Reckitt Benckiser Group plc Annual Report 2019

FY2019 Annual Report · Reckitt Benckiser Group plc

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Rejuvenating RB

Reckitt Benckiser Group plc
Reckitt Benckiser Group plc
Annual Report and Financial Statements 2018
Annual Report and Financial Statements 2019

I N T R O D U C T I O N

Welcome

Our purpose
We exist to protect, heal and nurture in the relentless pursuit of a cleaner
and healthier world.

Our fight
We have a fight on our hands. A fight to make access to the highest quality
hygiene, wellness and nourishment a right and not a privilege.

Health

48Page

Chief Executive’s Statement

CONTENTS

Strategic Report

Financial highlights

Health and Hygiene Home – at a glance

Chairman’s statement

Chief Executive’s statement

Our business model

How purpose drives our performance

Mapping what matters to our stakeholders

KPIs

Consumers

Customers

People

Partners

Communities

Environment

s172 statement

Health operating review

Hygiene Home operating review

Non-financial information statement

Financial review

Risk management

Viability statement

Governance

Board of Directors

Executive Committee

Corporate Governance – Chairman’s statement

Corporate Governance statement

Nomination Committee Report

97
103 Audit Committee Report
CRSEC Committee Report

111

117

138

141

Directors’ Remuneration Report

Report of the Directors

Statement of Directors’ Responsibilities

Financial Statements

143

Independent Auditors Report

Financial Statements

152
223 Shareholder Information

Hygiene Home

06Page

52Page

F I N A N C I A L H I G H L I G H T S

Net Revenue

Health

Hygiene Home

£12.8bn

+0.8% LFL growth4
Reported growth +2%

61%

of RB Total Net Revenue

39%

of RB Total Net Revenue

Adjusted Operating Margin4

Operating Margin

26.2%

-50bps

(15.2%)

n/m3

Adjusted Earnings Per Share (diluted)4

Reported Loss Per Share (diluted)

Total dividend for the year

349.0p

+3%

(519.7p)

-271%

174.6p

+2%

S O C I E T Y

Net Revenue from more sustainable
products1, 2

Number of people informed through
health and hygiene messaging and
campaigns since 2013

FTSE4Good Index membership

24.6%

956m

consecutive years, including meeting
20 additional Breast-Milk-Substitute (BMS)
criteria since 2018

E N V I R O N M E N T

Greenhouse gas emissions per unit
of production1

Water use per unit of production1

42%

reduction since 2012

37%

reduction since 2012

1 Excluding our Infant and Child Nutrition (IFCN) business

– see RB insights (www.rb.com/responsibility/
policies-and-reports) for details.

2 Calculated for 12 months ending 30 September 2019.
3 Not meaningful.
4 Non GAAP measures are defined on page 62.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019Health

AT A G L A N C E

Health Net Revenue

2019

£7,815m

2018

£7,762m

Our Health portfolio is unique and
compelling, with products that
provide pain relief, protection,
hygiene, wellness and nutrition,
spanning the whole of life’s journey.

LFL Growth1

Actual Growth

(1.0%)

+0.7%

Adjusted Operating Profit1

Adjusted Operating Margin1

£2,088m

+26.7%

50%

38%

25%

37%

G E O G R A P H I C P R O F I L E

Developed markets

Developing markets

C AT E G O RY P R O F I L E

Infant nutrition

Over the counter (OTC)

1. Non GAAP measures are defined on page 62.

Wellness, health hygiene and VMS

K E Y H E A LT H & N U T R I T I O N B R A N D S

From 2020, Nutrition will
operate as a separate global
business unit, focused on
bringing innovative solutions
to nourish the body at all
stages of life

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019Hygiene
Home

Hygiene Home Net Revenue

2019

£5,031m

2018

£4,835m

Our Hygiene Home portfolio brings
innovative solutions to households
across the world. They eliminate
dirt, germs, pests and odours that
impact health and happiness. Good
hygiene is the foundation of health.

LFL Growth1

Actual Growth

+3.6%

+4.1%

Adjusted Operating Profit1

Adjusted Operating Margin1

£1,279m

+25.4%

G E O G R A P H I C P R O F I L E

Developed markets

Developing markets

75%

25%

1. Non GAAP measures are defined on page 62.

K E Y H YG I E N E B R A N D S

From 2020, Hygiene Home
will be known simply as
Hygiene – still providing the
same range of trusted
products that consumers use
to enhance their daily lives
across the globe

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019C H A I R M A N ’ S S TAT E M E N T

BUILDING
FOUNDATIONS

C H R I S S I N C L A I R

RB has negotiated a complex year with resilience and
tenacity, while making decisive choices about our future.
In a year that brought self-reflection, a series of operational
challenges and new leadership, the people at RB have
demonstrated the enormous value of this Company’s
unique, can-do culture.

Our culture is one of RB’s most precious
assets. Another is the power of our
brands. RB’s market-leading brands are
in structurally attractive markets across
the globe. Frequently they hold the
number one or number two position in
many geographies and are loved by their
consumers. But we also know that, especially
in Health, our performance recently has
not matched up to our expectations.
As we indicated earlier in the
year, reinvigorating performance is our
immediate and top priority. Over the
longer term, restoring and maintaining the
outperformance and growth for which RB has
been known, calls for an evolution in strategy.
We need to revise our approach, based on
a clear understanding of our strengths and
weaknesses and the willingness to address
those areas where we have fallen short.
I am pleased to report that our new

CEO, Laxman Narasimhan, has wasted
no time in getting to grips with this task.
The Board is strongly supportive of his
strategic vision, set out in his statement in
the following pages, which seeks to create
and sustain long-term shareholder returns
while building a responsible company
guided by a strong sense of purpose.

Business performance
RB has faced a series of challenges over
the past three years, which have impacted
performance and hampered growth. While
macroeconomic issues have played a part in
this, we must also acknowledge that some of
our recent problems have been self-inflicted.
Total full-year (FY) net revenue was
£12,846 million, with growth of +0.8% on a
like-for-like (LFL) basis. On an adjusted basis,
operating profit was marginally lower and
equivalent to an adjusted operating margin of
26.2% (-50 bps versus 2018). This reflected
solid performance in Hygiene Home offset by
weakness in Health, in particular, declining
volumes. The relative weakness of Sterling
during the majority of the year resulted in
+1.2% increase in net revenue. Total growth
at actual rates was therefore +2.0%.

The integration of the Mead Johnson
business has proved more challenging than
anticipated. In addition, the business has
been negatively impacted by macro-economic
forces, particularly in China, where birth rates
have fallen progressively since acquisition.
This has led to the recognition of a £5,037
million impairment loss. The Company has
also taken a one-off charge of £898 million in
connection with the settlement with the US
Department of Justice on Indivior matters.

0 4

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019The Board’s continuing priority is to
use RB’s strong operating cash flow
generation to reinvest in the long-term
health of the business and to provide
strong returns to Shareholders.

We have maintained our existing
policy on dividend payments and are again
distributing around 50 percent of total
adjusted net income to Shareholders. The
Directors have proposed a final dividend of
101.6 pence per share, which when added
to the interim dividend of 73 pence, gives a
full-year dividend of 174.6 pence per share, an
increase of 2 percent. Subject to Shareholder
approval at the AGM in May 2020, this will
be paid on 28 May 2020 to Shareholders who
were on the register on 17 April 2020, all in
the commitment on sustaining the dividend.

Coronavirus (COVID-19) Pandemic
The COVID-19 health crisis is unprecedented
in living memory. Our priority is the safety of
our employees and the continued supply of
products that are important to combating the
spread of infection. I am proud of the way RB
is rising to the challenge.

AGM date
The AGM is currently planned for 12 May
2020. As the COVID-19 outbreak is a rapidly
changing and fluid situation, we will closely
monitor the situation and will advise
Shareholders on arrangements for the AGM,
based on UK Government advice.

Board priorities
When I took on the role of Chairman in
2018, among the priorities I identified
for the Board were restoration of
organic growth, integrating the Mead
Johnson business and delivering on the
associated synergies, strengthening
talent and culture, and exercising good
governance and risk management.

There has been some limited progress

on growth, with improved performance
from Hygiene Home as it benefits from a
more focused business model. It operates
in structurally attractive markets and net
revenue growth is built on both price/mix and
volume improvements. We need to build on
these capabilities to maintain and strengthen
this position across the whole Group in an
increasingly competitive environment.

The Board was also heavily involved

in reviewing IFCN performance and
projections for the future, leading to the
partial impairment of its goodwill.

CEO succession
Building up our talent bench was a key
priority for the Board during 2019. This was
led by the search for a successor to Rakesh
Kapoor following the announcement of his
decision to retire as Chief Executive Officer.
On behalf of the Board, I would like to take
this opportunity to thank Rakesh for his many
contributions over more than three decades.
His vision and drive have helped to position
RB as a global leader in consumer healthcare.
Laxman Narasimhan’s appointment

followed an exhaustive and rigorous
search process. In a field of highly talented
individuals, the Board was unanimous that
he was the outstanding candidate. He
joined RB in July as CEO-designate before
stepping into the role in September 2019.
Laxman is an exceptional leader
with a proven track record of developing
purpose-led brands and driving digital
innovation in the consumer goods industry.
He has led complex operational businesses
and inspired teams to achieve market-leading
performance in both developed and emerging
markets. I am confident that he will continue
to evolve RB’s exceptional culture and this will
be key to our future success as we roll out
our new strategy during 2020 and beyond.

Senior appointments
We have also been strengthening the pool of
talent for this next phase in the Company’s
development with a series of senior
executive and Board-level appointments.
I am delighted to welcome back RB
alumnus Jeff Carr, who rejoins the Company
as Chief Financial Officer in April 2020. He
succeeds Adrian Hennah who has kindly
agreed to remain with the Company before
retiring in October to ensure a seamless
transition. I would like to thank Adrian for his
many contributions during his time at RB.
After a decade with RB, Warren

Tucker will also be retiring. He will not
seek re-election to the Board at the
2020 AGM. My thanks go to Warren for
his valued service and sage advice.

In July 2019, Sara Mathew joined
the Board as a Non-Executive Director.
Her considerable experience in digital
technologies, healthcare and consumer
goods has enriched our deliberations. The
Board also appointed Mary Harris as the
designated Non-Executive Director, for
engagement with the Company’s workforce.
This reinforces our already strong connections
with RB employees, which will be vital as
we transform our Company to build up
profitability and growth in the coming years.

Governance
Laxman’s strategic vision of RB as a
more rounded, purpose-led business,
delivering sustainable long-term returns
to Shareholders while engaging with the
needs of wider society places responsibility
at the heart of our business strategy.
Long-term success requires good
stewardship of our business and fulfilment
of our obligations to society. The Board is
committed to strengthening governance and
extending our risk management capabilities.
I’m pleased to report excellent progress
in this area. The Corporate Responsibility,
Sustainability, Ethics and Compliance (CRSEC)
Committee is gaining real traction across the
Group as it seeks to move from a risk and
safety-led approach to a more holistic stance
that aligns environment and sustainability
issues with performance and purpose.
RB’s retention of its FTSE4Good listing and
readmission to the Dow Jones Sustainability
Index provide external validation of the work
we have been doing and the improvements
we have made to put responsibility at the
heart of the way we run our business.

Conclusion
I am extremely grateful to my fellow Board
members, to Laxman and his executive team,
and to all of RB’s people for their continued
loyalty and commitment during what has
been a complex and challenging year.
We are now entering a period
of transition. We have identified the
priorities to help chart a course to more
positive performance in the future.

We are sharpening our purpose,
strengthening our culture and embedding
responsibility to create a more rounded,
holistic business that can innovate and act
with agility in a fast-paced, interconnected
world. We are investing in our brands and
enhancing our frontline capabilities.

I am confident that these investments

will underpin our future growth. As a
Board we continue to have a clear focus
on maximising long-term opportunities.
RB is an outstanding company with leading
brands, a strong sense of purpose and
a track record of strong performance.
We are building on firm foundations
to create the conditions for long-term
sustainable growth and outperformance.

Chris Sinclair
Chairman
26 March 2020

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019C H I E F E X E C U T I V E O F F I C E R ’ S S TAT E M E N T

REINVIGORATING
PERFORMANCE

L A X M A N N A R A S I M H A N

RB operates in strong, structural growth categories with an
outstanding collection of trusted market leading brands that
benefit from the tailwinds of global mega trends. Our
strategy combines this with focused playbooks in each one
of these category spaces, while investing in capabilities at
scale. This positions RB for faster, sustainable growth and
significant value creation in the new decade.

I feel privileged to be RB’s new Chief Executive.
This is a company with a remarkable
heritage. It can trace its roots back nearly
200 years in Germany and the UK and has
well over a century of history in the US.

But it was not its past successes that

most attracted me when I took on the
role. What I saw was a company that was
a good house, in a great neighbourhood;
with amazing brands, a reputation as an
innovator, strong commercial capabilities
focused on outperformance – and with
the potential to be a great house again.

I want to set out my plans for the

future, but before doing that, I need
to address past performance.

Unquestionably, there are areas where
RB has underperformed in recent years. On
my arrival, I conducted a detailed review
of the business. This identified aspects of
current performance that required urgent
intervention. We are already moving on
multiple fronts to make the required changes.

2019 performance
As regards our 2019 performance, I am
pleased to report our Hygiene Home business
achieved volume and price/mix growth
during the year. It gained momentum as
the year progressed, culminating in good
volume growth in the final quarter.

Our Health business also finished
the year on a more positive note, but
overall this had a much more difficult
2019. I am not satisfied with the Health
unit’s performance during the year,
particularly on volume growth.

Within Health, it was a particularly
challenging year for our infant nutrition
business. There were some successes –
we saw good performance in the US,
where we gained market share, and
encouraging innovations, such as Enfinitas
in China. However, our overall share in
China declined and volumes there were
muted. Lower birth rates, expanding local
competition and steeper regulatory hurdles
all contributed to that. It has also taken us
longer to recover from the manufacturing
disruption we experienced in 2018. In
addition, there were executional issues in
the Latin America and ASEAN businesses.

Although the Mead Johnson business
has made progress since the 2017 acquisition,
its performance hasn’t met our expectations.
We have therefore had to take a £5 billion
non-cash impairment, reflecting a revised
valuation for the business we acquired.

0 6

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019
Even so, I firmly believe the Mead Johnson
business has strong longer-term prospects
beyond this revaluation. RB’s e-commerce and
commercialisation capabilities, combined with
Mead Johnson’s reputation for science and
quality, provide solid foundations for growth
in new areas. And we are finding different
ways to capitalise on its core strengths in
China, the US and other parts of the world.

Performance was also disappointing

in the ‘rest of Health’ business. The
issues here are largely executional. We
have taken urgent and decisive action
to address the underlying causes.
Improving execution is our top priority.

Business review
RB’s brands are loved by their consumers,
well supported by innovation, and with
great market positioning and brand equity
investment. The strength of our brands,
the premium nature of our products and
the level of our investments underpin
a strong gross margin with good price
premiums. With appropriate innovation and
investments, I believe this is sustainable.

At the same time, my review identified

clear opportunities for improvement. For
example, I feel largely comfortable with
our investments in brand equity and the
level of our gross margin, with some
pressure points to correct, but there are
several areas where we’ve underinvested
and overstretched people and assets.

We have to recognise that many of
the issues we have faced in recent years
have been driven by poor execution rather
than structural changes in our industry.
At the top line, we’ve had real issues
delivering growth, particularly in Health.

Creating separate business units over
the last two years brought a real focus to
the Hygiene business. The leadership team
invested in competitiveness, strengthened
the innovation pipeline and put in place
a strong operating rhythm. The business
began growing again, and has been a
steady performer, with further potential to
increase market share and to outperform.
But Health has faltered. It became

large, unwieldy and unfocused. While
the Mead Johnson acquisition delivered
synergies, integrating the business proved
challenging and diverted management
attention. We missed important innovations,
particularly in our Durex business, and
experienced a lot of innovation leakage. In
addition, some pricing decisions backfired.

We’ve been tackling execution issues with
vigour and are already seeing stronger
performance as a result. But longer term fixes
are also required; these are a parallel focus.
RB is rightly described as a lean

company, but we need to be lean in the right
ways. There are multiple opportunities to
capture efficiencies and invest in capabilities
– our end-to-end supply chain is currently
set up for lowest manufacturing cost rather
than to deliver customer service at the
lowest cost with highest quality and lowest
working capital; there is a need for some
capacity debottlenecking; overhead costs
have increased significantly; we don’t yet
make best use of process automation.
After examining all options, I have

concluded that the previous approach of
transforming the business to generate
long-term performance was sub-optimal
for value creation. Instead, our strategic
approach should focus first on performance
to rejuvenate and then transform the
business. I believe this gives RB the potential
to deliver growth in the medium to long term.

Global trends shaping our future
RB is present in large categories with strong,
sustainable, structural growth. In each of
these – hygiene, health and nutrition – major
global trends provide us with tailwinds.

The global pressures of urbanisation and

global warming make the need for hygiene
ever higher. Hygiene is the foundation
of health, creating a strong, symbiotic
relationship for our business. It is entirely
visible in the difficult events around us today,
with public health systems struggling to
manage the challenges posed by COVID-19.
Pressures on governmental health
spending is reinforcing self-care. Avoiding
one visit to the health care system with
available self-care products and digital
information access saves money in developed
markets, but also in developing markets.

Demographics are also a tailwind. We

benefit from both the increase of youth
coming of age and ageing consumers.
Sexual health and wellbeing is a big societal
issue. At the same time, ageing creates
opportunities for our science platforms.
When combined with digital, which is
completely transforming what people buy
and how they buy it, we can expect large
growth in areas like personalised nutrition,
wellness and digital health. Finally, all these
positive global-trends require solutions
that are sustainable. These underlying
mega-trends will be very compelling for
some time to come and directly support our
presence in hygiene, health and nutrition.

Leveraging scale
As demand grows, the bar for how we
meet that demand is going up, with
consumers asking for convenience, superior
experience, quality and value, along with
information. Our customers want efficiency,
flexibility, unique offers and service. There
are clear capabilities that we either have
or need to strengthen, and we need
to leverage our scale to build them.

Having a portfolio of trusted brands in
three broad categories gives us the scope to
earn additional value from our brand equity
investments. We can leverage insights and
analytical capabilities to broaden our reach
and extend our brands into adjacent areas.

We have built distinctive digital and
e-commerce capabilities locally. We can
use our scale to extend these globally and
across all brands. Our global scale also
gives us presence in the most important
markets, which drives availability.
That helps us build better customer
relationships at the highest levels.

And our scale helps us access and
develop stronger networks to progress
science, incubate development partners
that promote innovation, deliver on
complex environmental goals and further
our brands’ social commitments.

We can use our scale to build
capabilities in trusted brands, digital and
e-commerce, proximity and partnerships.
But a winning strategy is not just
about scale, focus is also critical.

Focused business models
Historically, RB’s success has been
driven by each of its businesses having
a clean, focused flywheel around which
management operates: a detailed playbook
that determines how we run our business
to create and compound success.

In its simplest form, this is about having

the right brands available at consumers’
preferred points of choice, incorporating
premium innovations that underpin an
attractive gross margin which fuels high
brand equity investment. When this is
supported by flawless execution and a highly
efficient business, it creates the resources to
reinvest, thereby compounding growth, cash
returns and long-term shareholder value.
When this is in place, as is the case
for Hygiene Home, this playbook leads
to compounding returns. There are large
areas of commonality across our business.
We therefore need to organise around
focused playbooks, while leveraging scale
where that helps build capabilities.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019C H I E F E X E C U T I V E O F F I C E R ’ S S TAT E M E N T CO N T I N U E D

Our new strategy
Our strategy is founded on a clear sense
of purpose. We exist to protect, heal and
nurture in our relentless pursuit of a cleaner,
healthier world. We do all we can to ensure
that access to high-quality hygiene, health
and nutrition becomes a right not a privilege.
Ensuring product availability and offering
attractive price points, promoting consumer
education and behavioural change, and
partnerships with other stakeholders are
some of the ways we make this happen.

This purpose-led agenda represents a
shift in business strategy. It is underpinned by
the core set of values guiding our behaviour.
They are set out in our compass. This places
integrity at the heart, with the goal of always
doing the right thing. Our compass describes
the values needed to promote a culture that
puts consumers and people first, continually
seeks out new opportunities, strives for
excellence and builds shared success. It
celebrates what made RB successful in the
past and aligns us with what is needed
for sustainable growth in the future.

We will redouble our focus on

environmental sustainability by, for example,
reducing, recycling or reusing plastics,
reducing our water footprint and meeting
our science-based targets. At the same
time, we will connect our brands even
more closely with relevant social issues.

RB is active in three major categories:

hygiene, health and nutrition. These are
complementary demand spaces that share
positive market dynamics and where
consumers display clear brand preferences.
Our emphasis on innovation together
with close customer relationships and
market presence are key attributes that
support an attractive earnings model.

We will target 100 CMUs (category
market units) with our Powerbrands, up from
75, and will invest to develop the requisite
capabilities. We expect our Powerbrands
to broaden the areas where they currently
compete. We will use e-commerce to build
customer engagement to scale rocket brands
and our Powerbrands everywhere. We are
working to ensure each of these spaces has
clear flywheels that drive how we win and
how we deliver compounding returns.

Our organisation
Getting the right balance between scale,
focus and accountability is key. As such,
we are moving to three category-focused
business units with full P&L accountability.
These are Hygiene – effectively our old
Hygiene Home business – Health and

Nutrition. Within each of these we’ll
develop capability centres of excellence that
can be leveraged across the Company.

China is strategically important for
the business. We are therefore elevating
China to an integrated unit that will
work across the three category business
units and report directly to me. Digital,
e-commerce and analytics are at a major
turning point for the consumer and we can
further speed its rapid growth by building
leapfrog digital capabilities. The digital
platform we have in China is one that
other rocket brands can leverage. For this
reason, the China business unit will also
house our global e-commerce capability.

Our roadmap for growth
Each of our business units can grow more
effectively than they do today. Driven
by the strong underlying tailwinds of
global trends, growth opportunities can
be realised through increased product
penetration, market share gains, expansion
into new places (“white space expansion”)
or new spaces (“market adjacencies”).

Penetration is about capturing new

consumers entering the category. We
optimise market share by servicing our
existing consumers faster, better, and more
efficiently. White space growth takes brands
and products into new territories: through our
existing network, via e-commerce and using
our cross-border organisation. Adjacencies
use our brand strength to penetrate other
parts of the demand space a brand plays in.
Underpinning each of these are the
capabilities around digital and e-commerce,
the role and importance for each in China
and common foundational areas, such
as supply, quality, marketing capabilities,
sales capabilities, regulatory and business
development, that will make this happen.

Our brands have significant penetration

potential, for example, in developing and
urbanising India and China. Hygiene has
40 core CMUs today that drive a significant
portion of its growth – growing over 5
percent per annum in a 3 percent growth
category. By investing in breadth and
capability and adding 10 more CMUs to the
core list, we can add 100 bps to our top-line
growth. Our e-commerce capabilities,
coupled with expansion to nascent China
and the emerging markets can drive further
growth, including with custom innovation.
As with hygiene, we are investing
resources to expand our CMU footprint in
health. Health is made up of two distinct
parts; self-care and sexual well-being. We
have Powerbrands addressing pain relief,

upper respiratory and gastro-intestinal
conditions, and general wellness. We
continue to see a large opportunity for
OTC through penetration, multi-year
innovation and brand building. There is
also significant scope to optimise market
share. We have revisited our commercial
and supply strategies to ensure we do not
miss out on seasonal opportunities.

There is considerable growth potential

in sexual wellbeing as well. Focusing on
better execution and more innovation will
also improve our growth prospects. We are
putting more emphasis on this category
and ensuring it is adequately resourced.

In the nutrition space, we currently only
operate in infant nutrition. This category has
strong fundamentals with steady growth
and very attractive margins. At the same
time, it is also highly competitive, subject
to changing regulations, and requires
higher than average capital investment in
sophisticated manufacturing and effective
marketing. Our brand is perceived as a
science-driven leader in the US and in China.
We have strong endorsement from the
medical community. There are considerable
penetration opportunities for this business,
particularly in specialty nutrition.

In the long term, birth rates will decline,

and seniors will increase in number. We
see exciting longer term opportunities
for leveraging our nutrition capabilities
in adjacencies like adult nutrition,
personalised nutrition and science-based
supplements. Neuriva, for example is an
innovation for ageing seniors that came
out of the technologies inside Mead
Johnson. There will be others that help us
broaden the consumer cohorts we serve.

Developing our digital and e-commerce
platform
Our digital strategy is central to the future
success of the Company and e-commerce is
at the heart of it. Our e-commerce platform
has had significant success in China where it
benefits from the scale of the Mead Johnson
business. These capabilities are readily
scalable to new white spaces, including
rocket brands in wellness. In the future we’ll
be leveraging e-commerce everywhere,
benefiting all parts of RB with scalable tools
and best-practice capabilities embedded as
a competitive advantage in the business.
We are already incubating and
scaling a portfolio of digital-first brands.
In our Hygiene business our work with
Launchpad and Founders Factory is testing
new approaches to developing digital-first
brands. UpSpring, a small women’s health

0 8

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019on having a winning culture – we need the
right people in the right places who want to
do the right thing for the world and for our
business. Alongside the internal RB talent,
including Harold van den Broek and Aditya
Sehgal, I am delighted to welcome Kris Licht,
Ranjay Radhakrishnan and Jeff Carr to my
Executive team. Further appointments will
be announced in the coming months.

Rejuvenating RB
As I said in my opening remarks, we have a
good house, in a great neighbourhood with
the potential to be a great house again. As
we’ve outlined, we have a clear strategy,
anchored in purpose, to rejuvenate mid-single
digit growth in the medium-term. We have
a detailed £2 billion three-year investment
plan, funded by enhanced productivity. This
will create long-term shareholder value,
while engaging with society with purpose.
I believe we have an organisation and team
inspired by this mission to carry this through.

I would also like to take this opportunity
to thank our Shareholders and other
stakeholders for their loyalty and trust,
and our employees for their hard work
and loyalty in what has been a complex
and challenging year. As we look to the
future, that trust and commitment is RB’s
greatest asset and our most important
measure of success. I look forward to
reporting on our progress next year.

Laxman Narasimhan
Chief Executive Officer
26 March 2020

brand that started in Texas, is another
recent example. We launched the brand
in China on Alibaba to coincide with the
platform’s Singles’ Day mega-shopping
event on 11/11. Our investments in rocket
brands and digital partners such as
Pharmapack and YourMD are still small, but
their strong growth so far suggests that
our e-commerce business can be a potent
platform for our own and partner brands.

Investing £2 billion in capabilities
Alongside e-commerce, we will invest in key
capabilities to replace some of the muscle that
we’ve taken out of the business as well as add
new muscles relevant for this new world.

Our plan is very specific, with targeted

initiatives to build brands, accelerate
innovation and sharpen execution. Our
investment programme is focused and
sequenced first to improve performance
and then drive sustained mid-single digit
revenue growth over the longer term.

It requires significant reinvestment of

resources in the business. In our first phase,
we are investing £600-£700 million a year
on a sustainable basis to address underlying
capability gaps, rejuvenate the business
and drive sustainable volume and price-mix
growth. Over £2 billion will be invested over
the next three years; around two-thirds
funded by an enhanced productivity
programme and the remaining third by
taking investment as a charge to the P&L.
We are ramping up the productivity
programme which will generate £1.3 billion
for reinvestment. We are also making direct
investments in key capabilities now, which
will help fuel the change in the short term.
We need to execute on our plans

swiftly to allow them time to gain
traction in the marketplace. The bulk of
that starts now. Accordingly, 2020 will
be a year of maximum investment.

Outlook
2020 is a transitional year, as we rejuvenate
RB to accelerate growth to deliver long-term
shareholder value. For 2020 we should
generate a higher level of revenue growth
on a like-for-like basis than achieved in 2019
(2019: 0.8%) and make steady progress
toward our medium-term target. While
we have started the year strongly, there
are a number of challenges, including the
uncertainty already being seen around the
impact of COVID-19 (see below). From an
operating margin perspective, in addition
to the 100 bps of operating margin
headwinds, principally normalising variable
pay assumptions, we will invest a further

£200 million (c.150 bps) in the business
to rejuvenate our commercial capabilities
and address issues where needed with
consumer service and value. In addition, we
will invest in cost-to-achieve transformation
spending of roughly £125 million (c.100 bps)
in each of the next two years (total of £250
million). These one-time costs to achieve
will be included within adjusted operating
profit. As a result, we expect 2020 adjusted
operating margins to be around 350 bps
lower in 2020 than those achieved in 2019.

COVID-19
The spread of Coronavirus disease 2019
(COVID-19) represents one of the most
serious global health emergencies in the
last 100 years, with the pandemic having
now reached over 120 countries.

As a leader in both hygiene and health,
RB is uniquely positioned to provide tangible
assistance to consumers, governments and
healthcare authorities. For example, in China
we have already announced a donation of
RMB 50 million (£5.5 million) in cash and
antibacterial products. Demand for certain RB
products, in particular Dettol and Lysol, has
increased substantially in recent months, and
we are working hard to increase the level of
available supply. At present, our supply chains
and distribution channels are proving both
resilient and flexible, though there has been
some unavoidable disruption in many parts of
the world. At the same time, as the situation
develops, it is likely that we will experience
increased levels of disruption, particularly
in those countries and regions that are
hardest hit. Longer term, the economic
consequences associated with COVID-19 are
difficult to predict, however they may lead
to weakened demand for some RB products.
We have also assessed the impact of
COVID-19 on the going concern and viability
statement set out on page 77 and this is
further discussed in the financial review.

The spread of COVID-19 has also
raised serious safety concerns for our own
employees and contractors. Keeping the
RB family safe is one of my key priorities,
and where required we have put in place
alternative working arrangements. We
will continue to monitor the situation
around the world, responding decisively
to events as and when they develop.

A winning culture
Our ambitious, exciting programme for
change takes the best of today’s RB and
positions it to address the challenges of
tomorrow’s society. I am confident that it
is achievable, but our success will depend

0 9

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019B U S I N E S S M O D E L

Our business
model

O U R E N A B L E R S

O U R F O C U S O N S U S TA I N A B L E VA L U E C R E AT I O N

Our purpose
Today, our brands like Dettol, Lysol, Harpic, Finish, Durex, Mucinex, Enfamil and Move Free,
among others, fight at the frontlines to give our consumers a better life. Why we exist
– our purpose, our soul – is clear.

We exist to protect, heal
and nurure in our relentless
pursuit of a cleaner and
healthier world.

Each word matters. They speak to our portfolio and the categories in which we play.
Relentless pursuit captures RB’s entrepreneurial and can-do spirit, all in service of creating
a cleaner, healthier world.

Our fight
Our Company is inspired by the fight of
making access to the highest quality
hygiene, wellness and nourishment a right,
not a privilege.

Access has multiple platforms: quality
products that are available, with attractive
price points, along with awareness and
advocacy, are all part of how we make high
quality accessible.

Our brands will over-index on social with
intentionality. But while doing so, we will
redouble our focus through our brands on
reducing, recycling or reusing plastics,
reducing our water footprint and meet our
science-based carbon reduction categories.

We aim to respond to trends and
underserved needs within growing consumer
markets, helping to tackle important global
issues and support the United Nations
Sustainable Development Goals.

Our compass
Our compass sets out the new values
and behaviours for our business. At it’s
heart is the goal of always doing the right
thing with clear principles around putting
consumers and people first, seeking out
new opportunities, striving for excellence
and building a culture of shared success. Our
compass will guide us to sustainable growth
in the future.

d
e
r
a
h
s

s
s
e
c
c
u

c onsumers
u t
d p eople f rst

Do the
right thing.
Always.

Strive f o r
excelle n c e

o
r
u
n

o
u
t
n
ities
e
w

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 key brands
We have a portfolio of global leading brands and other
‘local hero’ brands that offer faster growth and higher
margins. Disruptive, ‘rocket’ brands redefine and extend
the spaces in which we operate.

Our knowledge and skills
We have deep consumer understanding, proven R&D and
innovation capabilities and an agile organisation, which
gets products to markets fast.

Our relationships
We develop strong, trusted relationships with our
customers, consumers, suppliers and communities.
We access and develop networks and partnerships
that extend our impact.

Our infrastructure
Our business is underpinned by strong manufacturing
sites, R&D laboratories, centres of excellence and
logistics centres.

Our financial strength
Shareholders’ equity, debt and retained profit give us
the financial resources to implement our strategy.

Global Trends
Urbanisation and global warming
Dense populations in warmer regions drive demand
for good hygiene as the foundation for health.

Demographics
Growing, ageing populations are increasing demand
for nutrition solutions.

Sexual health
Sexual wellbeing is a growing priority as more young
people reach adulthood.

Growth in self-care
As public health systems come under pressure, self-care
has a vital role.

Technology
Technologically savvy consumers want personalised
solutions. Data spurs innovation and creates space
for disruption.

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019

Our business model responds to the global trends shaping our markets
to create sustainable value for our consumers, Shareholders, customers,
employees, communities and the environment. We leverage our scale,
trusted brands and global presence through agile, accountable business
units for hygiene, health and nutrition. Globally integrated e-commerce
and a Group-wide, multi-disciplinary focus on Greater China augment
our capabilities and magnify our effectiveness.

T H E VA L U E W E C R E AT E

Consumers
Consumers receive innovative, safe and high-quality products,
which help them live cleaner, healthier lives.

Shareholders
Shareholders benefit from strong operational and financial
performance, resulting in attractive returns via dividends and
long-term share price appreciation.

Customers
Bricks and mortar and e-commerce customers gain
from selling our leading brands, growing our categories
and driving customer value in relevant channels.

People
RB provides exciting and challenging careers,
with excellent rewards for outstanding performance.

Communities
Our products and social programmes lead to
improved health and hygiene standards.

Environment
We recognise the impact we have on the environment we share
with others. We are working to reduce our impact by reducing
our greenhouse gas emissions, contributing to reducing global
warming and climate change.

A focused portfolio of trusted brands
We own, build and acquire high-quality, trusted brands within our
chosen categories of hygiene, health and nutrition. We address
environmental impacts and advance important social objectives
through our brands.

A consumer-centric organisation

Hygiene

Health

Nutrition

Greater China

eRB

Global Functions

A virtuous circle of growth

3 category-focused
global business units:

• Hygiene
• Health
• Nutrition

eRB will be linked
to Greater China
integrated business

Supported by Global
Functions and Centres
of Excellence

Superior insights
coming from better data
across consumers,
channels and platforms

Trusted purpose-driven
solutions, supported by
well-invested brands

The relentless
pursuit of
a cleaner,
healthier world

Funded by productivity
with sustainable, lean
cost structures

Execution excellence
to drive growth from
product penetration,
market share gains, new
places and new spaces

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019H O W O U R P U R P O S E D R I V E S O U R P E R F O R M A N C E

Powerful global
trends are shaping
our future

The world’s population is growing
rapidly, we are living longer and
consuming more. According to UN
projections, within a decade there
will be 8.5 billion people on earth
and almost 10 billion by 2050,
compared to 7.7 billion today.
Already, more than half are in the
global middle classes; every
second, five more people join their
ranks, most of them in Asia.

Accelerating urbanisation, climate change,
rising technology and global shifts in
economic power present enormous risks
and tremendous opportunities. They also
pile pressure on the planet’s resources.

As a commercial business, we seek to

deliver long-term shareholder value through
high performance and growth. We do that
best by operating sustainably, through a
broad-based strategy that meets the needs
and concerns of all our stakeholders.
We act responsibly, focusing on

value creation that advances social and
environmental as well as economic
objectives. We aim to be transparent
and inclusive in our approach.

In all our categories, our brands meet

economic objectives by serving social needs.
What makes us distinctive is that many
of our brands authentically serve a large
social cause. Dettol, Lysol, Harpic, Durex,
Mucinex, Enfamil and Move Free, among
many others, are fighting at the frontlines
to give our consumers a better life.

