PREF
100.00%
Canterbury Square Holdings Sarl
Luxembourg
1 Rue de la Poudrerie, L – 3364 Leudelange, Luxembourg
Central Square Holding BV
Netherlands
Siriusdreef 14, 2132 WT Hoofddorp, The Netherlands
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
ORD/PREF
100.00%
Crookes Healthcare Limited
Ireland
Crookes Healthcare Limited
Cupal,Limited
Dakin Brothers Limited
UK
UK
UK
Dorincourt Holdings (Ireland) Limited
Ireland
Durex Limited
Earex Products Limited
ERH Propack Limited
Fenla Industria, Comercio e Administracao
Ltda
UK
UK
UK
Brazil
3rd Floor Kilmore House, Park Lane, Spencer Dock, Dublin 1,
Ireland
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
3rd Floor Kilmore House, Park Lane, Spencer Dock, Dublin 1,
Ireland
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
Rodovia Raposo Tavares, 8015, km 18, Jardim Arpoador, CEP
05577-900, Sao Paulo, Brazil
Gainbridge Investments (Cyprus) Limited
Cyprus
1 Lampousas Street, P.C. 1095, Nicosia, Cyprus
Glasgow Square Limited
Green, Young & Company Limited
UK
UK
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
Grosvenor Square Holding BV
Netherlands
Siriusdreef 14, 2132 WT Hoofddorp, The Netherlands
Guilong Pharmaceutical (Anhui) Co. Ltd
China
Dangtu Economic Development Zone, Maanshan City, Anhui
Province, China
Guilong Pharmaceutical (Anhui) Co. Ltd –
Xiamen Branch
China
11F New Port Plaza, 10 Hubinbei Road, Xiamen, China
–
100.00%
Hamol Limited
Helpcentral Limited
Howard Lloyd & Company,Limited
UK
UK
UK
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
Kukident GmbH
Germany
Heinestrasse 9, 69469 Weinheim, Germany
Lancaster Square Holdings SL
Spain
Carrer de Mataró, 28, 08403 Granollers, Barcelona, Spain
LI Pensions Trust Limited
Linden Germany A Limited
Linden Germany B Limited
Lloyds Pharmaceuticals
London International Group Limited
UK
UK
UK
UK
UK
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
A & B SHARES 88.32%
ORD
ORD
ORD
ORD
100.00%
100.00%
100.00%
100.00%
100.00%
ORD
ORD
ORD
ORD
100.00%
100.00%
100.00%
100.00%
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 Name
London International Trading Asia Ltd
LRC Investments Limited
LRC North America Inc
LRC Products Limited
Country of
Incorporation
Hong Kong
UK
USA
UK
165
Registered office
Units 1503-7, 15th Floor, Millennium City 6, 392 Kwun Tong,
Kowloon, Hong Kong
Share Class
ORD
Proportion
of shares held
100.00%
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
ORD/PREF
100.00%
c/o Corporation Service Company, 2711 Centerville Rd, Ste 400,
Wilmington, DE 19808, United States
COMMON
100.00%
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
100.00%
100.00%
100.00%
100.00%
100.00%
ORD
–
ORD
ORD
Partnership/
Membership
interests
LRC Products Limited – Australian Branch
Australia
44 Wharf Road, West Ryde, NSW 2114, Australia
LRC Secretarial Services Limited
UK
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
Maddison Square Holding BV
Netherlands
Siriusdreef 14, 2132 WT Hoofddorp, The Netherlands
Manufactura MJN, S. de R.L. de C.V.
Mexico
Ave De las Granjas 972, Offices 4 and 5, 2230
Mead Johnson & Company LLC
USA
Corporation Service Company, 251 Little Falls Drive, Wilmington,
DE 19808, New Castle County
Membership
Shares
100.00%
Mead Johnson A.E.B.E
Mead Johnson B.V.
Greece
Attikis 49-53 & Propontidos 2, Vrilissia – Athens, 15235
COMMON
100.00%
Netherlands
Middenkampweg2, 6545 CJ Nijmegen, the Netherlands,
ORD
Mead Johnson do Brasil Comercio E
Importacao De Productos de Nutricao Ltda.
Brazil
Av.das Nacoes Unidas 14171, 8 andar,Torre Marble-Vila
Gertrudes, Sao Paolo, 04794-000, Brazil
Mead Johnson Nutricionales de México, S. de
R.L. de C.V.
Mexico
Lago Zurich #245, Edificio Presa Falcon Floor 11, Mexico City,
11529
Participation/
Membership
Interests
Partnership/
Membership
interests
Mead Johnson Nutrition (Asia Pacific) Pte. Ltd.
Singapore
#19-01, 12 Marina Boulevard, Marina Bay Financial Centre
Tower 3, 18982, Singapore
ORD
100.00%
Mead Johnson Nutrition (Australia) Pty Ltd
Australia
236 Hogan Street, Tatura, Victoria, 3616, Australia
ORD
Mead Johnson Nutrition (Belgium) BVBA
Belgium
International Business Company Formation, Inc., Researchdreef/
Allée de la Recherche 20, B-1070 Brussel / Bruxelles, Belgium
Participation
Interests
100.00%
100.00%
Mead Johnson Nutrition (Canada) Co.
Canada
Mead Johnson Nutrition (Colombia) Ltda.
Colombia
Mead Johnson Nutrition (Dominicana), S.A.
Mead Johnson Nutrition (Dominicana), S.A.
Dominican Republic Branch
Dominican
Republic
Dominican
Republic
Mead Johnson Nutrition (Ecuador) Cia. Ltda.
Ecuador
Suite 900, 1959 Upper Water Street, Halifax, Nova Scotia, CA
B3J 3N2, Canada
COMMON
100.00%
Calle 76 No. 11-17 Piso 3, Edificio Torre Los Nogales, Bogota,
Colombia
100.00%
Participation/
Membership
Interests
Corporation Service Company, 251 Little Falls Drive, Wilmington,
DE 19808, New Castle County
COMMON
100.00%
Corporation Service Company, 251 Little Falls Drive, Wilmington,
DE 19808, New Castle County
–
Av. Coruna N27-88 y Orellana, Edificio Coruna Plaza 7 Floor,
Quito, Pichincha, Ecuador
Participation/
Membership
Interests
ORD
ORD
Mead Johnson Nutrition (France) SAS
France
LexEurope, 35 Avenue d’Eylau, Paris, France, 75116
Mead Johnson Nutrition (Hong Kong) Limited
Hong Kong
30/F., ACE Tower, Windsor House, 311 Gloucester Rd.,
Causeway Bay
Mead Johnson Nutrition (Hong Kong) Limited-
Macau Branch
Hong Kong
Alamdea Dr. Carlos D’assumpcao No.258,6 Andar, F6, Edif.Kin
Heng Long Plaza, Macau, MO, Macau.
–
Mead Johnson Nutrition (India) Private Limited
India
3rd Floor, Piramal Towers, Penisula Corporate Park, G.K. Marg,
Lower Parel, India-Mumbai, IN 400 013, India
Mead Johnson Nutrition (Italia) S.R.L.
Italy
Via Virgilio Maroso, 50, Rome, 142, Italy
Mead Johnson Nutrition (Malaysia) Sdn Bhd
Malaysia
Mead Johnson Nutrition (Panama), S. de R.L.
Panama
15th Floor, Menara Lien Hoe, #8 Persiaran Tropicana, Petaling
Jaya, Selangor Darul Ehsan, Malaysia, MY 47710, Malaysia
Regus, Torres de las Américas, Torre A, Piso 15. Oficina 1539,
Punta Pacifica, Ciudad de Panamá, PA, Panama
ORD
ORD
ORD
Partnership/
Membership
interests
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 166
Notes to the Parent Company Financial Statements
continued
15 Subsidiary Undertakings continued
Name
Country of
Incorporation
Registered office
Mead Johnson Nutrition (Peru) S.R.L.
Peru
Av. Canaval y Moreyra 380 6to piso, -27, San Isidro, Lima, PE,
Peru
Mead Johnson Nutrition (Philippines), Inc.
Philippines
2309 Don Chino Roces Avenue, Makati City, PH 1321,
Philippines
Proportion
of shares held
100.00%
99.96%
Share Class
Partnership/
Membership
interests
COMMON/
PREF
Mead Johnson Nutrition (Poland) SP.Z.O.O.
Poland
Al. Armii Ludowej 26, Warsaw, 00-609, Poland
ORD
100.00%
Mead Johnson Nutrition (Puerto Rico) Inc.