Our Company is inspired by the fight
to ensure that access to high-quality
hygiene, health and wellness is a
right, not a privilege. We don’t just
sell products we design solutions that
meet fundamental human needs.

Connecting with stakeholders
RB’s strategy is driven by a strong sense of
purpose. Our stakeholder relationships extend
our ability to deliver on our purpose.

Our purpose is encapsulated in a
simple statement. We exist to protect,
heal and nurture in the relentless
pursuit of a cleaner, healthier world.

Every word here matters. ‘Protect,
heal and nurture’ relate to our three major
categories. ‘Relentless pursuit’ captures RB’s
entrepreneurial and can-do spirit. And it is
all in service of ‘a cleaner, healthier world’.
And fuelling that relentless pursuit

are critical insights from consumers,
customers, colleagues and partners.

Driving sustainable growth
The major societal trends provide tailwinds
that support and strengthen our brands. Take
urbanisation and global warming: denser
populations living in warmer places need
more effective hygiene – and hygiene is a
foundation of health. The increasing pressures
on public health systems are fuelling demand
for self-care solutions. Growing populations
need more nutrition. And, with more people
on the planet, sexual well-being is a higher
priority. Underpinning the growth
opportunities in all our sectors is the
proliferation of technology, which is
transforming not just what people buy but
how they buy.

C A S E S T U D Y

RB REJOINS THE
DOW JONES
SUSTAINABILITY
INDEX (DJSI)

In 2019, RB was readmitted to the DJSI.
This acknowledges the work we have
been doing and the improvements we
have made over the last two years.
DJSI is a leading global standard for
measuring and advancing corporate
sustainability. The index assigns a total
sustainability score to all major listed
companies, based on a rigorous, rules-
based methodology, to identify the
top 10 percent of performers in each
industry. RB’s increased overall score of
82 percent, with notable improvement
in supply chain management, packaging
and human rights performance, merited
our inclusion this year. The DJSI World
Index is made up of the top 10 percent
of the world’s 2,500 largest companies
listed on the S&P Global Broad Market
Index based on environmental,
social and economic criteria.

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019C O N S U M E R S

P E O P L E

PA R T N E R S

Read more page 40

Connecting with our customers

Investing in communities

Safeguarding the future

Our key customers are retail experts.
Their insights reflect consumer priorities
and feed our innovation pipeline. We
work with them to design and develop
safe, effective products that consumers
want to buy, and that advance broad
social objectives. Our connections with
customers cement alliances that support
our products and align with our purpose.

As a purpose-led company, we want to do
well by doing good. Our investments in
communities focus on three areas – sexual
health and rights, maternal and child health,
water and sanitation. They aim to have
a lasting impact and change lives for the
better. We deliver those programmes in
partnership with organisations on the ground.

The world faces urgent environmental
challenges and we need to make rapid
progress on multiple fronts. We all have
a responsibility to confront these issues
and make a difference where we can.

We are determined to play our part.

Our focus is on major themes that connect
most directly with what we do, including
plastics and packaging, water scarcity,
climate change and deforestation. We
consult widely and collaborate with partners
to devise and deliver programmes that
reduce and remove our adverse impacts
and help safeguard the environment. As a
responsible business, improving sustainability
is integral to our purpose. It is in the long-
term interests of every stakeholder.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019M A P P I N G W H AT M AT T E R S T O O U R S TA K E H O L D E R S

Mapping what
matters to our
stakeholders

RB identifies and assesses actual
and potential impacts which
involve us, either through our own
activities or through our business
relationships. We address impacts
holistically, across our entire value
chain, from sourcing and
manufacturing through to the
marketing, sales and consumer
use of our products.

We consult with a range of stakeholders in
different ways. We convene multi-stakeholder
forums, hold top-level meetings with
customers and are active in trade
associations. Our 2018 Culture Pulse survey
solicited internal feedback from employees.
Stakeholders tell us what matters most to
them and we use this information to identify
areas of actual and potential risk and to adapt
and improve our approach.

The perceptions and priorities of internal

and external stakeholders determine what
matters most to our business. We conduct a
rigorous consultation process, which draws
on expertise within the Group and involves
extensive engagement with potentially
affected groups and other relevant
stakeholders. The latest study was completed
in 2019.

Our strategies, initiatives and
targets are informed by the feedback
received from the groups relevant to our
business operations, including consumers,
customers, suppliers, governments,
non-governmental organisations (NGOs),
industry peers, educational institutions,
communities and our employees.

Our materiality assessment
We completed a comprehensive assessment
of the most material issues across our
business in 2019. This built on work done
in 2016 and lays the groundwork for the
next phase in our sustainability journey,
beyond our current 2020 targets.

Our materiality assessment follows

a rigorous three-stage methodology. We
first identify salient issues, then engage
with internal and external stakeholders
on those issues. Finally, we analyse and
validate the results to derive a materiality
matrix that tracks the importance to
external stakeholders and the business
of our 20 most salient issues. All of
these are considered important by both
internal and external stakeholders.

We reached out to well over 200

external stakeholders worldwide. Consumers,
suppliers, experts, NGOs and investors
were among those that helped to frame
our thinking on ethical, governance,
environmental and social priorities. Internally,
insights gained from a diverse set of
colleagues across the organisation teased
out regional and functional variations in
their responses to our salient issues.

Analysing stakeholder responses
Internal and external stakeholders were
asked to rank the relative importance of a
series of different issues. Their responses
were affected both by specific concerns
(environmental NGOs for instance typically
assign higher weightings to environmental
issues) and their sense of RB’s engagement
with the issue (a significant issue may
be ranked lower if RB is thought to be
managing it effectively). Issues in the

top-right quadrant are considered the most
important, both internally and externally.
Analysis of the feedback revealed

some notable shifts in the materiality
landscape since our 2016 assessment.
Innovation, water, packaging materials
and talent retention and acquisition have
all become significantly more important to
both internal and external stakeholders.

Meanwhile, climate change, corporate

tax, employee health and safety and data
security and privacy have moved down the
priority list. This does not suggest these
are less consequential; it reflects instead
the significant efforts already underway
in these areas. We are committed to
maintaining this momentum. Indeed,
for some such as the environment and
climate change, we need to do more.

Product quality and safety and packaging

are the top priorities for both internal and
external stakeholders. In other areas, their
priorities diverge. External stakeholders
cite supply chain labour rights and climate
adaptation as big issues. Internally, business
ethics, cyber security and privacy, talent
attraction and employee development are
top-ten concerns. Examining the materiality
of clusters of issues and of subsets of
respondents yields further insights which
guide our strategic and operational priorities.
For instance, public health challenges
were rated as a higher priority issue by
respondents from developing markets.

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019Materiality matrix

Our 20 most salient issues

r
e
d
o
h
e
k
a
t
s
e
h
t
o
t

s
e
i
t
i
r
o
i
r
P

Tax and economic contribution

Demographic change

Packaging & waste

Traceability & responsible supply + biodiversity & land use impacts
Water consumption & quality

Product quality & safety

Fair wages & working practices + supply chain labour rights

Global health & development + public health challenges

Innovating for social & environmental impact

Business ethics & governance

Climate adaptation

Energy use

Ethical marketing & sales practices

Employee health and wellbeing

Diversity and gender equality

Talent attraction and employee development

Cybersecurity & privacy

Priorities to business

Economic & governance

Environmental

Human Rights

Social

Clustering material issues
The materiality matrix maps the relative importance for internal and
external stakeholders of our 20 most salient issues. There are
overlapping issues in three distinct areas; connected with land use,
labour rights and health. For each of these, we have clustered two sets
of responses to arrive at a single materiality rating. The clustered issues
are as follows:

Key

•

Traceability & responsible supply AND biodiversity & land
use impacts

•

Fair wages & working practices AND supply chain labour rights

• Global health & development AND public health challenges

Issues are clustered by taking the maximum ranking for each
component by each respondent. For example, where a respondent
scores biodiversity & land use impacts at 2/5 and gives traceability
& responsible supply 4/5, the clustered issue is assessed at 4/5.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019

M A P P I N G W H AT M AT T E R S T O O U R S TA K E H O L D E R S CO N T I N U E D

THE SUSTAINABLE
DEVELOPMENT GOALS

C A S E S T U D Y

BUSINESS
AVENGERS

September 2019 saw the launch of the
Business Avengers. Seventeen global
companies, including RB, representing
over USD500 billion in revenue and
900,000 employees, were unveiled as
champions of the 17 UN Sustainable
Development Goals (SDGs), one
for each SDG. RB was named the
official business champion for SDG 3
– Good health and well-being.

Collectively, the Business Avengers
group will promote a decade of delivery
from 2020 with the aim of encouraging
private sector companies to redouble
their efforts to achieve SDG targets by
the 2030 deadline. 2020 is a year of
action, to inspire and engage others to
meet the thirteen targets within SDG 3.
We will report on our initiatives and
progress in next year’s Annual Report
and on the www.rb.com website.

Sustainable Development Goals
In 2015, UN Member States adopted the 17
Sustainable Development Goals as part of the
2030 Agenda for Sustainable Development.
With limited progress since then, in 2019
the UN Secretary-General called for a
decade of action by all stakeholders, asking
civil society, academia, the media and the
private sector to deliver the 2030 Goals.
At RB, we want to do all we can to
help meet this challenge. We recognise
the importance and interdependence of
all the Global Goals. We have identified
four SDGs (see page 17) where we believe
our impact is most significant. We are
committing management time and resources
to make tangible progress in each.

The challenges and commitments

highlighted by the SDGs are interrelated.
It is the poorest communities – where
hunger, disease and poor sanitation are most
prevalent – that will suffer the worst effects
of climate change. Equally, the solutions to
poverty, inequality, climate change and other
global challenges are interlinked. Education is
often cited as a way to help people climb out
of poverty, but solutions need to take account
of the fact that women and girls have less
access. RB examines these interconnectivities

and favours projects and initiatives that
advance the SDG agenda as a whole, ahead
of those that simply target specific SDGs.
We are clear too that advancing the
sustainability agenda makes commercial
sense for us. Achieving the goals supports
a thriving society which benefits us all. At a
specific level, our commitment to reducing
the amount of energy we use or carbon
we generate in our facilities or through the
footprints of our products, their ingredients,
packaging, use and disposal, helps tackle
the impacts of climate change and support
sustainable consumption. It progresses
several SDGs, including SDG6, SDG7, SDG12
and SDG13, and at the same time, improves
operational efficiency. To take another
example: we are advancing SDG5, SDG8
and SDG10 by tackling gender and diversity
issues in the workplace, but in doing so we
are also motivating our people and promoting
talent; thereby, fuelling productivity. Across
the board, through our brands and our
business, we are improving our effectiveness
by pursuing responsible practices that
incorporate the SDG agenda. In doing so, we
are playing our part in delivering the SDGs.

At RB, we’re clear
about our purpose: the
relentless pursuit of a
cleaner, healthier
world. And it all starts
with conversations.
We’re listening and
engaging with
colleagues, customers,
partners and
stakeholders to plot
the right path.

Laxman Narasimhan
Chief Executive Officer

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019
Aligning with the United Nations
Sustainable Development Goals (SDGs)
RB’s approach is to support the delivery of
the Global Goals but in doing so to focus
primarily on those areas where we can have
the greatest impact. While our activities affect
a number of the SDGs, we have identified
four as the most relevant for our business:

SDG 2: Zero hunger
In infant nutrition we focus on the
first 1000 days of life. Our products
keep mothers healthy and nourish
their babies. In line with World Health
Organisation (“WHO”) guidelines,
we promote exclusive breastfeeding
in the first six months. Protecting
people against malnutrition and
stunting is a key theme for our social
impact investment programme.

SDG 3: Good health and
well-being
This goal is closely aligned with our
purpose and as the Business Avenger
for SDG3, we are championing
swifter progress in the private sector.
Many of our brands play a role in
promoting health and wellbeing.
They include Durex, Dettol, Gaviscon
and Mucinex, as well as Lysol and
our Mortein insecticide products.

SDG 5: Gender equality
Promoting gender equality is in our
employment policies and in our social
impact programmes Our employment
policies drive gender equality in
our teams. We have mentoring
schemes for female employees,
gender-balanced shortlists and
proportionality targets at senior
management level. We also now
report internationally on our gender
pay gap. We have set up social
impact projects to encourage girls
to stay in school in South Africa and
equip women in rural communities
with independent income.

SDG 6: Clean water and sanitation
Our Harpic, Dettol and Lysol
brands are closely associated with
programmes emphasising the
importance of good sanitation
and hygiene. In partnership with
Water.org our ‘morethanatoilet’
campaign is providing micro-
finance that allows people in India,
Bangladesh and Indonesia to get
access to clean water and fit flushing
toilets in their homes and villages.

C A S E S T U D Y

HUMAN RIGHTS
STAKEHOLDER FORUM

In December, we organised a major Human
Rights Stakeholder Forum in London
with our partner the Danish Institute
of Human Rights (DIHR). Our CEO and
key members of RB’s leadership team
gathered with external stakeholders to
discuss ways to strengthen and reinforce
RB’s approach to human rights across
the entire value chain. Additional insights
were provided by a leading human rights
policy campaigner along with human
rights specialists from law firms, NGOs,
global retailers and peer companies.

The workshop sought to develop our
senior leadership’s understanding of
existing and emerging global human rights
issues and to highlight any relevant policy
dilemmas for RB. It is part of a broader
engagement programme reaching out to
stakeholders on key human rights topics.
Further sessions are planned with relevant
experts and RB personnel to address DIHR
recommendations on specific topics.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019O U R S U S TA I N A B I L I T Y P E R F O R M A N C E

Delivering
performance
through our
KPIs

Delivering social purpose is deeply ingrained at RB.
We have been providing people with quality products
for health, hygiene and the home for over 200 years.

In 2012, our ‘better’ strategy made this explicit and put the business
and its brands on a purpose-led path and defined our targets for
2020. In 2016, we linked the strategic objectives to the UN’s
Sustainable Development Goals. Key sustainability themes coalesced
with long-term economic performance under the three maxims of
better business, better society, better environment. It was an
important staging post on our sustainability journey.

The better business, better society, better environment

programme set out sustainability commitments and identified focus
areas for measuring performance. Our better business commitments
focused on our organisation and culture, key brands and priority
markets and on improving earnings quality. We published better
society commitments for purpose-led brands, human rights, product
stewardship, social impact investment and product innovation. Our
better environment commitments included reducing greenhouse gas
emissions, water and waste, and responsible sourcing. We
underscored these objectives with key performance indicators which
measure progress against our 2020 targets.

The KPIs capture metrics that reflected our aims and ambitions at

the time. As our approach has matured, we have gained a broader
perspective on our sustainability challenges and opportunities. During
2020, we will be renewing and extending our non-financial KPIs with
metrics and targets that will drive our business and brands by putting
sustainability at the heart of our purpose.

1 Represented in our Senior Management Team, Global Leadership Team, and Executive

Committee including our CEO and CFO.

2 Restatement of 2016 LWDAR from previously reported figure of 0.071 to 0.084 after

recalculation during 2019 reporting for inclusion of commercial offices.

3 Excluding our Infant and Child Nutrition (IFCN) business – See RB Insights (www.rb.com/
responsibility/insights) and RB Reporting Criteria Basis for Preparation (www.rb.com/
responsibility/policies-and-reports) for details.

4 Calculated for 12 months ending 30th September 2019.
5 2019 year end zero waste to landfill performance includes IFCN sites.
6 Manufacturing and warehousing only.

O R G A N I S AT I O N

Gender diversity

KPI: Percentage of female senior managers in
our global workforce1.

20%

24%

25%

26%

2016

2017

2018

2019

Target to 2022: 40%

S O C I E T Y

Purpose-led brands

KPI: Total number of people informed
through health and hygiene messaging and
campaigns since 2013.

2016

2017

2018

2019

365m

568m

765m

956m

Target to 2025: Inform 1 billion people through health and
hygiene educational programmes and behaviour change
communications

E N V I R O N M E N T

GHG emissions per unit of production3,6

KPI: The percentage reduction in Greenhouse
gas emissions per unit of production, against
our 2012 baseline.

2016

2017

2018

2019

22%

31%

35%

42%

Target to 2020: 40% reduction

Carbon footprint per dose of product3

KPI: The percentage reduction in our total
carbon footprint per dose of product sold
against our 2012 baseline.

2016

2017

2018

2019

Target to 2020: 33% reduction

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019Lost Work Day Accident Rate (LWDAR)2

KPI: Number of incidents resulting in at least one
lost day of work per 100,000 hours worked.

2016

2017

2018

2019

Target: Continued decrease of LWDAR rate

0.084

0.121

0.084

0.076

Social impact investment

Product innovation3,4

KPI: Total value of cash contributed,
employee time in working hours and in-kind
product donations valued at cost to the
business

KPI: Total Net Revenue from more sustainable
products.

2016

2017

2018

2019

£5.2m

2016

£10.5m

2017

£14.4m

2018

£12.2m

2019

13.2%

18.2%

18.5%

24.6%

Target to 2025: £20m per year

Target to 2020: 33% of Net Revenue.

Water use per unit of production3,6

Sending zero waste to landfill5

KPI: The percentage reduction in total water
consumption per unit of production, against
our 2012 baseline.

KPI: The percentage of our factories
achieving zero waste to landfill, including
both hazardous and non-hazardous waste.

2016

2017

2018

2019

32%

2016

37%

2017

38%

2018

37%

2019

97%

100%

93%

96%

Target to 2020: 35% reduction

Target to 2020: 100%

Water impact per dose of product3

KPI: The percentage reduction in water used
during the product’s life cycle, adjusted to
reflect water scarcity, per dose of product
sold against our 2012 baseline.

Manufacturing waste per unit of
production3

KPI: The percentage reduction in
manufacturing waste per unit of production,
against our 2012 baseline.

2016

2017

2018

2019

2016

2017

-4%

2018

2019

20%

21%

26%

27%

Target to 2020: 33% reduction

Target to 2020: 30% reduction

Integrating sustainability
During the last eight years, interest in
sustainability has been increasing at an
accelerating rate. This trend looks set
to continue. Our own approach has
also matured.

Initially, our focus was on getting the

fundamentals right and making sure we
were meeting our compliance and reporting
obligations. With our 2020 targets we
looked forward, thinking about how we
needed to improve environmental and social
sustainability against the backdrop of climate
change and the wider Millennium and
subsequent Sustainable Development Goals.
Over time, this evolved into a more
holistic approach which took account of
stakeholders’ interests and allowed for
deeper engagement. For example, within our
supply networks, our initial concentration
on tier-one suppliers extended, increasingly
considering raw material suppliers and source
origins. This increased engagement applies
throughout our value chain, not just to
our suppliers but also with our customers,
distributors and consumers. Our greater
engagement reflects the growing recognition
that businesses operate in complex networks
and ecosystems and, increasingly, that their
impacts and interests intersect and overlap.
From climate change, to human
rights in our supply chains, to plastics
in the environment, we strive to play
our part and aim to lead where we can
be most effective. These are big issues,
and on our own we have limited impact.
We therefore embrace partnerships
and joint action which can amplify our
efforts and deliver meaningful change.
Only by integrating sustainability
objectives into our business practices and
model can we consistently address the major
challenges we all face. Internally, there is a
growing recognition that sustainable practices
also spur innovation and drive long-term
growth. This lends momentum to the work
we are currently undertaking to revitalise our
sustainability strategy and embed it more
directly in our purpose and business.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019C O N S U M E R S

Serving our
consumers

Consumers buy brands they trust. Rightly,
they expect safe, effective and sustainable
products, delivered at a fair price. Increasingly,
they also want to be sure that the products
they buy are responsibly sourced and won’t
damage the environment.

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019F I N A N C I A L S T A T E M E N T S

How we engage
The people who use our brands
are the lifeblood of our business.
We work hard to earn their trust
with safe, effective, high-quality
products that make a difference
to their daily lives.

Our products enable hygienic, healthy
living. They are swallowed, applied to the
skin and used to protect against harmful
germs and dangerous bacteria. Being
entrusted with this intimate level of care is
both a privilege and a huge responsibility.
We connect with our consumers

in many different ways, mainly through
our brands. We commission research
to track long-term trends. Our brand
equity investment programmes educate
and inform them on key social issues.
But mostly we listen to what they
are telling us. Shopper forums and online
channels flag concerns and highlight
preferences. Consumer insights drive
innovation. Today’s consumers expect more.
They don’t just want products that stand
out, they want to know what they stand for.

Consumers are actively engaged and
digitally empowered. Increasingly, they want
to take more responsibility for managing
their own health and wellbeing. RB’s
products are addressing this global trend.

STRATEGIC REPORTGOVERNANCEReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019C O N S U M E R S CO N T I N U E D

42,000+

people to make our consumers’
experiences the highest quality they can be

How we meet their priorities
… by earning their trust
Our brands can only succeed when
consumers trust them. We have to earn
that trust every day through products
that are safe and effective, innovation
that meets genuine needs, and by doing
business in the right way, always.

Generalities are not enough. Our
consumers expect detailed information
on how their products are sourced and
what makes them sustainable. That
extends right across the supply chain, on
everything from ingredients, to human
rights issues, to carbon impact.

RB, as the company behind the

brands, needs to be fully transparent;
not merely promoting positives, but
identifying and addressing dilemmas and
shortcomings. We need to walk the walk.

Ultimately, this is not just a set of tasks,

it is an overarching philosophy. We will
continue to fine-tune our consumer-centric
model to keep our brands’ attributes and
inherent qualities in sync with the values
and evolving needs of the people we serve.

… with quality products
Our consumers have often grown up with
our brands, discovering them at different
points in their lives. In some cases, they
depend on them – in infant nutrition for
instance – our products need to be safe
and effective with absolute consistency.
That makes quality fundamental.

Paying close attention to quality is

critical. Rightly, our consumers have high
expectations of the brands they use. We can
only deliver that by maintaining consistently
high standards right across the organisation.
We make quality visible through our controls,
our standards and in our training. We
share our Quality Vision throughout the
Group, building awareness of standards
and how they are to be delivered. We host
Quality Days at all our global sites to help
embed commitment across the business.
It is the responsibility of every one of
our 42,000+ people to make our consumers’
experiences the highest quality they can be.

C A S E S T U D Y

THE ROAD TO SELF-CARE:
NAVIGATING THE FUTURE
OF CONSUMER HEALTHCARE

RB has sponsored a report on the future
of consumer healthcare. In ‘Enabling
people to manage their health and
wellbeing’ the Economist Intelligence
Unit (EIU) looks at the key drivers for
self-care. It also examines political and
regulatory conditions in global markets.

There is a strong public health case for
extending self-care practices. Formal
healthcare systems already account for
15 percent of Organisation for Economic
Co-operation and Development (OECD)
government spending. With ageing
populations, higher expectations
and advancing technology, costs are
rising. These dynamics will make more
self-care a financial necessity.

Citizens are keen to do more to care
for themselves, but they need the
right support. The report cites health
literacy as a critical enabler. It notes the
importance of a consistent approach to
self-medication and improved education
for healthcare professionals. It also
describes how technology can help
groups work together to achieve better
health outcomes. E-pharmacies, apps
and medical devices are shifting self-care
dynamics. The report concludes with a
call for regulators to integrate self-care
approaches into policy making.

For further information, please visit:
www.rb.com/innovation/
the-future-is-self-care/

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019A NEW WORLD-
CL ASS SCIENCE
AND INNOVATION
CENTRE IN HULL

November 2019 saw the official
opening of RB’s purpose-built Centre
for Scientific Excellence in Hull. This
£105 million investment connects
state-of-the-art laboratories and
collaborative office space to RB’s
179-year heritage. A striking, steel,
glass and stone structure, built to
the highest sustainable standards,
extends from an extensively
renovated original building.

The site where Isaac Reckitt’s original
starch mill once stood now provides
space for inspiration, experimentation
and science for some 800 scientists.
It will support leading-edge
innovations in consumer health.

… purpose-led innovation
The most successful brands not only
perform efficiently and safely, they advance
and support broader social objectives.
We focus on fundamental human needs
that matter to consumers and design and
develop products that make a positive
contribution to people’s lives. This is what
we mean by purpose-led innovation.

… and ethical marketing
The integrity of the products we offer is
fundamental. Our approach to product
stewardship runs across the entire supply
chain. It’s about responsible sourcing,
from both a social and an environmental
perspective, of materials, ingredients
and packaging, through to the quality
and safety of the product and brand,
and the accuracy and transparency of
the information we give to consumers.
We work to improve environmental and
social impacts wherever possible and
to ensure our products do no harm.

We adopt an ethical marketing stance

for all our brands. We don’t just focus
on how our products benefit consumers,
we think about their needs first.

For instance, we provide infant nutrition, but
we also advocate exclusive breastfeeding for
the first six months of life, as recommended
by the World Health Organisation
(WHO). We invest in educating mothers
about the importance of breastfeeding,
especially in these formative months.

We provide safe, age-appropriate

and nutritious complementary foods for
the succeeding months and years. We
also support mothers who are unable to
breastfeed, or who choose not to do so,
with high quality breast-milk substitute
(BMS) products that help meet the
nutritional needs of infants and children.

800scientists supporting leading-edge

innovations at our Hull site

C A S E S T U D Y

UPSPRING IS
SERVING MOTHERS’
NEEDS

RB’s acquisition of UpSpring strengthens
our commitment to mothers and
their children in the critical first 1000
days from pregnancy. The founders
of the Texas-based business, mothers
themselves, believe in taking care of new
mums so they can take better care of
their babies. UpSpring’s solutions help
them meet the challenges they face
during pregnancy and in the children’s
early years. Its suite of innovative,
science-backed, pre- and post-natal
health products, all made with natural
ingredients, accelerate postpartum
recovery and extend breastfeeding
life. UpSpring products tie in well with
RB’s purpose-led portfolio. Scaled up,
they will soon be helping mothers and
expectant mothers across the world.

For further information, please visit:
www.upspringbaby.com

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019

C U S T O M E R S

Connecting with
our customers

We align ourselves with customers’ interests
through our shared sense of purpose.
We manage relationships with our major
customers centrally and engage at the top
of the business and at multiple different
levels. We collaborate closely with key
customers to meet shared strategic
objectives as well as focus on operational
performance and execution at the local level.

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019

F I N A N C I A L S T A T E M E N T S

How we engage
Globally, our major trading
channels include hypermarkets
and supermarkets, pharmacies,
drug stores, traditional trade
and emerging trade (including
discounters, convenience stores,
mother and baby stores, travel
and speciality retail). Our top ten
customers contribute around
20 percent of net revenue.

In North America and developed markets,
supermarkets are our primary channel,
particularly for Hygiene. We coordinate
our large retailer relationships globally,
regionally or nationally, according to the
customer profile. We aim to build strong
relationships with our key partners and
customers that allow us to co-create
and innovate to meet shopper needs.
We engage directly with peers at
different levels in customer companies.
Frequent, detailed conversations – discussing
purpose, strategy, operations and execution
– infuse customer priorities into our thinking,
allowing us to address them more effectively.
In Europe, supermarkets are again
the primary channel for hygiene and home
products, while pharmacy is the largest
single channel for our health and wellness
brands. Small independents with relatively
few branches, make up the bulk of the
pharmacy sector. We engage with these
directly through our extensive network of
specialist local representatives. We have more
than 10,000 sales representatives managing
relationships and cross-selling brands to
pharmacies and smaller outlets worldwide.
The majority of net revenue is earned
through bricks-and-mortar outlets, but our
digital presence is growing fast, especially
in China. RB’s double-digit growth in
e-commerce during 2019 outpaced
sector-wide e-commerce growth. We sell
direct to consumers online and we also
have a wide range of digital channels.

Both online and offline, we maintain

global, regional and local contacts, as
appropriate, with clear objectives for each.
Each business unit has its own regional
customer leads developing local execution
and relationships. They are supported
by a network of local champions.

STRATEGIC REPORTGOVERNANCEReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019C U S T O M E R S CO N T I N U E D

For our most significant customers, the
focus is on strategic, long-term relationships
founded on purpose. We are allocating more
resources to this: our bricks-and-mortar
global sales team doubled in size during 2019.
This centrally managed team of strategy,
shopper, channel & customer experts
supplements local and product-specific
collaboration with Category Growth Platforms
and global growth initiatives that ties the
retailer’s purpose with our own purpose.

Meeting their priorities
We are unlocking opportunities by
viewing our activities from the customer’s
perspective. Customers prefer to work with
agile manufacturers with transformational
ambitions for their brands and categories.
We build vertically integrated networks with
our customers that aim to grow mutually
beneficial long-term relationships. Global
strategy is agreed centrally and operational
and execution decisions are made in the field.
Longstanding relationships are based on
more than brand sales, they are grounded in

a shared sense of purpose. We express our
purpose through the innovations we deliver
and by making a difference with our brands
to the categories in which we operate. And
we develop those categories more effectively
when we work closely with customers and
other partners. We saw the benefits of
this approach in 2019 with our Poseidon
campaign in Turkey, which connected Finish
with the growing issue of water scarcity in
the country. For the campaign to have a
meaningful impact in the country, we needed
an army of in-store ambassadors to help get
across our message that this is a purpose-led
brand serious about leaving our children
a better world. We arranged top-to-top
and key management meetings with major
retailers to set out our manifesto and explain
how we were taking action ourselves. This
led to invitations to their retail fairs, joint
campaigns to raise awareness and discount
schemes linked to savings on consumers’
water bills. We also became lead sponsor
of the annual Local Chains summit where
we shared our message with over close to

8,000 delegates from local supermarkets,
an important channel in Turkey. The
Poseidon campaign has gained significant
momentum through retail partnerships.
We will build on this in the coming years.
Our new CEO Laxman Narasimhan,
has been clear about the importance of
strong customer relationships. In his first few
months at RB, he has met with the CEOs of
several top-ten customers to identify, discuss
and advance mutual strategic interests.
These leadership meetings have focused
on shared purpose and looked at how we
can collaborate on big ticket initiatives.
In e-commerce, we invest in building ever
closer partnerships. We engage with our
digital customers not just as a vendor but also
as a supplier of media space. This promotes
more positive relationships, based on mutual
advantage as well as coinciding interests.
Whether the sales channel is online or offline,
we aim, at the strategic level, to identify
synergies, promote purpose-led innovation
and invest in partnerships and networks
that enhance and expand our categories.

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019Growth in e-commerce
E-commerce activities have been growing
rapidly over the last two years, outpacing the
market as a whole. We now have a larger
global digital presence than any of our
key competitors.

We have well over 1000 e-commerce

customers and our brands are present on all
the main portals. Three of RB’s global top
ten customers are in e-commerce. Indeed,
if e-commerce were a territory it would be
RB’s third largest. We are agnostic about
sales channels. The dynamics of e-commerce
are constantly changing. Our omni-channel
approach maximises optionality.

We currently engage with four main
categories of e-commerce customer. We
work directly with the major global players,
like Amazon, Alibaba and Jd.com. We also
have numerous marketplace customers;
these third-party retailers fulfil orders on
the global platforms. Marketplace has
become an increasingly significant channel
in terms of both Amazon and Alibaba
sales. For example, 58 percent of Amazon
sales are now through Marketplace.
In 2018, when the Marketplace

channel was less significant for Amazon, we
recognised its potential and took a minority
stake in Pharmapacks. Today, the Company is
one of Amazon’s biggest third-party retailers.

With our third major category,

bricks-and-clicks retailers, we typically also
have offline relationships. E-pharmacy, our
fourth major category, is one of our
fastest-growing channels.

Growth in these categories has been

unlocked by our willingness to adopt an
agile, transformational approach to building
up our brands and developing closer
customer partnerships. We are adapting
our business processes to align more
closely with e-business priorities. Our Lysol
SMART concentrated refill, for instance,
reduces plastic waste by up to 75%. Its
lightweight, leakproof format is well-suited
to e-commerce shipping requirements.

C A S E S T U D Y

TEAMING UP WITH RETAILERS TO
IMPROVE HEALTHCARE ACCESS

In the US, the high cost of insurance
puts formal, high-quality healthcare
out of reach for a section of the
population. Unsurprisingly, some
of these people are starting to take
health matters into their own hands.
Selfcare is an appealing alternative,
but without professional assistance,
they risk making the wrong choices.

With the right support, self-care can offer
fast, reliable and affordable healthcare
solutions. As part of our mission to
promote self-care in society we have
teamed up with major US retailers.
Together, we introduced a range of
projects that give shoppers better

product solutions, access to healthcare
professionals, education tools and
smartphone-based health tracking and
diagnostics. In one scheme, customers
who purchased RB products such as
Mucinex, Delsym, Airborne and Digestive
Advantage at specified retail outlets
received vouchers that entitled them to
instant, free telehealth consultations with
board-certified clinical professionals.

RB is participating in a broad-based
alliance of changemakers who want
to transform healthcare in America.
We work with medical professionals,
nonprofits, governments, medical research
organisations and like-minded businesses.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019P E O P L E

Empowering
our people

The talented people who work at RB want to do
more than make a good living. They are here to
make a difference. At RB we put consumers and
people first. There is a spirit of ownership and
entrepreneurship. We give colleagues the space,
the opportunities and the chance to have a real
and positive impact. It’s what we call ‘Freedom
to Succeed’.

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019F I N A N C I A L S T A T E M E N T S

How we engage
For RB to achieve its purpose to
protect, heal and nurture, we need
to fight and make access to the
highest-quality hygiene, wellness
and nourishment a right, not
a privilege.

Together and individually, RB colleagues
have the task of bringing our purpose
to life. To achieve that, they need
support, they need resources and they
need to be properly motivated.

Freedom to Succeed, our new
employee value proposition, encapsulates
RB’s entrepreneurial ethos. The people
that work here want the freedom to make
their own choices and shape their own
lives, at work and at home. RB’s open,
collaborative culture empowers them to
make a tangible positive difference. A
non-hierarchical structure promotes faster
decision-making with autonomy and
accountability on the ground. Our work-life
balance initiatives support individuals and
their choices. Progressive policies on diversity
and inclusion ensure everyone’s voice is
heard and all contributions are respected.

In 2019, Non-Executive Director Mary

Harris took on a newly created role of
designated Non-Executive Director, for
engagement with the Company’s workforce.
She is engaging across the business to gather
insights on cultural and people related
issues. Her remit is to ensure employee
concerns are conveyed at Board level and
incorporated into strategic decision-making.

Our compass

d
e
r
a
h
s

s
s
e
c
c
u

c onsumers
u t
d p eople f rst

Do the
right thing.
Always.

Strive f o r
excelle n c e

o
r
u
n

o
u
t
n
ities
e
w

STRATEGIC REPORTGOVERNANCEReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019

P E O P L E CO N T I N U E D

>55%

people from around the globe currently
participating in our award-winning
share plan

The RB culture
The values we hold and share define the
organisation. Our success as a business
is founded on our strong, distinctive
culture, guided by our compass.

If we want to deliver on our business

objectives we need a dynamic, evolving
and connected organisation. Our
people strategy aims to instil, reinforce
and reward the positive behaviours
and attributes that make that real.

A shared sense of responsibility anchors
our approach. Doing the right thing, always,
is a fundamental value for everyone here.

We want all colleagues to have a sense

of belonging and take personal pride in what
they do.

This also makes sense commercially.
We all do more when we have a personal
stake in the outcome. We reinforce that
sense of ownership by giving employees a
financial interest in RB’s success, through
our rewards systems and our share plans.
Our award-winning employee share plan
is open to employees across 57 countries
and is highly popular, with over 55 percent
of our employees currently participating.
RB prioritises always doing the right
thing – by putting consumers and people
first, building shared success, seeking out new
opportunities and striving for excellence.

Doing the right thing, always
We are clear as a business that all colleagues
must act with integrity and demonstrate
respect for each other, our stakeholders
and society as a whole. RB’s Code of
Business Conduct, available online, sets
out the values and behaviours expected of
all colleagues and contractors. The Code
makes it clear that where there are concerns,
raising them is everyone’s responsibility.

We are committed to providing a safe,
supportive working environment for all our
people. We have global policies on health
and safety and on diversity and inclusion that
set out minimum standards expected at all
our operations. Individual business units and
local operations apply these according to their
specific circumstances. Our Speak-Up hotline
allows people to call out unethical behaviour,
safety concerns and other non-compliance

without the risk of retaliation. In 2019,
we received and investigated 466
reports. We subsequently took remedial
action in 57 percent of these cases.

Developing our people
Continually improving our performance
depends on attracting, retaining and
developing great people. We build functional
and leadership capability at all levels, to help
managers inspire and empower their teams.

We value depth and breadth of
experience. We frequently move our
people into new roles and territories.
We support them with appropriate
training and development.

Our online training hub, learn.rb.com
builds key capabilities with bite-size learning.
Colleagues, striving for excellence, undertook
around 83,000 hours of learning in total
during 2019. E-learning and blended learning
programmes are available for all employees
and are phone and tablet friendly.

Fostering partnerships
Partnership at RB is all about building
shared success. No one has all the
solutions. We succeed by partnering with
others, both internally and externally.

As we seek out new opportunities

innovation can come from anywhere.
Our non-hierarchical structure promotes
collaboration and agile working. Every RB
colleague has the ability to make suggestions
on how we can innovate and improve.
We operate a reverse mentoring
scheme that ensures every leadership
team member has a young mentor,
empowering them to contribute to
thoughts and suggestions. RB’s Purpose
Council is advancing youth-led initiatives.
Free-flowing communication is
essential in a fast-functioning, fluid
organisation. Our Chief Executive Officer
sets the tone with an open-door policy
that encourages everyone to speak up.
There is a regular rhythm of
interactive communications at all levels,
with frequent town halls at the global,
local and functional level, and round-table

83,000

hours of learning undertaken by colleagues

C A S E S T U D Y

ONE YOUNG
WORLD SUMMIT
MEETS IN LONDON

Young people bring energy, idealism
and fresh ideas. And this generation is
the most informed, the best educated
and the most interconnected in
human history. It is good to know
the future is in their hands.

In 2019, 2,000 young people from 190
countries met in London at the tenth
One Young World (OYW) Summit
to discuss and address the pressing
social and environmental challenges
we all face. RB is a longstanding OYW
supporter. We sent 50 delegates to this
important gathering – our most ever. Our
CEO and the President of Hygiene Home
also attended, to share their experiences
and, importantly, to listen and learn.

The delegates returned fizzing with
ideas, inspired to pursue RB’s social-
impact areas of focus and determined
to address diversity and inclusion in
the business. Their voices continue to
be heard and will drive change as they
now join RB’s Purpose Council, made
up of 94 people from 20 countries
who are sponsoring programmes that
embed purpose in the business.

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019meetings that bring together different
specialists around selected topics.
We have a regular digital newsletter and
a robust, interactive intranet site. Social
media, videos – including Q&As with the
CEO while carpooling – are just some of the
mechanisms for engaging teams in company
content. Our multifaceted approach aims to
appeal to different generations and deliver
relevant content and communications
to all levels of the organisation.

Diversity and inclusion
RB has long recognised that increasing
diversity is not just a moral but a business
imperative. More diverse backgrounds
bring differing perspectives. That creates
a richer, more informed culture and
better decision-making, which is good
for business. As a global company, with
over 42,000 people, we can draw on an
international pool of talent and experience.
This cultural diversity enriches our
perspective and informs our approach.

Our global ambition for gender diversity
is that women should hold at least 40
percent of senior management roles by
2022. RB’s DARE initiative – to develop,
attract, retain and engage talented
women – has made progress since its
introduction four years ago. Still, in 2019,
just 26 percent of our senior managers were
female. There is certainly more to do.

This is a challenging target, but we are

focusing relentlessly on gender balance.
We offer mentoring and development
schemes to assist women in their career
progression. Our recruitment policy ensures
gender-balanced shortlists for all open
positions. We are embedding flexible
working arrangements that assist colleagues
with family and personal commitments.

We have also introduced gender pay

reporting in our top five markets, which
account for nearly half of our global
workforce. This commitment exceeds the
UK reporting requirement and we are the
first FTSE company to take this step.

OY W SCHOL ARS

Lead 2030, a One Young World
initiative, is the world’s biggest prize
fund for young leaders working
towards achieving the SDGs. RB
sponsors the challenge in two SDG
categories – zero hunger and clean
water and sanitation – the winners
receive $50,000 to fund their initiative,
along with mentorship from RB.

C A S E S T U D Y

FREEDOM TO
SUCCEED – GLOBAL
PARENTAL LEAVE
POLICY

We want all children to get the
best start in life, including the
children of those that work at RB

Our new global policy on parental
leave positions RB as one of the most
supportive FTSE 100 companies for
parents. The policy gives every new
mother six months paid leave to rest
and bond with her newborn, and the
option to take another six months’
unpaid. Fathers and partners get four
weeks paid leave and an additional
four unpaid weeks. The policy allows
for extra paid leave for premature
births. And because families come in all
shapes and sizes, LGBTQ+ employees
get exactly the same rights, as do
adopting and surrogacy families.

The support continues for mothers
returning to the workplace. Mentors
are available, where needed, to help
guide their re-entry into the working
environment. We have set up over 100
wellness rooms at our various locations
where they can rest, express milk and
extend their ability to breastfeed.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019PA R T N E R S

Forging links with
our parners

We work with our partners to deliver
practical and sustainable solutions that
further our purpose of creating a cleaner,
healthier world.

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019F I N A N C I A L S T A T E M E N T S

How we engage
Partnerships are key to enabling us
to deliver lasting solutions that
have real social impact. We look
for partners that share our purpose
and endorse our values.

External partners support our efforts with
expertise, objective assurance, research and
local knowledge. We work with our trading
partners to build efficient and resilient global
supply chains. We forge purpose-led alliances
that link with our categories and brands. We
participate in local and global campaigns to
advance social and environmental objectives.

EPA SAFER CHOICE
PARTNER OF THE
YEAR

The US Environmental Protection Agency’s
Safer Choice label promotes the use of safer
chemicals in the home. RB has been a Safer
Choice partner since 2009. It is recognised
for having adopted chemicals that meet Safer
Choice criteria at an early stage. The 2019
award recognises its outreach and education
campaign over the previous year.
This resulted in all 50 US states
adopting Safer Choice labelling for
antimicrobial products. Consumers
can now find safer antimicrobial
products much more easily.

STRATEGIC REPORTGOVERNANCEReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019PA R T N E R S CO N T I N U E D

Responsible supply chains
Our trading partners, suppliers and
distribution centres are located around the
globe and we have contractual arrangements
with them that set out our standards and
requirements. As a responsible business,
we expect all employees, contractors and
suppliers to adhere to our human rights policy
and supply chain monitoring programme.
All our manufacturing and hub

locations are subject to regular on-site
auditing, assessing product quality, the
safety of our people, our environmental
and human rights performance.

Together with our trading partners,
we focus on creating safe, high-quality,
effective products for consumers around
the world. We promote end-to-end
sustainable business principles that take
account of our products, the environment
and ecosystems we are part of, and the
people within our global value chains.

C A S E S T U D Y

LYSOL HERE
FOR HEALTHY
SCHOOLS

The best weapon against germs is
knowledge. RB has partnered with the
National Education Association and
Parent Teacher Association to develop
the Lysol Healthy Habits programme
with interactive and downloadable
lesson plans to teach primary school
children the importance of healthy
habits. To help alert schools when it is
most important to protect their children,
Lysol partners with health technology
company Kinsa on the FLUency in Action
initiative. Together, Lysol and Kinsa
have provided 1,300 schools with Smart
Thermometers to create connected
communities that help teachers and
parents fight illness together.

Sparking innovation
In our hyperconnected society, the
purpose-led network is a highly effective
structure for delivering impact at scale.
Boundaries between organisations are
becoming less rigid. Businesses are
operating in ecosystems that form around
common objectives and outcomes,
including delivering against the SDGs.
The sharing economy and open-source
thinking have moved mainstream, opening
up a number of new opportunities for
co-development and collaboration.

RB is at the centre of a global network

of expert individuals and organisations.
We’ve built up international links over
many years with product innovators,
suppliers, digital developers, regulators,
researchers and academics.

We have opened up our organisation to
embrace other approaches. External partners
bring fresh perspective and inject new
thinking. By sharing insights and capabilities
with them we can disrupt traditional models
and accelerate innovation. We collaborate
with scientists to accelerate the development
of novel ingredients and solutions. Our
innovation partner programme invites
entrepreneurs to make a difference with us to
people’s lives by co-creating, developing and
scaling up their ideas into global solutions.

FOUNDERS
FACTORY HYGIENE
AND HOME

RB’s new joint venture with Founders
Factory creates a powerful engine
for bringing innovative solutions to
our consumers. Founders Factory
Hygiene and Home combines our
complementary skills and resources
to help entrepreneurs take their
businesses to the next level.

With over 100 investments in
multiple sectors since its launch in
2015, Founders Factory has a proven
model for unleashing the growth
potential of start-ups and small
businesses. The JV leverages RB’s
scale and ability to innovate at speed.
Sharing our expertise and resources
with talented entrepreneurs and
disruptive thinkers will help us bring
the next generation of technology-
driven solutions to our consumers.

3 4

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019Advancing best practice
We regularly engage academic and research
institutions and think tanks to research key
categories and markets. We collaborated
with the Economist Intelligence Unit in 2019
to map out the future of self-care and review
global policy progress and requirements.

We consult with clinical professionals

and health organisations to ensure our
healthcare solutions are advancing public
health objectives. For example we have
been strengthening our links in the past
year with healthcare professionals to align
infant nutrition with the latest advice.

Regulatory intelligence
We reach out to regulators, both directly
and through trade associations and industry
bodies, to ensure we are fully compliant and
get early notice of any regulatory changes
that may affect our categories and brands.
We also work with them on consumer-related
campaigns linked to our brands.

We are active in local and regional
trade associations, especially in Europe,
Latin America and the ASEAN region. In
2020, we joined the Consumer Goods Forum,
a major global CEO led platform that brings
together consumer goods retailers and
manufacturers to partner and collaborate
together to build consumer trust and drive
positive change, including greater efficiency.

We also joined Cosmetics Europe, the

European trade association for the cosmetics
and personal care industry. As board
members of the Global Self-Care Federation,
we aim to promote discussion on the role of
self-care for both positive health outcomes
and sustainable healthcare systems.

Fostering close links with regulators

allows us to participate in discussions
on policy and adapt more quickly to
upcoming regulatory change, either
to maintain compliance or innovate
to address new opportunities.

With the EU health business to protect,
ensuring internal preparedness for Brexit was
a priority during 2019. A core Brexit team
worked cross-functionally alongside local
and regional partners to ensure continued
compliance with European legislation. We
established a new European regulatory
location outside the UK, there were close to
1,000 changes to medicines submitted, 3,200
cosmetic notifications prepared and circa
3,000 artworks amended. All but one of our
medical devices have now been transferred
to EU-notified bodies, with the last one due
to be finalised in the first half of 2020.

C A S E S T U D Y

DANISH INSTITUTE
FOR HUMAN RIGHTS

In 2019, we partnered with the Danish
Institute for Human Rights (DIHR) to help
us develop a more holistic understanding
of our human rights responsibilities.

We asked the DIHR to conduct a
gap analysis to assess human rights
performance across our organisation and
identify opportunities for improvement.
This resulted in 35 recommendations that
further embed a human rights lens into
our day-to-day activities. We are now
engaging with the relevant stakeholders
to prioritise and implement these.

The Institute also piloted a country-level
human rights impact assessment focusing
on key elements of our Durex and Enfa
brand value chains within Thailand to
identify any adverse impacts within our
value chain and offer recommendations
to prevent, mitigate and remedy them. Its
report will be published in 2020 together
with our corresponding action plan.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019C O M M U N I T I E S

Investing in
communities

Everyday changes can make a difference
that lasts a lifetime. An investment in small
changes today is an investment in all of us. As
individuals in our own communities, and as a
business, we all do better when societies thrive
and prosper. Our purpose and fight will define
how we engage with communities.

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019G O V E R N A N C E

F I N A N C I A L S T A T E M E N T S

How we engage
Health, hygiene, nutrition, proper
sanitation, a solid education and a
safe environment – these are basic
rights and they should be within
everyone’s reach. With the right
support and enough persistence,
even small interventions can
ignite movements that transform
entire communities and make a
lasting difference.

Our current social impact strategy is built
on this idea. We focus on three areas
with a direct connection to our business:
sexual health and rights, maternal and
child health, water and sanitation.

We engage with women, girls and

children, the people who shape these
communities, to understand what steps
we can take to help them transform
their homes and lives. We use our deep
understanding of consumer behaviour
to make sustainable improvements
that address complex global issues.

We don’t have all the answers. We work

closely with local partners who understand
conditions on the ground. Together, we are
introducing everyday improvements and
amplifying their effects into life-changing
impacts across the globe.

How we make a difference
Our overall objective with all our social
impact investment is to build programmes
through our brands that enable us to
bring RB’s purpose to life at scale.

Our investment comes in three forms:

financial support, donated products and
volunteering. Alongside brands that enable
the same purpose, we support projects that
are in line with our three focus areas and
which have a measurable sustainable impact.

We have a robust process when

selecting partners and projects. We conduct
extensive financial due diligence and use an
independent external assessor for human
rights due diligence. Our grant agreements
link funding to delivery against an agreed set
of KPIs. Once the project goes live we monitor
its performance against the specified criteria.
During 2019, our focus has been on
strengthening partnerships established in
previous years which are delivering sustained,
significant impact. Programmes in India,
Nigeria and Pakistan drew to a close, while
new programmes in Nepal and Colombia are
yet to report. This led to fewer people
reached in the year, reducing our
performance on impact, until the results
of new programmes are realised.

STRATEGIC REPORTReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019C O M M U N I T I E S CO N T I N U E D

Sexual Health and Rights
Our sexual health and rights projects promote
sexual wellbeing, protect young people
from sexually transmitted diseases and
reduce the risk of teenage pregnancies.

In 2018, Durex joined forces with (RED)

in South Africa to reduce the incidence of
teenage pregnancy and protect girls and young
women from sexually transmitted diseases. RB
and Durex have committed US$5 million over
three years and the Bill and Melinda Gates
Foundation has pledged to match this, taking
the total commitment to US$10 million.

All funds raised from the partnership

will go to the Global Fund to fight AIDS,
tuberculosis and malaria, directed specifically
to a school-based intervention programme,
Keeping Girls in School, in South Africa.
The programme identifies girls at risk of
dropping out and implements preventative
measures through services such as tutoring
and homework support, peer education,
sexual reproductive health education, career
jamborees and home visits, to ensure they
complete their education and lead healthy,
productive lives. With this investment,
Keeping Girls in School is aiming to reduce
new HIV infections in young women, reduce
teenage pregnancies, improve access to

sexual reproductive health services and
education and encourage school retention
among adolescent girls and young women.

Maternal and Child Health
By giving mothers and communities the
support and facilities they need, we can
give the next generation the best start in
life. Our partnerships in this area, focus
on reducing stunting in children, in the
first 1000 days of life, by 40 percent.

In India, RB is funding a programme

in the remote tribal region of Maharashtra,
where rates of malnutrition in children
under five are particularly high – 1.5 times
the national average. Together with a
consortium of partners, RB is working with
local communities to build up a workforce
of travelling Community Nutrition Workers
(CNWs), who are rigorously trained by a
team of public health experts, paediatricians,
gynaecologists and community development
specialists. So far, the programme has 40
Community Nutrition Workers going village
to village, reaching out to 204 communities
across the Maharashtra region. Over the next
five years, the Nutrition India Programme
aims to reach 177,000 young mothers of
undernourished children across 1,000 villages.

S O C I A L I M PAC T P E R F O R M A N C E 2 019

Individuals impacted through our
programmes

KPI: Total number of people who have
reported positive change, or where a positive
change has been observed and evidenced.

Social impact investment

KPI: Total value of cash contributed,
employee time in working hours and
in-kind product donations valued at cost
to the business

2016

2017

2018

2019

1.4m

2016

2.1m

2017

2.6m

2018

0.6m

2019

£5.2m

£10.5m

£14.4m

£12.2m

Target to 2025: 4 million people impacted through our
programmes each year

Target to 2025: £20m per year

Employee engagement

Purpose-led brands

KPI: Hours contributed by employees who
are actively engaging in volunteering and
fundraising during company time.

KPI: Total number of people informed
through health and hygiene messaging and
campaigns since 2013.

2016

2017

2018

2019

13.2k

2016

19.6k

2017

31.7k

2018

53.9k

2019

365m

568m

765m

956m

Target to 2025: 100,000 employee volunteering hours
per year

Target to 2025: Inform 1 billion people through health
and hygiene educational programmes and behaviour
change communications

C A S E S T U D Y

MAKING WATER
SCARCITY A
PUBLIC PRIORITY
WITH FINISH

RB and Finish teamed up with National
Geographic to take on water scarcity in
Turkey. The country’s declining water
resources, growing population and
large agricultural sector are expected
to result in intense scarcity within the
next decade. Despite this, the threat
of scarcity is still little understood.
A National Geographic documentary
asked what would it be like for the
average citizen if they only had
access to 25 litres of water a day?
It brought the issue vividly to life.

The Finish campaign urged households
to abandon manual pre-rinsing and
save an average 57 litres per wash.
Since the launch over 100,000 people
have pledged to save 15 million tonnes
of water and do what they can to
conserve water for the future.

The success of the Turkey campaign
provides a template for raising consumer
consciousness on water saving that can
be applied globally. A similar campaign
was launched in Australia. The Finish
global sustainability campaign will
now continue in other countries.

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019In China, our partnership with China Children
and Teenagers’ Fund (CCTF), aims to directly
impact 10,000 pregnant women and babies
and reduce stunting by 40 percent in rural
China. In addition, the 1,000 days of nutrition
education will reach millions of Chinese
families with valuable nutrition education
through public communication

Water and Sanitation
Providing access to adequate sanitation and
proper hygiene means providing education,
safety and freedom from disease.

Access to safe water and sanitation are

among the most fundamental of social needs,
and their absence affects almost every part
of life. In 2018, RB entered into a partnership
with Water.org, investing US$1 million to
support their work. Half of the investment
was channelled into Water.org projects in
India, the other half supporting various Water.
org projects all over the world. With RB’s
investment, Water.org and their implementing
partners were able to advance a range of
activities to help families at the base of the
economic pyramid access improved water and
sanitation sources. RB’s support specifically
enabled Water.org to reach 176,275 people
in India, helping them secure their own
empowering water and sanitation solutions.

Today, RB and Water.org are building

upon our work in 2019 with a second
partnership through 2021, with a focus
on supporting Water.org programmes in
India and Indonesia. We’re exploring ways
to deepen our collaboration between our
teams in India and Indonesia to further
help people secure their own empowering
water and sanitation solutions. Within
this partnership extension, Water.org will
help mobilise $29.1 million in funds, and
their partners will disburse 138,000 loans,
changing the lives of 641,400 people
across India and Indonesia with improved
water and sanitation access by 2021.

Give Time
Colleagues are encouraged to make a
tangible impact by giving skills and time
in their local communities. Our Give Time
programme allows every one of RB’s
employees two days paid leave annually for
voluntary activity. In 2019, RB employees
gave over 47,000 hours to good causes.
We are committed to encouraging our
employees to ‘Give Time’ and have a goal of
donating 100,000 hours a year by 2025.

C A S E S T U D Y

LIVING OUR PURPOSE THROUGH
VOLUNTEERING IN TANZANIA

One of these focuses on persuading
male household heads (or Babbas) of
the importance of good sanitation,
encouraging them to spend more of
the household budget on hygiene and
sanitation products. Already, more than
2000 Babbas have committed to promote
positive hygiene in their homes. The
Shujaa Wa Usafi project aims to improve
hand-washing, toilet cleaning and water
treatment practices by training students to
become SWASH (School Water, Sanitation
and Hygiene) heroes, delivering hygiene
education in their respective communities.

The Global Volunteer Challenge is the
biennial flagship event in RB’s Give Time
volunteering programme. For 2019, we
partnered with sustainable development
charity Raleigh International. This
year, for the first time, the challenge
leveraged volunteers’ skills and connected
directly with our business purpose.

Raleigh has been supplying water,
installing toilets and teaching about
hygiene in rural Tanzania since 2013,
but people there were still getting sick.
It was looking for fresh insights.

Thirty colleagues from 23 countries stayed
in the villages to get a real sense of the
villagers everyday problems. They worked
in small groups alongside local volunteers
to develop ideas for improving hygiene. At
the end of two weeks they pitched their
proposals. Two of these were selected for
further development. They are currently
being implemented on the ground.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019E N V I R O N M E N T

Safeguarding
the future

As a responsible business we play our
part in addressing key societal and
environmental issues.

4 0

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019G O V E R N A N C E

F I N A N C I A L S T A T E M E N T S

How we engage
There has been a seismic shift in
public concern for the scale and
urgency of the global challenges
the world faces. Consumers are
increasingly conscious and expect
the brands and companies behind
the brands to take action to
address them. For brands to
continue to be trusted they must
be seen as part of the solution
and not part of the problem.

RB’s engagement with sustainability
issues has evolved accordingly. In the
past, sustainability was not always fully
integrated into our core business. It had a
focus on compliance, and was influenced
by industry benchmarking, regulatory and,
to an extent consumer considerations.

Today, there has been a fundamental

shift in attitude within the business. We
now have a more active stance that pays
attention not just to how we mitigate
negative impacts, but on how we can
contribute positively to society.

Sustainability is viewed internally
as a driver of long-term growth rather
than a limiter of risk. Integrating
sustainability into our core strategy
helps to bring our purpose to life for our
brands, and across the wider business.
We have been gathering data,
strengthening tools and plans, and laying
the groundwork for the 2020 launch of our
new strategy and targets. This extends our
existing strategy, which was underpinned by
non-financial KPIs that set targets for 2020,
with broader, more ambitious objectives.

We want to be a force for positive
change. RB can play an active role on a wide
range of environmental issues, tackling GHG
emissions, eliminating waste and managing
water scarcity. But these are huge issues with
global consequences. We cannot expect to
solve them on our own. To have any impact
we need to combine our strengths with
others. We are forging partnerships with
trading partners, consumers and communities.
Our purpose-led brands champion

compelling causes. Their reach and recognition
enables them to be powerful agents for
positive change. To underpin that, the wider
business needs the right foundations in place.
We have to be rigorous about examining
the issues, tackling them where we can and
addressing those areas where we fall short.
That requires integrity and full transparency.

STRATEGIC REPORTReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019E N V I R O N M E N T CO N T I N U E D

Promoting the circular economy
As global prosperity increases, populations
are consuming more, but with the current
linear model, much of that consumption
is disposable. Single-use packaging is a
pervasive and growing problem. Very little
is recycled, most ends up being burned, on
landfill sites or in our oceans. This wastes
valuable resources, contaminates the planet
and contributes to global warming.

In a circular economy resources stay
in use for far longer, cycling through the
system. It emphasises reuse ahead of
recycling, which means less energy and
fewer processes are required to transform
used products back into useful ones. Making
that happen relies on concerted action
and the involvement of all stakeholders.

We are engaging across our value
chain to raise awareness about single-use
packaging. In the US, we have teamed
up with TerraCycle. The Healthy You,
Healthy Planet partnership is a national
recycling programme encompassing all
brands of health and nutrition packaging.

This programme is part of RB’s continuing
commitment to the circular economy, which
also includes ensuring at least 25 percent of
our plastic is recycled and making all of our
packaging recyclable or reusable by 2025.

Sustainable innovation
We can make our products more sustainable
through innovation. We set ourselves a
deliberately ambitious target for 2020, for
a third of net revenue to be earned from
more sustainable products. Although this
has not yet been achieved, setting the target
has helped to focus minds on this issue.
We use our sustainable innovation
app to benchmark product innovation and
evaluate sustainability credentials. The app
is a streamlined life cycle assessment tool
that models a product’s carbon footprint,
water impact, non-recyclable packaging and
ingredients on a per dose basis. Only those
products registering significant improvement
in at least one category, with no categories
made worse, qualify as more sustainable.

25%

Total net revenue from more
sustainable products1,2

1 Excluding our Infant and Child Nutrition (IFCN) business
– See RB Insights (www.rb.com/responsibility/insights)
and RB Reporting Criteria Basis for Preparation
(www.rb.com/responsibility/policies-and-reports)
for details.

2 Calculated for 12 months ending 30th September 2019.

CDP RECOGNISES
SUPPLIER
ENGAGEMENT ON
CLIMATE CHANGE

CDP (Carbon Disclosure Project),
the global leader on environmental
disclosure, has recognised RB’s global
leadership in managing carbon and
climate change across the supply
chain. CDP evaluated the supply
chain engagement strategies of more
than 5,000 companies worldwide in
2018. RB was included in the top 3
percent awarded an A grade. These
companies featured on CDP’s supplier
engagement leader board for 2019.

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019RECOGNISED FOR
SUSTAINABILIT Y

RB has been commended as one of the
top-scoring companies in its industry for its
corporate sustainability achievements. In the
2019 edition of RobecoSAM’s Sustainability
Yearbook, we earned a Silver Class distinction
for our sustainability performance in 2018.

Plastics and packaging
To make the transition to a circular economy
we need to think differently about how we
use plastics. There are big challenges. The
microplastics littering our oceans are getting
into the food chain and over 350 million tons
of plastic are produced globally every year.

Stakeholder interest in this topic has

grown rapidly in recent years, but more
research is needed and the necessary
infrastructure is not yet in place. The Ellen
MacArthur Foundation (EMF) has done
important work on plastics as part of its
mission to promote the transition to a circular
economy. RB is a committed EMF member.
We endorse its New Plastics Economy
initiative and share its vision of a future
where plastics never become waste. We aim
to eliminate plastic items wherever possible;
innovate so that where plastic is needed it
can be safely reused, recycled or composted;
and reuse any plastics to keep them in the
economy and out of the environment.
Currently, plastic is expensive and

inconvenient to recycle, but for many
products, it also provides the best solution
in terms of safety, cost and carbon footprint.
We are researching and introducing
durable packaging for our own brands
that is more sustainable in an effort to
reduce our environmental impact.

In 2019, we made strides in
understanding plastics and packaging
issues across our markets, and our impact
across the whole product life cycle. RB
is continuing to embed new tools and
knowledge across the organisation,
especially in the product development
process. Some major improvements are in
the pipeline, but research, development
and implementation will require patience.

Product stewardship
Product stewardship is about protecting
the integrity of our products. It starts with
responsible sourcing, from both a social and
an environmental perspective, of materials
and ingredients. It extends through to
the quality and safety of the product and
brand, and the accuracy and transparency
of the information we give to consumers.
At every stage we aim to be transparent, to
do no harm and to improve environmental
and social impacts wherever we can.

Our supply chains can be long and

complex. Palm oil, latex, dairy, paper and
board are all key raw materials for RB,
but we are often far removed from their
original suppliers. It is therefore critical
to maintain traceability and integrity.
We have introduced global standards
for product quality and safety and apply
these across our supply chains in all our
territories – in many cases the RB standards
are far superior to the local regulations.
We commission an external risk
assessment of all the natural raw materials
we use. They are graded from low risk to
high risk according to a range of social
and environmental criteria. We use this
assessment to ensure we continue to focus
our efforts on the highest priority materials.
We are continually strengthening
the sustainability of our ingredients by
adopting safe and effective alternatives
(SEA). The long-term focus is on building
resiliency by prioritising purer, simpler
and transparent products and innovations
that adopt SEA technologies and
follow green chemistry principles.

Responsible sourcing
A progressive approach to human rights
and responsible sourcing is fundamental
to our sustainability ethos. We want to
have a positive impact on society in the
way we develop our products, as well
as through their functional benefits.

We work closely with our suppliers to
ensure universal standards on employment
rights and wider sustainability issues and to
ensure product quality and safety are upheld.

100%

management employees completed human
rights training

C A S E S T U D Y

FINISH TACKLES
PLASTIC WASTE

RB has pledged that our packaging will
be 100 percent recyclable and contain
at least 25 percent recycled content by
2025. With Finish, we plan to meet this
pledge well before then. In January 2019,
we launched Finish Quantum Ultimate
in fully recyclable black plastic tubs.
These use a non-carbon black plastic,
an industry first, which overcomes
technical constraints for recyclers.

Finish is also available in light, resealable
plastic pouches. We sells millions of
pouches every year. Currently these use
bonded plastics to meet strict technical
requirements for safety and storage.
That makes them hard to recycle. We
joined forces with Dow and Drukpol.
Flexo to develop recyclable pouches.
The fruits of that collaboration –
award-winning eco-pouches made of
a single, specially developed plastic
– will be on sale globally from 2020.

And we went further. In 2020, RB will
launch new Finish Quantum Ultimate
tubs containing 30 percent recycled
polypropylene (rPP) and become the
first FMCG company to use undyed
rPP at scale in its packaging. rPP is
unpopular with most manufacturers;
its strong smell and matt grey colour
make it hard to recycle. We have
worked with leading recycler Veolia to
develop a low-odour grade for our tubs.
The tubs themselves are intentionally
grey – proudly proclaiming their rPP
content as a product credential.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019E N V I R O N M E N T CO N T I N U E D

IN THE LOOP –
PROMOTING THE
CIRCUL AR
ECONOMY

RB was a founding partner in the US
launch of TerraCycle’s Loop global
recycling programme. Our Airborne,
Move Free, MegaRed and Neuriva
products are being made on the
Loop shopping platform in reusable
packaging. After using the products,
customers put empty containers in
a Loop tote bag and leave it on their
doorstep. The containers are collected,
cleaned, refilled and reused.

To achieve traceability and achieve positive
impacts, we work with a range of expert
partners. With the Earthworm Foundation,
we support programmes that enable detailed
monitoring of complex supply chains and use
this to improve the livelihoods of smallholder
farmers, limiting their impacts on important
ecosystems. In 2019, The Danish Institute for
Human Rights supported our first ever human
rights impact assessment, which included
a focus on risks and impacts associated
with our Durex brand on smallholder
rubber tapper farmers in Thailand.

Managing water resources
Climate change is exacerbating the negative
effects of water scarcity and poor water
quality on health and hygiene. According to
the UN Food and Agriculture Organization,
1.8 billion people will be exposed to absolute
water scarcity and more than 5.4 billion are
expected to face water stress by 2025.

Managing water resources efficiently
is a key operational issue for RB. We look
at the life cycle of our products, initially
prioritising the way we produce them but
increasingly looking at their total footprint.
We monitor water use per unit of production
and water impact per product dose.

We have successfully reduced our

water use in manufacturing by using and
recycling water more efficiently. However,
most of our water impact happens

upstream and downstream of our own
production and we recognise we need
to do more to help our suppliers and
consumers reduce their water usage.
We have conducted a global
water scarcity assessment to focus
our efforts on where we can have the
greatest positive impact both now and
in the future. 24 of our sites operate in
water-stressed locations, notably in India
where we have a significant presence.

A litre of water in India has to go far

further than a litre elsewhere. We need
to take account of this in our product
development when assessing water use
alongside other sustainability priorities.
For instance, producing concentrates
reduces packaging material and lowers
transport-related carbon emissions, but these
benefits must be balanced with the need for
the consumer to add water at point of use.

Global water scarcity is a huge and
complex issue. We are strengthening the
water-saving credentials of key brands,
including Dettol, Lysol and Finish. We
participate in national and global campaigns
to promote water saving. We can only
make a relatively minor contribution,
but every drop is valuable. We are
researching what more we could do to
reduce the water impact from consumer
use, especially in water-stressed areas.

4 4

37%

reduction in water use per unit of
production since 20121

Waste
RB has established a good track record of
local and regional compliance for waste
management. In 2019, we continued
identifying, implementing and tracking
initiatives to reduce waste at our
manufacturing sites. Many of our sites
have already met our 2020 global target of
a 30 percent reduction in manufacturing
waste. Our recently incorporated IFCN sites
are not included in these waste targets
as we progressively integrate them.

One of our 2020 targets is disposing zero
waste to landfill. This is especially challenging
In parts of the world where recycling or even
energy from waste disposal routes are not yet
practical. We made significant improvements
in waste reduction and recycling during the
year, with all but two of our manufacturing
sites around the world achieving zero waste
to landfill in 2019. We are currently seeking
a different route to dispose of waste from
those sites where a local waste-to-energy
disposal option closed in 2019.

Waste generation is not just about
efficiency in the production process. Quality
control, oversupply, obsolete machinery
and changes in packaging can also require
materials to be disposed of or reused
elsewhere. By minimising all kinds of waste,
we enhance our operational efficiency.

Revised Global Waste Management
standards introduced this year harmonise and
enhance the product waste management
requirements at our sites. The new guidelines
include specific requirements to prevent the
misuse of waste and ensure safe disposal of
products and materials. This has particular
relevance for our OTC health products.

GHG emissions
Around 2 percent of RB’s carbon footprint
is associated with emissions stemming
mainly from our manufacturing sites (Scope
1 and Scope 2). Most of our operational
emissions come from electricity use, making
our commitment to buying only renewable
electricity by 2030 all the more important.
Other emissions from either upstream in
our supply network or downstream to our
consumers and the final disposal of products
after their use, account for the remaining

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 201998 percent. Major causes of these indirect
(Scope 3) emissions include the consumer
use of our products, accompanied by the
ingredients we use, packaging and logistics.
Our factories and operations are

becoming more energy efficient and adopting
renewable energy sources. We had made
good progress in reducing our carbon
footprint but this slowed a little in 2019,
with lower production levels increasing
energy intensity as compared with the
previous year. Renewable energy purchases
helped reduce our overall Scope 1 and 2
GHG emissions against our 2012 baseline
(IFCN sites are excluded). As we review
our position and targets beyond 2020, we
recognise the need for stronger focus on
these areas of environmental performance.
Reducing our Scope 3 emissions is
much more challenging. Innovative solutions,
such as better product design and closer
collaboration with intermediaries such as
appliance manufacturers, can have some
impact. We can also influence consumer
behaviour when using our brands by
encouraging the use of lower temperatures
or less water where practical. However, like
many others, we recognise that change here
can be much more difficult and requires
collaboration with trading partners and
the active engagement from consumers.
In recent years, we have focused on
strengthening product quality, safety and
production efficiency. These have all helped
to reduce energy use but this has also meant
that transformative environmental initiatives
were a less immediate priority.

We are currently reframing these
plans and looking ahead to 2030 with new
science-based targets for reducing global
warming and tackling climate change.
There will be a stronger focus on the
IFCN sites, our largest users of energy and
water. We will examine both the energy
we use and how we use it at all our sites.
It will also mean reviewing our products,
their design, their ingredients, packaging
and how they are used by consumers
from a sustainability perspective.

42%

reduction in GHG emissions per unit of
production since 20121

C A S E S T U D Y

TACKLING DEFORESTATION WITH
THE EARTHWORM FOUNDATION

Our comprehensive programme with
the Earthworm Foundation focuses
on securing positive social and
environmental change in the sourcing
and production of palm oil and latex.

RB continues to support Earthworm’s
programme to prevent deforestation in our
supply chains. This uses real-time satellite
imagery to identify recently deforested
areas that may be used for palm oil
plantations. We have started working
systematically with our suppliers to remove
such locations, not just from our own, but
from all supply chains. Combined with
other industry efforts, our programme

has the potential to tackle deforestation
across the entire palm oil landscape.