Puerto Rico
Corporation Service Company, 251 Little Falls Drive, Wilmington,
DE 19808, New Castle County
COMMON
100.00%
Mead Johnson Nutrition (Puerto Rico) Inc.
Puerto Rico Branch
Puerto Rico
Corporation Service Company, 251 Little Falls Drive, Wilmington,
DE 19808, New Castle County
–
Mead Johnson Nutrition (Singapore) Pte. Ltd.
Singapore
66 East Coast Road #04-00, Singapore, 428778
ORD
Mead Johnson Nutrition (Spain), S.L.
Spain
Campus Empresarial Jose Maria Churr, C/ Beatriz de Bobadilla,
14 5ª plta, Madrid, 28040
Participation
Quotas
Mead Johnson Nutrition (Taiwan) Ltd.
Mead Johnson Nutrition (Thailand) Ltd.
Mead Johnson Nutrition (UK) Ltd.
Mead Johnson Nutrition (Venezuela) LLC
Taiwan
Thailand
UK
USA
5F., No.156, Jiankang Rd., Songshan Dist.Taipei, 105, Taiwan
388 Exchange Tower, 14th Fl.,Sukhumvit Rd., Klongtoey,
Bangkok, 10110
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
ORD
ORD
ORD
Corporation Service Company, 251 Little Falls Drive, Wilmington,
DE 19808, New Castle County
Membership
Shares
Mead Johnson Nutrition (Vietnam) Company
Limited (FKA: BMS Vietnam Company)
Vietnam
Suite 401,4th flr,Metropolitan Bldg, 235 Dong Khoi St., District
1, Ho Chi Minh City, Vietnam
Mead Johnson Nutrition Argentina, S.A.
Argentina
Alferez Bouchard 4191, 3rd floor, Munro, Buenos Aires,
Argentina
ORD
ORD
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
90.00%
Mead Johnson Nutrition Company
USA
Mead Johnson Nutrition Foundation (IL)
USA
Corporation Service Company, 251 Little Falls Drive, Wilmington,
DE 19808, New Castle County
COMMON
100.00%
Illinois Corporation Service Company, 801 Adlai Stevenson Drive,
Springfield IL 62703, Sangamon County
Not for Profit
100.00%
Mead Johnson Nutrition Holdings (Singapore)
Pte. Ltd.
Singapore
#19-01, 12 Marina Boulevard, Marina Bay Financial Centre
Tower 3, 18982, Singapore
Mead Johnson Nutrition International Holdings
Pte Ltd
Singapore
#19-01, 12 Marina Boulevard, Marina Bay Financial Centre
Tower 3, 18982, Singapore
ORD
ORD
Mead Johnson Nutrition Nominees LLC
USA
Corporation Service Company, 251 Little Falls Drive, Wilmington,
DE 19808, New Castle County
Membership
Shares
100.00%
100.00%
100.00%
Mead Johnson Nutrition Trading Poland Sp.
z o.o
Poland
Al. Armii Ludowej 26, Warsaw, 00-609, Poland
ORD
100.00%
Mead Johnson Nutrition Venezuela S.C.A.
Venezuela
Mead Johnson Nutritionals (China Limited)
China
Calle Bernardette Los Cortijos de Lourdres, Edificio Bristol Myers
de Venezuela, Caracas, VE, Venezuela Bolivarian Republic of
ORD/
COMMON
100.00%
Xia Yuan Road, Dongji Industrial Di, Development Zone,
Guangzhou, 510610, China
ORD
88.89%
Mead Johnson One, C.V.
Netherlands
225 North Canal Street, Floor 25, Chicago, IL 60606
Mead Johnson Pediatric Nutrition Institiute
(China) Ltd.
Mead Johnson Pediatric Nutrition Technology
(Guangzhou) Ltd.
China
China
Xia Yuan Road, Dongji Industrial Di, Development Zone,
Guangzhou, 510730, China
Xia Yuan Road, Dongji Industrial Di, Guangzhou Economic &
Technological, Guangzhou, 510730, Guangdong, China
Mead Johnson Two, C.V.
Netherlands
225 North Canal Street, Floor 25, Chicago, IL 60606
Medcom LLC
Medcom Marketing And Prodazha Ukraine
LLC (In Liquidation)
Belarus
UKraine
220108, Minsk, Kazintsa, 121A, app.450, Belarus
1 Block, 120 40-Richchia Zhovtnia Ave., Kyiv, 03127, Ukraine
MJ UK Holdings Limited
UK
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
Partnership
interests
ORD
ORD
Partnership
interests
ORD
ORD
ORD
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 167
Proportion
of shares held
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
ORD
ORD
ORD
ORD
ORD
ORD
ORD
Participation/
Membership
Interests
15 Subsidiary Undertakings continued
Name
MJ USA Holdings LLC
MJN Asia Pacific Holdings, LLC
USA
USA
MJN Global Holdings B.V.
Netherlands
MJN Holdings (Gibraltar) Limited
Gibraltar
Country of
Incorporation
Registered office
Share Class
c/o Corporation Service Company, 2711 Centerville Rd, Ste 400,
Wilmington, DE 19808, United States
Membership
Shares
Corporation Service Company, 251 Little Falls Drive, Wilmington,
DE 19808, New Castle County
Membership
Shares
100.00%
Zuidplein 142, Tower H, 17th Floor, 1077 XV Amsterdam, the
Netherlands
ORD
100.00%
Fiduciary Management Limited, Glacis Road, Suite 23, Portland
House, Gibraltar
ORD
100.00%
MJN Holdings (Netherlands) B.V.
Netherlands
Zuidplein 142, Tower H, 17th Floor, 1077 XV Amsterdam, the
Netherlands
MJN Innovation Services B.V.
Netherlands
Middenkampweg2, 6545 CJ Nijmegen, the Netherlands,
MJN International Holdings (UK), Ltd.
MJN U.S. Holdings LLC
Nances Holding S.A.
UK
USA
Brazil
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
Corporation Service Company, 251 Little Falls Drive, Wilmington,
DE 19808, New Castle County
Membership
Shares
Avenida Piracicaba, 137, Parte, Mameleiro, Vila Nova São
Roque, Cidade de São Roque/SP
COMMON
100.00%
New Bridge Holdings BV
Netherlands
Siriusdreef 14, 2132 WT Hoofddorp, The Netherlands
New Bridge Street Invoicing Limited
Norwich Square Holding SL
Nurofen Limited
Only Good Nutrition Industria de Alimentos
Ltda.