We support efforts to engage
governments, producers, communities
and NGOs to develop comprehensive
land use plans across palm oil sourcing
areas, relevant to our supply chains.
Through Earthworm’s Rurality programme,
we are working to improve conditions
for small-scale farming communities in
Malaysia, Indonesia and Thailand. Efforts
are centred on diversifying farmer incomes,
increasing the efficiency of agricultural
practices and reducing pressure on
farmers to clear forests to grow crops.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019S17 2 S TAT E M E N T

term if we understand the views and needs
of our stakeholders. Understanding our
stakeholders is key to ensuring the Board
can have informed discussions and factor
stakeholder interests into decision-making.

Factoring stakeholder interests into
Board deliberations
During 2019, we reviewed our approach
to engagement with the workforce,
Shareholders and other stakeholders.
The Board decided on a series of measures
to ensure stakeholders’ views and
interests were properly understood and
were factored into decision-making.

In line with the UK Corporate

Governance Code 2018, the Board appointed
Mary Harris as the designated Non-Executive
Director for engagement with the Company’s
workforce in July 2019. We also undertook
a detailed mapping exercise to assess other
key external stakeholder groups. A ‘top
50’ stakeholder list was established, of
which the key stakeholder groups were
identified as customers; consumers; partners;
communities; NGOs and ratings agencies; and
Government and international organisations.
The Board is also commissioning independent
perception research into other external
stakeholders’ views and expectations of
RB as a Company. The Board will review
these research findings – along with
other external stakeholder insights – as
part of our ongoing decision-making.

Stakeholder influence on strategic
decisions
Following the announcement in January
2019 of CEO Rakesh Kapoor’s intention to
retire during the year, the Board focused in
the succeeding months on the appointment
of his successor. We considered the
candidates’ fit with the existing RB culture
as well as the need to evolve that culture.
We looked for an individual that would
improve performance, while strengthening
RB’s stakeholder relationships and
sustainability focus. The Board took account
of feedback from Shareholders, employees
and other stakeholders in appointing
Laxman Narasimhan in June 2019.

Laxman joined the Company in the
following month, with his appointment
as CEO becoming effective at the
beginning of September. He consulted
widely, both internally and with a range
of external stakeholders. Discussions with
employees highlighted the distraction
from performance caused by some of the
Project Gemini activities to enable the
two business units created by RB 2.0 to
operate autonomously. This led to Laxman’s

recommendation, which the Board approved,
to pause such activities pending the
outcome of his strategic review. Feedback
from multiple stakeholders, including
customers, Shareholders and employees,
also informed that strategic review, the
conclusions of which were reviewed and
approved by the Board in February 2020.

Process for taking stakeholder views
and interests into account
Templates for Board papers were updated
to require a stakeholder impact analysis to
be completed for any strategic decisions
requiring its approval. The stakeholder
impact analysis provides the Board with
assurance that potential impacts on our
stakeholders are being carefully considered
by management when developing plans
for Board approval. It also helps the Board
to take into account the views and needs
of stakeholders when making decisions.
The paper template will be used for
strategic decisions made during 2020.

H O W T H E B OA R D E N G AG E D
W I T H I T S S TA K E H O L D E R S
D U R I N G T H E Y E A R

Our people
We understand the importance of engaging
with, and understanding the perspectives of,
our workforce. The Board has regular reviews
of talent, employee engagement and culture
and direct interactions at Board meetings
with key people in the business on a variety
of topics. We also recognise the benefits of
personal interaction and informal discussions
in learning more about the day-to-day
operations; the development and execution
of strategy and gathering direct insight into
our culture and workforce engagement.
The Board held several round-table
discussions with employees during 2019 to
understand the issues that are important to
them and how to strengthen engagement
with the Company’s purpose. Group and
individual sessions took place in Parsippany
and Montvale, NJ and Slough and Hull, UK
with employees from a range of backgrounds
and job roles. The Board plans to expand
these sessions in 2020 and will consider
the feedback in decision-making. During
the year, the Chairman and other Board
members were also actively involved in
meeting top talent and future leaders.
Our values are key to our distinct
culture and are encapsulated in Freedom
to Succeed, our new employee value
proposition, which we rolled out during 2019.

This statement, which forms
part of the Strategic Report, is
intended to show how RB’s
Directors have approached and
met their responsibilities under
s172 Companies Act 2006
during 2019. The statement has
been prepared in response to
the obligations as set out in the
Companies (Miscellaneous
Reporting) Regulations 2018,
and the UK Corporate
Governance Code 2018.

As required by s172 of the UK Companies
Act 2006, a Director of a Company must
act in a way s/he considers, in good faith,
would most likely promote the success of the
company for the benefit of its Shareholders.
In doing this, the Director must have
regard, amongst other matters, to the:

•

likely consequences of any decisions in
the long term;

interests of the Company’s employees;

need to foster the Company’s business
relationships with suppliers, customers
and others;

impact of the Company’s operations on
the community and environment;

Company’s reputation for high standards
of business conduct; and

need to act fairly as between members
of the Company.

As a Board our aim is always to uphold
the highest standards of governance and
conduct, taking decisions in the interests
of the long-term sustainable success of
the Company, generating value for our
Shareholders and contributing to wider
society. We understand that our business
can only grow and prosper over the long

4 6

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019Our culture has been further enhanced in
early 2020 with our renewed purpose, fight
and compass, as detailed on pages 10 and
11. During 2020 the Board will be looking
to understand how this cultural change is
being received by the broader workforce
through surveys, as well as through direct
engagement across the organisation.
The Company’s non-hierarchical
structure encourages all employees to make
their voices heard. In 2019, we established
our Purpose Council, comprised mainly of
younger employees, to identify and add
momentum to social and environmental
initiatives. Senior managers have youth
mentors that are empowered to provide
input, and share the wisdom of youth.
Our Speak-Up whistleblowing policy
provides safe communication channels
for those wishing to raise concerns.

The Board has undertaken a thorough
exercise to understand the composition of
the RB workforce, and while we are primarily
focused on permanent employees, we remain
alert to any issues with employees of our
subcontractors and ensure our procurement
contracts have the highest possible
requirements regarding working conditions.

Shareholders
The Board also continued engagement
with investors. Several Non-Executive
Board members participated in one-on-one
investor meetings, in addition to the normal
meetings between executive management
and investors and analysts. Our Chairman
had extensive interactions with many of
our key Shareholders, particularly upon
the announcement of our retiring CEO
and the appointment of Laxman, our new
CEO. This ensured they were kept abreast
of Company strategy and transition plans
during this important succession period.
The Chair of our Remuneration
Committee has continued to have a close
dialogue with Shareholders in respect of
executive remuneration, and we are pleased
to note the wide-ranging acceptance
of the improvements that we made to
our Remuneration Policy during 2019.
The Chairs of both our Audit and CRSEC
Committees also participated in one-on-
one investor meetings on an ad hoc basis.
We welcome the opportunity for
individual Shareholders to attend our
AGM each year where they can meet
the Directors and ask questions of
the Board. Board members listen and
respond to Shareholder views and feed
back to the business as necessary.

Customers
Our CEO has visited several key customers
since his appointment as CEO in September
2019, including major US retailers, to maintain
and build on our existing relationships and
ensure that key stakeholder concerns are
understood and reported back to the Board.

Communities and Partners
During 2019, RB partnered with the
world-renowned Danish Institute for Human
Rights and completed its first-ever country
level human rights impact assessment. The
assessment focused on our entire value in
Thailand, from sourcing to consumers, and
that means a particular emphasis for two
brands – Durex and Enfa. Completing the
assessment at a country level gives us a
holistic view of the human rights impacts
across the entire value chain for these
two brands: from latex plantations to our
immediate suppliers and business partners;
from our own manufacturing operations
and the communities around them, to our
customers and finally our consumers. This
robust and in-depth process demonstrates

RB’s commitment to acting responsibly by
understanding and tackling social issues,
such as sanitation and sexual health.

In December, we also held a workshop
on human rights which was attended by our
CEO, where he met with representatives from
the Danish Institute for Human Rights an
international NGO and major customers. The
workshop focused on how we are embedding
human rights in our work at RB and our value
chain. The outcomes of the workshop will be
reported back to the Board and the Board will
look to continually engage stakeholders to
tackle these issues and drive positive impact.
Throughout this Annual Report are
further examples of how we take into account
the likely consequences of our long-term
decisions; build relationships with our
stakeholders; understand the importance of
engaging with our employees; understand
our impact on the environment and the
communities in which we operate; and how
we strive always to behave responsibly.

As a Board, direct interaction with
employees, both at Board meetings
and more informally, adds real value to
our decision-making. We regularly hold
our September Board over several days
in a key market. In 2019, we went to
our Parsippany site in the US. We held
townhalls and smaller group meetings
there and gained invaluable insights
into three key themes – our purpose;
employee wellbeing and our culture.
These are reflected in the new strategy.

In my first six months in the role, I have
focused on ensuring the full Board has
a thorough understanding of workforce
composition and key metrics, including
gender, age, ethnicity, as well as
turnover and internal promotion rates.
The Board reviewed employee concerns
and sentiment, as well as examining the
existing communication channels and
workforce engagement mechanisms,
to ensure its interaction plan leverages
the comprehensive and well-functioning
procedures already in place. The Board’s
2020 engagement plan covers topics
that will be brought to Board and
Committee meetings as well as site
visits and other direct engagement.

We make
better decisions
with input from
our workforce

Mary Harris
Designated Non-Executive Director
for engagement with the Company’s
workforce (see page 101)

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019O P E R AT I N G R E V I E W

Health

4 8

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 20192 019 P E R F O R M A N C E H I G H L I G H T S

O U R 2 019 P R I O R I T I E S

LFL Net Revenue growth

(1.0)%

Adjusted Operating Margin1

26.7%

Double-digit growth in e-commerce2

Improved supply chain resilience

Reinforcing our strong foundations in safety,
quality and regulatory compliance (SQRC)

Innovating to empower people globally to
manage their own health more effectively

Focusing on operational performance
and execution

Driving growth on digital platforms

Investing in our people, capabilities
and resources

2019 fell short of
expectations, the
focus now is on
restoring operational
performance and
improving our
execution

Adi Sehgal
Chief Operating Officer – Health

Our markets and performance in 2019
This was a disappointing year for the Health
business unit. Despite the good growth
prospects in many of our markets and
stable consumer off-take during the year,
Health net revenue was £7,815 million, with
a like-for-like decline of -1.0%, comprised
of -4% volume and +3% price/mix.

Within this, we continue to make
strong progress in e-commerce as we meet
consumers’ changing shopping habits.
E-Commerce1 activities made up 11 percent
of total Health net revenue during 2019
led by IFCN (Infant and Child Nutrition),
VMS (Vitamins, Minerals and Supplements)
and our sexual wellbeing brands.

Overall for Health, adjusted operating

profit was £2,088 million, with a 26.7
percent margin. This was -180bps lower
than the prior year. This reflected a
gross margin decline (negative product
mix, lack of operational leverage and
investment in capacity), and increased
investment in brand building initiatives.

1 Non GAAP measures are defined on page 62.
2 Sales achieved on our brands’ own websites + estimated

sales achieved by our brands corresponding to sales
through our retailers’ websites (non-audited data).

Our brand portfolio
The Health business unit has strong brands
in categories with good structural growth
characteristics. Most of our revenue comes
from brands that are market leaders in
their category market combinations. Brand
equity is foundational to the business
success and we continue to invest in this.

Infant and child nutrition
In our first two full-years of ownership of the
Mead Johnson Nutrition (MJN) business, we
have grown revenue at 3 percent per annum,
compared to two years of net revenue
decline previously. From a macro perspective,
however, we have seen a slowing of volume
growth and more competitive market
conditions in Greater China in particular.
Following the 2018 supply disruption, we
have also identified a need to focus on
key aspects of the IFCN supply chain. As
a result, we no longer expect to improve
margins to the levels originally envisaged
at the time of acquisition. These factors
have been considered within our annual
impairment review of IFCN goodwill and
other intangible assets. As a result of this
review, we have recognised an impairment
of £5,037 million as a non-cash exceptional
item in our 2019 income statement. Detailed
information can be found in Note 9 to the
accounts on page 172 of this Annual Report.
The market in China continues to see

growing demand for premium products,
offset by a recent decline in births. We are
however seeing improving shares trends,
and the recent launch of our grass-fed
innovation has been well received by

consumers to date. We expect the first
quarter of 2020 to see some weakness as
these factors remain relevant. The timing of
the Chinese New Year will impact phasing
of shipments, and disruption from COVID-19
is leading to some temporary changes
in channel and ‘pantry’ stocking levels.
IFCN net revenue in 2019 was lapping the
manufacturing disruptions in the prior year.
Our North American business had
another strong year following the successful
launch of Enfamil NeuroPro during 2018
in the mainstream IFCN segment, and
strong growth in the specialist allergy
segment, which is both a faster growing
segment and one where our key brand
Nutramigen is gaining market share.

Other IFCN markets continue to be
mixed, and they remain a focus area for
future development.

Over-the-counter
Our over-the-counter (OTC) brands declined
-4.4% with solid growth in Europe, offset
by a decline in the US following lower than
average incidence of cold and flu at the
beginning of the year, significant retailer
destocking in the US and some limited supply
challenges. Overall share trends were positive,
as were in-market consumption trends.

Gaviscon and Nurofen delivered mid-
single digit growth behind a combination
of recent innovations, such as Guardium
PPI (by Gaviscon), and improved execution
and education from medical marketing,
doctor detailing and digital activation.

Mucinex delivered an extremely weak

net revenue performance in 2019 due to

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019
O P E R AT I N G R E V I E W : H E A LT H CO N T I N U E D

the reduction in retailer inventory impacting
our US business. This is not reflective of
in-market trends where we saw mid-single
digit market growth and improving share
trends during the course of the year as
we lapped the re-entry of private label
competition. Mucinex continues to build
on its strong brand equity via the launch of
its new innovation – Mucinex NightShift,
for relief at night, and better mornings.

Local OTC brands experienced a mixed
year with growth in Lemsip (UK), Luftal and
Naldecon (Brazil) more than offset by Delsym
(US) due to retailer destocking and declines
in a number of other small, local brands.

Wellness, health, hygiene and VMS
Our other health segment declined by -2.2%
on a like-for-like basis in 2019.

Dettol, our largest brand in other
health grew despite a competitive pricing
environment across multiple emerging
markets, combined with slowing market
conditions in India, which impacted our
net revenue performance. Measures have
been put in place to restore our price
competitiveness and we have returned to
share growth in recent months. Dettol’s
powerful purpose agenda, and trusted
reputation in emerging markets position
this brand well to drive significant value
creation over the coming decade.

Durex also experienced a tough year with
a relatively flat net revenue performance as
we faced increased competitive pressures
in China. We expect these pressures to
remain throughout 2020 as we build a
strong innovation pipeline, consistent with
the Durex promise of quality excellence.

For our VMS brands, our overall
performance was subdued given seasonal
factors at the beginning of the year and
some channel destocking in the US.

Scholl was again a headwind for the
business in the year, as we implemented a
strategic re-focusing of the brand towards
a more sustainable portfolio. Our foot aid
segment stabilised during the year and
gadgets, a major contributor to the decline
in recent years, now represent only 17
percent of the Scholl portfolio, building a
stronger mix for recovery going-forward.

Supply chain resilience
The manufacturing issues that arose for
our IFCN business in 2018 highlighted
the importance of managing a strong
and flexible supply chain. We have been
investing in stronger foundations to build
supply chain resilience, rolling out global
standards for safety and quality, and
bridging gaps in supply to ensure we aren’t
caught out by changes in demand. We are
targeting improvements with substantial

INVESTING
IN DIGITAL

Led by a strong performance in China
we achieved double-digit growth on
digital platforms during 2019. By the
end of the year, e-commerce activities
made up 11 percent of total net revenue
for health. Our sexual wellbeing, IFCN
and VMS category brands were the
most active online, but growth was
broad-based across all Health brands.

E-commerce is a key growth driver and
we are investing to grow our capabilities.
Digital has been integrated as a core skill
for our brand marketing people. More
than 40 percent of our global media
spend is now online. We now have 6 agile,
in-house content studios. We are building
a data ecosystem that connects all brands
and channels. We are in the process of
centralising first-, second- and third-party
data for insights and audience building.

investments in resources, teams and tools.
We rolled out new enterprise resource

planning (ERP) software during the year. This
significantly extends our ability to automate
linked processes and manage our supply
chain in a more integrated and agile way.

Science-led innovation
Our research effort retains scope for rapid
innovation in response to changing market
conditions, but our core strengths lie in
longer term, science-led innovations in
support of our purpose that add value to
people’s lives. We more than doubled our
investment in clinical trials during the year.
In the US, there was an encouragingly

positive market reception for our new
Mucinex NightShift range. The product
helps cold and flu sufferers gain a good
night’s sleep and wake feeling fresh, while
getting to work on their symptoms.

Broader and deeper stakeholder
engagement
We continue to advocate for a healthcare
future where self-care plays a more
important role. In the last year we have
commissioned reports into the future
of self-care, teamed up with Walmart
to offer free video-based medical
consultations and distributed education
and advice on cognitive development.

Our strategic investment in Your.MD
is another example of RB partnering with
others to help unlock self-care. Your.MD
is an online marketplace for trusted health
service providers and products. It provides
personalised advice to consumers via an
Artificial Intelligence-based assistant.
RB’s investment will accelerate its
speed-to-market and improve access to
pre-primary care for consumers globally.

Sustainable performance
Our focus on operational execution implies
closer engagement with customers,
suppliers, consumers – all our major
stakeholders. We are allocating more
resources to front-line operations to build
stronger, more consistent delivery as
we continue to invest in our brands.

The Health business unit has leading

brands in structurally attractive markets.
Growth prospects are even greater in
developing markets and these make up
approximately 50 percent of total net revenue.
We are making more direct connections
between our purpose and our brands and
investing in supply chains, e-commerce
capabilities as well as in the brands
themselves. These are firm foundations
for restoring performance and growth.

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019C A S E S T U D Y

RB TACKLES BRAIN HEALTH
WITH NEURIVA

In April 2019, RB launched Neuriva, a
scientifically proven supplement that
boosts brain function. Neuriva includes
two natural, GMO-free ingredients,
Neurofactor and the plant-sourced
Sharp Phosphatidylserine (PS), that are
clinically proven to fuel five indicators of
brain performance, including accuracy,
concentration, focus, learning and memory.

We worked with external partners to
enter the brain health category within
just 12 months. Without our collaboration
with Futureceuticals, a world-class
ingredient discovery company, Neuriva
might have been years in the making.

Consumers today want personalised,
digitally driven solutions. With Neuriva,
for the first time, we are combining a pill
with a digital service. We partnered with
specialist brain health software company
CogniFit to build a complementary
smartphone app with its own clinical
benefit. Neuriva consumers can subscribe
to an online brain gym to manage and
monitor their brain health. They can track
and test cognitive fitness, monitor their
use of the supplement and benchmark
their performance against others. A
multidisciplinary network of nutrition and
brain health experts, including physicians,
researchers, dietitians and chefs,
support app users with brain-boosting
tips and brain-healthy recipes.

REJUVENATING RB

Restoring sustained strong performance
to Health is our top priority. In the
shorter term, the focus is on restoring
stability and consistency to operational
performance and improving our
execution. In the longer term, we will
do that by building a more resilient
business through innovation-led growth,
investing in purpose-led brands and
outperformance in e-channels.

From July 2020, Health will be
operated as two global business units;
Health and Nutrition. This will help
provide additional strategic focus on
the initiatives necessary to improve
customer service, revenue growth
and profit performance. Kris Licht will
lead Health and Adi Sehgal will lead
Nutrition, with additional responsibility
for developing our business in
e-commerce and Greater China.

Our strategy for Health and
Nutrition
The health and nutrition categories
are set to benefit from the strong
global trends set out on page 10 of this
Annual Report. In particular, the trend
to urbanisation, constraints on the
provision of state-funded healthcare,
growing populations and the move to
online commercial environments should
all benefit strong brands in our spaces.

We will invest behind our businesses
to capitalise on these growth drivers
offering consumers relevant innovation,
trusted products and availability,
supported by education and information.
This includes investment in supply
chain infrastructure, R&D and online
capabilities, as well as developing
partnerships and advocacy across the
communities in which we operate.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019O P E R AT I N G R E V I E W

Hygiene Home

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 20192 019 P E R F O R M A N C E H I G H L I G H T S

O U R 2 019 P R I O R I T I E S

LFL Net Revenue growth

3.6%

Identifying powerful social causes and
developing purpose-led innovations

Focusing on low-penetration, higher-growth
categories

Adjusted Operating Margin1

Expanding e-commerce opportunities

25.4%

Launch of start-up incubator with
Founders Factory

Strong innovation pipeline

Unlocking emerging markets

Increasing the contribution that innovation
makes to our growth rates

Investing in capabilities and innovation while
sustaining our best-in-class operating margins

Our highly integrated
model has allowed us
to adapt, innovate
quickly and deliver solid
performance

Harold van den Broek
Chief Operating Officer – Hygiene Home

Our markets and performance in 2019
Our core markets grew 3% in 2019, made
up of a combination of volume and value
growth. Against this backdrop, we benefited
from a generally solid pricing environment.
As a result, Hygiene Home net revenue was
£5,031 million in 2019, with like-for-like
growth of +3.6%. Within this, volume
growth was +1% and price/mix +3%.

Our growth was broad-based across
all our leading brands – delivering growth in
both developed and emerging market areas.
From a channel perspective, e-commerce
continued to grow strongly in Hygiene Home,
contributing 4% to total 2019 net revenue.
We continue to focus on this important
high-growth channel with increased
investment and channel specific innovation.
Overall for Hygiene Home, adjusted

operating profit was £1,279 million, with a
25.4% margin. This was 150bps higher than
the prior year, reflecting a strong expansion
in gross margin, plus operating leverage
and efficiencies in the fixed cost base, partly
offset by increased brand equity investment.

Our brand portfolio
We aim to build on our global presence by
focusing investment on our leading global
brands. These account for around 80 percent
of net revenue, delivering solutions to
improve hygiene and living experience in the
home. We invest in innovation to improve
the quality of our products and their fit with
evolving consumer needs and aspirations.
We invest in purpose-led partnerships
and brand-building campaigns to inform
and educate people on water, waste and
hygiene-related issues. These initiatives
underpin our performance in 2019 and the
strength of our brands going forward.

In North America, we saw continued
good growth from our Airwick Essential Mist
diffuser technology. Lysol, fuelled by the
success of our laundry sanitiser innovation,
was another growth driver. H1 growth was
limited by the lapping effect of a big cold
and flu season, but this gave way to stronger
growth in H2. Lysol was also aided by some
seasonal benefit in the fourth quarter.

Finish delivered a good performance

range of products, combined with new
purpose campaigns aimed at reducing
water usage. Air Wick saw success from
its new electrical range, aided by its new
i8 electrical plug which offers improved
air diffusion compared to a normal plug.
Our business in developing markets
delivered broad-based growth across our
Powerbrands. Year-end results were boosted
by a one-off indirect tax benefit, but we
nonetheless achieved high single-digit
underlying growth. Highlights included
excellent growth in Mexico across all
brands and strong performance in Brazil
backed by successful innovations.

Harpic had success with its recently

launched premium liquid, continued
progress on its purpose campaign in India
around toilets and water sanitation, and
with the expansion of its range to all areas
of the bathroom. Lysol delivered good
growth in India following the launch of
its cement surface cleaner. Vanish and
Finish also delivered strong growth.

in a competitive environment, behind Finish
Quantum Ultimate and a focus on machine
cleaner and rinse-aid additives. This was offset
by a slow performance from Air Wick which
experienced competitive market conditions.
Our operations in Europe, Australia

and New Zealand delivered a strong
performance, led by the region’s largest
brands of Finish and Air Wick. Finish saw
strong growth behind the roll-out of Finish
Quantum Ultimate in multiple markets
across Europe, the launch of our new eco

An integrated business model
The value chains for our brands are highly
integrated. This allows us to respond rapidly
to changes on the ground. Being able to
manage procurement, supply, distribution
and sales in a very integrated way unlocks
agility, optimises value and creates space for
growth. This was a key factor underpinning
our margin expansion during 2019.
Our integrated model has a

demonstrable payoff in speed to market. In
the premium segment where we operate,

1 Non GAAP measures are defined on page 62.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019
O P E R AT I N G R E V I E W : H YG I E N E H O M E CO N T I N U E D

continued strong performance depends
on identifying the right innovations and
getting them to market quickly. Brand-wide
innovation is managed globally, but
around a third of our innovations come
from local insights. These feed directly
into our category organisations. The best
ideas emerge quickly and resources get
allocated to product improvements. Our
integrated approach smooths this process.

29%

of our growth contributed by e-commerce1

1 Sales achieved on our brands’ own website + estimated
sales achieved by our brands corresponding to sales
through our retailers’ websites (non-audited data)

Science-led innovation
Innovation is a key driver for the business.
Increasingly, we are focusing on longer
term, purpose-led innovation that
makes a difference to people’s lives.
One metric for innovation is its
absolute contribution to growth. We also
monitor portfolio vitality, the proportion
of the portfolio that is made up of new
products. We aim to meet and exceed
peer group performance on the vitality of
our portfolio. We made good progress in
2019, our products launched within the last
three years increased. We aim to maintain
that momentum to reach a position of
innovation leadership in our markets.
Lysol’s laundry sanitiser product
illustrates the benefits of science-led
innovation. The sanitiser uses the
credentials of the Lysol brand, germ killing
and safe protection, and applies them
to a novel process. Unlike a typical fabric
softener, Lysol’s sanitiser actually kills
the germs and bacteria in the laundry.

This hygiene-based approach to laundry
cleaning has unlocked significant interest,
particularly in the US. Penetration is still
low, but there is tremendous potential
in this rapidly growing market.

Working with external partners
We are exposing the organisation to
external inspiration by working with
suppliers and start-ups in the technology
and product spaces. In 2019, we set up a
joint venture, Founders Factory Hygiene and
Home to incubate and scale-up promising
start-ups that address human needs.

We are also collaborating with external
partners to bring our purpose to life. Finish
teamed up with National Geographic in
Turkey and launched a global campaign
to tackle the pressing issue of water
scarcity. Following their success with the
Brazilian Red Cross and the London School
of Tropical Medicine, Mortein and SBP
are extending their mosquito eradication
programme to other countries.

INVESTING
IN DIGITAL

E-commerce1 continued to perform
strongly in 2019. It contributed
more than 30 percent of our
growth and now accounts for over
4 percent of total sales, up from
3 percent in 2018. Our most active
platforms are in our three main
markets – the US, China and India.

Our digital journey is well underway.
We are building digital skills
companywide. A more rigorous
approach to programmatic buying
is adding clarity to our strategies
for targeting specific communities
in key markets, especially the
US. Real-time engagement with
consumers is improving customer
service and accelerating innovation.

5 4

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019REJUVENATING RB

Many of our markets benefit from global
macro trends, including urbanisation and
the growth of the middle classes. We
offer consumers purpose-led products
that meet their needs and advance
positive social impacts. We focus mainly
on higher-margin, under-penetrated
markets that provide a combination of
attractive margins and volume growth.

From 2020 onwards, Hygiene Home
will be known as Hygiene, still offering
the same strong portfolio of trusted
household hygiene and wellness
products. Headquartered in Amsterdam,
the business will continue to be led by
Harold van den Broek, who becomes
President, Hygiene (previously Chief
Operating Officer, Hygiene Home).

Our strategy for Hygiene
Our Hygiene business is today a solid
performer amongst its peer group with
steady revenue growth and strong
margins. The focus going forward
will be to capitalise on its strengths –
leading, trusted brands and a strong
science-base – to develop its market
positions through increased penetration
in existing markets and developing new
markets where our products and brands
are not yet present or well represented.

To achieve this, we will invest in
broadening our focus on new growth
markets by increasing our ‘core’
category market units, with increased
spending on people, marketing and
product development. We will invest
in digital and accelerate innovation
through external partnerships, while
ensuring purpose is at the heart of our
brand strategies. At the same time,
we will address the changing needs of
consumers and customers for sustainable
solutions around packaging, product
performance and e-commerce.

99%

biodegradable, free from chlorine bleach,
formaldehyde, phosphates and quats

C A S E S T U D Y

VEO – TOUGH ON GRIME
KIND TO THE PLANET

VEO’s breakthrough formula goes
beyond surface cleaning. Bio-based
surfactants and active-probiotics remove
dirt and grime at the microscopic level
from crevices and cracks. And it carries
on working for up to three days.

It contains active probiotics that preserve
the home microbiome. It adds up to
a natural, efficient cleaning agent

that works with, rather than against,
the beneficial bacteria that keep our
homes healthy, hygienic and safe.

VEO’s formula is 99 percent biodegradable,
free from chlorine bleach, formaldehyde,
phosphates and quats. The sustainable
bottle features a removable label
and uses 95 percent post-consumer
recycled plastic to aid recycling.

and build shared successes with local
and international customers. We aspire
to be known for our entrepreneurship
and excellence in execution, delivered by
a capable, diverse organisation that acts
responsibly and with integrity. These are the
active ingredients for sustained success.

Sustainable performance
Clearer focus and more clarity within
the organisation have contributed to
our improved operating margin this
year. Net revenue growth is in line with
our medium-term objectives. But we
operate in a fast-changing world and we
can never be complacent, we continue
to sharpen operational performance,
enhance execution and minimise waste.
Our strategic priorities are setting us up for
sustained growth. With our purpose-driven,
innovation-led approach we service the
needs of consumers across the world

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019N O N - F I N A N C I A L I N F O R M AT I O N S TAT E M E N T

The information below is intended to help our stakeholders understand our position on key non-financial matters, following the new
non-financial reporting requirements contained in sections 414C(7), 414CA and 414CB of the Companies Act 2006.

Reporting requirements

Policies and standards which govern our approach

Additional information and risk management

Environmental matters

Employees

• Environmental policy
• Responsible sourcing of natural

raw materials policy

• Plastics Pledge

• RB Code of Conduct
• Our Values
• Occupational Health & Safety
• Speak Up policy
• RB Corporate Diversity & Inclusion Policy

Human rights

• Policy on Human Rights and Responsible

Social and community
matters

Business

• Modern Slavery Act Statement
• Commitments to international standards

• Breast-Milk Substitute (BMS) and

Marketing Policy
• Consumer Safety

Anti-bribery and
anti-corruption

• RB Code of Conduct
• Speak Up policy

Policy embedding, due
diligence and outcomes

Principal risks and impact
of business activity

Description of business model

Non-financial key performance
indicators

1 Information not in the public domain.

Group Environmental
Management System1
Mapping what matters to our stakeholders
Our Sustainability Performance
Environment

Mapping what matters to our stakeholders
Our Sustainability Performance
People
CRSEC Committee Report
Gender Pay Gap Report
Group Occupational Health &
Safety Management System1

page 14-17
page 18-19
page 40-45

page 14-17
page 18-19
page 28-31
page 111-116

Mapping what matters to our stakeholders
Our Sustainability Performance
Partners
Environment

page 14-17
page 18-19
page 32-35
page 40-45

Our commitment to auditing and transparency
on BMS
Mapping what matters to our stakeholders
Our Sustainability Performance
Communities
Social Impact Investment Report

page 14-17
page 18-19
page 36-39

People
CRSEC Committee Report

Risk Management and Principal Risks
CRSEC Committee Report

Principal Risks

Our Business Model

page 28-31
page 111-116

page 64-76
page 111-116

page 66-74

page 10-11

From pages 18-19

Most of our reporting on these topics and KPIs are contained in our Strategic Report under the sections entitled Mapping What Matters Most to our Stakeholders, Our Sustainability
Performance, Consumers, Customers, Employees, Partners, Communities, Environment, and Risk Management (or are incorporated into the Strategic Report by reference for these purposes
from the pages noted). RB has formulated appropriate policies and due diligence procedures regarding all the non-financial information presented in this Annual Report. We make it our
responsibility to follow legislation and policy diligently. Insights into key policies and due diligence procedures, and the basis and methodological principles for the collation of our key
sustainability metrics, can be found online at www.rb.com/responsibility/insights.

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 baseline.

Board Directors

Senior managers

Other employees*

7 (2018: 8) male

417 (2018: 424) male

20,472 (2018: 20,624) male

4 (2018: 3) female

148 (2018: 139) female 16,708 (2018: 16,147) female

* 24 persons with undisclosed gender.

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019
Greenhouse Gas (GHG) emissions

Our GHG data includes emissions from operations covered by the Group Financial Statements for which we have operational control.
Where we acquire new businesses, we include their emissions from the first full calendar year of our ownership onwards.

In 2019, our GHG emissions from our entire operations, including manufacturing, R&D, offices and distribution centres, were made up of:

•

Scope 1: 140,117 tCO2e (2018: 148,214) – emissions from combustion of fuel in our facilities

Scope 2: 201,902 tCO2e (2018: 247,856) – emissions from energy supplied to us, such as electricity, heat, steam or cooling

Total emissions from Scope 1 and Scope 2 activities in 2019 were 342,019 (2018: 396,070). We calculate our emissions intensity per unit
of production1, which in 2019, equated to 0.0424 tCO2e. (2018: 0.0423).

We reported the above on a market-based approach in line with the WRI/WBSCD Greenhouse Gas Protocol, Scope 2 Guidance and our
Reporting Criteria. Following a location-based approach, our Scope 2 emissions for 2019 were 273,688 tonnes of CO2e (2018: 309,179)
and our total Scope 1 and 2 tonnes of CO2e were 413,805 (2018: 457,393).

1 The scope of our GHG emissions per unit of production KPI is manufacturing and warehousing. Including R&D and offices the GHG emissions intensity per unit of production would

be 0.0447 tCO2e.

Our policies

Anti-bribery and corruption
Our policy is that all RB companies, employees and contractors must comply with the anti-bribery, anti-corruption and competition laws of
all countries in which they operate. Directors and managers must ensure that the employees and contractors they supervise are aware of and
comply with this policy. All employees and contractors must certify annually that they have complied with our Code of Conduct and the
Audit Committee 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 our stakeholders. In addition, RB has policies
committing to equal opportunities at work and to providing a safe and healthy working environment. Health and safety performance is
monitored through our Group Occupational Health and Safety Management system, enabling us to investigate any incidents and take any
necessary action. We have a Speak Up policy and process, allowing any employee or third party to confidentially report a violation of the
Code of Conduct, local law or regulation, or unethical behaviour.

Human rights
Our Human Rights and Responsible Business Policy is based on the International Bill of Human Rights and the International Labour Organisation’s
(ILO) Declaration on Fundamental Principles and Rights at Work. We also follow the UN Guiding Principles on Business and Human Rights and
Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises.

Consumer safety
Our Consumer Safety Policy commits us to complying with relevant laws, assessing our products, packaging, labelling and ingredients, and
evaluating consumer safety issues. We apply consistent global standards, freely disclose consumer safety information and check that our
products comply with our Restricted Substances List (RSL).

Responsible sourcing policy
This commits us to ensuring that natural raw materials 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.

Environmental policy
This sets out our objectives for reducing our environmental impacts. It requires us to comply with relevant legislation, consider environmental
issues in key decisions, and engage with multiple stakeholders for better environmental performance.

See more
www.rb.com/responsibility/policies-and-reports

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019

F I N A N C I A L R E V I E W

GOOD FINANCIAL
PROGRESS IN
HYGIENE HOME,
BUT WEAKER IN
HEALTH

A D R I A N H E N N A H

Net Revenue

£12.8bn

+2.0%
+0.8% LFL1

Adjusted Operating Profit1

£3.4bn

(0.1%)3

Operating Loss

(£2.0bn)

(163.9%)3

Adjusted Operating Margin1

26.2%

(50bps)3

Operating Margin

(15.2%)

n/m4

Net Income – Adjusted1,2

£2.5bn

+2.7%3

Net loss from continuing operations2

(£2.8bn)

(228.7%)3

Earnings Per Share – Adjusted1

349p

+2.8%3

Loss Per Share from continuing
operations

(393p)

(228.8%)3

Free Cash Flow1

£2.1bn

87% free cash flow conversion

1 Non-GAAP measures are defined on page 62
2 Net (loss)/income attributable to the owners of the parent

company

3 Restated for the adoption of IFRS 16 (see note 31)
4 Not meaningful

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019The Group delivered 0.8% like-for-like (LFL) revenue growth in 2019;
a 50bps decrease in operating margin; a 2.8% increase in Adjusted
Diluted Earnings per share; and free cash flow conversion of 87%.
The Group incurred an impairment charge of £5.0bn on the net
book value of its investment in MJN, resulting in a reported net loss
of £2.8bn.

The Group was run as two discrete business units during the year;

and this is reflected in the segment reporting in this Report.

The momentum created in the Hygiene Home business in 2018
continued in 2019, delivering 3.6% LFL revenue growth, and 150bps
of margin improvement; ahead of our expectation for the progress of
this business. The business benefited from the focus on its brands, the
further optimisation of its operating model, and from the increase in
investment in the business in 2018.

RB2.0
The Group was engaged from late 2017 in implementing the RB2.0
programme. This was designed to deliver by mid-2020, Health and
Hygiene Home as commercially distinct units with separate
infrastructures, which would allow the units to operate as substantially
autonomous businesses. This programme was paused in mid-2019,
and subsequently stopped. It has been replaced by the strategy set
out in pages 6 to 9.

2020 Outlook
For 2020 the Group expects to generate a higher level of revenue
growth on a like-for-like basis than achieved in 2019 (2019: 0.8%)
and make steady progress toward our medium-term target.

While the Group has started the year strongly, there are a number

Conversely, the performance of the Health business was below

of challenges, including uncertainty around the impact of COVID-19.

From an operating margin perspective, in addition to the 100
basis points of operating margin headwind principally normalising
variable pay levels, the Group plans to invest £200m (c.150 bps) in the
business to rejuvenate commercial capabilities and address issues
where needed with consumer service and value. And, in addition, to
invest in cost-to-achieve transformation spending of roughly £125m
(c.100 bps) in each of the next two years (total of £250m). These one
time costs to achieve will be included within adjusted operating profit.
As a result, we expect 2020 adjusted operating margins to be around
350 bps lower in 2020 than those achieved in 2019.

COVID-19
The Group continues to monitor the impact of COVID-19. The Group
has assessed the impact of COVID-19 on its going concern and viability
statement which is on page 77.

Due to illiquidity in the short-term market for commercial paper,

in March 2020, the Group drew down around £750m from its
committed borrowing facilities. Committed facilities total £5,500m
(2018: £4,500m), of which £4,750m remains undrawn, and available
to draw. The Group remains compliant with its banking covenants.

Dividends
The Board of Directors recommends a final 2019 dividend of
101.6 pence (2018: 100.2 pence), to give a full year dividend of
174.6 pence (2018: 170.7 pence). The dividend, if approved by
Shareholders at the AGM on 12 May 2020, will be paid on 28 May
2020 to Shareholders on the register at the record date of 17 April
2020. The ex-dividend date is 16 April 2020. The final dividend will
be accrued once approved by Shareholders.

The Board intends to maintain its policy of paying an ordinary
dividend equivalent to around 50% of total adjusted net income over
the medium term. However, in anticipation of a reduction in adjusted
earnings in the short term, it is the Board’s current intent to maintain
the 2019 absolute sterling value of the dividend until the 50% of
adjusted net income policy indicates an increase.

our expectation; delivering a 1.0% LFL revenue reduction and a
180bps margin reduction. It has taken longer than we expected to
integrate MJN and RB Health and to implement focused operating
models for the different parts of the business at a time of leadership
change. We have also concluded that the business should increase
investment in some areas. These lessons and changes are reflected in
the changes in the direction for the Group set out on pages 6-9 of
this Report.

Cash flow continued to be strong. We generated £2.1bn of free

cash flow in the year. Cash flow conversion, expressed as free cash
flow divided by adjusted continuing Net Income, was 87%. This was
slightly below our target, principally as a result of exceptional cash
spend on the MJN acquisition and RB2.0, which reduced conversion
by 8%.

Capital Allocation
Our capital allocation policy remained unchanged during the year.
Our priorities were:

•

Reinvesting in the business

A dividend of 50% of Adjusted Net Income

Reducing debt levels

Net debt was £10.7bn at the year-end, broadly equal to the start of
the year. Payments in respect of the settlement with the DoJ (see
page 201) substantially used the free cash flow generated after paying
the dividend.

The Group is currently rated A- by S&P and A3 by Moody’s. In
both cases the rating has a negative outlook reflecting the expectation
of somewhat reduced operating margins and free cash flow
generation over the next three years, as described on pages 6-9.
The Board’s gearing policy remains unchanged – to seek to run the
company in the long-term as a single A credit rating. This reflects the
Board’s view of the long-term nature of our brands, the core of our
business; the importance of having a long-term view in managing
them well for stakeholders; and the desire to have a balance sheet
consistent with this long-term view.

Return on Capital Employed (ROCE)
The Group continues to focus on employing capital appropriately to
drive long term value creation for its Shareholders. The Group’s ROCE
in 2019, excluding the impairment of goodwill and other intangible
assets, was 10.3%, a decrease against 10.7% (restated for IFRS 16)
for 2018. The decrease was principally due to a 1.9% reduction in
adjusted operating profit at constant exchange rates and a slight
increase in the adjusted tax rate.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019F I N A N C I A L R E V I E W CO N T I N U E D

Detailed Financial Review
Total full year (“FY”) net revenue was £12,846m, with growth of
+0.8% on a LFL and constant exchange basis. The majority of our
revenue and profits are generated outside of the UK, and the
translation impact of consolidating local business into our reporting
currency, resulted in a +1.2% increase to net revenue due to the
depreciation of sterling against the weighted average of currencies we
operated in during 2019. Total net revenue growth at actual rates was
therefore +2.0% for the year.

Year ended 31 December

% change

2019
£m

20182
£m

exch. rates
actual

Total Net Revenue
IFCN
Rest of Health

Health
Hygiene Home

2,980
4,835

7,815
5,031

2,839
4,923

7,762
4,835

Total

Health

12,846

12,597

+5.0
-1.8

+0.7
+4.1

+2.0

By Geography

£m

LFL1

Reported

North America
Europe/ANZ
DvM

Total

Hygiene Home

1,916
2,006
3,893

7,815

-6.1%
+0.5%
+0.8%

-1.0%

+4.6%
-0.7%
+1.5%

+1.7%

-1.5%
-0.2%
+2.3%

+0.7%

By Geography

£m

LFL1

Reported

North America
Europe/ANZ
DvM

Total

1,598
2,187
1,246

5,031

+1.0%
+2.7%
+8.6%

+3.6%

+4.4%
-1.2%
-1.6%

+0.5%

+5.4%
+1.5%
+7.0%

+4.1%

1 Non-GAAP measures are defined on page 62.
North America comprises United States and Canada.
Europe/ANZ comprises Europe, Russia/CIS, Turkey, Israel, Australia and New Zealand.
DvM comprises all remaining countries in the Group.

Our Health business unit (“Health”) declined by -1.0% on a LFL basis,
with positive benefits from price/mix offsetting lower volumes in
Health due to a combination of share loss and retailer destocking.
Within Health, IFCN grew +2.6% reflecting a strong performance in
North America, partially offset by weaker performance elsewhere.
Over-the-counter (“OTC”) revenues declined -4.4% following lower
than average incidence of cold and flu at the beginning of 2019 and
retailer destocking in the US. OTC share and in-market consumption
trends were positive. The “rest of Health” (our wellness, VMS and
hygiene brands) declined by -2.2% on a LFL basis. Dettol was weak
due to a slowdown in India and the Middle East and a competitive
pricing environment. Durex saw competitive challenges in China, and
Scholl remained weak.

6 0

Our Hygiene Home business unit saw a stable and consistent
performance in 2019 with +3.6% LFL growth. Growth was
broad-based across our brands, with growth in Finish, Lysol, Harpic
and Vanish, and comprised balanced price/mix and volume growth.

On a geographical basis, Europe, Australia and New Zealand
(“Europe/ANZ”) returned to growth across both Health and Hygiene
Home. North America saw in-market consumption growth ahead of
net revenue, due mainly to retailer destocking and supply challenges in
the Health business. Developing Markets (“DvM”) delivered strong
growth in our Hygiene Home portfolio but weakness in Health,
particularly across Africa, the Middle East, ASEAN and LATAM.

The year on year movement in our operating margin comprised:

const.1

+2.6
-2.9

-0.9
+3.6

+0.8

(bps impact on Adjusted operating margin)

Gross Margin
Brand Equity Investment (“BEI”)
Other costs
Operating Margin (adjusted)

% of
Net Revenue

60.5%
14.4%
19.9%
26.2%

Impact on
operating
margin

(10bps)
(60bps)
20bps
(50bps)

FY gross margin was 60.5%, a decline of -10bps, reflecting a decline
in Health offset by expansion in Hygiene Home. Health experienced a
combination of negative volume leverage, cost increases, and negative
mix. Hygiene Home benefited from net positive pricing and mix.

Investment behind our brands (as defined by our BEI metric),
was 14.4% of net revenue, a 60bps increase from the prior year.
Investment increased in both businesses behind the launch of
new initiatives.

Our fixed cost base was relatively stable during the year, reflecting

a modest underlying increase, more than offset by lower variable
incentive accruals due to the weak performance of Health. We expect
a return to long term levels of variable pay to provide a headwind of
approximately 100 bps in 2020.

Following the annual impairment review, the value of the IFCN

net assets was impaired by £5,037m. The book value of the IFCN net
assets prior to the impairment was £14,927m. The relevant IFRS
impairment test focused only on the current geographies and current
product types of the business. Future “white space” was not included.

At the time of the acquisition of MJN in H1 2017, we expected

medium-term market growth of 3-5%; and we expected to move the
annual growth of the business from an inherited decline to c.5% over
a few years. We also expected to be able to increase the inherited
c.23% operating margin by an incremental 6-7% with £200m annual
synergies, largely from removing duplicated corporate costs and
greater procurement effectiveness. The acquisition model implied
a 3% terminal growth rate.

The most significant changes, evident over the last year, have
been in the China market. The prospects for market growth have
lowered, as a sustained materially lower birth rate has become likely.
In addition, the competitive dynamics have changed with evolving
regulation and the progress of a number of local competitors. We have
also revised our view on the optimum long-term design of the supply
network for the business as a whole. This will be more capital intensive
than we had expected. More short-term in nature, the integration of
the MJN and RB Health businesses has progressed more slowly than
expected, particularly in LATAM and ASEAN, which has led to weaker
performance. When combined, these factors have led to a reduction in
expected revenue growth to c.3% at constant rates over the next five
years; and only a moderate net margin improvement from the current

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019position. The geographies we serve have on average general inflation
about 1% higher than sterling. In this context, we now also see a
2.5% terminal growth rate to be more appropriate. Valuing these cash
flows at a pre-tax discount rate of 9.0% gives a value-in-use of
£9,890m. We continue to see opportunities in nutrition more broadly,
in “white spaces” outside the impairment model.

As a result, operating loss as reported was £1,954m. Operating

profit adjusting items were a pre-tax charge of £5,321m (2018:
£311m). On an adjusted basis, operating profit was marginally lower
(down -0.1%, -1.9% on a constant basis) to £3,367m. Overall, the
adjusted operating margin for the Group declined -50bps to 26.2%,
driven primarily by increased investment in BEI.

Year ended 31 December

% change

2019
£m

20181
£m

exch. rates
actual

2,088
1,279

2,213
1,156

-5.6
+10.6

const.

-7.7
+9.2

£79m due to the impairment of intangible assets on Oriental Pharma,
acquired in 2012, £113m of costs relating to MJN/RB2.0 restructuring
programs and £81m due to the amortisation of certain intangible
assets. Further details of these items can be found in Note 3.

Discontinued operations
The £898m loss reported in discontinued operations (2018: loss of
£5m) reflects the $1.4bn settlement agreed with the Department of
Justice (“DoJ”). See Note 30.

Net Loss/Income
Continuing net loss attributable to owners of the parent company as
reported was £2,785m including the £5,037m MJN impairment
charge. Diluted earnings per share from continuing operations were
-393.0 pence on a reported basis; on an adjusted basis, the growth
was +2.8% to 349 pence.

Total reported net loss attributable to owners of the parent
company was £3,683m. This includes the charge of £898m in respect
of the settlement of Indivior related matters with the US DoJ reported
at the half year. On an adjusted basis, total net income was £2,473m,
+2.7% (+0.7% constant) versus 2018.

3,367
(5,321)

3,369
(311)

-0.1

-1.9

(1,954)

3,058

-163.9

-166.0

Net working capital
During the year, inventories increased to £1,314m (2018: £1,276m),
trade and other receivables decreased to £2,079m (2018: £2,097m),
and trade and other payables increased to £4,820m (20181: £4,811m).
Net working capital was minus £1,427m (2018: minus £1,438m). Net
working capital as a percentage of net revenue is -11% (2018: -11%).

Operating profit
Health
Hygiene Home

Operating profit
– adjusted
Adjusting items

Total Operating
(loss)/profit

Operating
margin –
adjusted
Health
Hygiene Home

Total

26.7
25.4

26.2

28.5
23.9

26.7

-180bps
+150bps

-50bps

1 Restated for the adoption of IFRS 16 (see note 31).

Net finance expense
Net finance expense was £153m (2018: £338m). The decrease reflects
the repayment of term loans and bonds, £35m finance income on tax
balances (2018: £29m expense) and other significant items that went
in the Group’s favour in the year. These include a settlement of
litigation in Latin America, a gain due to a fair value credit relating to
a downward revaluation of a put option held by our partners in a joint
venture and a higher hedged return from temporary intercompany
deposits with group treasury. Adjusted finance expense excludes £35m
of finance income on tax balances reclassed into income tax expense
(2018: £29m expense).

Tax
The adjusted tax rate, which excludes the effect of adjusting items,
was 22% (2018: 21%), benefiting from the settlement of a number
of tax issues during the year. We continue to expect our ongoing
adjusted tax rate to be approximately 23%.

Adjusting items
In 2019, adjusting items comprised of £5,321m of expenses recorded
in operating profit (2018: £311m) driven primarily by the impairment of
IFCN goodwill of £5,037m. See Note 9. Other adjusting items include

Cash flow
Cash generated from continuing operations was £3,408m (2018:
£3,400m). Net cash generated from operating activities was £1,411m
(2018: £2,524m) after net interest payments of £210m (2018: £321m)
and tax payments of £647m (2018: £567m) and net cash out flow
attributable to discontinued operations of £1,140m (2018: cash inflow
of £12m).

Free cash flow is the net cash generated from operating activities

(excluding discontinued operations) 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, to fund acquisitions or other
strategic objectives. Free cash flow as a percentage of continuing
adjusted net income was 87% (20181: 87%).

Cash generated from continuing
operations
Less: net interest paid
Less: tax paid
Less: purchase of property, plant &
equipment
Less: purchase of intangible assets
Plus: proceeds from the sale of property,
plant & equipment

31 December
2019
£m

(Restated)2
31 December
2018
£m

3,408
(210)
(647)

(306)
(137)

3,400
(321)
(567)

(342)
(95)

Free cash flow

2,145

2,099

2 Restated for the adoption of IFRS 16 (see note 31).

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019
F I N A N C I A L R E V I E W CO N T I N U E D

–

2,486

(13)

2,473

–

Year ended
31 December 2019

Reported
£m

Adjust-
ing:
Excep-
tional
items
£m

Adjust-
ing:
Other
items
£m

Adjust-
ing:
Finance
expense
reclass
£m

Adjusted
£m

Operating (Loss)/
Profit
Net finance expense

(Loss)/profit before
income tax
Income tax (expense)/
credit

(1,954)
(153)

5,240
–

(2,107)

5,240

81
–

–
(35)

3,367
(188)

(35)

3,179

(665)

(45)

(18)

(693)

Net (loss)/income for
the year from
continuing operations (2,772)
Less: Attributable to
non-controlling
interests

(13)

5,195

–

Continuing net (loss)/
income attributable
to owners of the
parent company
Net loss for the year
from discontinued
operations

Total net (loss)/
income
attributable to
owners of the
parent company

(2,785)

5,195

(898)

898

–

(3,683)

6,093

–

2,473

Adjusted net income is used in the calculation of adjusted EPS.
Adjusted EPS is defined as adjusted net income attributable to owners
of the parent company divided by the weighted average number of
ordinary shares. A reconciliation is included in Note 8.

The adjusted tax rate is defined as the adjusted continuing

income tax expense as a percentage of adjusted profit before tax.

Other non-GAAP measures and terms
Like-for-Like (“LFL”) growth excludes the impact on net revenue of
changes in exchange rates, acquisitions, disposals and discontinued
operations. LFL growth also excludes Venezuela. A reconciliation of LFL
to reported net revenue growth by operating segment is shown on
page 60.

Constant exchange rate adjusts the actual consolidated results
such that the foreign currency conversion uses the same exchange
rates as were applied in the prior year.

Free cash flow, the Group’s principal measure of cash flow, is
defined as net cash generated from operating activities (excluding
discontinued operations) less net capital expenditure. Free cash flow
reflects cash flows that could be used for payment of dividends,
repayment of debt, to fund acquisitions or other strategic objectives.
A reconciliation of cash generated from operations to Free cash flow
is shown on page 61.

Net debt
At the end of the year, net debt was £10,749m (20181: £10,746m). This
reflected strong free cash flow generation of £2,145m, offset by the
payment of dividends totalling £1,242m (2018: £1,200m) and
payments relating to the DoJ for the Indivior PLC settlement of
£1,140m. The Group regularly reviews its banking arrangements and
currently has adequate facilities available to it.

In March 2020, the Group drew down around £750m from its

committed borrowing facilities due to illiquidity in the short-term
market for commercial paper. Committed facilities total £5,500m
(2018: £4,500m), of which £4,750m remains undrawn, and available
to draw. The Group remains compliant with its banking covenants. Our
committed facilities are not subject to renewal until from 2022
onwards. The Group has also assessed the impact of COVID-19 on its
going concern and viability statement set out on page 77.

Balance sheet
At the end of 2019, the Group had total equity of £9,407m (20181:
£14,771m), a decrease of 36%.

The Group has non-current assets of £27,106m (20181:

£33,002m), of which £24,261m (2018: 30,278m) is goodwill and other
intangible assets, lower this year primarily due to the impairment of
goodwill in relation to the MJN acquisition of £5,037m. Property, plant
and equipment is £2,140m (20181: £2,162m) and includes £289m
(20181 £304m) of right of use assets as a result of the adoption of IFRS
16. The Group has net working capital of minus £1,427m (2018: minus
£1,438m), current provisions of £178m (20181: £537m) and long-term
liabilities other than borrowings of £5,256m (20181: £5,564m).

The Group continues to focus on employing capital appropriately

to drive long term value creation for its Shareholders. The Group’s
ROCE, excluding the impairment of goodwill and other intangible
assets, is 10.3%, a decrease against 10.7% (restated for IFRS 16) for
2018. The decrease was principally due to a 1.9% reduction in
adjusted operating profit at constant exchange rates and slight
increase in the adjusted tax rate.

Return on Shareholders’ funds (total net income attributable to

owners of the parent company divided by total equity) was -39.3% on
a reported basis and 26.4% on an adjusted basis (20181: 14.7% on a
reported basis and 16.4% on an adjusted basis).

Basis of Presentation and Non-GAAP measures
Throughout the report, certain measures are used to describe the
Group’s financial performance which are not defined by International
Financial Reporting Standards (IFRS).

Adjusted Measures
The Executive Committee of the Group assesses the performance
based on net revenue and certain adjusted measures which exclude
the effect of adjusting items.

As described in Note 3, 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. Management believes that the use of adjusted measures
provides additional useful information about underlying trends.
The table below reconciles the Group’s reported statutory earnings
measures to its adjusted measures for the year ended 31 December
2019. Descriptions of the adjusting items are included in Note 3.

1 Restated for the adoption of IFRS 16 (see note 31).

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019Brand equity investment (“BEI”) is the marketing support designed
to capture the voice, mind and heart of our consumers.

Continuing operations excludes any charges related to the
previously demerged RB Pharmaceuticals business that became
Indivior. Net loss from discontinued operations is presented as
a single line item in the Group Income Statement.

Return on capital employed (“ROCE”) is defined as adjusted

operating profit after tax divided by monthly average capital
employed. Capital employed comprises total assets less current
liabilities other than borrowings-related liabilities. Total assets exclude
cash, retirement benefit surplus, current tax and a technical gross-up
to goodwill that arises because of deferred tax liabilities recorded
against identified assets acquired in business combinations. Current
liabilities exclude legal provisions recorded as a result of exceptional
items and current tax.

Adrian Hennah
Chief Financial Officer
26 March 2020

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019R I S K M A N A G E M E N T

Our approach to integrated
risk management at RB

Risk management occurs at different levels in RB with identification and assessment performed at the functional, business unit, corporate and
Group levels to provide both a ‘top-down’ and ‘bottom-up’ three-dimensional view of risk and is implemented as follows:

Functional
risk assessments

Business unit/corporate
risk assessments

Group principal and emerging
risk assessment

Board
oversight

Annual
Report

Identification

of risks

Control

strategy

Assessment of net risk

and prioritization

Management

action

• Identifies the most significant

• Control strategy is appropriate

• Considering the controls

• Having identified areas of

principal and emerging risks

and reviewed to establish if it

we have in place to manage

highest risk that require

with potential to impact

is operating as intended

each risk:

the Group

• Where we identify control

– What is the probability that

attention, action plans are

developed by management to:

• 1:1 meetings are held with all

gaps, what more do we need

the risk will materialise?

– address any control gaps

Executive Committee members,

to do?

Group functional and assurance

heads, external advisors and

Non-Executive Directors

• Functional, business unit and

corporate risk assessments feed

into this process

• Identifies sources of risk, key

drivers and areas of impact

• Completed annually in advance

of the business unit strategic

planning process

– If it did, what would the

likely impact be?

– How comfortable are we

with how the risk is being

managed?

• Assessment identifies those

risks and controls where

management should focus

its effort

• The decision to act will be

based on which risks are

no longer acceptable

identified

– improve the effectiveness of

existing controls, thereby

reducing the probability and

impact to an acceptable level

• Executive owners assigned,

with principal and emerging

risks circulated to the Board

for final review, sign-off and

ongoing monitoring

• Principal and emerging

risks are disclosed in the

Annual Report

Consolidation and critical
challenge by Internal Audit

Reviewed by business unit/
corporate function leadership
teams

T
A
H
W

• Identifies and monitors risks

impacting the operation of each
function or functional area
• Controls are mapped to the

three lines of defence

• Identifies and monitors risks
with the potential to impact
each business unit and the
corporate centre

• High-level control strategies

• Detailed management action

plans are developed to address
control gaps

and action plans are
documented for each risk.
Supporting functional risks
are referenced

• Identifies the most significant
principal and emerging risks
with potential to impact
the Group

• Principal and emerging
risks are disclosed in the
Annual Report

Principal and emerging risks
identified through the Group
Risk Assessment are disclosed
in RB’s Annual Report

• Oversight across each

principal risk provided by a
nominated Board Committee

N • Completed annually, reviewed
quarterly with updates
provided to the Audit
Committee

E
H
W

• Completed annually in

• Periodic reporting and risk

advance of the business unit
strategic planning process

deep dives occur with input
from the risk owner

• 1:1 meetings are held with all
Executive Committee (EC)
members, Group functional
and assurance heads, external
advisors and Non-Executive
Directors (NEDs)

• Synthesised output formally
reviewed and signed off by
the EC and thereafter by
the Board

• Internal Audit led
• Executive owners assigned

with principal and emerging
risks circulated to the Board
for final review and sign-off

• Executive member

• Risks identified through
a series of 1:1 interviews
with management

• Workshops build out and stress

test input from interviews
• Formal sign-off by functional

W
O
H

Head with Group CFO

• Risks identified and assessed

through a series of 1:1
meetings with business
unit leadership

• For corporate functions, the
functional risk assessments
are reviewed and challenged

• Business unit/corporate
management teams led

• Initial exercise facilitated by

Internal Audit

• Risk assessment owned by
functional leadership team

• Functional risk owners assigned
to each specific risk, controls
and action plans

• Quarterly reporting to the

Audit Committee on actions
taken to address the top
functional risks

O
H
W

6 4

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019Functional

risk assessments

Business unit/corporate

Group principal and emerging

Board

risk assessments

risk assessment

oversight

Annual

Report

Identification
of risks

Control
strategy

Assessment of net risk
and prioritization

Management
action

Our approach to principal and emerging risk assessment
The Group principal and emerging risk assessment is an integral part of the integrated risk management framework above, identifying the
principal and emerging risks with the greatest potential to impact the Group. The assessment is completed annually in advance of the business
unit and corporate strategic planning process as follows:

• Identifies and monitors risks

• Identifies the most significant

• Oversight across each

impacting the operation of each

with the potential to impact

principal and emerging risks

principal risk provided by a

function or functional area

each business unit and the

with potential to impact

nominated Board Committee

• Controls are mapped to the

corporate centre

the Group

three lines of defence

• High-level control strategies

• Principal and emerging

• Detailed management action

plans are developed to address

control gaps

and action plans are

documented for each risk.

Supporting functional risks

are referenced

risks are disclosed in the

Annual Report

N • Completed annually, reviewed

quarterly with updates

provided to the Audit

Committee

• Completed annually in

• Periodic reporting and risk

advance of the business unit

deep dives occur with input

strategic planning process

from the risk owner

• Risks identified through

a series of 1:1 interviews

with management

• Workshops build out and stress

through a series of 1:1

meetings with business

unit leadership

• Risks identified and assessed

• 1:1 meetings are held with all

test input from interviews

• For corporate functions, the

• Formal sign-off by functional

Head with Group CFO

functional risk assessments

Directors (NEDs)

are reviewed and challenged

• Synthesised output formally

Executive Committee (EC)

members, Group functional

and assurance heads, external

advisors and Non-Executive

reviewed and signed off by

the EC and thereafter by

the Board

• Initial exercise facilitated by

• Business unit/corporate

• Internal Audit led

• Executive member

Internal Audit

management teams led

• Executive owners assigned

with principal and emerging

risks circulated to the Board

for final review and sign-off

• Risk assessment owned by

functional leadership team

• Functional risk owners assigned

to each specific risk, controls

and action plans

• Quarterly reporting to the

Audit Committee on actions

taken to address the top

functional risks

What could impact RB
and the achievement
of its objectives?

• Identifies the most significant
principal and emerging risks
with potential to impact
the Group

• 1:1 meetings are held with all

Executive Committee members,
Group functional and assurance
heads, external advisors and
Non-Executive Directors

• Functional, business unit and

corporate risk assessments feed
into this process

• Identifies sources of risk, key
drivers and areas of impact

• Completed annually in advance
of the business unit strategic
planning process

What are we doing to
manage the risk?

How comfortable are we
with the level of risk?

What more do
we need to do?

• Control strategy is appropriate
and reviewed to establish if it
is operating as intended
• Where we identify control

gaps, what more do we need
to do?

• Considering the controls

we have in place to manage
each risk:
– What is the probability that
the risk will materialise?
– If it did, what would the

likely impact be?

– How comfortable are we
with how the risk is being
managed?

• Assessment identifies those
risks and controls where
management should focus
its effort

• The decision to act will be
based on which risks are
no longer acceptable

• Having identified areas of
highest risk that require
attention, action plans are
developed by management to:
– address any control gaps

identified

– improve the effectiveness of
existing controls, thereby
reducing the probability and
impact to an acceptable level

• Executive owners assigned,
with principal and emerging
risks circulated to the Board
for final review, sign-off and
ongoing monitoring
• Principal and emerging
risks are disclosed in the
Annual Report

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019P R I N C I PA L R I S K S

Our principal and emerging risks,
as at 31 December 2019

K E Y T O P R I N C I PA L R I S K S

Risk title

Innovation

Disruption

Product safety

Supply disruption

Cyber-security

Risk statement

The current innovation pipeline does not meet the changing needs of our consumers and
new go-to-market channels and is not sufficient to achieve organic growth ambitions and
drive gross margin accretion.

Inability to respond, adapt and evolve both our products and processes to disruptive
market forces including e-commerce, digital and new formats, impacting our ability
to effectively service our customers and consumers with the required agility.

Risk of robust process, systems and culture for the development and assessment
of product safety not being in place or operating effectively, leading to safety risk
to consumers.

Disruption to the continuity of supply as a result of inability to procure critical ingredients
and reliance on single factories that supply key markets without actively qualified
alternative manufacturing sites in place.

As a global complex organisation, there is a risk that RB falls victim to increasingly
sophisticated cyber-attacks aimed at causing disruption to our information assets by
circumventing confidentiality, integrity or availability controls.

Fatality/major employee
safety incident

Work accidents leading to death, injury or illness on RB premises or premises under RB
supervision, in case of outsourced operations.

People

Sustainability

Failure to achieve strategic objectives as a result of significant management churn and
inability to attract and retain top talent.

We do not increase the sustainability of our environmental and social footprint across the
immediate and longer term impacting market share and increasing the risk of longer-term
climate change related impacts such as extreme weather events and water shortages.

Adherence to product Quality
Standards

Non-compliance with applicable quality regulations, guidelines, internal/external
standards across the product lifecycle governing how we produce and supply product.

Tax disputes

Product Regulations

Risk of significant unprovisioned cash outflows as a result of tax authority challenge to
filed tax positions in territories.

Risk of non-compliance with product classification regulations, guidelines, internal
standards and/or registrations across the supply chain and throughout the product
life cycle.

Legal & Compliance

Risk that we are not fully compliant with relevant laws and regulations, including
anti-corruption laws, data privacy laws and global competition laws.

South Korea Humidifier
Sanitizer (HS)

Financial and reputational risk as a result of the health issues caused by consumers
inhaling Oxy Sac Sac (a humidifier sanitizer sold by Oxy, which RB acquired in 2001).

Black Swan event

Multiple brands impacted by unforeseen reputational incident(s).

Category

Strategic

Digital
Capability

Change
Execution
(Health)

Operational

China

We lack strategic direction
and investment in capability
to succeed in an increasingly
digital marketplace.

We do not execute the
required changes to create
an effective operating
model and deliver the
required improved
performance across the
Health business.

Risk of economic uncertainty
in China, changing
regulations and changes in
current or new partners
impacting growth and
business performance.

COVID-19
We are closely monitoring the outbreak of COVID-19, and how it
will affect our operations in key markets. While the full scale of the
disruption is still evolving, immediate impacts may include shortages
of raw and pack materials, potential closure of supply sites and
restrictions on the movement of people. Planning is underway in
affected countries to ensure we are prepared for the impact of
the outbreak on our people and supply chains, and appropriate
contingencies put in place.

As an organisation, we are taking whatever steps we can to
minimise any risk that we may contribute to the virus spreading.
These include restrictions on travel, providing up-to-date resources
to all employees and guidance on working remotely where required.

*See Viability Statement on page 77

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019

P R I N C I PA L R I S K S CO N T I N U E D

1. Digital Capability

3. China

The risk: We lack strategic direction and investment in
capability to succeed in an increasingly digital marketplace.

The risk: Risk of economic uncertainty in China, changing
regulations and changes in current or new partners impacting
growth and business performance.

Potential impact
China is a critical market increasingly characterised by economic
uncertainty. This includes trade conflicts between China and other
major trading partners and regional tensions. The behaviours of
Chinese consumers are also changing alongside other domestic
economic factors that, all combined, have the potential to impact
how we manufacture and supply this market.

Mitigation
We maintain a strong network in China so that we can understand
both international and domestic economic developments that may
impact our footprint. This includes active engagement with industry
associations and regulators, external affairs capability and collaborative
partnerships with government agencies.

Our China based regulatory intelligence teams provide insight on

any changes in regulation that may impact us, and we work closely
with local industry to ensure we are working within government
set parameters.

Our global operations are subject to appropriate forex hedging

that allows us to maintain accurate balance sheet forecasting and
minimise any unwanted exposures.

Potential impact
While we have made significant investment to build our e-commerce
capability, continued investment in developing and executing our
digital strategy is critical in order to enhance our digital solutions,
protect market share and drive sustained growth across priority
channels.

Mitigation
As we begin the next phase of transformation, understanding how we
can both continue to build digital capability and increase the quality
and efficiency of core processes through digital solutions, is a priority.
We also plan to further develop our digital marketing and CRM
capability. Chief among these projects will be the continued
development of the Product Lifecycle Management (PLM) system, and
enhanced integration of resource planning and reporting systems.

2. Change Execution (Health)

The risk: We do not execute the required changes to create an
effective operating model and deliver the required improved
performance across the business.

Potential impact
Failure to effectively execute the key change programs required
across the Health business may result in cost overruns and inefficient
use of resources, loss of key talent and distract us from future
growth priorities.

Mitigation
By focusing on stabilising brand performance, simplifying the
operating model and increasing productivity, we are working to return
Health to outperformance. A number of internal initiatives are
underway to drive this, with appropriate oversight and governance
from the Health leadership team.

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019Viability 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 forecasts 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 pages 64 to 76). The adverse assumptions also took
account of the potential impact of COVID-19 on the Group’s
production sites, supply chains, distribution channels and customers.

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 substantial share price fall, significant loss of consumer
confidence, and the 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.

The Strategic Report, as set out on pages 1 to 77, has been approved
by the Board.

On behalf of the Board

Rupert Bondy
Company Secretary
26 March 2020

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019O U R B O A R D O F D I R E C T O R S

The Board consists of a balance of
Executive and Non-Executive Directors
who together have collective accountability
to RB’s Shareholders and stakeholders.

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019From left to right –

Laxman Narasimhan
Chief Executive Officer

Sara Mathew
Non-Executive Director

Warren Tucker
Non-Executive Director

Andrew Bonfield
Non-Executive Director

Elane Stock
Non-Executive Director

Pam Kirby
Non-Executive Director

Nicandro Durante
Senior Independent Director

Adrian Hennah
Chief Financial Officer

Mehmood Khan
Non-Executive Director

Rupert Bondy
SVP, General Counsel/
Company Secretary

Mary Harris
Designated Non-Executive
Director for engagement with
the Company’s workforce

Chris Sinclair
Chairman of the Board

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019O U R B O A R D O F D I R E C T O R S CO N T I N U E D

Directors as at 31 December 2019

Male

Female

Laxman Narasimhan
Chief Executive Officer

Nationality
American

Board tenure
9 months

Appointment
Appointed as CEO-Designate in July 2019 and appointed as CEO on
1 September 2019.

Career
Prior to joining RB, Laxman held various senior roles at PepsiCo from 2012 to
2019, including, Global Chief Commercial Officer, Chief Executive Officer of
Latin America, Europe and Sub-Saharan Africa operations, where he ran the
Company’s food and beverage businesses across the regions and Chief
Executive Officer of Latin America. Prior to PepsiCo, Laxman served as a Director
of McKinsey & Company and held various roles from 1993 to 2012. He was also
an Advisory Board member of the Jay H. Baker Retailing Centre at The Wharton
School of The University of Pennsylvania.

Laxman holds a degree in Mechanical Engineering from the College of
Engineering, University of Pune, India. He has an MA in German and International
Studies from The Lauder Institute at The University of Pennsylvania and an MBA
in Finance from The Wharton School of The University of Pennsylvania.

Skills and experience
Laxman is an outstanding leader who brings wide experience across the
consumer goods sector, both operationally and at scale. Laxman has exceptional
strategic capabilities and consumer insight with a proven track record in
developing purpose-led brands and driving consumer-centric and digital
innovation. He has previously led complex operational businesses and inspired
teams across developed and emerging markets to achieve market-leading
performance. This, combined with his excellent people engagement and
leadership skills, makes him well qualified for the role.