Open Championship Limited
Optrex Limited
UK
Spain
UK
Brazil
UK
UK
Oriental Medicine Company Limited
Hong Kong
Oxy Reckitt Benckiser LLC
South Korea
Paras Global FZE
Paras Inc
Paras Overseas Holding Limited
Pharmalab Limited
Prebbles Limited
Propack GmbH
PT Mead Johnson Indonesia
Dubai
USA
Dubai
UK
UK
Germany
Indonesia
Pt Reckitt Benckiser Indonesia
Indonesia
Pt Reckitt Benckiser Trading Indonesia
Indonesia
Qingdao London Durex Co Ltd
Qingdao New Bridge Corporate Management
Consulting Company Ltd
R & C Nominees Limited
R & C Nominees One Limited
China
China
UK
UK
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
Carrer de Mataró, 28, 08403 Granollers, Barcelona, Spain
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
Estrada Fukutaro Yida, 930, Cooperativa, SAO BERNARDO DO
CAMPO, Sao Paulo, 09852-060, Brazil
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
Units 1503-7, 15th Floor, Millennium City 6, 392 Kwun Tong,
Kowloon, Hong Kong
24th Floor Two IFC, 10 Gukjegeumyung-ro, Youngdeungpo-gu,
Seoul, 150-945 South Korea
Sheikh Zayed Road, 8.5 Interchange, Dubai, United Arab
Emirates
ORD
ORD
ORD
ORD
ORD
c/o Corporation Service Company, 2711 Centerville Rd, Ste 400,
Wilmington, DE 19808, United States
COMMON
100.00%
Sheikh Zayed Road, 8.5 Interchange, Dubai, United Arab
Emirates
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
ORD
ORD
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
ORD/DEF
Dr. Albert-Reimann-Strasse 3, 68526 Ladenburg, Germany
ORD
100.00%
100.00%
100.00%
100.00%
The Plaza Office Tower 43rd floor, Jalan MH. Thamrin Kav 28-30,
Jakarta, 10350
COMMON
90.10%
Artha Graha Building, 11th Floor, Jalan Jendral Sudirman Kav
52-53, Jakarta 12190, Indonesia
ORD
100.00%
Jalan Raya Narogong Km. 15, Desa Limusnunggal Pangkalan VII,
Kec Cileungsi , Bogor , Indonesia
ORD
No.1 Shangma, Aodong Road, Qingdao City, Shandong
Province, China
No.1 Shangma, Aodong Road, Qingdao City, Shandong
Province, China
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
ORD
ORD
ORD
ORD
100.00%
100.00%
100.00%
100.00%
100.00%
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 168
Notes to the Parent Company Financial Statements
continued
15 Subsidiary Undertakings continued
Name
R & C Nominees Two Limited
RB & Manon Business Co. Ltd
Country of
Incorporation
UK
China
RB & Manon Business Limited
Hong Kong
RB (China Trading) Limited
RB (China) Holding Co Ltd
RB Asia Holding Limited
RB East Trading Limited
UK
China
UK
Dubai
Registered office
Share Class
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
Room 1101, No.1033, Zhao Jia Bang Road, Shanghai, China
Unit 2001, 20/F, Greenfield Tower, Concordia Plaza, No. 1
Science Museum Road, Kowloon, Hong Kong
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
6th Floor, Tower D, Parkview Green Fang Cao Di, No.9
Dongdaqiao Road, Chaoyang District, China
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
ORD
ORD
ORD
ORD
ORD
ORD
Behind GAC Complex, Jebel Ali Free Zone, PO Box 61344 Dubai,
UAE
–
RB Healthcare Pte Ltd – Malaysia Branch
Malaysia
Level 7, Menara Milenium, Jalan Damanlela, Pusat Bandar
Damansara, Damansara Heights, 50490 Kuala Lumpur, Malaysia
RB Healthcare Pte Ltd (in Liquidation)
Singapore
1 Fifth Avenue, #04-06 Guthrie House, Singapore 268802
RB Holding Europe Du Sud SNC
France
38 rue Victor Basch, 91300 Massy, France
RB Holdings (Luxembourg) Sarl
Luxembourg
1 Rue de la Poudrerie, L – 3364 Leudelange, Luxembourg
RB Holdings (Nottingham) Limited
RB Luxembourg (2016) Limited
UK
UK
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
RB Luxembourg (TFFC) S.a.r.l
Luxembourg
1 Rue de la Poudrerie, L – 3364 Leudelange, Luxembourg
RB Luxembourg Holdings (TFFC) Limited
UK
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
Luxembourg
1 Rue de la Poudrerie, L – 3364 Leudelange, Luxembourg
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
–
RB Luxembourg Holdings (TFFC) Limited-
Luxembourg Branch
RB Manufacturing LLC
RB Mexico Investments Limited
USA
UK
RB Reigate (Ireland) Unlimited Company
Ireland
RB Reigate (UK) Limited
RB Salute Mexico S.A de C.V.
RB Square Holdings (Spain) SL
RB UK Commercial Limited
RB USA Holdings LLC
UK
Mexico
Spain
UK
USA
c/o Corporation Service Company, 2711 Centerville Rd, Ste 400,
Wilmington, DE 19808, United States
Membership
Shares
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
3rd Floor Kilmore House, Park Lane, Spencer Dock, Dublin 1,
Ireland
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
Av. De los Angeles No 303 Bodega 3B-1 Col. San Matin
Xochinahuac, Azcapotzalco, Mexico
Carrer de Mataró, 28, 08403 Granollers, Barcelona, Spain
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
ORD
ORD
ORD
ORD
ORD
ORD
c/o Corporation Service Company, 2711 Centerville Rd, Ste 400,
Wilmington, DE 19808, United States
Membership
Shares
RB Winchester (Ireland) Unlimited Company
Ireland
3rd Floor Kilmore House, Park Lane, Spencer Dock, Dublin 1,
Ireland
RBH Verwertungs GmbH
Germany
Darwinstrasse 2-4, 69115 Heidelberg, Germany
ORD
ORD
Reckitt & Colman (Jersey) Limited
Reckitt & Colman (Overseas) Limited
Reckitt & Colman (UK) Limited
Reckitt & Colman Capital Finance Limited
Reckitt & Colman Guangzhou Limited
Reckitt & Colman Holdings Limited
Reckitt & Colman Management Services
(Ireland) Limited
Jersey
UK
UK
Jersey
China
UK
Ireland
13 Castle Street, St. Helier, Jersey, JE4 5UT
ORD/PREF
100.00%
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
ORD
100.00%
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
ORD/PREF
100.00%
13 Castle Street, St. Helier, Jersey, JE4 5UT
Economic and Technological Development Zone, Eastern,
Guangzhou City, Guangdong Province, China
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
3rd Floor Kilmore House, Park Lane, Spencer Dock, Dublin 1,
Ireland
Reckitt & Colman Pension Trustee Limited
UK
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
Reckitt & Colman Sagrotan
Verwaltungsgesellschaft mbH
Germany
Darwinstrasse 2-4, 69115 Heidelberg, Germany
Reckitt & Colman Trustee Services Limited
UK
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
ORD
ORD
ORD
ORD
ORD
ORD
ORD
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
Proportion
of shares held
100.00%
75.05%
75.00%
80.00%
100.00%
100.00%
80.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 169
15 Subsidiary Undertakings continued
Name
Country of
Incorporation
Registered office
Reckitt & Sons Limited
UK
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
Reckitt Benckiser (2012) BV
Netherlands
Siriusdreef 14, 2132 WT Hoofddorp, The Netherlands
Share Class
ORD
ORD
Proportion
of shares held
100.00%
100.00%
Reckitt Benckiser (Australia) Pty Limited
Australia
44 Wharf Road, West Ryde, NSW 2114, Australia
ORD/PREF
100.00%
Reckitt Benckiser (Bangladesh) Limited
Bangladesh
58/59 Nasirabad Industrial Area, Chittagong- 4209, Bangladesh ORD
Reckitt Benckiser (Belgium) SA/NV
Belgium
Reckitt Benckiser (Brands) Limited
Reckitt Benckiser (Brasil) Comercial De
Products De Higene, Limpeza E Cosmeticos
Ltda.
Reckitt Benckiser (Brasil) Ltda
UK
Brazil
Brazil
Researchdreef, Allée de la Recherche 20, B-1070 Brussel,
Bruxelles, Belgium
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
Av. Presidente Juscelino Kubitshek,1909, cj 241 and 251, Ed.
São Paulo Corporate Center / North Tower, São Paulo/SP – Brasil.