Current external appointments
Trustee of Brookings Institution

Member of the Council on Foreign Relations

Chris Sinclair
Chairman of the Board

Nationality
American

Board tenure
5 years, 2 months

Appointment
Appointed as a Non-Executive Director in February 2015 and appointed as
Chairman of the Board in May 2018.

Career
Chris is the former Chair and CEO of Mattel, Inc. Previously, he served as CEO
for various private-equity backed companies, including Caribiner International
and Quality Food Centers (now part of the Kroger Co.). Earlier in his career,
Chris held a number of senior positions at PepsiCo, including Chair and CEO
of Pepsi-Cola Co. (worldwide beverages), and CEO of PepsiCo Foods and
Beverages International. He was also a Director of Foot Locker, Inc. and
Perdue Farms, Inc.

Chris graduated with a degree in Marketing from the University of Kansas and
received an MBA from the Tuck School of Business at Dartmouth College.

Skills and experience
Chris brings strong leadership skills to the Board through his experience as CEO
and Chair for other major companies. He also has a strong understanding of
international consumer-focused businesses.

Length of tenure as at 31 December 2019

0-3 years

3-6 years

6-9 years

9 plus

British

American

British/Dutch

American/British

Brazillian/Italian

Nationality as at 31 December 2019

C O M M I T T E E S

Remuneration

Nomination

Audit

Corporate
Responsibility,
Sustainability,
Ethics and
Compliance

Key

Chair

8 0

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019Adrian Hennah
Chief Financial Officer

Nationality
British

Board tenure
7 years, 3 months

Appointment
Appointed as CFO-Designate in January 2013 and appointed as CFO in February
2013. Adrian will retire from the Board on 9 April 2020.

Career
Adrian started his career working in audit and consultancy with PwC and
Stadtsparkasse Koeln, the German regional bank. He then spent 18 years at
GlaxoSmithKline plc where he held a number of senior management and
financial roles. After this, Adrian spent four years as CFO at Invensys plc and
six years as CFO at Smith & Nephew plc.

Adrian has a degree in Law from the University of Cambridge and is a Sloan
Fellow of the London Business School.

Skills and competencies
Adrian has significant financial and strategic expertise through leading the
performance and strategy of many large companies. His global experience
within the healthcare industry has been extremely valuable to the growth
of RB’s Health and Hygiene brands, especially within emerging markets.

Current external appointments
Non-Executive Director of RELX plc

Nicandro Durante
Senior Independent Director

Nationality
Brazilian/Italian

Board tenure
6 years, 4 months

Appointment
Appointed as a Non-Executive Director in December 2013 and appointed as
Senior Independent Director in January 2019.

Career
Nicandro started his career working in finance in Brazil and joined British
American Tobacco plc (BAT) in 1981. Whilst at BAT, Nicandro worked in the UK,
Hong Kong and Brazil and held a number of senior positions including Regional
Director for Africa and the Middle East, Chief Operating Officer and, from 2011
to 2019, as Chief Executive Officer.

Nicandro holds a degree in Business administration from PUC-Pontificie
Universidade Católica and has obtained post graduation qualifications in Finance
and Economics.

Skills and competencies
Nicandro has strong leadership skills, developed in various senior positions held
throughout his career which is of great benefit to the Board. He has a strong
background in the consumer goods industry and has strong international
business experience, bringing a global perspective to his role.

Current external appointments
Chairman of TIM Participações S.A.

Mary Harris
Designated Non-Executive Director for engagement
with the Company’s workforce

Nationality
British/Dutch

Board tenure
5 years, 2 months

Appointment
Appointed as a Non-Executive Director in February 2015, as Chair of the
Remuneration Committee in November 2017 and as Designated NED for
engagement with the Company’s workforce in July 2019.

Career
Mary is currently a Non-Executive Director of ITV plc, where she is also a
member of the Audit & Risk Committee, the Nomination Committee and Chair
of the Remuneration Committee. Mary is also vice-Chair of the Supervisory
Board and Chair of the Remuneration Committee of Unibail-Rodamco-Westfield
S.E. She is also a member of the Remuneration Committee of St. Hilda’s College,
Oxford. Mary was previously a Partner at McKinsey & Company. She also held
the position of Member of the Supervisory Board of TNT NV, Scotch and Soda
NV and TNT Express NV. She was formerly a Non-Executive Director and Chair
of the Remuneration Committee of J. Sainsburys plc.

Mary graduated from the University of Oxford with an MA in Politics, Philosophy
and Economics and completed her MBA at Harvard Business School.

Skills and competencies
Mary has substantial experience in consumer and retail businesses across
China, South East Asia and Europe. She brings to the Board a top-level strategic
outlook, with international and consumer focus. Her previous experience
in other Non-Executive Director roles and as Chair of other Remuneration
Committees, is invaluable in allowing her to effectively Chair the
Remuneration Committee.

Current external appointments
Non-Executive Director of ITV plc

Member of the Supervisory Board of Unibail-Rodamco-Westfield SE

Member of the Remuneration Committee of St. Hilda’s College,
Oxford University

Andrew Bonfield
Non-Executive Director

Nationality
British

Board tenure
1 year, 9 months

Appointment
Appointed as a Non-Executive Director in July 2018 and Chair of the Audit
Committee in January 2019.

Career
Andrew has been Chief Financial Officer of Caterpillar Inc. since September
2018. He was previously Group CFO of National Grid plc from 2010 to 2018.
Prior to this, he held the position of Chief Financial Officer at Cadbury plc
and also served as Executive Vice President & Chief Financial Officer at
Bristol-Myers Squibb.

Andrew is a Chartered Accountant and holds a Bachelor of Commerce degree
from the University of KwaZulu-Natal in Durban, South Africa.

Skills and competencies
Andrew brings more than three decades of financial expertise to the Board.
He is a strong leader and has a history of driving strong financial performance
in the UK and globally. These skills are valuable to Andrew’s membership of
the Board and to his role as Chair of the Audit Committee.

Current external appointments
Chief Financial Officer of Caterpillar Inc.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019O U R B O A R D O F D I R E C T O R S CO N T I N U E D

Mehmood Khan
Non-Executive Director

Elane Stock
Non-Executive Director

Nationality
American/British

Board tenure
1 year, 9 months

Nationality
American

Board tenure
1 year, 7 months

Appointment
Appointed as a Non-Executive Director in July 2018.

Appointment
Appointed as a Non-Executive Director in September 2018.

Career
Mehmood has been Chief Executive Officer of Life Biosciences Inc. since April
2019. He was previously Vice Chairman and Chief Scientific Officer, Global
Research and Development, at PepsiCo Inc. Mehmood previously held the
position of President, Global Research & Development Centre at Takeda
Pharmaceutical Company. He was a faculty member at the Mayo Clinic and
Mayo Medical School in Rochester, Minnesota, serving as Consultant
Endocrinologist and Director of the Diabetes, Endocrine and Nutritional Trials
Unit in the endocrinology division.

Mehmood has a Medical degree from the University of Liverpool, is a Fellow
of the Royal College of Physicians, London and of the American College
of Endocrinology and holds two ad honorem PhDs in Humanities and
International Law.

Skills and competencies
Mehmood is a highly skilled medical practitioner and researcher. He brings to
the Board extensive experience in both developing and developed markets,
adding value to the CRSEC Committee through his knowledge of creating
sustainable initiatives and past experiences of leading R&D efforts to create
breakthrough innovations.

Current external appointments
CEO of Life Biosciences Inc.

Director of CorMedix Inc.

Director of Indigo Agriculture Inc.

Pam Kirby
Non-Executive Director

Career
Elane was previously Group President at Kimberly-Clark International where she
was responsible for business operations in EMEA, Asia Pacific and Latin America.
Prior to this, Elane was Global President at Kimberly-Clark Professional with
responsibility for the division selling workplace hygiene and safety products.
In her earlier career, Elane was a Partner at McKinsey & Company in the US
and Ireland.

Elane holds a BA in Political Science from the University of Illinois and an MBA
in Finance from The Wharton School of The University of Pennsylvania.

Skills and competencies
Elane brings great sector-relevant experience and insight of consumer goods
products to the Board, particularly in personal care and wellness. She also brings
wide experience of emerging markets and the changing channels of trade and
consumer preferences.

Current external appointments
Director of Yum! Brands, Inc.

Director of Equifax Inc.

Sara Mathew
Non-Executive Director

Nationality
American

Board tenure
9 months

Appointment
Appointed as a Non-Executive Director in July 2019

Nationality
British

Board tenure
5 years, 2 months

Appointment
Appointed as a Non-Executive Director in February 2015 and Chair of the
CRSEC Committee in July 2016.

Career
Pam served as Chairman of SCYNEXIS, Inc. until June 2015. She was formerly
CEO of Quintiles Transnational Corporation and held senior positions in the
international healthcare industry at AstraZeneca plc and Hoffman-La Roche.

Pam holds a first class BSc honours degree and a PhD in Clinical Pharmacology
from the University of London.

Skills and competencies
Pam brings to the Board extensive knowledge of the healthcare sector and a
wealth of pharmaceutical experience. These skills are highly valuable to her role
as Chair of the CRSEC Committee.

Current external appointments
Non-Executive Director of DCC plc

Non-Executive Director of Hikma Pharmaceuticals plc

Member of the Supervisory Board of AkzoNobel N.V.

Career
Sara was previously Chair and Chief Executive Officer of Dun & Bradstreet. In
this role, she led the transformation of the Company into an innovative digital
enterprise. Prior to her role as Chair and Chief Executive Officer, she also served
as President and Chief Operating Officer, and Chief Financial Officer where she
initiated and managed the redesign of the Company’s accounting processes and
controls. Prior to her career at Dun & Bradstreet, Sara spent 18 years at Procter
& Gamble serving as CFO of the Baby Care and Pamper Products businesses and
Vice President of Finance in Asia. Previously, she served on the boards of Shire
Pharmaceuticals Limited, Campbell Soup Company and Avon.

Sara received her undergraduate degree from the University of Madras in
Chennai, India and holds an MBA in Marketing and Finance from Xavier
University in Cincinnati, Ohio.

Skills and competencies
Sara has extensive Board experience across a number of industries including
healthcare, consumer products and financial services. She has experience with
consumer goods products and digital technologies and has led strategic and
digital transformations. She brings great insight to the Board through her
previous positions and demonstrates valuable leadership qualities.

Current external appointments
Chair of Freddie Mac

Director of State Street Corporation

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019Warren Tucker
Non-Executive Director

Nationality
British

Board tenure
10 years, 2 months

Board members skills overview

Financial expertise

Strategy

Appointment
Appointed as a Non-Executive Director in February 2010. Warren will retire from
the Board in May 2020.

Career
Warren has held various senior finance positions at Cable & Wireless plc and
British Airways plc. He was Executive Director and Chief Finance Officer at
Cobham plc from 2003 to 2013 and previously Non-Executive Chairman at
PayPoint plc. He was also previously a Non-Executive Director of Thomas Cook
Group plc until May 2019.

Warren is a Chartered Accountant and holds an MBA from INSEAD.

Skills and competencies
Warren has extensive Board experience and brings a wealth of financial
expertise to the Board. He has provided continuity to the Board with his deep
insight and experience of RB.

Consumer goods & retail

Healthcare & pharmaceuticals

Current external appointments
Non-Executive Director of Tate & Lyle plc

Non-Executive Director of the UK Foreign & Commonwealth Office

Rupert Bondy
Senior Vice President, General Counsel/Company Secretary

Joined RB as SVP, General Counsel/Company Secretary in January 2017 and is
responsible for legal matters across RB.

Company Secretary to the Board, see page 85

for further biographical details

Other Directors who served during the year

Rakesh Kapoor
Rakesh joined RB in 1987 and was appointed as Chief Executive
Officer in 2011. Rakesh retired as Chief Executive Officer on
2 September 2019.

Leadership

With skill

Without skill

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019E X E C U T I V E C O M M I T T E E

01 Laxman Narasimhan
Chief Executive Officer

Nationality
American

Company tenure
9 months

Experience
Joined RB as CEO-Designate in July 2019 and appointed as CEO on 1 September
2019. Prior to joining RB, Laxman held various senior roles at PepsiCo from 2012
to 2019, including, Global Chief Commercial Officer, Chief Executive Officer of
Latin America, Europe and Sub-Saharan Africa operations, where he ran the
Company’s food and beverage businesses across the regions and Chief
Executive Officer of Latin America. Prior to PepsiCo, Laxman served as a Director
of McKinsey & Company and held various roles from 1993 to 2012. He was also
an Advisory Board member of the Jay H. Baker Retailing Centre at The Wharton
School of The University of Pennsylvania.

02 Jeff Carr
Chief Financial Officer

Nationality
British

Company tenure
Starting on 9 April 2020

Experience
Jeff will join RB as Chief Financial Officer and an Executive Committee member
on 9th April 2020. Jeff is Chief Financial Officer and Management Board
member at Ahold Delhaize, the Dutch retailer operating across Europe and the
USA. Before joining Ahold Delhaize, Jeff held the role of Chief Financial Officer
at First Group plc and easyJet plc and held senior finance roles at Associated
British Foods plc and RB. Jeff started his career as a graduate trainee at Unilever.

Jeff is currently Chairman of the Audit Committee and Non-Executive Director
of Kingfisher plc.

Jeff holds a degree in Chemical Engineering from the University of Exeter and
is a Chartered Management Accountant.

03 Kris Licht
Chief Transformation Officer

President Health, and Global Chief Customer Officer, from 1 July 2020

Nationality
American

Company tenure
5 months

Experience
Kris joined RB in November 2019 in the newly created role of Chief
Transformation Officer and as an Executive Committee member. Prior to joining
RB, Kris held a number of senior strategic and operational positions at PepsiCo.
Most recently he served as Division President in PepsiCo’s North American
Beverage Business. Prior to this, Kris was a Partner at McKinsey & Company
working for over 12 years in the firm’s consumer, health and retail practices.
Kris will become President Health, and Global Chief Customer Officer on
1 July 2020.

8 4

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 201904 Harold van den Broek
Chief Operating Officer, Hygiene Home

President Hygiene, from 1 July 2020

Nationality
Dutch

Company tenure
6 years

Experience
Harold joined RB in 2014. He was appointed Chief Operating Officer for the
Hygiene Home business unit in December 2019, with responsibility for the
overall management of the business unit. Before his current role, Harold was
the CFO of the Hygiene Home business unit, a position he had held since the
formation of the business unit in January 2018. Prior to joining RB, Harold
worked at Unilever, where he started his career. During his tenure there, he held
many senior financial positions spanning categories in developed and emerging
markets and corporate roles.

Harold will become President Hygiene on 1 July 2020.

05 Aditya Sehgal
Chief Operating Officer, Health

President Nutrition, and President China and E-RB from 1 July 2020

Nationality
Indian

Company tenure
25 years

Experience
Aditya joined RB in 1994 as a management trainee in India. After various roles in
sales and marketing he moved to his first General Manager role in 2009. He was
appointed SVP North Asia in 2012 and in 2015 he was promoted to Global
Category Officer Health. In 2017, Aditya became EVP Infant & Child Nutrition
(IFCN) with responsibility for leading the on-boarding of Mead Johnson into RB
and the integration of the IFCN division into Health. In January 2018, he was
appointed EVP Health for Developing Markets and E-commerce.

Aditya became Chief Operating Officer, Health in January 2019, with
responsibility for the global operations of the Health business unit.

Aditya will become President Nutrition, and President China and E-RB on
1 July 2020. As part of this role, he will also lead RB’s e-commerce and
digital marketing/CRM businesses.

06 Ranjay Radhakrishnan
Chief Human Resources Officer

Nationality
Indian

Company tenure
1 month

Experience
Ranjay Radhakrishnan joined RB as Chief Human Resources Officer on 1 March
2020. Ranjay brings with him 27 years of experience in the Human Resources
function across different geographies and industries. Prior to joining RB, Ranjay
was the Chief Human Resources Officer at InterContinental Hotels Group plc,
one of the world’s leading hotel companies. Previously Ranjay spent over two
decades at Unilever, in a range of senior leadership roles at global, regional and
country levels. His last role at Unilever was Executive Vice President Global HR,
where he led HR for Unilever’s eight regions and four global product categories
under a unified global HR leadership role.

Ranjay has worked in a number of specialist areas of HR such as Talent,
Learning, Reward, Change and Organisational Effectiveness, complementing
large generalist roles in both mature and developing markets. Ranjay has
worked and lived in several countries, including the UK, The Netherlands,
Singapore, UAE and India. He graduated from Mumbai University in Commerce
and Accounting and has a Master’s degree in Personnel Management and
Industrial Relations from the Tata Institute of Social Sciences in Mumbai, India.

07 Rupert Bondy
Senior Vice President, General Counsel/Company Secretary

Nationality
British

Company tenure
3 years, 4 months

Experience
Joined RB as SVP, General Counsel/Company Secretary in January 2017 and is
responsible for legal matters across the Group. 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
Glaxo Wellcome 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.

Other Executive Committee members who served in
the year

Rakesh Kapoor
Chief Executive Officer, joined RB in 1987 and retired on
2 September 2019 following a handover with Laxman
Narasimhan, who was appointed Chief Executive Officer
on 1 September 2019.

Adrian Hennah
Chief Financial Officer, joined RB in January 2013 and will step
down from the Board on 9 April 2020. Adrian will retire from the
business on 21 October 2020 following a handover with Jeff Carr,
who will be appointed as Chief Financial Officer and Executive
Committee member on 9 April 2020.

Gurveen Singh
Chief Human Resources Officer, joined RB in 1993 and will retire
in June 2020, following her handover to Ranjay Radhakrishnan,
current Executive Committee member and Chief Human
Resources Officer.

Rob De Groot
President, Hygiene Home, retired from RB in February 2020,
following a handover to Harold van den Broek, current Executive
Committee member and Chief Operating Officer, Hygiene Home.

Seth Cohen
Group Chief Information Officer, joined RB in September 2017
and left on 1 November 2019.

Mike Duijser
Chief Supply Officer, joined RB in November 2018 and left in
January 2020 and his successor will be announced in due course.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019C O R P O R AT E G O V E R N A N C E

CHAIRMAN’S
STATEMENT

As a Board, we have a clear focus on
promoting the long-term sustainable
success of the Company, creating value
for our Shareholders, and contributing
to wider society

Chris Sinclair
Chairman

On behalf of the
Board, I present the
Company’s Corporate
Governance Report
for the financial
year ended
31 December 2019.

The revised UK Corporate Governance
Code (the Code), published by the Financial
Reporting Council (FRC) in July 2018,
applies to financial accounting periods
beginning on or after 1 January 2019.

The revised Code requires Boards to:

•

effectively engage with employees and
consider the interests of a wider group
of external stakeholders in company
decision-making;

review and align company culture with
purpose, values and business strategy;

focus on company diversity plus the skills
and experience of Board members; and

ensure that company executive
remuneration is proportionate and
consistent with the long-term success
of the business.

During 2019, the Board reviewed its
practices in relation to the Code and this
Report details some of the new provisions
adopted. These include Mary Harris, Chair
of the Remuneration Committee, being
appointed as the designated Non-Executive
Director, responsible for engagement
with the Company’s workforce.

There have also continued to be a

number of other changes in the political
and regulatory landscape affecting the
corporate governance agenda over 2019
and into the future. The Shareholder Rights
Directive II, The Companies (Miscellaneous
Reporting) Regulations 2018, the implications

8 6

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019
for the Group of the ongoing negotiations
relating to the withdrawal of the UK from
the EU, and the UK General Election in
2019 were reviewed by the Board during
the year, and we have continued to
enhance our high governance standards.

Stakeholder engagement
As well as updating our procedures for
engaging with employees and Shareholders,
the Board undertook a detailed mapping
exercise to assess its other key external
stakeholder groups. This identified RB’s 50
most important stakeholders list as being in
the following groups: customers, consumers,
partners, communities, NGOs, rating
agencies, Government and international
organisations.

The Board commissioned independent

perception research to identify external
stakeholders’ views and their expectations of
RB. These research findings along with other
external stakeholder insights are incorporated
into its decision-making process. Templates
for Board papers have been prepared to
ensure the impact on stakeholders is factored
into any strategic decisions that require its
approval. All strategic decisions made during
2020 will use these templates to incorporate
formal stakeholder impact analysis.

Long-term focus
The Board continues to pursue policies and
reinvest resources so as to safeguard the
long-term health of RB. It believes that this is
best achieved through a holistic approach
that pursues sustainable rewards for
Shareholders, while also addressing social
needs and meeting environmental
obligations. The Board has approved
investment in new capabilities that will help
RB return to sustainable outperformance and
growth in the medium to long term.

The Board is responsible for good
stewardship of the Company to protect
Shareholders’ long-term interests and ensure
its social and environmental obligations
are fulfilled. Through the Corporate
Responsibility, Sustainability, Ethics and
Compliance (CRSEC) Committee, it is working
to integrate sound governance principles
in business decision-making as it moves
from a risk and safety-led approach to one
that aligns environment and sustainability
issues with performance and purpose.

Culture and values
Our values define the way that RB does
business. Our Code of Conduct reinforces
our principles of business conduct and
is communicated to all employees at the
start of each year with mandatory training.
Our values underpin our Code of Conduct
and have been further enhanced in early
2020 with our renewed purpose, fight and
compass set out on pages 10 and 11. All
Directors lead by example and promote
the Company’s values and culture.

Board and succession planning
There were a number of changes to the
Company’s leadership during 2019.
After 32 years with RB, Rakesh
Kapoor retired from the Board and from
his role of Chief Executive Officer (CEO)
on 2 September 2019. The Board carried
out an extensive formal search process for
Rakesh’s replacement, considering both
internal and external candidates, and in June
2019 we announced the appointment of
Laxman Narasimhan. Laxman was appointed
as CEO-Designate on 16 July 2019 and
became CEO on 1 September 2019. On
behalf of the Board, I would like to take this
opportunity to once again thank Rakesh
for his many significant contributions to
RB, transforming the Company with his
vision, passion and leadership throughout
his tenure. Looking ahead, the Board and I
are confident that Laxman will continue to
evolve the strong culture of RB in this next
phase. Laxman is an outstanding leader who
brings a wealth of experience in the consumer
goods industry and has a proven track
record in developing purpose-led brands.
Further details on the CEO recruitment
process are provided in the Nomination
Committee Report on pages 97 to 102.

In October, we announced that Adrian
Hennah, Chief Financial Officer (CFO) would
be retiring from the Board and his role as CFO
in 2020, and Jeff Carr would be appointed
as Adrian’s successor. Adrian will be stepping
down as CFO and retiring from the Board
when Jeff starts on 9 April 2020, remaining
with the Company until his retirement date
of 21 October 2020 to ensure a seamless
transition. I would like to thank Adrian for the
important role he has played in the strategic
transformation of RB and in helping drive
our strong track record of value creation.
I wish Adrian all the best for the future.

After ten years with RB, Warren Tucker will be
retiring from the Board and Audit Committee
and will not stand for re-election at this year’s
AGM. On behalf of the Board, I would like to
thank Warren for his valued service and
strong commitment to RB, and wish him well
for the future.

As part of the ongoing refreshment
of the Board, and following an extensive
search and thorough recruitment process,
we strengthened the Board with the
appointment of Sara Mathew as a new
Non-Executive Director. On her appointment
in July 2019, Sara also joined the Audit
Committee. Sara has extensive experience
with consumer goods products, digital
technologies and healthcare and brings
great insight to the Board. I am delighted
to welcome Sara to the Board.

The Board also appointed Mary Harris

as designated Non-Executive Director, for
engagement with the Company’s workforce
on 26 July 2019 and further information
on Mary’s role can be found on pages 47
and 101.

Further details on the Board and
Executive Committee’s succession plans,
including the recruitment process and
selection criteria, can be found in the
Nomination Committee Report, commencing
on page 97. Biographies of the members of
our Board and Executive Committee can be
found on pages 78 to 85.

Code
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.

The Corporate Governance Statement

outlines the Company’s governance
processes in greater detail and is on
pages 86 to 96. The Company has
complied with the Code throughout
the year ended 31 December 2019.

I am extremely proud of the Board

and all our RB colleagues for their
commitment to creating value for our
Shareholders and for contributing to the
good governance and stewardship of our
business, on behalf of all our stakeholders.

Chris Sinclair
Chairman
26 March 2020

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019C O R P O R AT E G O V E R N A N C E CO N T I N U E D

Key areas of Board focus in 2019
Board meetings are structured in an open atmosphere conducive to challenge and debate. Agendas are tailored to the requirements of the
business, and agreed in advance by the Chairman, CEO and General Counsel/Company Secretary. Five formal meetings are held each year.
Additional meetings, which may be held in person, by phone or consist of written resolutions, are held throughout the year to consider topics
that may arise outside the formal standing agenda.

The Board receives operating and financial reports from the CEO and CFO on strategic and business developments as well as financial
performance and forecasts at each meeting. Detailed presentations are also made by non-Board members on material matters to the Group.
In addition, the Chairs of the Audit, Remuneration, Corporate Responsibility, Sustainability, Ethics and Compliance (CRSEC) and Nomination
Committees update the Board on the proceedings of those meetings, including key topics and areas of concern.

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. Details of each Director’s attendance at Board meetings can be found on page 91.

The Board uses its meetings as a way of discharging its responsibilities set out in s172 of the Companies Act 2006, and considers the various

stakeholder groups when making decisions to promote the success of the Company as a whole.

The following areas formed substantial areas of focus for the Board in the year:

Strategy and planning

Key stakeholder
groups considered

Group budgets, forecasts and key performance targets, including assumptions, scenarios and projections

Potential mergers and acquisitions and post-acquisition reviews. This year RB acquired UpSpring LLC, an innovative pre- and post-natal
health company

Group debt and funding arrangements

RB Strategic Review

Investment into new Chinese factory in Taicang, Jiangsu province

Approval of interim and final dividend payments

Risk management and internal control

Review of RB’s principal risks and internal controls, emerging risks and the Group’s risk register

Consideration and approval of the Viability Statement

Agreement with US Department of Justice (DoJ) to settle investigation into the Group’s former pharmaceuticals business, Indivior, which
was demerged at the end of 2014

Review and update of the Group’s Treasury Policy

Results and Financial Statements

Annual Report and Financial Statements including compliance with reporting requirements

Results and presentations to analysts

Leadership and governance

Board and Committee evaluation and effectiveness

Director and senior management succession planning, including appointment of a new CEO and CFO

Relations with Shareholders and stakeholders

Review of Board Matters Reserved, Share Dealing Code and compliance with Corporate Governance Code and best practice

Other

Independent review of the Group’s management of sustainability and social impact issues

Key stakeholder
groups considered

Pensions

Colour key

Communities

Consumers

8 8

Customers

Employees

Shareholders

Government and industry associations

Partners

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019
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
2019, 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 Regulation 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 2019 on page 88.

UK Corporate Governance Code
The Company is premium listed on the London Stock Exchange (LSE)
and this Statement is prepared with reference to the Financial
Reporting Council’s (FRC) UK Corporate Governance Code 2018
(the Code) in effect for the financial periods beginning on or after
1 January 2019, which can be found on the FRC’s website at
www.frc.org.uk, and the Disclosure Guidance and Transparency Rules
requirements to provide a corporate governance statement. The Code
sets out the framework of governance for premium listed companies
within the UK, emphasising the value of good corporate governance
to long-term sustainable success. It sets out governance practices in
relation to Board leadership, purpose and culture; division of
responsibilities on the Board; Board composition and effectiveness;
procedures for audit, risk and internal control; and remuneration
practices and policies.

We are pleased to report that we have complied with the
provisions of the Code. This Statement sets out how the Company
has applied the Principles of the Code throughout the year ended
31 December 2019 and as at the date of this Statement.

Board responsibilities
The Board is responsible for the effective leadership of the Group and
for promoting its long-term sustainable success, generating value for
Shareholders and contributing to wider society, whilst focusing on
governance with the highest regard to the principles of the Code. The
Board provides leadership by setting the Company’s purpose, strategy
and values, monitoring our culture and ensuring alignment with
purpose, strategy and values, and overseeing implementation by
management. All Directors must act with integrity, lead by example
and promote the Company’s values and culture. The Board also
ensures there are appropriate processes in place to manage risk,
including the Company’s risk appetite 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 and stakeholders as well as responsibility for the
overriding strategic, financial and operational objectives and direction
of RB. It is the Board’s responsibility to ensure there are effective
engagement methods in place with its stakeholders. Further
information on the Board’s engagement activities can be found
in the s172 Statement set out on pages 46-47.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019C O R P O R AT E G O V E R N A N C E CO N T I N U E D

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 Corporate Responsibility, Sustainability, Ethics and Compliance (CRSEC) 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
2019, and can be found on the Company’s website, www.rb.com. The current Committee membership of each Director is shown on pages 80 to
83. The Board has also established two supporting management committees: the Disclosure Committee and the Executive Committee.

B OA R D

The Board is responsible for the overall leadership of
the Group and for promoting its long-term success
whilst focusing on its governance with the highest
regard to the principles of the Code.

AU D I T
C O M M I T T E E

Chaired by
Andrew Bonfield

The Audit Committee is
responsible for monitoring
the integrity of RB’s Financial
Statements and is responsible
for ensuring effective internal
financial control and risk
management. It is also
responsible for managing
the Company’s relationship
with the External Auditor.

N O M I N AT I O N
C O M M I T T E E

Chaired by Chris Sinclair

The Nomination Committee’s
key objective is to make
recommendations to the
Board on suitable candidates
for appointment to the
Board, its Committees and
senior management 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,
whilst keeping in mind the
importance of diversity.

R E M U N E R AT I O N
C O M M I T T E E

C R S E C
C O M M I T T E E

Chaired by Mary Harris

Chaired by Pam Kirby

The 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.

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. The Committee
is responsible for determining
the remuneration for
the Chairman, Executive
Directors and senior
management.

More details are set out in
the Nomination Committee
Report on pages 97 to 102

More details are set out in
the Audit Committee Report
on pages 103 to 110

More details are set out in
the Remuneration Committee
Report on pages 117 to 137

More details are set out in
the CRSEC Committee Report
on pages 111 to 116

D I S C L O S U R E C O M M I T T E E

Chaired by Laxman Narasimhan

E X E C U T I V E C O M M I T T E E

Chaired by Laxman Narasimhan

The Disclosure Committee’s key objective is to ensure accuracy
and timeliness of disclosure of financial and other public
announcements.

The Executive Committee is responsible for overseeing RB’s
management and recommending and implementing the strategy
and budget as approved by the Board. It ensures liaison between
functions, reviews major investments and approves business
development plans.

9 0

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019Board attendance at scheduled meetings
In 2019, there were five scheduled Board meetings, plus 12 additional Board meetings relating to various matters, including the appointment of
a new CEO and CFO, settlement of federal investigations into RB in connection with the subject matter of the Indivior indictment and ongoing
reviews of the Company’s strategy. There were four scheduled and two additional Audit Committee meetings, five scheduled and six additional
Remuneration Committee meetings, three scheduled and three additional Nomination Committee meetings and four scheduled meetings of the
CRSEC Committee. The table sets out the attendance by individual Directors at the regularly scheduled 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 Chair of the relevant Board Committee, so that their views are considered at the meeting. Given the nature of the
business to be conducted, some of the additional Board meetings are convened at short notice, which can make it difficult for some Directors
to attend due to prior commitments and their home locations.

Board attendance at scheduled meetings

Andrew Bonfield

Nicandro Durante

Mary Harris

Adrian Hennah

Rakesh Kapoor1

Mehmood Khan

Pam Kirby

Sara Mathew2

Laxman Narasimhan3

Chris Sinclair

Elane Stock

Warren Tucker

Board

5 of 5

3 of 3

5 of 5

3 of 3

5 of 5

Audit
Committee

4 of 4

–

4 of 4

2 of 2

–

4 of 4

Remuneration
Committee

CRSEC
Committee

Nomination
Committee

–

5 of 5

–

5 of 5

–

3 of 44

–

3 of 44

4 of 4

–

4 of 4

–

3 of 3

–

1 of 21

–

3 of 3

–

1 of 1

3 of 3

–

1 Retired from the Board on 2 September 2019. He did not attend one Nomination Committee meeting as it was in respect of his succession.
2 Appointed to the Board and Audit Committee on 1 July 2019.
3 Appointed to the Board as CEO-Designate on 16 July 2019 and as CEO on 1 September 2019.
4 Did not attend one CRSEC Committee meeting due to a long-standing commitment.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019C O R P O R AT E G O V E R N A N C E CO N T I N U E D

Leadership
To ensure the Board performs effectively, there is a clear division of responsibilities, set out in writing and agreed by the Board, between the
leadership of the Board and executive leadership of the business. The key roles have been defined in greater detail below.

T H E C H A I R M A N

T H E C H I E F E X E C U T I V E O F F I C E R

•

•
•

•

Leading the Board and taking responsibility for the Board’s
overall effectiveness in directing the Company.
Chairing Board and Shareholder meetings and setting
Board agendas.
Encouraging constructive challenge and facilitating effective
communication between Board, management, Shareholders
and wider stakeholders, whilst promoting a culture of
openness and constructive debate.
Leading the annual performance evaluation process for
the Board and its Committees and addressing any
subsequent actions.
Promoting the highest standards of corporate governance.
Ensuring Directors receive accurate, timely and clear
information.
Ensuring there are appropriate induction and development
programmes for all Board members.

•

Principally responsible for the day-to-day management of RB,
in line with the strategic, financial and operational objectives
set by the Board.
Chair of 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.
Effective development and implementation of strategy and
commercial objectives as agreed by the Board.
• Managing RB’s risk profile and establishing effective

•

internal controls.
Ensuring there are effective communication flows to the
Board and the Chairman, and that they are regularly updated
on key matters, including progress on delivering strategic
objectives.
Regularly reviewing the organisation structure, developing
an executive team and planning for succession.
Ensuring the long-term sustainability of the business.

•

T H E S E N I O R I N D E P E N D E N T D I R E C T O R

C H I E F F I N A N C I A L O F F I C E R

•

•
•
•
•

•

Acting as a sounding board for the Chairman on
Board-related matters.
Acting as an intermediary for other Directors as necessary.
Evaluating the Chairman’s performance on an annual basis.
Chairing meetings in the absence of the Chairman.
Being available to Shareholders and stakeholders to address
any of their concerns, which they have been unable to
resolve through normal channels.
Leading the search and appointment process for a new
Chairman, if necessary.

•

Supporting the CEO in developing and implementing the
Company’s strategy.
Leading the global finance function, developing key talent
and planning for succession.
Responsible for establishing and maintaining adequate
internal controls over financial reporting.
Developing and recommending the long-term strategic and
financial plan.

N O N - E X E C U T I V E D I R E C T O R S

C O M PA N Y S E C R E TA RY

•

Providing independent input into Board decisions through
constructive challenge and debate, strategic guidance and
specialist advice.
Setting/approving the Company’s long-term strategic,
financial and operational goals.
Examining the day-to-day management of the business
against the performance targets and objectives set, ensuring
that management is held to account.
Reviewing financial information and ensuring it is complete,
accurate and transparent.
Ensuring there are effective systems of internal control and
risk management and that these are continually monitored
and reviewed.
Setting appropriate levels of remuneration for Executive
Directors and ensuring performance targets are closely
aligned with Shareholder interests.
Development of succession planning and the appointment
and removal of senior executives and management.

•

•
•

Providing advice and support to the Chairman and
all Directors.
Advising and keeping the Board up to date on all relevant
legal and governance requirements and ensuring the
Company is compliant.
Ensuring the Board receives high-quality, timely information
in advance of Board meetings to ensure effective discussion.
Facilitating the induction program for all Board members.
Ensuring there are policies and processes in place to help the
Board function efficiently and effectively.

A full description of the roles and responsibilities of the Chairman,

Chief Executive Officer and Senior Independent Director can be found
in the Corporate Governance section of our website: www.rb.com.