Postal Code: 04543-903
Rodovia Raposo Tavares, 8015, km 18, Jardim Arpoador, CEP
05577-900, Sao Paulo, Brazil
Reckitt Benckiser (BVI) No. 1 Limited
British Virgin
Islands
Palm Grove House, PO Box 438, Road Town, Tortola, British
Virgin Islands
ORD
ORD
ORD
ORD
ORD
82.96%
100.00%
100.00%
100.00%
100.00%
100.00%
Reckitt Benckiser (BVI) No. 1 Limited – UK
Branch
Reckitt Benckiser (BVI) No. 2 Limited
Reckitt Benckiser (BVI) No. 2 Limited – UK
Branch
Reckitt Benckiser (BVI) No. 3 Limited
Reckitt Benckiser (BVI) No. 3 Limited – UK
Branch
Reckitt Benckiser (BVI) No. 4 Limited
UK
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
–
100.00%
British Virgin
Islands
Palm Grove House, PO Box 438, Road Town, Tortola, British
Virgin Islands
ORD
100.00%
UK
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
–
100.00%
British Virgin
Islands
Palm Grove House, PO Box 438, Road Town, Tortola, British
Virgin Islands
ORD
100.00%
UK
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
–
100.00%
British Virgin
Islands
Palm Grove House, PO Box 438, Road Town, Tortola, British
Virgin Islands
ORD
100.00%
Reckitt Benckiser (Canada) Inc
Canada
1680 Tech Avenue Unit 2, Mississauga, Ontario L4W 5S9,
Canada
NEW
COMMON
Reckitt Benckiser (Cayman Islands) Limited
Cayman Islands
Reckitt Benckiser (Centroamerica) SA
Costa Rica
Reckitt Benckiser (Channel Islands) Limited
Guernsey
PO Box 309, Ugland House, South Church Street, George Town,
Grand Cayman, KY1-1104, Cayman Islands
San José, Escazú Corporate Center, 7 Piso, Costado Sur de
Multiplaza Escazú, San José, Costa Rica
1st and 2nd Floors, Elizabeth House, Les Ruettes Brayes, St Peter
Port, Guernsey, GY1 1EW
ORD
ORD
ORD
Reckitt Benckiser (Czech Republic) Spol s r o
Czech Republic
Vinohradská 2828/151, 130 00 Praha 3-Žižkov, Czech Republic
ORD
Reckitt Benckiser (Egypt) Limited
Egypt
Polyium Building 22, Off-road 90, District 1, 5th Settlement,
New Cairo, Egypt
Reckitt Benckiser (ENA) BV
Netherlands
Schiphol Boulevard 267, 1118 BH Schiphol, The Netherlands
Reckitt Benckiser (Espana) SL
Reckitt Benckiser (Granollers) SL
Spain
Spain
Carrer de Mataró, 28, 08403 Granollers, Barcelona, Spain
Carrer de Mataró, 28, 08403 Granollers, Barcelona, Spain
Reckitt Benckiser (Grosvenor) Holdings Limited UK
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
Reckitt Benckiser (Health) Holdings Limited
Reckitt Benckiser (Hygiene Home) Holdings
Limited
UK
UK
Reckitt Benckiser (India) Private Limited
India
Reckitt Benckiser (Lanka) Limited
Reckitt Benckiser (Latvia) SIA
Reckitt Benckiser (Malaysia) Sdn Bhd
Sri Lanka
Latvia
Malaysia
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
227, OKHLA INDUSTRIAL ESTATE, PHASE III, NEW DELHI, South
Delhi, Delhi, India, 110020
41 Lauries Road, Colombo 4, Sri Lanka
Streˉ lnieku iela 1A – 2, Rıˉga, LV-1010, Latvia
Level 7, Menara Milenium, Jalan Damanlela, Pusat Bandar
Damansara, Damansara Heights, 50490 Kuala Lumpur, Malaysia
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
99.99%
100.00%
100.00%
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 170
Notes to the Parent Company Financial Statements
continued
15 Subsidiary Undertakings continued
Name
Country of
Incorporation
Registered office
Reckitt Benckiser (Near East) Limited
Israel
6 Hangar Street, I.Z. Neve Neeman B Hod Hasharon 45250, P.O.
Box 6440., Israel
Reckitt Benckiser (New Zealand) Limited
New Zealand
2 Fred Thomas Dr, Takapuna, Auckland 0622, New Zealand
Reckitt Benckiser (Pars) PJSC
Reckitt Benckiser (Poland) SA
Reckitt Benckiser (Portugal) SA
Iran
Poland
Portugal
No 67, West Taban Avenue, Africa Boulevard, Tehran, Iran
Okunin 1, 05-100 Nowy Dwór Mazowiecki, Poland
R. Dom Cristóvão da Gama 1 – 1º Andar C/D, Edifício Restelo,
1400-113 Lisboa, Portugal
Share Class
ORD
ORD
ORD
ORD
ORD
Reckitt Benckiser (Romania) Srl
Romania
Reckitt Benckiser (RUMEA) Limited
Reckitt Benckiser (RUMEA) Limited – Dubai
Branch
Reckitt Benckiser (RUMEA) Limited – JAFZA
Branch
UK
Dubai
Dubai
Floor 5, Building A, 89-97 Grigore Alexandrescu Street, Bucarest,
Romania
ORD
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
ORD
Behind GAC Complex, Jebel Ali Free Zone, PO Box 61344 Dubai,
UAE
Behind GAC Complex, Jebel Ali Free Zone, PO Box 61344 Dubai,
UAE
Reckitt Benckiser (Singapore) Pte Limited
Singapore
1 Fifth Avenue, #04-06 Guthrie House, Singapore 268802
Reckitt Benckiser (Slovak Republic) Spol s r o
Slovakia
Drienˇová 3, 82108 Bratislava, Slovakia
Reckitt Benckiser (South America) Holding BV
Netherlands
Siriusdreef 14, 2132 WT Hoofddorp, The Netherlands
Reckitt Benckiser (Spain) BV
Netherlands
Siriusdreef 14, 2132 WT Hoofddorp, The Netherlands
Reckitt Benckiser (Switzerland) AG
Switzerland
Richtistrasse 5, 8405 Wallisellen, Switzerland
Reckitt Benckiser (Thailand) Limited
Thailand
No. 89 AIA Capital Center, Rooms 2504 – 2507, 25th Floor,
Ratchadaphisek Rd., Dindaeng Sub-District, Dindaeng District,
Bangkok 10400, Thailand
Reckitt Benckiser (UK) Limited
Reckitt Benckiser (USA) Limited
UK
UK
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
Reckitt Benckiser AG
Switzerland
Richtistrasse 5, 8304 Wallisellen, Switzerland
Reckitt Benckiser Arabia FZE
Dubai
Behind GAC Complex, Jebel Ali Free Zone, PO Box 61344 Dubai,
UAE
Reckitt Benckiser Argentina SA
Argentina
Bucarelli 2608 PB A, CABA, Buenos Aires, Argentina
Reckitt Benckiser Asia Pacific Limited
Reckitt Benckiser Asia Pacific Limited – Japan
Branch
Reckitt Benckiser Austria GmbH
Reckitt Benckiser Bahrain W.L.L
UK
Japan
Austria
Bahrain
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
3-20-14 Higashi-Gotanda, Shinagawa-ku, Tokyo 141-0022
Guglgasse 15, A-1110 Wien (Vienna), Austria
PO Box 50833, Hidd, Kingdom of Bahrain
Reckitt Benckiser Brands Investments BV
Netherlands
Siriusdreef 14, 2132 WT Hoofddorp, The Netherlands
–
–
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
–
ORD
ORD
ORD
ORD
Proportion
of shares held
100.00%
100.00%
99.80%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
45.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
Reckitt Benckiser Bulgaria Eood
Reckitt Benckiser BY LLC
Bulgaria
Belarus
22 Zlaten Rog Str 1407 Sofia, Bulgaria
220108, Minsk, Kazintsa, 121A, app.403, Belarus
COMMON
100.00%
Reckitt Benckiser Calgon BV
Netherlands
Siriusdreef 14, 2132 WT Hoofddorp, The Netherlands
Reckitt Benckiser Chartres SAS
Reckitt Benckiser Chile SA
France
Chile
102 rue de Sours 28000 Chartres
Av. Pdte. Kennedy Lateral 5454, Vitacura, Región Metropolitana,
Chile
Reckitt Benckiser Colombia SA
Colombia
Calle 46 # 5 – 76. Cali, Colombia
Reckitt Benckiser Commercial (Italia) Srl
Reckitt Benckiser Corporate Services Limited
Reckitt Benckiser d.o.o
Reckitt Benckiser Detergents GmbH
Reckitt Benckiser Deutschland GmbH
Reckitt Benckiser East Africa Limited
Reckitt Benckiser Ecuador SA
Italy
UK
Croatia
Germany
Germany
Kenya
Ecuador
Via Spadolini, 7, 20141 Milano, Italy
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
Ulica grada Vukovara 269d, 10 000 Zagreb, Hrvatska, Croatia
Darwinstrasse 2-4, 69115 Heidelberg, Germany
Darwinstrasse 2-4, 69115 Heidelberg, Germany
Plot Lr No 209/2462, Likoni Road, Nairobi, Kenya, Africa
Francisco Salazar E10-37 y Jose Luis Tamayo. Quito, Ecuador
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
99.00%
100.00%
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 171
15 Subsidiary Undertakings continued
Name
Reckitt Benckiser Employees Trustees (Jersey)
Limited
Country of
Incorporation
Registered office
Share Class
Jersey
Queensway House, Hilgrove Street, St Helier, Jersey, JE1 1ES
ORD
Proportion
of shares held
100.00%
Reckitt Benckiser Europe General Partnership
UK
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
Partnership
Shares
100.00%
Reckitt Benckiser Europe General Partnership,
Slough (UK), Wallisellen Branch – Swiss Branch
Switzerland
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
–
100.00%
Reckitt Benckiser Expatriate Services Limited
UK
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
Reckitt Benckiser Fabric Treatment BV
Netherlands
Siriusdreef 14, 2132 WT Hoofddorp, The Netherlands
Reckitt Benckiser Finance (2005) Limited
Reckitt Benckiser Finance (2007)
Reckitt Benckiser Finance (2010) Limited
UK
UK
UK
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
Reckitt Benckiser Finance (Ireland) Unlimited
Company
Ireland
3rd Floor Kilmore House, Park Lane, Spencer Dock, Dublin 1,
Ireland
Reckitt Benckiser Finance Company Limited
UK
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
Reckitt Benckiser Finish BV
Netherlands
Siriusdreef 14, 2132 WT Hoofddorp, The Netherlands
Reckitt Benckiser France SAS
France
38 rue Victor Basch, 91300 Massy, France
Reckitt Benckiser FSIA BV
Netherlands
Siriusdreef 14, 2132 WT Hoofddorp, The Netherlands
Reckitt Benckiser Health Limited
Reckitt Benckiser Healthcare (Central & Eastern
Europe) Limited
Reckitt Benckiser Healthcare (CIS) Limited
UK
UK
UK
Reckitt Benckiser Healthcare (Ireland) Limited
Ireland
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
3rd Floor Kilmore House, Park Lane, Spencer Dock, Dublin 1,
Ireland
Reckitt Benckiser Healthcare (Italia) SpA
Italy
Via Spadolini, 7, 20141 Milano, Italy
Reckitt Benckiser Healthcare (MEMA) Limited
UK
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
Reckitt Benckiser Healthcare (Philippines), Inc
Philippines
Unit 2202 One Global Place, 5th Ave. Corner 25th St. Bonifacio
Global City, Taguig City 1634, Philippines
Reckitt Benckiser Healthcare (Russia) LLC
Russia
Shlyuzovaya emb., 4, 115114 Moscow, Russia
Reckitt Benckiser Healthcare (UK) Limited
UK
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
Reckitt Benckiser Healthcare Australia Pty
Limited
Australia
44 Wharf Road, West Ryde, NSW 2114, Australia
Reckitt Benckiser Healthcare BV
Netherlands
Siriusdreef 14, 2132 WT Hoofddorp, The Netherlands
Reckitt Benckiser Healthcare France SAS
Reckitt Benckiser Healthcare India Private
Limited
Reckitt Benckiser Healthcare International
Limited
France
India
38 rue Victor Basch, 91300 Massy, France
PLOT NO. 48,SECTOR 32,, NEAR IITM, GURGAON, Gurgaon,
Haryana, India, 122001
UK
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
Reckitt Benckiser Healthcare Manufacturing
(Thailand) Limited
Thailand
65 Moo 12 Lardkrabang-Bangplee Road, Bangplee
Samutprakarn, Bangkok 10540, Thailand
ORD/PREF
45.00%
Reckitt Benckiser Healthcare Portugal Ltda
Portugal
Reckitt Benckiser Healthcare SA
Reckitt Benckiser Hellas Chemicals SA
Spain
Greece
Reckitt Benckiser Holding (Thailand) Limited
Thailand
R. Dom Cristóvão da Gama 1 – 1º Andar C/D, Edifício Restelo,
1400-113 Lisboa, Portugal
Carrer de Mataró, 28, 08403 Granollers, Barcelona, Spain
7 Taki Kavalieratou Street, 145 64 Kifissia, Greece
No. 89 AIA Capital Center, Rooms 2504 – 2507, 25th Floor,
Ratchadaphisek Rd., Dindaeng Sub-District, Dindaeng District,
Bangkok 10400, Thailand
Reckitt Benckiser Holding GmbH & Co KG
Germany
Darwinstrasse 2-4, 69115 Heidelberg, Germany
Reckitt Benckiser Holdings (2017) Ltd
UK
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
ORD
ORD
ORD
100.00%
100.00%
100.00%
ORD/PREF
45.00%
ORD
ORD
100.00%
100.00%
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 172
Notes to the Parent Company Financial Statements
continued
ORD
ORD
ORD
–
ORD
ORD
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
15 Subsidiary Undertakings continued
Name
Reckitt Benckiser Holdings (Channel Islands)
Limited
Reckitt Benckiser Holdings (Channel Islands)
Limited – UK Branch
Reckitt Benckiser Holdings (Italia) Srl
Reckitt Benckiser Holdings (Luxembourg)
Limited
Reckitt Benckiser Holdings (Overseas) Limited
Reckitt Benckiser Holdings (TFFC) Limited
Reckitt Benckiser Holdings (USA) Limited
Reckitt Benckiser Holdings (USA) Limited –
Luxembourg Branch
Country of
Incorporation
Guernsey
UK
Italy
UK
UK
UK
UK
Registered office
Share Class
1st and 2nd Floors, Elizabeth House, Les Ruettes Brayes, St Peter
Port, Guernsey, GY1 1EW
ORD
Proportion
of shares held
100.00%
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
–
100.00%
Via Spadolini, 7, 20141 Milano, Italy
ORD
100.00%
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
ORD/PREF
100.00%
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
Luxembourg
1 Rue de la Poudrerie, L – 3364 Leudelange, Luxembourg
Reckitt Benckiser Home Chemical Products
Trading (Shanghai) Co Limited
China
C6-8 site, 6F, No.333 Futexi Road, Waigaoqiao Free Trade Zone,
Shanghai City, China
Reckitt Benckiser Hong Kong Limited
Hong Kong
Room 03-07, 15/F, Millennium City 6, 392 Kwun Tong Road,
Kwun Tong, Kowloon.
Reckitt Benckiser Hong Kong Limited – Taiwan
Branch
Taiwan
6F., No. 136, Sec. 3, Ren’ai Rd., Da’an Dist., Taipei City 10657,
Taiwan, R.O.C.
–
Reckitt Benckiser Household and Healthcare
Ukraine LLC
UKraine
Ukraine, 04073, Kyiv, prospect Stepana Bandery, building 28-A,
letter «G», office 80
ORD
Reckitt Benckiser Household Products (China)
Company Limited
China
No.34 Beijing East Road, Jingzhou City, Hubei Province, China
ORD
100.00%
Reckitt Benckiser International GmbH
Germany
Darwinstrasse 2-4, 69115 Heidelberg, Germany
ORD
Reckitt Benckiser Investments (2012) LLC
USA
c/o Corporation Service Company, 2711 Centerville Rd, Ste 400,
Wilmington, DE 19808, United States
Membership
Shares
Reckitt Benckiser Investments (2017) Limited
UK
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
Reckitt Benckiser Investments (No. 1) Sarl
Luxembourg
1 Rue de la Poudrerie, L – 3364 Leudelange, Luxembourg
Reckitt Benckiser Investments (No. 2) Sarl
Luxembourg
1 Rue de la Poudrerie, L – 3364 Leudelange, Luxembourg
Reckitt Benckiser Investments (No. 4) Sarl
Luxembourg
1 Rue de la Poudrerie, L – 3364 Leudelange, Luxembourg
Reckitt Benckiser Investments (No. 5) Sarl
Luxembourg
1 Rue de la Poudrerie, L – 3364 Leudelange, Luxembourg
Reckitt Benckiser Investments (No. 6) Sarl
Luxembourg
1 Rue de la Poudrerie, L – 3364 Leudelange, Luxembourg
Reckitt Benckiser Investments (No. 7) Sarl
Luxembourg
1 Rue de la Poudrerie, L – 3364 Leudelange, Luxembourg
Reckitt Benckiser Investments (No. 8) Sarl
Luxembourg
1 Rue de la Poudrerie, L – 3364 Leudelange, Luxembourg
Reckitt Benckiser Investments Limited
Reckitt Benckiser IP LLC
Reckitt Benckiser Ireland Limited
Reckitt Benckiser Italia SpA
Reckitt Benckiser Japan Limited
Reckitt Benckiser Jersey (No.1) Limited
Reckitt Benckiser Jersey (No.1) Limited – UK
Branch
Reckitt Benckiser Jersey (No.2) Limited
Reckitt Benckiser Jersey (No.2) Limited – UK
Branch
Reckitt Benckiser Jersey (No.3) Limited