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019The 2019 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 election or 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 Shareholders vote in favour
of the resolutions to elect or re-elect the Directors put forward for
election or re-election at the 2020 AGM.

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. Procedures
are in place to manage and, where appropriate, approve such conflicts.
Any authorisations granted by the Board are recorded by the Company
Secretary in a Register of Conflicts, together with the date on which
the conflict was authorised. Any conflicts authorised during the year
are reviewed annually by the Board. In addition, each Director certifies
on an annual basis that the information contained in the Register of
Conflicts is correct.

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 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.

Effectiveness
Board composition and succession planning
The Board regularly reviews its composition to determine whether it
has the right mix of skills, experience, diversity and background to
effectively perform its duties. The Board also reviews internal
executives and senior management positions to ensure a proper
breadth of talent is developed. Appointments are subject to a formal,
rigorous and transparent procedure and are based on merit and
objective criteria, promoting diversity of gender, social and ethnic
backgrounds, cognitive and personal strengths. 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 80-83. More details about succession planning can be found in
the Nomination Committee Report on pages 97-102.

In accordance with the Code, every Director submits himself or

herself for election or re-election at every AGM.

Board balance and independence
On appointment, Non-Executive Directors are made aware and are
required to confirm that 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. The Board has examined the length of
service of each Director and considers that the Chairman and each
Non-Executive Director standing for re-election or election at this
year’s AGM is independent. The Board considered all Non-Executive
Directors who served during the year to be independent. Warren
Tucker has served for ten years since his first election at the 2010
AGM. However, Warren continued to demonstrate appropriate
challenge, act independently and provided newly appointed
Non-Executive Directors with a wealth of experience to avail
themselves of in respect of the RB business. Warren Tucker will
not be standing for re-election at this year’s AGM.

The Nomination Committee has principal responsibility delegated
to it for making recommendations to the Board on new appointments
and the composition of the Board and its Committees. The Board and
each Director are confident that each Director individually has the
expertise and relevant experience required to perform the role of a
Director of a listed company and to contribute effectively to the Board
and Committees to which they are appointed. 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 currently a Non-Executive Director of
RELX plc and Jeff Carr, who will become a Director on 9 April 2020,
is currently a Non-Executive Director of Kingfisher plc.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019C O R P O R AT E G O V E R N A N C E CO N T I N U E D

Evaluation of the Board
The Board undertakes an annual review of its own and its Committees’ performance and effectiveness, with a formal externally facilitated
evaluation of the Board conducted every three years. An externally facilitated evaluation took place in 2019, conducted by MWM Consulting
Limited (MWM). MWM is independent of and has no other links with the Company or its Directors in connection with the evaluation, apart from
having undertaken a limited number of executive searches. The process consisted of two elements: the completion of a questionnaire by all
Directors; and individual interviews between each Director and MWM. These confidential discussions explored the efficiency and effectiveness
of the Board and focused on the following key areas:
•

Board composition and diversity

Board dynamics

•

Capability and alignment

Efficiency and effectiveness (both of the Board and individual
Board Committees)

•

Strategy

Risk and financial controls

A report, with action points and recommendations for the Board to consider, was distributed to Directors and the results of the evaluation were
subsequently discussed by the Board at its September meeting, facilitated by MWM. The key areas outlined in the 2018 internal evaluation were
reviewed and have been and continue to be addressed including: CEO succession planning; strategic review, supporting a culture of
responsibility; risk management; and maintaining Shareholder engagement.

In addition, the Chairman’s performance was considered by the Senior Independent Director with input from his fellow Non-Executive

Directors and discussed following the November Board meeting without the Chairman present. The discussion concluded that the Chairman
continued to devote sufficient time to his role, and continued to lead the Board constructively, demonstrating objective judgement, and
encouraging a culture of openness and debate.

Principal outcomes of the Board evaluation

B OA R D C O M P O S I T I O N A N D D I V E R S I T Y

B OA R D DY N A M I C S

• The Board has been through a period of significant change with a number
of new members, but has quickly established itself and is developing into
a strong collaborative team. Positive progress has been made in building
Board capability as well as successfully hiring a new CEO and this new
talent has contributed additional capability, experience and diversity to
the Board.

• There was a culture of increased openness and dialogue evolving between

the Non-Executives and the executive team and the Board is well
positioned to provide highly effective governance and strong strategic
challenge in the business.

S T R AT E G Y

C A PA B I L I T Y A N D A L I G N M E N T

• Reviewing and determining strategy and ensuring appropriate support and

challenge to the executive team will be key.

• The Board should continue to monitor and oversee the delivery of the

strategy against clear performance KPIs.

• The Board should continue to build a culture of ongoing strategic dialogue
between the Board and executive team, creating a clear annual framework
for the discussion of key topics (strategy, talent, succession) which follows
the cycle of the business.

E F F I C I E N C Y A N D E F F E C T I V E N E S S (O F T H E B OA R D,
I N D I V I D UA L B OA R D C O M M I T T E E S A N D
I N D I V I D UA L D I R E C T O R S )

• The Board and its Committees worked well together, with thorough debate
and challenge demonstrated. There was a good balance of appropriate
skills, knowledge and experience of Non-Executives on each Committee
and Committees were considered to be well chaired and managed.

R I S K A N D F I N A N C I A L C O N T R O L S

• The Board’s focus on risk was considered to be appropriate. Continuing to
support a culture of responsibility, including health, safety, compliance and
risk management was noted.

• Ensuring that the Board has sufficient oversight and control on

reputational-related risks, and that the Board understands the key
assumptions, uncertainties and risks associated with strategic proposals
was key.

P E O P L E A N D D I V E R S I T Y

• Monitoring people, culture, succession planning and ensuring that the
organisation is building capability for the future should be a key focus.

The 2019 review of the Board’s performance and that of its Committees concluded that the Board, its Committees and individual Directors were
performing effectively. The Board was considered to have a good mix of skills and sector-relevant experience and the degree of support and
challenge provided by Directors was appropriate. The Board has reviewed the recommendations of the evaluation and is taking steps to address
these. The principal outcomes of the review will be reviewed and reassessed as part of the Board’s 2020 evaluation.

9 4

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019Accountability
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 the Code’s requirements.
The Board considers that the Annual Report and Financial Statements
taken as a whole are fair, balanced and understandable and provide
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 157 under Accounting Policies.

The Company’s External Auditor’s Report, setting out its work

and reporting responsibilities, can be found on pages 143 to 151.
The terms, areas of responsibility and scope of the External Auditor’s
work are agreed by the Board and set out in the Auditor’s
engagement letter.

More information on the Group’s principal and emerging risks
and strategy for growth and achieving targeted goals is detailed in
the Strategic Report, which can be found on pages 64 to 76.
The Viability Statement can be found on page 77.
The Statement of Directors’ Responsibilities on page 141 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 External 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 FRC’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 in some areas highly regulated, and the controls are
continually kept under review to minimise the potential exposure to
risk. The system is designed to assess 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
principal risks and mitigating factors are detailed on pages 64-76.

As part of its risk control, RB regularly evaluates its risks to
achieving objectives, and the likelihood of such risks materialising and
determining the ability of the Group to cope with the circumstances
should they occur. In doing so, we are inherently considering our risk
appetite through the 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, supported by clear policies and procedures,
delegated to the executive team and senior management.

RB operates three strands in monitoring internal control systems

and managing risk:

• Management ensures that the controls, policies and procedures

•

are followed in dealing with risks in day-to-day business. Such
risks are mitigated at source with controls embedded into the
relevant systems and processes. Supervisory controls either at
management level or through delegation ensure appropriate
checks and verifications take 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 business 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 business unit is monitored
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
the Internal Audit team, 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 activities can be found on
pages 103 to 110. The Group’s compliance controls further
include operating an independent and anonymous Speak Up
whistleblower hotline, 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 is committed to maintaining strong internal controls. Functions 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 and emerging 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 1 to 77.

The CRSEC Committee focuses on the Company’s corporate
social responsibilities, environmental and sustainability issues and
overall ethical conduct and regulatory compliance. Further details of
the work of the Committee can be found in the report of the CRSEC
Committee Chair from page 111.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019C O R P O R AT E G O V E R N A N C E CO N T I N U E D

The Audit Committee focuses on maintaining the integrity of financial
reporting, reviewing and challenging management on the robustness
of internal controls and risk management systems, and providing
oversight and reassurance to the Board on risk management processes
and control procedures. Further details of the work of the Committee
can be found in the Audit Committee Report from page 103.
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.

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 one
vote for each share held. 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 a 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 2019, all resolutions
were passed and no resolution had a vote of 20% or more against it.

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 and key calendar dates are available.
The page can be found at www.rb.com/investors.

Shareholders can also access information on all our sustainability
activities, our Modern Slavery Statement, our Gender Pay Gap Report
and associated policies on the RB website at www.rb.com/
responsibility.

9 6

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019N O M I N AT I O N C O M M I T T E E R E P O R T

On behalf of the Board,
I am pleased to present the
Nomination Committee
Report for the financial year
ended 31 December 2019.

There were many changes to the Board and at Executive Committee
level during the year which necessitated extensive time-commitment
from Committee members. I am grateful to my fellow Directors for
their support and dedication during this busy period. Our main priority
during 2019 was to find a successor for our outgoing Chief Executive
Officer. We also undertook the appointment of the successor for our
outgoing Chief Financial Officer, continued the review and refresh of
our Non-Executive Directorships and worked on succession planning
for other Executive Committee roles.

Board changes during the year
Following André Lacroix’s departure from the Board and as Audit
Committee Chair last year, with effect from 1 January 2019 we
appointed Nicandro Durante as Senior Independent Director and
Andrew Bonfield as Chair of the Audit Committee. Nicandro and
Andrew became members of the Nomination Committee on the
same day.

We announced in January 2019 that Rakesh Kapoor would retire

as Chief Executive Officer (CEO) and a Director of RB by the end of
2019, after more than 32 years with RB. Following an extensive search,
in June 2019 we announced we had selected Rakesh’s successor for
the position of CEO – Laxman Narasimhan. Laxman joined the Board
on 16 July 2019 as CEO-designate and Executive Director, and became
CEO on 1 September 2019. Laxman joined us from PepsiCo, Inc.,
where he had been Global Chief Commercial Officer, responsible for
the long-term growth strategy, and a member of PepsiCo’s executive
committee. I provide more details of Laxman’s priorities and further
insight into the CEO recruitment process later in this report.

Rakesh retired from the Board on 2 September 2019 and left the

Group at the end of December. I would like to acknowledge the
enormous contribution and leadership that Rakesh provided to RB over
the past three decades. RB has transformed and, while it has not been
without its challenges, we would not be where we are today without
Rakesh’s vision, passion and leadership throughout his tenure.

2019 was a busy year for
the Committee, which saw
the search for and
appointments of a new CEO
and new CFO, changes to
the Executive Committee
and the appointment of an
additional Non-Executive
Director

Chris Sinclair
Chair of the Nomination Committee

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019
N O M I N AT I O N C O M M I T T E E R E P O R T CO N T I N U E D

We were pleased to welcome a number of new Executive Committee
members: Laxman Narasimhan, Chief Executive Officer, joined us in
September 2019; Kris Licht, Chief Transformation Officer – a
newly-created role – joined us in November 2019; and in December
2019 it was announced that Harold van den Broek had been promoted
from CFO Hygiene Home to Chief Operating Officer, Hygiene Home. In
October 2019 we also announced the appointment of Jeff Carr as
Chief Financial Officer from April 2020. Since the year end we
announced in January 2020 Ranjay Radhakrishnan’s appointment as
Chief Human Resources Officer from 1 March 2020. We are delighted
to have these new Executive Committee members with us and are
confident they will make a great contribution to RB.

In February, at the time of our strategy announcement, we also

confirmed new senior leadership roles with effect from 1 July 2020 for
Harold van den Broek, Kris Licht and Adi Sehgal, as Presidents of
Hygiene, Health, and Nutrition and E-RB/China respectively. Kris Licht
will also be the Global Chief Customer Officer for the Group.

Committee priorities for 2020

•

Succession planning and bench strength for senior executive roles
and above at RB.

Ensuring successful handover and onboarding of our new
Executive Committee members, and our new Chief Financial
Officer, Jeff Carr.

• Ongoing renewal of the Non-Executive Directors of the Board.

I would like to thank my fellow Committee members for their
exceptional support during another busy year for the Committee.

Chris Sinclair
Chair of the Nomination Committee
26 March 2020

As also announced in January 2019, as part of our succession planning
for the Board and Audit Committee, Warren Tucker was asked to
remain on the Board for an additional 12 months from the 2019 AGM,
when he had been intending to retire. Warren will not stand for
re-election at this year’s AGM and accordingly will retire from both the
Board and Audit Committee on conclusion of the AGM on 12 May
2020. Warren has been a long-standing and valued member of both
the Board and Audit Committee and has provided continuity during
a period of change and assisted with the induction of new Board
members. On behalf of the Board, I would like to extend our
gratitude to Warren for his excellent service and wish him well
in his future endeavours.

We strengthened the Board with the appointment of Sara
Mathew as a Non-Executive Director from 1 July 2019 and are
confident that Sara is a great fit for RB. Sara brings a wealth of
relevant sectoral experience in healthcare and consumer goods, and
we are delighted that she accepted our offer to join the Board, where
she has already made a strong contribution.

The Board also appointed Mary Harris as designated
Non-Executive Director, for engagement with the Company’s
workforce on 26 July 2019.

Chief Financial Officer succession
On 21 October 2019 we announced that Adrian Hennah, Chief
Financial Officer and Executive Director, had signalled his intention to
retire from the business on 21 October 2020. Adrian has been with RB
since 2013 and has helped to navigate many changes at RB including
the Mead Johnson Nutrition acquisition and RB 2.0. We thank Adrian
for his many contributions during his time at RB, but are delighted to
welcome back Jeff Carr as Adrian’s successor. Jeff previously worked
at RB in senior finance roles between 1994 and 2004. He brings
extensive experience across consumer and retail companies, with a
strong record of transformational strategic and operational leadership.
Jeff is currently CFO of Koninklijke Ahold Delhaize N.V. and has held
many financial roles at other large companies such as Grand
Metropolitan plc, Associated British Foods plc and easyJet plc. Adrian
will be stepping down as Chief Financial Officer and Executive Director
when Jeff starts on 9 April 2020, though he will remain with the
Company until his retirement date of 21 October 2020 to ensure
a seamless transition.

Refreshment of Executive Committee
During the year, there were other changes to our Executive
Committee, including: the retirement of Amedeo Fasano, Chief Supply
Officer; Seth Cohen, Chief Information Officer, departed the
Company; we announced the retirement of Adrian Hennah, Chief
Financial Officer, in October 2019; and the departure of Rob de Groot,
President, Hygiene Home in December 2019. Rakesh Kapoor, who was
Chief Executive Officer, stepped down from the Board and as CEO in
September 2019. Following the year end, regretfully Mike Duijser,
Chief Supply Officer, and Gurveen Singh, Chief Human Resources
Officer, both indicated they would leave RB in 2020. On behalf of the
Committee and the Board, I would like to express gratitude to the
outgoing Executive Committee members for their commitment and
dedication during their time with RB.

9 8

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019Composition
The members of the Committee during the year were:

Composition

Tenure during the year

Chris Sinclair (Chair)

Chair and member of the Committee for
the whole year

Nicandro Durante

Member for the whole year

Andrew Bonfield

Member for the whole year

Laxman Narasimhan

Member from 17 September 2019

Rakesh Kapoor

Pam Kirby

Mary Harris

Member until resignation on
2 September 2019

Member for the whole year

Members of the Committee are appointed by the Board. Membership
is set out in the Committee’s terms of reference and comprises the
Chairman, CEO, Senior Independent Director and Chair of each of the
Board’s Committees. In accordance with the principles of the 2018 UK
Corporate Governance Code (the Code), the Committee is made up of
a majority of independent Non-Executive Directors. The Company
Secretary acted as Secretary to the Committee during the year.

The membership of the Committee is reviewed annually by the

Chairman, as part of the annual performance evaluation of the
Committee. All Directors are required to seek re-election each year at
the AGM. Biographical details of the Directors, explaining their skills
and expertise, can be found on pages 80 to 83.

Meetings
The Committee meets as needed but is required to meet at least once
a year. In 2019 the Committee met six times. Meetings usually take
place ahead of Board meetings and the Chair of the Committee
reports formally to the Board on its proceedings.

During the year, Committee members met with candidates
shortlisted for the positions of CEO, CFO and Non-Executive Director,
reported their feedback at Committee meetings and made ensuing
recommendations to the Board. Further details on the recruitment
process are discussed on the following pages.

Role of the Nomination Committee
The role of the Committee is to ensure 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 also assists the Board
in succession planning for top management. The role of the
Committee includes, but is not limited to, the following matters:

•

Regularly reviewing the structure, size and composition (including
skills, experience, independence, knowledge and diversity) of the
Board and making recommendations to the Board with regard to
any changes deemed necessary, taking into account the length
of service of the Board as a whole and the need to regularly
refresh membership.

Reviewing the composition of each of the Board Committees and
evaluating the performance and effectiveness of each Director.

Keeping under review the leadership capabilities of the Company,
covering executive, non-executive and senior management
positions and ensuring plans are in place for orderly succession,
with a view to ensuring the continued ability of the Company to
compete effectively in the markets in which it operates.

•

Ensuring that all new Directors undertake an appropriate
induction programme to ensure that they are fully informed
about the strategic and commercial issues affecting the Company
and the markets in which it operates, as well as their duties
and responsibilities as a Director of the Board and member of
Board Committee(s).

Keeping under review and continually monitoring potential
conflicts of interest, and, if appropriate, authorising situational
conflicts of interest, whilst ensuring the risk of unacceptable
influence resulting from any conflict of interest is minimised.

A further description of the Committee’s roles and responsibilities

is set out in its terms of reference which can be found on our website
at www.rb.com.

Executive Director succession planning
Chief Executive Officer
Following the announcement on 16 January 2019 of Rakesh Kapoor’s
decision to retire as CEO by the end of 2019, during the year we
undertook a formal search for his successor. The Committee instructed
an independent executive search firm, MWM Consulting Limited
(MWM), to assist with the search, considering both internal and
external candidates. MWM is independent of and has no other links to
the Company or its Directors in connection with the executive search,
apart from having undertaken the Board’s 2019 externally facilitated
evaluation. I was delighted to announce on 12 June 2019 that we had
concluded our search and the Committee appointed Laxman
Narasimhan as Rakesh’s successor. Rakesh formally resigned from the
Board and Committee on 2 September 2019. Laxman was appointed
as CEO-designate and as an Executive Director from 16 July 2019, and
became CEO on 1 September 2019, at which time he also took over
leadership of the Health business unit. Laxman became a member of
the Committee on 17 September 2019.

Laxman is an outstanding leader who brings wide experience

across the consumer goods sector, both operationally at scale,
and from his time at McKinsey & Company. In previous roles, he
has led complex operational businesses and inspired teams across
developed and emerging markets to achieve market-leading
performance. He has exceptional strategic capabilities and consumer
insight with a proven track record in developing purpose-led
brands and driving consumer-centric and digital innovation.
This, combined with his excellent people engagement and
leadership skills, filled the Board with confidence that Laxman will
continue to evolve the strong culture of RB in its next phase.

I would like to thank Rakesh for his outstanding leadership

and express my gratitude for his commitment and enormous
contribution to RB over more than three decades.

Selection process
If I had one word to describe the selection process, it would be
‘comprehensive’. Whilst I led the process, I was assisted by the
Committee. The Board defined its key attributes for RB’s new CEO,
which included strong cultural fit, demonstrable operational leadership
at scale, strong consumer orientation, strategic capability and
commitment to RB’s purpose and corporate responsibility.

We initially identified over 60 candidates, shortlisted 12 and

interviewed eight. The candidates included CEOs, former CEOs,
divisional heads of large companies and specialists in our sector,
consumer goods. The candidates were diverse from both a gender
and nationality perspective and included both internal and external

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019N O M I N AT I O N C O M M I T T E E R E P O R T CO N T I N U E D

candidates. The top three candidates were interviewed extensively
by the Board and we unanimously agreed that Laxman was the right
candidate and are delighted that he agreed to join us. Laxman’s
leadership, talent development capabilities and business acumen are
without parallel and made him stand out above the other candidates.

Overview of selection process – in numbers

Candidates

Shortlisted

Interviewed

Induction
Laxman had a handover with Rakesh where they both travelled to key
RB sites so Laxman could be immersed into the RB business and build
his knowledge and understanding of how our businesses operate.
Laxman met with customers, brand and category teams and visited
factories in Evansville (US) and Nijmegen (Netherlands) and operations
in Parsippany (US) and Amsterdam (Netherlands). Laxman and Rakesh
also travelled to China where Laxman had an opportunity to meet
customers, partners and colleagues and visit stores. Leaders across
both the Health and Hygiene Home business units and corporate
group spent time with Laxman, and employee town halls, roadshows
and broadcasts were held to give employees an opportunity to say
farewell to Rakesh and to learn more about Laxman and his initial
priorities following his appointment.

Chief Financial Officer
During the year, Adrian Hennah, Chief Financial Officer and Executive
Director, announced his intention to retire from his positions in 2020.
At the same time as announcing Adrian’s retirement, we were able to
confirm Jeff Carr as Adrian’s successor. Adrian will be stepping down
as Chief Financial Officer and Executive Director when Jeff starts on
9 April 2020, remaining with the Company until his retirement date
of 21 October 2020 to ensure a seamless transition.

We instructed Egon Zehnder International Ltd to carry out the
search for a new Chief Financial Officer. Both internal and external
candidates had been considered and a shortlist drawn up, which was
followed up by meetings with the Chairman and the Chair of the Audit
Committee. Jeff was considered the most suitable candidate and best
fit, given his wealth of experience in global consumer goods and retail
companies and strong track record, coupled with his previous
experience at RB and understanding of the business and our culture.
Jeff is an RB alumnus, having previously worked at RB in financial roles
for some ten years.

Adrian has played an important role in the strategic

transformation of RB and in helping drive our strong track record of
value creation. We wish Adrian all the best for the future and are
happy to welcome Jeff back.

Egon Zehnder International Ltd is an independent executive
search firm which undertakes a number of executive searches for the
Group and is a signatory to the Voluntary Code of Conduct for
Executive Search Firms in the UK to address diversity and best practice
relating to Board appointments. They do not provide any other services
to the Group.

Non-Executive Director search
We instructed Egon Zehnder International Ltd to carry out the search
for new Non-Executive Directors. Upon their recommendation we
reviewed a list of candidate profiles and I had exploratory meetings
with potential candidates who were considered a good fit for RB, in
terms of international experience, skills, culture and diverse talent
ahead of recommending for further consideration. This was followed
up by individual meetings with each of the Committee members, the
CEO (who is a Committee member) and the CFO.

Following recommendation by the Committee, we announced
the appointment of a new Non-Executive Director to the Board, Sara
Mathew, with effect from 1 July 2019. Sara became a member of
the Audit Committee on the same day. Sara has extensive Board
experience across a number of industries, including healthcare,
consumer goods and financial services and has held several senior
management roles. In previous roles, Sara led strategic and digital
transformations and she holds an MBA in Marketing and Finance.
We believe Sara brings great insight and we have been delighted
to welcome her to the Board.

During the recruitment process, the Committee followed
a formal, rigorous and transparent assessment of all potential
candidates and considered potential conflicts of interest in making
recommendations to the Board. As a Committee we will continue
to regularly review and refresh the Board where appropriate.

Director induction 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, CRSEC Committee matters,
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 an open offer to meet with the Group’s
External Auditor.

During 2019 Sara Mathew was appointed Non-Executive Director

and Laxman Narasimhan was appointed as Chief Executive Officer.
Both received tailored inductions following their appointment.
Consistent across the separate inductions were meetings with the
CEO, CFO, SVP General Counsel/Company Secretary. The new
Directors then met with pertinent individuals depending on the
Committees they had joined/were joining. For example, Sara Mathew
is a member of the Audit Committee and met with key individuals in
RB’s IT, Treasury, Finance and Safety, Quality, Regulatory & Compliance
(SQRC) teams, in addition to receiving presentations on topics covered
in all Director inductions, such as tax, Internal Audit and strategy.

Ad hoc site visits are arranged to the Group’s operations to gain

an insight into the business, and form part of the annual Board
meeting cycle, and we aim to have one Board strategy 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

10 0

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019them 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 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.

Renewal of existing Board members
Non-Executive Director appointments are generally made for
three-year terms. During the year the Committee considered the
renewal of existing Non-Executive Directors. Details of the specific
reasons each Director contributes to and continues to be important to
RB’s long-term success are set out in the Notice of Annual General
Meeting, available at www.rb.com.

With the exception of Warren Tucker, who will not stand for
re-election at the AGM on 12 May 2020, the Committee recommended
that all existing Board members have their appointments renewed, and
as such, resolutions to this effect will be proposed to Shareholders for
approval at the AGM.

Executive Committee changes
We announced the appointment of Kris Licht to the new position of
Chief Transformation Officer and as an Executive Committee member
in November 2019. Kris has held several transformation roles at other
large companies and we believe his contributions in this area will be
extremely valuable during a period of strategic change and focus for
RB. We were sorry to see Amedeo Fasano, Chief Supply Officer, and
Seth Cohen, Chief Information Officer, leave RB in June and July 2019
respectively. We thank both Amedeo and Seth for their contributions
and wish them well.

In December 2019 we announced that Rob de Groot, President of
our Hygiene Home business, would step down from his role and leave
the Group in February 2020. Rob has been an excellent leader of our
Hygiene Home business and has seen great success over his long
career at RB. We would like to thank Rob and wish him good luck for
the future. We were happy to announce Harold van den Broek as
Rob’s successor. Harold was previously CFO to the Hygiene Home
business and has worked closely with Rob for a number of years.
Harold became Chief Operating Officer, Hygiene Home and an
Executive Committee member on 4 December 2019 and we have every
confidence that Harold will be a great leader of the Hygiene business
and continue its growth.

Since the year end, further changes to the Executive Committee

were announced. In January 2020, regretfully we announced that Mike
Duijser, Chief Supply Officer, had decided to leave RB to return to the
US for personal reasons. Mike had been instrumental in building the
strategy for the supply function and implementing transformational
change within supply. We are grateful to Mike for his contribution and
wish him all the best for the future. Mike left in February 2020 and his
successor will be appointed in due course.

We also announced in January 2020 that after 27 years at RB,
Gurveen Singh, Chief Human Resources Officer, decided to retire in
June 2020. During her tenure, Gurveen has held a number of roles at
RB and in her current role she has led and improved many HR
initiatives and is known for her passion for people. We wish Gurveen
all the best in her future endeavours. Ranjay Radhakrishnan joined RB
on 1 March 2020 as Chief Human Resources Officer (and Executive
Committee member). Ranjay is a skilled and experienced HR leader; he
was previously CHRO at InterContinental Hotels Group plc and prior to

that, he worked at Unilever for 23 years in senior HR leadership roles
– his last role being Executive Vice President Global HR, where he was
responsible for eight regions and four global product categories.
Ranjay holds degrees in Commerce and Accounting and Personnel
Management and Industrial Relations. We were delighted to welcome
Ranjay to RB and are positive that he will contribute greatly to both RB
and the HR function.

In February, at the time of our strategy announcement, we also

More information about our current Executive Committee

membership can be found on pages 84 to 85.

Review of potential conflicts of interest
During the year the Committee reviewed Board members’ potential
conflicts of interest. The Committee reviewed a schedule of external
appointments and other potential situational conflicts as disclosed by
each Director. Having reviewed the schedule, the Committee
concluded that the appointments did not affect any Director’s ability
to perform his/her duties and recommended that the Board authorises
each Director to continue in each of his/her external commitments.

We acknowledge that Pam Kirby sits on four Boards, and some

Shareholders are concerned she is ‘overboarded’. The Committee
monitors her time devoted to her duties, her attendance at meetings
and availability to Shareholders, and believes that Pam continues to be
effective, committed and diligent in her role.

Governance
Committee evaluation
This year, the Committee did not carry out its own self-evaluation, as it
was covered under the main Board external evaluation, conducted by
MWM Consulting Limited. Respondents scored the Committee highly
in key areas, specifically noting excellent new Board member
inductions, and the Board as a whole is satisfied that the Committee
works well and is effective. The main area of focus relevant to the
Committee, identified as a result of the evaluation, is to ensure
succession planning remains a top priority. Further details on the
Board evaluation can be found on page 94.

Review of Committee terms of reference
At the Committee’s November meeting, we reviewed our terms of
reference and proposed minor changes regarding the evaluations of
the Committee, Board and Chairman and those of individual Board
members. The revised terms of reference were approved by the Board
in November 2019 and can be found on our website at www.rb.com.
We review our terms of reference annually.

Designated Non-Executive Director
On 26 July 2019, following consideration of the best manner of Board
engagement with the workforce, Mary Harris was appointed as
designated Non-Executive Director in line with the provisions of the
Code. Whilst Mary holds the title of designated Non-Executive
Director, for engagement with the Company’s workforce, it is not
intended to delegate all such Board engagement to Mary, but rather
that she should have oversight of a programme of engagement in
co-ordination with management. A proposed plan and areas of focus
have been drawn up. Details of engagement activities carried out
during 2019 are set out on page 46 to 47.

101

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019N O M I N AT I O N C O M M I T T E E R E P O R T CO N T I N U E D

Our Group diversity policy can be found at www.rb.com/responsibility/
people-and-culture/diversity-and-inclusion/. We are committed to
equality of opportunity in all areas of employment and business,
regardless of personal characteristics. 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. Ultimate responsibility and
sponsorship for this policy rests with the Executive Committee. Senior
management is accountable, and all RB employees are responsible,
for ensuring that our diversity policies and programmes are actively
implemented and followed.

We continue to work hard on our inclusion and diversity
programmes, and further details can be found in our Stakeholder
Engagement section from page 12.

Inclusion and diversity
The Board and Committee fully recognise the importance of diversity,
including gender and ethnicity, at Board level and senior management
roles at RB. We do not have a written Board diversity policy but the
Committee and the Board are committed to recruit members of the
Board on the strict criteria of merit, skill, experience and cultural fit of
any potential candidates, and to seek diversity of gender, social and
ethnic backgrounds, cognitive and personal strengths. This
commitment is demonstrated by the composition of the Board, which
comprises five nationalities, and four women, two of whom are
Committee Chairs. I am pleased to report that 36% of our Board
members are women, which exceeds the original 25% target set
by the Davies Report and we have achieved the 33% target by
2020, set out by Lord Davies, and subsequently outlined in the
Hampton-Alexander Review. We also meet the requirements of the
Parker Review published in October 2017, with at least one person
from an ethnic minority on the Board.

Female representation on the Board

30%

36%

2018

2019

33% by 2020 target set out in
the Hampton-Alexander Review

Our Executive Committee, comprising the most senior management
level in the business, represents five different nationalities from across
the globe, embodying our corporate inclusion and diversity 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.

At 31 December 2019, female representation within the Executive

Committee (and their direct reports) was 26%. We are cognisant of
our poor performance towards the 33% target for female leadership
within the Executive Committee (and their direct reports) as detailed
in the Hampton-Alexander Review (and in provision 23 of the Code),
and we are working to improve gender balance amongst our
senior management.

102

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019A U D I T C O M M I T T E E R E P O R T

On behalf of the Board,
I am pleased to present the
Audit Committee Report
for the financial year ended
31 December 2019.

This report details how the Committee has discharged its role, duties
and performance during the year under review in relation to internal
control, financial and other reporting, risk management, the
internal audit function and our relationship and interaction with
the External Auditor.

The Committee has a detailed annual standing agenda of matters
to be considered and reviewed based on its terms of reference, which,
during 2019, included focused reviews in the following areas: risk
assurance mapping; delivery of the RB 2.0 programme; the structure of
shared services; IT risk; compliance risk; and taxation matters.

The risk and control challenges around the RB 2.0 reorganisation

were reviewed to track implementation of the programme and
mitigation of the risks associated with it. The Committee met with
operational management at each scheduled meeting to review the
RB 2.0 workstreams and to consider programme governance and the
associated financial, legal, regulatory and IT risks and controls. Though
some work remains in relation to this programme, much of the work
has now been completed. The Committee and I would like to convey
our thanks to the teams involved in the successful implementation of
the programme and for their hard work during a busy year for RB.

During the year, we also reviewed the Company’s major risk
assessment process, which identifies and prioritises the principal and
emerging strategic risks and uncertainties which may affect the Group,
how they can be mitigated and whether they have increased,
diminished or remained the same, compared to the previous year.
Looking at the major risk assessment 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 transparently reflected in
our communications to Shareholders in the Annual Report. Details
are set out on pages 64 to 76.

103

Maintaining the integrity of
our financial reporting and
monitoring the robustness
and effectiveness of internal
controls and risk
management systems
remain our primary
objectives. To achieve this,
we work closely with the
Board and other
Committees, as appropriate

Andrew Bonfield
Chair of the Audit Committee

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019
A U D I T C O M M I T T E E R E P O R T CO N T I N U E D

The Committee also considered many other matters outside its annual
standing agenda, such as: UK payment reporting practices;
implementation of the UK Corporate Governance Code 2018 (the
Code); the potential impact of Brexit; the US Department of Justice
(DoJ) settlement; the annual impairment testing of goodwill and
indefinite-life assets; the adoption of IFRS 16 (Leases) from 1 January
2019; and revised Group finance policies. Further detail on our activity
during the year can be found on pages 106 to 107.

The Committee is responsible for the External Auditor’s

effectiveness and independence. In 2017, the Committee led a
rigorous external audit tender process leading to the Board’s
recommendation to Shareholders at the 2018 AGM to appoint KPMG
LLP (KPMG) as External Auditor for the 2018 financial year. I am
pleased to report that the Shareholders passed a resolution to
re-appoint KPMG at the 2019 AGM, and as the Committee has
recommended to the Board that KPMG be re-appointed by the
Shareholders, a similar resolution to re-appoint KPMG as External
Auditor for the 2020 financial year will be proposed at the AGM on
12 May 2020. Further details on our interaction with the External
Auditor can be found on pages 108 to 109.

Committee priorities for 2020

• Maintaining oversight and reassurance to the Board on RB’s risk
management process and internal control procedures, including
monitoring key areas in the context of risk and control, such as IT,
tax and legal and compliance.

•

Aligning RB’s new strategic aims and priorities within our risk
assessment process.

•

Sustaining a strong culture of risk management across the Group.

• Monitoring IT controls and embedding new IT and finance

systems across the Group.

•

Continuing to monitor legislative and regulatory changes which
may affect the work of the Committee.

•

Closely monitoring developments in the UK audit profession.

During the year, we strengthened the membership of the Committee
with the appointment of Sara Mathew. Sara has an MBA in Marketing
and Finance and has held various senior roles during her career,
including roles as Chief Financial Officer at Dun & Bradstreet
Corporation and Procter & Gamble’s global baby care business. She
has extensive experience in the consumer goods, digital technologies
and healthcare sectors and the Committee is confident that Sara’s
appointment has added valuable insight, relevant financial and sectoral
expertise and challenge.

I would like to acknowledge and thank my fellow Committee

members, Pam Kirby, Warren Tucker and Sara Mathew, for their
diligence and service during the year.

Andrew Bonfield
Chair of the Audit Committee
26 March 2020

Committee membership

Member from

Meetings attended

Recent and relevant financial
experience

Sectoral experience relevant to RB’s
operations

Andrew Bonfield (Chair)1

July 2018

6/6

Pam Kirby

February 2015

Warren Tucker2

February 2010

6/6

Sara Mathew3

July 2019

2/2

• Financial expert
• Chartered Accountant
• Has held numerous CFO roles
at other large companies,
including those in the
consumer goods sector

• Consumer goods
• Pharmaceuticals/healthcare

• Sits on another FTSE 100

company’s Audit Committee

• Pharmaceuticals/healthcare
• Technology

• Financial expert
• Chartered Accountant
• Has held senior finance roles
at other large companies
• Sits on a FTSE 250 company’s

Audit Committee

• Financial expert
• Holds Master’s degrees in
Finance and Accounting
• Has held senior finance

roles and CFO roles at other
large companies

• Manufacturing

• Consumer goods
• Pharmaceuticals/healthcare

There were four scheduled meetings and two additional meetings (held by telephone) during the year.