Reckitt Benckiser Jersey (No.3) Limited – UK
Branch
UK
Russia
Ireland
Italy
Japan
Jersey
UK
Jersey
UK
Jersey
UK
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
Moscow, Kosmodamianskaya Nab d.52 / 1
3rd Floor Kilmore House, Park Lane, Spencer Dock, Dublin 1,
Ireland
Via Spadolini, 7, 20141 Milano, Italy
Shinagawa-ku, 141-0022, Japan
13 Castle Street, St. Helier, Jersey, JE4 5UT
103- 105 Bath Road, Slough, SL1 3UH
13 Castle Street, St. Helier, Jersey, JE4 5UT
103- 105 Bath Road, Slough, SL1 3UH
13 Castle Street, St. Helier, Jersey, JE4 5UT
103- 105 Bath Road, Slough, SL1 3UH
Reckitt Benckiser Jersey (No.5) Limited
Jersey
13 Castle Street, St. Helier, Jersey, JE4 5UT
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
–
ORD
–
ORD
–
ORD
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 173
Share Class
–
Proportion
of shares held
100.00%
ORD, CLASS
A, C & D
ORD
ORD
ORD
ORD
ORD
ORD
15 Subsidiary Undertakings continued
Name
Country of
Incorporation
Registered office
Reckitt Benckiser Jersey (No.5) Limited – UK
Branch
UK
103- 105 Bath Road, Slough, SL1 3UH
Reckitt Benckiser Jersey (No.7) Limited
Jersey
13 Castle Street, St. Helier, Jersey, JE4 5UT
Reckitt Benckiser Kazakhstan LLC
Kazakhstan
House 15A, Koktem 1, Bostandyksky District, Almaty, 050040,
Kazakhstan
Reckitt Benckiser Kereskedelmi Kft
Hungary
134-146 ut Bocksai, 1113 Budapest, Hungary
Reckitt Benckiser Laundry Detergents (No. 1)
BV
Reckitt Benckiser Laundry Detergents (No. 2)
BV
Netherlands
Siriusdreef 14, 2132 WT Hoofddorp, The Netherlands
Netherlands
Siriusdreef 14, 2132 WT Hoofddorp, The Netherlands
Reckitt Benckiser Lime-A-Way BV
Netherlands
Siriusdreef 14, 2132 WT Hoofddorp, The Netherlands
Reckitt Benckiser LLC
Reckitt Benckiser LLC
Russia
USA
Reckitt Benckiser Luxembourg (2010) Limited
Reckitt Benckiser Luxembourg (No. 1) Limited
Reckitt Benckiser Luxembourg (No. 2) Limited
Reckitt Benckiser Luxembourg (No. 3) Limited
Reckitt Benckiser Luxembourg (No. 4) Limited
UK
UK
UK
UK
UK
Moscow, Kosmodamianskaya Nab d.52 / 1
c/o Corporation Service Company, 2711 Centerville Rd, Ste 400,
Wilmington, DE 19808, United States
Membership
Shares
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
ORD
ORD
ORD
ORD
ORD
Reckitt Benckiser Management Services
Unlimited Company
Ireland
3rd Floor Kilmore House, Park Lane, Spencer Dock, Dublin 1,
Ireland
A, B, C, D, E, F,
G, H, I, K ORD
Reckitt Benckiser Marc BV
Netherlands
Siriusdreef 14, 2132 WT Hoofddorp, The Netherlands
Reckitt Benckiser Mexico, SA de CV
Mexico
Reckitt Benckiser Morocco Sarl AU
Morocco
Circuito Dr Gustavo Baz,7 No 7, Fracc Industrial El Pedregal,
Atizapan de Zaragoza, Edomex, Mexico
322 Boulevard, Zerktouni, Residence Boissy Ler Etage –
Bourgogne, Casablanca, Morocco
Reckitt Benckiser Netherlands Brands BV
Netherlands
Siriusdreef 14, 2132 WT Hoofddorp, The Netherlands
Reckitt Benckiser Nigeria Limited
Reckitt Benckiser Nordic A/S
Nigeria
Denmark
12 Montgomery Road, Yaba, Lagos, Nigeria
Vandtårnsvej 83 A, 2860 Søborg, Denmark
Reckitt Benckiser NV
Netherlands
Siriusdreef 14, 2132 WT Hoofddorp, The Netherlands
Reckitt Benckiser NV – Luxembourg Branch
Luxembourg
1 Rue de la Poudrerie, L – 3364 Leudelange, Luxembourg
Reckitt Benckiser Oven Cleaners BV
Netherlands
Siriusdreef 14, 2132 WT Hoofddorp, The Netherlands
Reckitt Benckiser Pakistan Limited
Pakistan
Reckitt Benckiser Peru SA
Peru
3rd Floor, Tenancy 04 and 05, Corporate Office Block, Dolman
City, HC-3, Block 4, Scheme 5, Clifton, Karachi
Avenida República de Panamá No. 2557 Int. 202, La Victoria.
Lima, Perú
Reckitt Benckiser Pharmaceuticals (Pty) Limited South Africa
8 Jet Park Road, Elandsfontein 1406, South Africa
Reckitt Benckiser plc
Reckitt Benckiser Porto Alto Lda
UK
Portugal
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
Estrada Malhada dos Carrascos nr12, 2135-061, Samora
Correia, Portugal
Reckitt Benckiser Power Cleaners BV
Netherlands
Siriusdreef 14, 2132 WT Hoofddorp, The Netherlands
Reckitt Benckiser Production (Poland) Sp. z.o.o. Poland
Okunin 1, 05-100 Nowy Dwór Mazowiecki, Poland
Reckitt Benckiser Produktions GmbH
Germany
Dr. Albert-Reimann-Strasse 3, 68526 Ladenburg, Germany
Reckitt Benckiser Sarl
Luxembourg
1 Rue de la Poudrerie, L – 3364 Leudelange, Luxembourg
Reckitt Benckiser Scholl India Private Limited
India
F73 & 74, SIPCOT Industrial Park, Irungattukottai,
Sriperumbudur TK, Kancheepuram Distt. – 602 117, Tamilnadu,
India
ORD
ORD
ORD
ORD
ORD
ORD
ORD
–
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
99.53%
100.00%
100.00%
100.00%
100.00%
98.60%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
Reckitt Benckiser Service Bureau Limited
UK
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
ORD
100.00%
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 174
Notes to the Parent Company Financial Statements
continued
15 Subsidiary Undertakings continued
Name
Country of
Incorporation
Registered office
Reckitt Benckiser Services (Kenya) Limited
Kenya
Reckitt Benckiser Services SA de CV
Mexico
Plot Lr No 1870/I/569, 2nd Floor Apollo Centre, Ring Road
Parklands, Westlands, Pobox 764, 00606 Nairobi, Kenya, Africa
Circuito Dr Gustavo Baz,7 No 7, Fracc Industrial El Pedregal,
Atizapan de Zaragoza, Edomex, Mexico
Reckitt Benckiser South Africa (Pty) Limited
South Africa
8 Jet Park Road, Elandsfontein 1406, South Africa
Reckitt Benckiser Taiwan Limited
Reckitt Benckiser Tatabanya Kft
Reckitt Benckiser Temizlik Malzemesi San. ve
Tic. A.S.
Taiwan
Hungary
Turkey
106 94043 Charity No. 136, Sec Taiwan
134-146 ut Bocksai, 1113 Budapest, Hungary
Hakki Yeten Cad. Selenium Plaza K:7-8-9, Fulya, Besiktas,
Istanbul, Turkey
Reckitt Benckiser Tiret BV
Netherlands
Siriusdreef 14, 2132 WT Hoofddorp, The Netherlands
Share Class
ORD
ORD
ORD
ORD
ORD
ORD
ORD
Proportion
of shares held
100.00%
100.00%
100.00%
100.00%
100.00%
99.96%
100.00%
Reckitt Benckiser Treasury (2007) Limited
Reckitt Benckiser Treasury Services plc
Reckitt Benckiser USA (2010) LLC
UK
UK
USA
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
ORD/PREF
100.00%
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
ORD
c/o Corporation Service Company, 2711 Centerville Rd, Ste 400,
Wilmington, DE 19808, United States
Membership
Shares
Reckitt Benckiser USA (2010) LLC – UK Branch UK
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
–
Reckitt Benckiser USA (2012) LLC
Reckitt Benckiser USA (2013) LLC
USA
USA
c/o Corporation Service Company, 2711 Centerville Rd, Ste 400,
Wilmington, DE 19808, United States
Membership
Shares
c/o Corporation Service Company, 2711 Centerville Rd, Ste 400,
Wilmington, DE 19808, United States
Membership
Shares
Reckitt Benckiser USA (2013) LLC – UK Branch UK
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
Reckitt Benckiser USA Finance (No.1) Limited
Reckitt Benckiser USA Finance (No.2) Limited
Reckitt Benckiser USA Finance (No.3) Limited
UK
UK
UK
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
Reckitt Benckiser Vanish BV
Netherlands
Siriusdreef 14, 2132 WT Hoofddorp, The Netherlands
Reckitt Benckiser Venezuela SA
Venezuela
Reckitt Colman Chiswick (OTC) Limited
Reckitt Piramal Private Limited
UK
India
Avenida Mara con Calle San José, Centro Comercial Macaracuay
Plaza, Nivel C3, Locales 5 y 12. Urb. Colinas de la California.
Caracas, Venezuela
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
8th Floor, B-Wing, Marwah Centre, Krishanlal Marwah Marg,
Saki Naka, Andheri East, Mumbai – 400 072, India
Reigate Square Holdings Sarl
Luxembourg
1 Rue de la Poudrerie, L – 3364 Leudelange, Luxembourg
Relcamp Aie (in liquidation)
Spain
Rivalmuster
Scholl (Investments) Limited
Scholl (UK) Limited
Scholl Consumer Products Limited
UK
UK
UK
UK
Carrer de Fray Pau Carbó, 24, 08403, Granollers, Barcelona,
Spain
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
Scholl Latin America Limited (in liquidation)
Bahamas
c/o 103-105 Bath Road, Slough, SL1 3UH, United Kingdom
–
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
Scholl Limited
Servicios Nutricionales Mead Johnson, S. de
R.L. de C.V.
UK
Mexico
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
ORD/PREF
100.00%
Lago Zurich #245, Edificio Presa Falcon Floor 11, Mexico City,
11529, Mexico
Partnership/
Membership
interests
Seton Healthcare Group No.2 Trustee Limited UK
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
Seton Healthcare No.1 Trustee Limited
Sonet Group Limited
Sonet Healthcare Limited
Sonet Investments Limited
Sonet Prebbles Limited
Sonet Products Limited
UK
UK
UK
UK
UK
UK
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
ORD
ORD
ORD
ORD
ORD
ORD
ORD
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 175
15 Subsidiary Undertakings continued
Name
Country of
Incorporation
Registered office
Share Class
Proportion
of shares held
SSL Healthcare Singapore Pte Ltd
Singapore
1 Fifth Avenue, #04-06 Guthrie House, Singapore 268802
Sonet Scholl Healthcare International Limited
Sonet Scholl Healthcare Limited
Sonet Scholl Overseas Investments Limited
Sonet Scholl UK Limited
UK
UK
UK
UK
Sphinx Holding Company, Inc.
Philippines
SSL (C C Manufacturing) Limited
SSL (C C Services) Limited
SSL (MG) Polymers Limited
SSL (MG) Products Limited
SSL (RB) Products Limited
SSL (SD) International Limited
SSL Australia Pty Ltd
SSL Capital Ltd
SSL Healthcare (Shanghai) Ltd
UK
UK
UK
UK
UK
UK
Jersey
China
SSL Healthcare Ireland Limited
Ireland
SSL Healthcare Malaysia Sdn Bhd (in
Liquidation)
SSL Healthcare Manufacturing SA
SSL Healthcare Norge AS
Malaysia
Spain
Norway
SSL Healthcare Sverige AB
SSL Holdings (USA) Inc
SSL International plc
SSL Manufacturing (Thailand) Ltd
Sweden
USA
UK
Thailand
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
ORD
ORD
ORD
ORD
2309 Don Chino Roces Avenue, Makati City, PH 1321,
Philippines
COMMON/
PREF
100.00%
100.00%
100.00%
100.00%
38.00%
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
ORD
100.00%
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
ORD/PREF
100.00%
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
Australia
225 Beach Road, Mordialloc VIC 3195, Australia
44 Esplanade, St Helier, Jersey, JE4 9WG
ORD/PREF
100.00%
Room 1605, No.660 Shangcheng Road, Pudong District,
Shanghai City, China
3rd Floor Kilmore House, Park Lane, Spencer Dock, Dublin 1,
Ireland
Level 7, Menara Milenium, Jalan Damanlela, Pusat Bandar
Damansara, Damansara Heights, 50490 Kuala Lumpur, Malaysia
Av. Can Fatjó, 151, 08191 Rubí, Barcelona, Spain
Vollsveien 9, 1366 Lysaker, Norway
Waterfront, Box 190, SE-101 23 Stockholm, Sweden
c/o Corporation Service Company, 2711 Centerville Rd, Ste 400,
Wilmington, DE 19808, United States
COMMON
100.00%
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
Wellgrow Industrial Estate, 100 Moo 5, Bagna Trad Rd Km 36
Bangaamak, Bangpakong, Chachoengsao, Bangkok 24180,
Thailand
ORD
ORD
ORD
ORD
ORD
100.00%
100.00%
100.00%
100.00%
100.00%
ORD
ORD
ORD
ORD
ORD
ORD
ORD
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
ORD
ORD
ORD
ORD
100.00%
100.00%
100.00%
100.00%
100.00%
SSL New Zealand Limited
New Zealand
2 Fred Thomas Dr, Takapuna, Auckland 0622, New Zealand
SSL Products Limited
Suffolk Finance Company Limited
UK
UK
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
ORD/DEF
Suffolk Insurance Limited
Bermuda
Clarendon House, 2 Church Street, Hamilton, HM DX, Bermuda COMMON
100.00%
Tai He Tai Lai Culture Communication Co Ltd
China
1-1707, No.15 Majiapu West Road, Fengtai District, Beijing City,
China
The RB Company (Malaysia) Sdn Bhd (in
Liquidation)
Malaysia
Level 7, Menara Milenium, Jalan Damanlela, Pusat Bandar
Damansara, Damansara Heights, 50490 Kuala Lumpur, Malaysia
Tubifoam Limited
Ultra Chemical Limited
Ultra Laboratories Limited
W.Woodward,Limited
UK
UK
UK
UK
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
103-105 Bath Road, Slough, SL1 3UH, United Kingdom
Winchester Square Holdings Sarl
Luxembourg
1 Rue de la Poudrerie, L – 3364 Leudelange, Luxembourg
Xinzhou ZhongHeng Pharmaceutical Co Ltd
China
Zhong Wei Guo Yuan (Beijing) Biotech Co Ltd
China
Economic Development Zone, Xinzhou City, Shanxi Province,
China
B-1201, Area 1, Fang Zhuang Fang Cheng Yuan, Fengtai
District, Beijing, China
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
ORD
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements 176
Shareholder Information
Dividend Reinvestment Plan
Shareholders participating in the DRIP receive additional shares
purchased in the market instead of receiving a cash dividend.
Statements and (if appropriate) share certificates are posted to each
DRIP participant after the shares have been purchased confirming how
many additional shares have been added to their holding. You can elect
to join the DRIP by registering at the Computershare Investor Centre at
www.investorcentre.co.uk. Alternatively, you can request a DRIP
mandate form and terms and conditions by contacting Computershare.
Global Payments Service
This service, provided by the Registrar, enables Shareholders to have
dividend payments paid directly into their bank account in their
chosen local currency. To view terms and register, please visit
www.computershare.com/uk/investor/GPS.
Electronic communications
We encourage all Shareholders to receive an email notification when
Shareholder documents become available online to reduce our impact
on the environment. An election to receive Shareholder communications
in this way will:
• result in annual cost savings to the Company since less paper
documentation will need to be produced and posted;
• allow for more effective communications with Shareholders; and
• support RB’s corporate responsibility profile.
Shareholders can register their email address at
http://wwwinvestorcentre.co.uk/etreeuk/ReckittBenckiser. For each new
Shareholder that does so, we will donate to the Tree for All campaign run
by the Woodland Trust.
Shareholders who have positively elected for electronic communications
will receive an email whenever Shareholder documents are available to
view on the Company’s website. Shareholders who have elected by
deemed consent in accordance with the Companies Act 2006 will receive
a notice of availability of a document on the Company’s website and are
entitled to request a hard copy of any such document, at any time, free
of charge from the Company’s Registrar. Shareholders can revoke their
consent at any time by contacting the Registrar.
The Company’s 2017 Annual Report and Notice of the 2018 AGM are
available to view at www.rb.com. The Investor Relations section of the
website contains up-to-date information for Shareholders, including:
• Detailed share price information;
• Financial results;
• Regulatory announcements;
• Dividend payment dates and amounts;
• Access to Shareholder documents including the Annual Report; and
• Share capital information.
Annual General Meeting
The AGM will be held on Thursday 3 May 2018 at 11.15am at the London
Heathrow Marriott Hotel, Bath Road, Hayes, Middlesex UB3 5AN.
The Notice convening the meeting is contained in a separate document
for Shareholders. The Notice contains an explanation of the business to
be considered and is available on the Company’s website.
2018 financial calendar and key dates
Announcement of Quarter 1 interim
management statement
Annual General Meeting
Record date for 2017 final dividend
Payment of 2017 final ordinary dividend
Announcement of 2018 interim results
Record date for 2018 interim dividend
Payment of 2018 interim ordinary dividend
Announcement of Quarter 3 interim
management statement
1 Provisional dates
20 April 2018
3 May 2018
13 April 2018
24 May 2018
27 July 2018
17 August 20181
27 September 20181
23 October 2018
Dividend
The Directors have recommended a final dividend of 97.7 pence per
share, for the year ended 31 December 2017. Subject to approval at the
2018 AGM, payment will be made on 24 May 2018 to all Shareholders on
the register as at 13 April 2018. The latest date for receipt of new
applications to participate in the DRIP in respect of the 2017 final
dividend is 2 May 2018.
Mandatory Direct Credit
From September 2018, we will change the way we pay dividends to
Shareholders and will no longer pay dividends by cheque. Shareholders
will receive dividend funds quicker and we will reduce our environmental
impact. The risk of cheque fraud will be eliminated and there will be no
fees to replace lost cheques. For our Shareholders who currently receive
dividends by cheque, you will need to provide Computershare with your
bank details as soon as possible, but in any case by no later than
31 August 2018, in order to have your dividends paid directly to your
bank account.
You can register your preference, either online at www.investorcentre.co.uk,
or by telephone on +44 (0)370 703 0118. If you are overseas, you may
choose to have your dividends paid to your account in your local currency by
using Computershare’s Global Payment Service (GPS). If you wish to reinvest
your dividend to buy more shares, please join our Dividend Reinvestment
Plan (DRIP).
If you don’t choose a new payment method by 31 August 2018, we will
hold your dividends for you until you provide valid bank details. Your
dividends will not accrue interest while they are held. If we receive your
new instruction after 31 August 2018, it will be applied for all future
dividends, but charges may be applied to reissue any dividend payments,
where their payment date falls on or after 31 August 2018, but before
your instructions are received. Shareholders on the UK main register who
already have their dividends paid: (1) by direct credit into their UK bank or
building society account; or (2) through the Euroclear service using the
CREST messaging system; or (3) through Computershare’s Global
Payments Service (GPS) are not affected by this change. Similarly,
Shareholders who participate in our Dividend Reinvestment Plan (DRIP)
are not required to take any action unless they choose to withdraw from
the DRIP.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017
177
Share dealing facility
The Company’s shares can be traded through most banks, building
societies, stockbrokers or ‘share shops’. In addition, UK-based
Shareholders are able to buy or sell Reckitt Benckiser Group plc shares
using a share dealing facility operated by the Registrar:
• Telephone share dealing: commission is 1%, plus £35; stamp duty at
•
0.5% is payable on purchases. The service is available from 8.00am to
4.30pm Monday to Friday excluding bank holidays. Telephone:
+44(0)370 703 0084.
Internet share dealing: commission is 1%, subject to a minimum
charge of £30; stamp duty at 0.5% is payable on purchases. The
service is available to place orders out of market hours. Simply log
onto www.investorcentre.co.uk.
Terms and conditions of both services can be obtained by telephoning
+44(0) 370 702 0129.
Analysis of Shareholders as at 31 December 2017
Distribution of shares by type of Shareholder
Nominees and institutional investors
Individuals
Total
Size of shareholding
1 – 500
501 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 50,000
50,001 – 100,000
100,001 – 1,000,000
1,000,001 and above
Total
No. of
holdings
Shares
5,856
12,239
724,792,705
11,742,474
18,095
736,535,179
No. of
holdings
10,810
2,827
2,757
379
648
203
369
102
Shares
2,056,074
2,067,755
5,720,676
2,636,865
15,592,971
14,633,188
118,580,032
575,247,618
18,095
736,535,179
American Depositary Receipts
Reckitt Benckiser Group plc American Depositary Receipts (ADRs) are
traded on the over-the-counter market (OTC) under the symbol RBGLY.
Five ADRs represent one ordinary share. J.P. Morgan Chase Bank N.A. is
the Depositary.
J.P. Morgan Chase Bank N.A.
PO Box 64504, St. Paul, MN 55164-0854, US
Email: jpmorgan.adr@wellsfargo.com
Telephone number for general queries: Tel. (800) 990 1135
Telephone number from outside the US: Tel. +1 651 453 2128
Solicitors
Linklaters LLP/Slaughter and May
Registrar and transfer office
The Company’s Registrar, Computershare, is responsible for maintaining
and updating the Shareholder register and making dividend payments.
If you have any queries relating to 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
Reckitt Benckiser Shareholder helpline:
Tel. +44 (0)370 703 0118
Website: www.computershare.com/uk
Charity donation
ShareGift is a UK registered charity (No.1052686) which specialises in
realising the value locked up in small shareholdings for charitable
purposes. The resulting proceeds are donated to a wide range of charities,
reflecting suggestions received from donors. If you have only a small
number of Reckitt Benckiser Group plc shares, you may wish to consider
donating them to ShareGift. Please visit www.ShareGift.org/donate-shares
or telephone +44 (0)20 7930 3737 for more information about how to
proceed. Further details about ShareGift can be found at
www.ShareGift.org.
Unsolicited mail
We are legally obliged to make our register of members available to the
public, subject to a proper purpose test. As a result, some Shareholders
might receive unsolicited mail. Shareholders wishing to limit the amount
of such mail should write to the Mailing Preference Service, MPS
FREEPOST LON20771, London W1E 0ZT or register online at register
online at www.mpsonline.org.uk.
‘Boiler Room’ scams
Shareholders who are offered unsolicited investment advice, discounted
shares, a premium price for shares, or free company or research reports,
should take these steps before handing over any money:
• Obtain the name of the person and organisation and make a record
of any information given.
• Check the FCA website which lists steps you can take to protect
yourself and how to avoid scams from unauthorised firms
www.fca.org.uk/consumers/protect-yourself/unauthorised-firms.
• Call the FCA Consumer Helpline on 0800 111 6768 if there are
no contact details on the Register or if they are out of date.
Using an unauthorised firm to buy or sell shares or other investments will
prohibit access to the Financial Ombudsman Service or Financial Services
Compensation Scheme (FSCS) if things go wrong.
Company Secretary
Rupert Bondy
Registered office
103–105 Bath Road, Slough,
Berkshire SL1 3UH
Telephone: +44 (0)1753 217800
Facsimile: +44 (0)1753 217899
Registered and domiciled in England and Wales No. 6270876
Legal Entity Identifier: 5493003JFSMOJG48V108
Company status
Public Limited Company
Auditor
PricewaterhouseCoopers LLP
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017Strategic ReportGovernanceFinancial Statements
178
Shareholder Information
continued
Cautionary note concerning forward-looking statements
This Annual Report and Financial Statements contains statements with
respect to the financial condition, results of operations and business of
RB (the ‘Group’) and certain of the plans and objectives of the Group
that are forward-looking statements. Words such as ‘intends’, ‘targets’,
or the negative of these terms and other similar expressions of future
performance or results, and their negatives, are intended to identify such
forward-looking statements. In particular, all statements that express
forecasts, expectations and projections with respect to future matters,
including targets for Net Revenue, Operating Margin and cost efficiency,
are forward-looking statements. Such statements are not historical facts,
nor are they guarantees of future performance.
By their nature, forward-looking statements involve risk and uncertainty
because they relate to events and depend on circumstances that will
occur in the future. There are a number of factors that could cause actual
results and developments to differ materially from those expressed or
implied by these forward-looking statements, including many factors
outside the Group’s control. Among other risks and uncertainties, the
material or principal factors which could cause actual results to differ
materially are: the general economic, business, political and social
conditions in the key markets in which the Group operates; the ability
of the Group to manage regulatory, tax and legal matters, including
changes thereto; the reliability of the Group’s technological infrastructure
or that of third parties on which the Group relies; interruptions in the
Group’s supply chain and disruptions to its production facilities; 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,
RB 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.
Any information contained in the 2017 Annual Report and Financial
Statements on the price at which shares or other securities in Reckitt
Benckiser Group plc have been bought or sold in the past, or on the yield
on such shares or other securities, should not be relied upon as a guide to
future performance.
Reckitt Benckiser Group plc (RB)Annual Report and Financial Statements 2017 R
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Reckitt Benckiser Group plc Registered office
103 – 105 Bath Road, Slough, Berkshire, SL1 3UH
Registered in England & Wales,
No 6270876
rb.com