1 Andrew became Chair of the Committee on 1 January 2019.
2 Earlier this year we announced that the Board had asked Warren to remain as a Director and member of the Committee until the Company’s AGM in 2020, when he will not stand for

re-election and will retire from the Board and Committee.

3 Sara was eligible to attend two of the scheduled meetings during the year, having been appointed on 1 July 2019.

10 4

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019The Chair of the Committee is a Chartered Accountant with recent and
relevant financial experience. He is currently Chief Financial Officer of
Caterpillar Inc. and has previously held CFO roles for large,
multinational companies.

All Committee members are independent Non-Executive Directors
who have financial, economics and/or business management expertise
in multinational companies. Committee members are expected in
particular to have an understanding of:

•

the Group’s operations, policies and internal control environment;

the principles of, and recent developments in, financial reporting;

relevant legislation, regulatory requirements and ethical codes of
practice; and

•

the role of internal and external auditing and risk management.

Role and responsibilities
The Committee is part of the Group’s governance framework and
supports the Board in fulfilling its oversight responsibilities in ensuring
the integrity of the Group’s financial reporting, internal controls and
overall risk management process and relationship with the Company’s
External Auditor. There were no significant changes to the
Committee’s role and responsibilities during the year. The Committee’s
role and responsibilities are set out in its terms of reference, which can
be found at www.rb.com.

Committee meetings cover matters set out in its terms of

reference related to the reporting and audit cycle, including: half- and
full-year results; Internal and External Audit work plans and reports;
and regular updates from senior financial management and the
External Auditor.

The Committee’s responsibilities include, but are not limited to,

the following matters:

The Board is satisfied that, in compliance with the Code, Committee
members as a whole have competence relevant to the Company’s
sector (consumer goods). The skills and expertise of each Committee
member are summarised in the table on page 104.

Committee appointments are generally made for a three-year
period. Members of the Committee are appointed by the Board on
the recommendation of the Nomination Committee, which reviews
membership in terms of skills, experience, independence, knowledge
and diversity. On joining the Committee and during their tenure,
members receive additional training tailored to their individual
requirements. Such training includes meetings with management
covering internal audit, risk management, 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.

The Assistant Company Secretary was Secretary to the

Committee throughout the year.

Meetings
During 2019, the Committee held four scheduled meetings at times
aligned to the Company’s reporting cycle, two additional calls and an
informal session with local finance management in the US, as part of
the Board’s overseas strategy meetings in September 2019. Committee
meetings usually take place ahead of Board meetings and the
Committee Chair provides an update to the Board on the key issues
discussed at each meeting. Committee papers are provided to all
Board Directors in advance of each meeting, including a copy of the
minutes of the previous meeting(s).

Meetings are attended by senior representatives of the External

Auditor, the Group Head of Internal Audit, Group CFO and SVP
Corporate Controller. The Chairman of the Board and the Group CEO
are also invited to attend. Other senior management attend when
deemed appropriate by the Committee. Time is allocated at the end
of each meeting for private discussion with the Internal and External
Auditors without other invitees being present, as well as a private
session of the Committee members. Committee member meeting
attendance is set out in the table on page 91.

Financial and other reporting matters

• Monitoring the integrity of the Group Financial Statements

including annual and half-yearly reports, interim management
statements, preliminary announcements and any other formal
announcements relating to the Company’s financial performance.
Reviewing and challenging, where necessary, the actions and
judgements of management before submission to the full Board,
paying particular attention to: the clarity and completeness of
financial reporting disclosures; the application and
appropriateness of significant accounting policies; methods used
to account for significant or unusual transactions; whether
judgements and estimates are appropriate; and considering the
External Auditor’s views on the Financial Statements.

As requested by the Board, reviewing the content of the Annual
Report and Financial Statements and advising the Board on
whether, taken as a whole, it is fair, balanced and understandable
and provides the information necessary for Shareholders to assess
the Company’s position, performance, business model and
strategy and whether it informs the Board’s statement in the
Annual Report on these matters that is required under provision
25 of the Code.

Reviewing all material non-financial information presented with
the Annual Report and Financial Statements, such as the Strategic
Report and the Corporate Governance Statements, insofar as it
relates to activities or functions within the Committee’s remit.

Reviewing and approving the statements to be included in the
Annual Report concerning internal control, risk management,
going concern and the Viability Statement.

Receiving updates on accounting matters, including consideration
of relevant accounting standards, underlying assumptions and the
impact of changing or adopting new accounting standards.

•

Considering significant legal claims and regulatory issues.

105

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019A U D I T C O M M I T T E E R E P O R T CO N T I N U E D

Risk management and internal controls

• Meeting with the External Auditor following each formal

Committee meeting without management being present, to
review and discuss the External Auditor’s remit and the findings
of the audit including (but not limited to) any major resolved or
unresolved issues arising from the audit, the External Auditor’s
explanation of how risks to audit quality were addressed, key
accounting and audit judgements, the External Auditor’s view of
their interactions with senior management and levels of errors
identified during the audit.

Considering communications from the External Auditor on audit
planning and findings on material weaknesses in accounting and
internal control systems that come to the External Auditor’s
attention, including a review of material items of correspondence
between the Company and the External Auditor.

Developing, implementing and keeping under review the policy
on non-audit services provided by the External Auditor,
considering relevant ethical guidance and the impact this may
have on independence.

Agreeing with the Board the Group’s policy for the employment
of former employees of the External Auditor, taking into account
the Ethical Standard and legal requirements and monitoring the
application of this policy.

At the end of the audit cycle, assessing the effectiveness of the
External Audit process.

•

• Monitoring the rotation of the External Audit lead partner and

managing the competitive tendering process of the external audit
services contract, ensuring a competitive tender for the external
audit services contract is conducted at least once every ten years.

Activity during the year
Standing agenda items reviewed by the Committee throughout
the year

•

Received reports from the SVP Corporate Controller, Internal
Auditor and External Auditor.

Considered tax and treasury matters, including provisioning
and compliance with statutory reporting obligations.

Considered legal matters, including provisioning and
compliance risk.

Kept abreast of changes in financial reporting and governance
matters by way of technical updates throughout the year.

Received focused risk and control reviews concerning the delivery
of RB 2.0 (in particular, in the areas of the shared services
function, deployment of IT systems, legal entity restructuring,
operating model review and financial reporting); risk assurance
mapping; IT risk; legal and compliance; and tax disputes risk.

• Monitored the Group’s risk assessment processes.

• On behalf of the Board, overseeing and ensuring that the

assessment process for the Group’s principal and emerging risks
is robust and of a high quality, that procedures are in place to
identify emerging risks and considering the Company’s response
to identified risks.

•

Advising the Board on the Group’s current risk exposure and
future risk strategy.

Reviewing and monitoring, on behalf of the Board, the Group’s
internal financial controls and systems and, at least annually,
carrying out a review of its effectiveness and reviewing and
approving the statement to be included in the Annual Report
concerning internal risk management.

Ensuring that appropriate procedures are in place for detecting
fraud and prevention of bribery, and secure whistleblowing
arrangements by which staff may raise concerns including
possible wrongdoings in matters of financial reporting and
financial controls.

Internal Audit

• Monitoring and assessing the effectiveness of the Internal Audit

function, including its role and mandate, assessing the
effectiveness of its work and satisfying itself that the function has
the requisite skills, expertise and standing within the Group.

•

Reviewing Internal Audit activities, significant recommendations
and findings and related management actions.

Assessing and approving Internal Audit’s annual work plan to
ensure it is aligned to the key risks of the Group and receiving
reports on progress.

Ensuring that the Internal Audit function has unrestricted scope,
the necessary resources and appropriate access to information
to enable it to perform effectively.

External Audit

• Overseeing the relationship with the External Auditor,

negotiating, agreeing and approving their terms of engagement
and their remuneration to ensure that the level of fees is
appropriate to enable an effective and high-quality audit
to be undertaken.

Annually reviewing and monitoring the External Auditor’s
independence, objectivity and effectiveness, taking into account
relevant UK law, the Ethical Standard and other professional and
regulatory requirements.

Considering and making recommendations to the Board to put
to Shareholders for their approval at the AGM regarding the
appointment, reappointment or removal of the External Auditor.

Receiving the annual Audit plan and receiving the External
Auditor’s findings and reports on the annual Audit and
interim review.

•

10 6

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019Other items considered by the Committee at meetings during the year

Meeting

Topic

January 2019

February 2019

• Additional meeting held by telephone, following
Corporate Control’s 2018 impairment review
exercise, to consider the outcome in detail

• Conclusion of 2018 impairment reviews
• Review of 2018 preliminary results, draft unaudited

Financial Statements and related announcement and
recommendation for approval by the Board

• Review of going concern and viability statements
• Refinements to Group return on capital employed

(ROCE) definition

• Review of KPMG’s 2018 audit findings report and

draft management representation letter

• Approval of KPMG’s final non-audit fees for 2018

and review of 2019 non-audit fees forecast

• Results of KPMG’s assessment of its objectivity and

• Review of risk management and internal controls,

including developments undertaken in 2018, review
of three lines of defence and in-depth review of risks
across each of the Group functions and associated
controls

• UK payment reporting practices
• Corporate governance developments and their

impact (UK Corporate Governance Code 2018, new
reporting requirements under section 172 of the
Companies Act 2006 and the Companies
(Miscellaneous Reporting) Regulations 2018)
• Update on adoption of IFRS 16 (Leases) effective

independence

1 January 2019

• KPMG’s report on the reform of the External Audit

• Potential impact of Brexit

profession

• Review of work undertaken in respect of the 2018

Internal Audit plan

March 2019

• Additional meeting held by telephone, to consider

• Review of KPMG’s findings on RB’s 2018 Annual

May 2019

whether the Committee could recommend that the
Board approve RB’s 2018 Annual Report and
Financial Statements

• Review of full year 2019 Internal Audit plan
• Review of KPMG’s 2019 audit strategy
• KPMG’s observations of RB’s internal controls for the
2018 financial year, including their report on the
2018 Annual Report

Report and Financial Statements

• Review of revised Risk Management policy
• Review of Speak Up whistleblowing facility

July 2019

• Review of the half-year results announcement and

• Review of the impact of adopting IFRS 16 (Leases) on

November 2019

recommendation for approval by the Board
• Review of going concern and Viability Statement
• Review of KPMG’s half-year review report findings

a fully retrospective basis

• Review of changes to finance policies (e.g. trade

spend policy)

to 30 June 2019 and draft management
representation letter

• Review of internal control environment
• US Department of Justice (DoJ) settlement and

• Review of KPMG’s response to Audit Quality

provisioning

Review findings

• Review of the Committee’s 2020 standing agenda
• Review of the Committee’s terms of reference and

recommendation to the Board for approval
• Review of the results of effectiveness reviews
of the Committee, Internal Audit function and
External Auditor

• Annual tax function ‘deep dive’
• Review of updated Group Treasury policy
• Review of KPMG’s interim IT control findings relating

to the 2019 audit cycle

• Review of 2020 Internal Audit plan covering the first

half of 2020

Significant and key financial reporting matters
The key matters reviewed and evaluated by the Audit Committee
during the year were as follows:

Accounting and financial reporting
The Audit Committee is responsible for reviewing and approving the
appropriateness of the interim and annual Financial Statements and
related announcements, including:

•

recommending that, in the Committee’s view, the Financial
Statements are fair, balanced and understandable. In addition to
the detailed preparation and verification procedures in place for
the 2019 Annual Report and Financial Statements, management

continued its focus on narrative reporting and clear written and
visual messaging to communicate the Group’s strategy; and

•

reviewing the appropriateness of the accounting policies,
judgements and estimates used as set out on page 157 and
concluding that the judgements and assumptions used
are reasonable.

Areas of significant financial judgement
The significant financial judgements and complex areas in relation to
the 2019 Group Financial Statements considered by the Committee,
together with a summary of the actions taken, were as follows:

107

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019A U D I T C O M M I T T E E R E P O R T CO N T I N U E D

Impairment assessments
Under International Financial Reporting Standards (IFRS), goodwill and
indefinite life assets must be tested for impairment on at least an
annual basis.

As in prior years, management performed this testing over the

course of late 2019 and early 2020. The testing utilised cash flow
projections included within one-year budgets and three- to five-year
strategic plans. Cash flows beyond the five-year period were projected
using steady or progressively decreasing growth rates followed by
terminal growth rates.

Impairment testing is inherently judgemental and requires
management to make multiple estimates, for example around future
price and volume growth, future margins, and discount rates.
As a result of the 2019 testing, management recorded a
£5.0 billion impairment against Infant and Child Nutrition (IFCN)
goodwill and a £0.1 billion impairment against Oriental Pharma
intangible assets.

In February 2020, the Audit Committee reviewed the detailed
results of the 2019 testing and understood both the external (e.g.
declining birth rates in China) and internal (e.g. performance against
budgets) drivers behind the impairments. The Committee confirmed
the appropriateness of the key judgements and estimates made by
management (see Note 9 for further details) and reviewed the
sensitivity of the impairment models to reasonable changes in key
assumptions.

As required under IFRS, management has included additional

impairment-related disclosures in the Financial Statements. The
Committee has reviewed these disclosures, included within Note 9,
and considers them appropriate.

Trade spend
Trade spend remains a significant cost for the Group, and the main
judgements relate to trade accruals, specifically the timing and extent
to which temporary promotional activities occurred. The Committee
reviewed with management its assessment of the control environment,
a revision to trade spend policy 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.

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 local 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 and disclosures to
be appropriate.

Legal liability provisioning
At 31 December 2019, a provision of £151 million (2018: £461 million)
was held on the Group’s Balance Sheet in relation to regulatory, civil
and/or criminal investigations as well as litigation proceedings and a
provision in respect of the South Korea Humidifier Sanitizer (HS) and
the US DoJ issues. The Committee challenged management on legal
judgements made in determining the level of provisioning and was
satisfied with the level of provisioning and disclosure.

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 Committee discussed
this with management and agreed that the presentation provided
meaningful information to Shareholders about the underlying
performance of the Group.

Going concern and Viability Statement
A viability review was undertaken by management, encompassing its
going concern review. The Committee reviewed and challenged the
key assumptions used by management in its viability review and going
concern assessment, as well as the scenarios applied and risks
considered, including the risks associated with COVID-19. Based on
its review, the 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 a five-year period, as set out on page 77. The use of a
five-year period for the viability review was approved by the Board in
2019 as it is the period of the Group’s long-term forecasting process
and covers the various business cycles.

Risk management and internal control
In monitoring the adequacy and effectiveness of the system of risk
management and internal controls, the Committee reviewed
compliance procedures and RB’s overall risk framework (including the
Group’s whistleblowing arrangements) and considered financial,
operational risk and internal control processes. There were no
significant failings or weaknesses during the year meriting disclosure
in this report. The Committee reported to the Board in February 2020
that it considers the internal control framework to be functioning
appropriately, to enable the Board to meet its obligations under
section C of the Code, to maintain sound risk management and
internal control systems and to report to Shareholders on these
in the Annual Report (see pages 95 to 96).

External Auditor
The Committee is responsible for maintaining the relationship with
RB’s External Auditor on behalf of the Board. The Company’s External
Auditor is KPMG LLP (KPMG). Following a competitive tender
undertaken in 2017, KPMG was formally appointed as the Group’s
External Auditor by Shareholders in 2018. There are no current plans
to commence an External Audit tender. The Company will be required
to conduct its next External Audit tender no later than 2027.

The Committee considers and makes a recommendation to the
Board in relation to the appointment, reappointment and removal of
the External Auditor, taking into account independence, effectiveness,
lead audit partner rotation and any other relevant factors, and
oversees the tendering of the External Audit contract. The Committee
approves the External Auditor’s terms of engagement and
remuneration and reviews the strategy and scope of the audit and the
work plan. The Committee also monitors the rotation of the lead audit
partner, who rotates every five years in accordance with the Ethical
Standards. The current lead audit partner, Richard Broadbelt, has just
completed the second year of his five-year term. A new lead audit
partner will be required for the year ending 31 December 2023.

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. The Board recognises that in certain circumstances
the nature of the service required may make it more timely and

10 8

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019cost-effective to appoint an auditor that already has a good
understanding of RB. The total fees paid to KPMG for the year ended
31 December 2019 was £14.5 million, of which £1.9 million related to
audit-related and non-audit work (to which KPMG was appointed
principally for the above reasons). Details of services provided by the
Auditor are set out in Note 4 on page 167.

Following the introduction of EU reforms, the Group’s internal

policy on non-audit fees was revised, effective 1 January 2017, to
reflect prohibited non-audit services, including all tax services provided
to entities within the EU. 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 2019, non-audit and audit-related fees were
15% of the audit fees.

RB has a formal policy in place to safeguard the External Auditor’s
independence. In addition, as part of its audit strategy presentation to
the Committee in May 2019, KPMG identified its own safeguards in
place to protect its independence and confirmed their independence
in March 2020 to the Committee.

The Group has a policy that restricts the recruitment or
secondment of individuals employed by the External Auditor into
positions that provide financial reporting oversight where they could
exercise influence over the financial or regulatory statements of the
Group or the level of audit and non-audit fees.

The External Auditor is a key stakeholder in helping the

Committee fulfil its oversight role for the Board. In the opinion of the
Committee, the relationship with the External Auditor works well, the
Committee remains satisfied with the External Auditor’s independence
and effectiveness and believes KPMG is best placed to conduct the
Company’s audit for 2020. KPMG has expressed a willingness to
continue as External Auditor of the Company. Following a
recommendation by the Committee, the Board concluded, on the
Committee’s recommendation, that it was in the best interests of
Shareholders to appoint KPMG as the Company’s External Auditor
for the financial year ending 31 December 2020. In accordance
with s489 of the Companies Act 2006, resolutions to propose the
re-appointment of KPMG as the Company’s External Auditor and to
authorise the Committee to fix its remuneration will be put to the
Shareholders at the AGM on 12 May 2020.

For the year ended 31 December 2019, the Company has

complied with the Competition & Markets Authority Order: The
Statutory Services for Large Companies Market Investigation
(Mandatory use of Competitive Tender Processes and Audit Committee
Responsibilities) Order 2014.

During the financial year under review, the Company had no
interaction with the FRC’s Corporate Reporting Review Team or its
Audit Quality Review Team.

Internal Audit
The Committee is responsible for reviewing and monitoring the
effectiveness of the Internal Audit function. The Group Head of
Internal Audit reports to the Chair of the Committee and to the
CFO for administrative matters and updates the Committee at each
meeting. The Internal Audit function 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.

The Internal Audit plan is prepared on a half-yearly basis under an
agreed cover and scope policy and reflects a risk-based approach
within the cover policy. 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, change programmes
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 Committee, together with
recommendations and updates. Resulting management actions and
progress are tracked until a report is satisfactorily closed. In 2019,
routine Internal Audit work delivered 61 audits, which covered 39%
(by Net Revenue) of RB’s global commercial business and 40% (by
industrial sales) of global manufacturing facilities. The failure rate for
2019 audits was broadly consistent with previous years; all failed audits
receive a follow-up audit within six to 18 months as appropriate.

Fair, balanced and understandable
The Committee reviewed the 2019 Annual Report and Financial
Statements to ensure that they are fair, balanced and understandable
and provide sufficient information to enable the Shareholders to assess
the Group’s position, performance, business model and strategy.
The Annual Report project team was primarily comprised of

individuals in RB’s Company Secretarial, Finance, Investor Relations,
Corporate Communications and Sustainability teams. Individuals from
those teams with sufficient knowledge and experience undertook the
drafting of sections of this Annual Report. The overall governance and
coordination of the Annual Report was managed by the Company
Secretarial team, in conjunction with the Corporate Communications
team. The project team held regular meetings and accountability was
ensured by obtaining internal sign-off from key stakeholders in the
project team for the section(s) they were responsible for.

The Directors, individually and collectively, were provided with

drafts of the Annual Report at set stages, and information contained
within the Annual Report was verified internally and by our External
Auditor as required. The preparation and verification processes were
determined to be robust.

Following the Committee’s review, the form, content and
consistency of narrative within the 2019 Annual Report and Financial
Statements, the disclosures contained in the Financial Statements and
the underlying processes and controls were confirmed as appropriate.
The Committee was satisfied that the 2019 Annual Report and
Financial Statements, taken as a whole, met its objectives and
accordingly we recommended to the Board that the 2019 Annual
Report and Financial Statements be approved and we supported
the Board in making its statement on page 141.

Governance
Terms of reference
We review our terms of reference annually. During the year, the
Committee’s terms of reference were reviewed and updated, to more
closely align all RB Committee terms of reference and to ensure that
the Committee’s terms of reference continue to reflect best practice.
Following a recommendation from the Committee to approve its
updated terms of reference, the Board approved the changes in
November 2019. The updated terms of reference can be found at
www.rb.com.

10 9

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019A U D I T C O M M I T T E E R E P O R T CO N T I N U E D

Informal Committee evaluation
In addition to the Committee’s inclusion in the Board’s external
performance evaluation this year, the Committee chose to undertake
a separate, informal evaluation of its performance. The informal
evaluation of the Committee consisted of two internally facilitated
questionnaires; one was sent to Committee members and regular
meeting attendees, and the other was sent to individuals who
regularly present at Committee meetings. The rationale was to provide
the Committee with a more holistic view from other internal
Stakeholders and to gather their views of the Committee’s operation
and interaction with them.

Matters reviewed by Committee members included effectiveness

in the areas of: risk strategy and framework; Internal and External
Audit; external reporting; Committee role and composition;
information and support; meeting logistics and focus; and engaging
internally and externally. The questionnaire used for presenters was
more narrative based and sought views on interaction with Committee
members and levels of engagement, feedback and challenge.

The overall conclusions drawn from both questionnaires depicted

a Committee with strong foundations and talented members,
recognising there was a continual learning and improvement process.

Internal Audit evaluation
The Internal Audit effectiveness review was carried out through a
combination of direct post-audit feedback together with questionnaires
targeted at Committee members, Executive Committee members,
business unit leadership teams and local finance management.

The evaluation of the Internal Audit function, which covered audit

scope, cost and communications, quality process, governance and
independence, and calibre and capability, indicated that respondents
deemed the Internal Audit team to have a strong degree of integrity,
a reputation for producing high-quality audits and as a function are
well respected.

The 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
and the Committee remains satisfied that the resourcing, quality,
experience and expertise of the function is appropriate for
the Company.

External Audit evaluation
As 2018 was KPMG’s first year as RB’s External Auditor, the
assessment was conducted during the November 2018 Committee
meeting. This year, the assessment of the External Auditor was
conducted using a questionnaire which was circulated to the Board,
Committee, Executive Committee, business unit, finance and other
functional leadership and local finance management.

The questionnaire covered the four competency areas outlined in

the Financial Reporting Council’s Guidance on Audit Quality Practice
(published in May 2015) (Guidance): mindset and culture; skills and
knowledge; quality control; and judgement. In addition, specific areas
in the questionnaire included the audit team, fees, communication,
governance and independence. In terms of the Guidance, KPMG
scored particularly highly in ‘mindset and culture’ and ‘quality and
control’ and the overall results were largely consistent with those
attained by RB’s previous External Auditor.

The Committee is satisfied with the effectiveness, expertise,
quality, review, and in particular, challenge from the External Auditor
and is confident that KPMG remains best placed to conduct a
high-quality audit of the Group for the 2020 financial year.

110

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019C O R P O R AT E R E S P O N S I B I L I T Y, S U S TA I N A B I L I T Y,
E T H I C S A N D C O M P L I A N C E C O M M I T T E E R E P O R T

On behalf of the Board,
I am pleased to present the
Corporate Responsibility,
Sustainability, Ethics and
Compliance (CRSEC) Committee
Report for the financial year
ended 31 December 2019.

The CRSEC Committee supports the Board in reviewing, monitoring
and assessing the Company’s approach to responsible, sustainable,
ethical and compliant corporate conduct and assists the Board in
upholding its values of responsibility, honesty, integrity and respect.
The following report details the work undertaken by the Committee
during 2019 and our role in ensuring that our approach to CRSEC is
aligned to the Group’s purpose-led strategy and societal responsibility.
We have worked hard, together with the RB management team, to
continue to build on our foundations and ensure that momentum is
maintained to deliver planned safety, quality and compliance
objectives within and across each of our business units.

I am pleased to report on our good progress over the last year.
In addition to reviewing matters at our CRSEC Committee meetings,
I have held regular meetings with our CEO, Chief Safety, Quality,
Regulatory and Compliance (SQRC) Officer and SVP Corporate
Communications and External Affairs, and the Chief Ethics and
Compliance Officer, to review progress against the strategy and to
represent the Board in supporting the efforts in these critical areas.
I was also able to visit our R&D sites in Hull, UK and Montvale, US with
my fellow Committee member Mehmood Khan and the CEO over the
last year to see our R&D facilities and speak with employees on any
matters of concern. The visit to Hull incorporated an inspection of the
newly built innovation centre that links our proud history in RB to the
future of science and technology. In Montvale, the science platforms
were reviewed and it was an excellent opportunity to meet some of
the inspiring scientists in our organisation.

During 2019, a strong compliance plan was implemented focusing

on key priorities such as strengthening and driving consistency in our
global standards for quality and employee safety, delivering systems
and infrastructure initiatives that will strengthen our foundation of
compliance and our operating model and building essential capabilities
to meet the obligations we have today as well as anticipating the
future. In the area of legal compliance, due diligence assessments
to a total of 7,743 new third parties (vendors and distributors) were
conducted to ensure we are selecting reliable partners to work with.
New policies have been implemented to mitigate major risks, such
as a policy related to interactions with healthcare professionals.

111

We are committed to always
acting responsibly and with
integrity, for the health,
safety and benefit of our
consumers and employees

Pam Kirby
Chair of the Corporate Responsibility, Sustainability,
Ethics and Compliance Committee

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019
C O R P O R AT E R E S P O N S I B I L I T Y, S U S TA I N A B I L I T Y,
E T H I C S A N D C O M P L I A N C E C O M M I T T E E R E P O R T CO N T I N U E D

With the arrival of our new CEO, we took the opportunity to review
and further strengthen management’s approach to governance, and
instituted a new management Risk, Sustainability and Compliance
Committee which will report into the CRSEC Committee.

At the start of the year, following disruption at our European
Infant and Child Nutrition (IFCN) plant in late 2018, the Committee
undertook a programme to strengthen foundations at its Nijmegen
site in the Netherlands and improve performance, innovation and
business continuity. A focus was placed on safety and people, quality
assurance and strengthening operational rigour.

We recognise the central element of non-financial delivery as part

of our purpose, supporting brands and performance going forward.
As a manufacturer, we are ever mindful of the emerging risks relating
to the sustainability of our products and packaging using plastics. In
addition, we are taking steps to reduce our environmental footprint,
including reduced emissions. We have monitored and supported the
varying requirements arising from such issues to ensure RB is equipped
to manage its obligations and remains a responsible global citizen, on
behalf of all its stakeholders. More details on our sustainability aims,
activities and progress can be read from page 40 and online at
www.rb.com/responsibility.

We have continued to further our human rights strategy. We have

been working with the Danish Institute of Human Rights on our total
value supply chain, embedding human rights into our overall business
activity. To date, I can report a good improvement in first-tier supply
chain performance. RB has also mapped areas with migrant labour of
high potential risk, for example the Gulf States and Malaysia, and is
also addressing the repayment debt potentially accrued by those
migrant workers during their international recruitment process.

We were delighted in September 2019 to re-join the Dow Jones

Sustainability Index, after two years. This result reflects the
improvements we have been making to run our entire business in
a responsible way. Also, in December 2019 RB secured continued
accreditation for the 16th year in the FTSE4Good Index, the world’s
leading global responsibility investment index.

In January 2020 we donated £5.5 million in cash and antibacterial

products to combat the COVID-19 outbreak in China. Soap and
sanitiser products were donated to help meet the cleaning and
disinfection requirements in Wuhan’s hospitals, as well as cash to
support front line health working in the promotion of hand washing.
Finally, although not mentioned specifically in the following
report, the Committee continues to oversee the efforts to mitigate
the impact and alleviate the suffering caused by the tragic Humidifier
Sanitizer issue in South Korea. Further details on the event and our
remediation efforts can be found at www.rb.com/responsibility/
humidifier-sanitizer.

I should like to thank my fellow Committee members, Chris
Sinclair, Nicandro Durante and Mehmood Khan, for their diligence and
service to the Committee, and all my fellow Board colleagues for their
strong support and focus on our work throughout the year. I also
thank the RB management team for the timeliness, quality and rigour
of their reporting.

Pam Kirby
Chair of the Corporate Responsibility, Sustainability, Ethics and
Compliance Committee
26 March 2020

Activities
Some of the key achievements in the reporting period follow.

RB Code of Conduct
During 2019 we ran RB’s Compliance Passport training, achieving a
completion rate of 96% of employees and contractors worldwide.
This training uses RB’s Code of Conduct, its mission and values as a
cornerstone to address RB’s most relevant and mandatory topics which
all employees need to understand. Our Code of Conduct is divided in
to key sections including RB’s leadership tone at the top, living our
values, respect for each other, caring for our consumers and
customers, responsibility to our Shareholders and acting with integrity
in any market in which we sell our products.

Additionally, in 2019 we also developed RB’s Third-Party Code of

Conduct which serves as an independent guide and standard of our
expectations that our suppliers and vendors need to meet to work
with RB, aiming to build trusted business relationships in accordance
to the Company’s values, policies, procedures and applicable laws.
With the arrival of our new CEO in 2019, we have developed a
new Code of Conduct that is being launched in 2020, incorporating
RB’s new vision and values.

Interactions with healthcare professionals and
healthcare entities
RB Health launched a new global policy, along with eight related
Standard Operating Procedures, which set the minimum compliance
standards for interacting with healthcare professionals, healthcare
entities and government officials. It applies to all of the RB Health
portfolio of products, as well as to all RB Health employees,
contractors and sub-contractors including any third parties interacting
on behalf of RB. Online training has been developed and is mandatory
for all relevant employees.

Speak Up service
2019 was an opportunity to continue raising awareness of the
confidential Speak Up service available for all employees and third
parties to ask questions and raise concerns on potential violations
of regulations, internal policies or any misconduct observed at RB.

A campaign was launched globally that promoted a significant

increase in reported cases. To ensure the increase in cases were
managed and investigated in a timely manner, investigation training
was delivered globally to all regions and included both business units.
RB received a total of 466 Speak Up cases during 2019 in both Health
and Hygiene Home. From those cases, 339 were from Health, 115
from Hygiene Home and 12 related to the Corporate Centre. All cases
were or are in the process of being investigated. 160 reports have
been so far substantiated or partially substantiated. The complete
report can be viewed online at www.rb.com/responsibility/
policies-and-reports.

GDPR
With the implementation of the European General Data Protection
Regulation, RB developed a programme to increase the internal levels
of privacy awareness and compliance through the remediation of
several areas. This is consistent with RB’s vision to create a ‘Privacy by
Design’ culture, where the privacy rights of our employees, consumers
and business partners are considered at the forefront of all projects
and future innovation developed by the Company.

112

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019RB has appointed a Group Data Privacy Officer (DPO) and established
a Group Privacy Office to support the DPO in overseeing and
maintaining RB’s privacy risk framework. The Privacy Office also
established an extended network of Heads of Privacy and Privacy
Champions for all EU markets and other relevant jurisdictions. This
network is now starting to be extended outside of the EU, in markets
like the US, Brazil, Russia, India and China, which have been identified
as relevant from a privacy compliance perspective. The second phase
of the programme focused on identifying and mitigating privacy risks
through the implementation of RB’s privacy strategy both in central
functions, as well as more broadly across EU offices and factory sites.

Global Anti-Money Laundering Policy
In 2019, RB launched the Global Anti-Money Laundering Policy,
which aims to ensure that all business transactions are accomplished
in full compliance with applicable laws aimed at combating money
laundering and terrorist financing. The Policy is further evidence of RB
as a responsible company that only conducts business with those who
are involved in legitimate business activities. The Policy can be found
online at www.rb.com/responsibility/policies-and-reports.

Infant and Child Nutrition (IFCN)
In December 2019, we introduced a supportive and inclusive Global
Parental Leave Policy, increasing fully paid maternity leave to 26 weeks.
The policy places RB in the top tier of all FMCG companies. In addition,
100 wellness suites are available at our sites to support nursing
mothers.

During 2019, as part of RB’s commitment to monitoring and
transparency, we responded to the Globalisation Monitor Report
and undertook two external audits. The audit reports, RB’s responses
and corrective action plan are all publicly available. We also reported
on our Breast Milk Substitute (BMS) progress over 2018 and will
be preparing a similar report for fiscal year 2019. Please refer
to www.rb.com/responsibility/infant-and-child-nutrition/
policies-and-progress-reports/ for further related materials.

As a result of RB securing continued accreditation in the
FTSE4Good Index, FTSE undertake independent verifications of RB’s
BMS marketing practices. In late 2019, the first step was completed – a
review of our Corporate Centre. FTSE will undertake further field work
during 2020, with public reporting expected by the end of the year.
The CRSEC Committee has final oversight of all IFCN related reporting.

Global Sanctions Policy
In 2019, RB launched the Global Sanctions Policy, as part of our
commitment to complying with all applicable trade sanctions laws that
restrict activities with certain countries, entities, or individuals
worldwide. The objective is to support RB in making the right decisions
in line with this corporate position and the Policy applies to all RB
operations globally and other third parties acting on RB’s behalf.
The Policy can be found online at www.rb.com/responsibility/
policies-and-reports.

Ingredients
There was continued focus on the management and safety of
ingredients in products. The Committee continued to monitor
emerging concerns on any ingredients, and RB’s approach to both
developing new ingredients to address these and collaboration with
relevant regulators where appropriate. Efforts were being made to
reduce our chemical footprint, alongside our commitment to
transparent product labelling for consumers. More information
can be found on page 43.

Environment
Our environmental performance was not where we wanted to see it
against our 2020 targets, while we focused on quality, safety and
supply chain consolidation in the past three years. We are reinstating
our environmental programme with new targets for 2020 looking
beyond to 2025/2030 so we effectively play our part in tackling global
climate change. During the year, we have made progress on plastics
and improving our packaging and use of recycled materials, but
recognise that there is more to do. Our overriding objective is
responsible use of plastic for packaging, using the 4R approach –
reduce, replace, reuse and recycle. Further details can be found at:
www.rb.com/responsibility/plastics. In September 2019, we partnered
with TerraCycle to announce a free ‘Healthy You, Healthy Planet’
national recycling programme in the US. Packaging waste from
vitamins, sexual health and well being, cold and flu, infant formula and
personal care items are cleaned and melted into hard plastic that can
be remoulded to make new recycled products.

Climate change was and continues to be a material issue within

our sustainability activity and we continue to review our strategies and
operational activity on energy and water specifically, and climate
change more broadly. This includes considering risks arising from both
low-carbon transition policies and physical climate impacts in the
context of the Task Force on Climate-related Financial Disclosures.

Human Rights and Modern Slavery Act Statement
In May 2019, RB published its third Slavery and Human Trafficking
Statement following the Committee’s recommendation to the Board.
The Statement can be found at: www.rb.com/media/news/2019/may/
rb-releases-2018-modern-slavery-act-statement/. The statement is
based on our established Human Rights Policy that commits to no
slavery and human trafficking, and our monitoring and improvement
programme to prevent modern slavery and improve supply chain
standards. During the year we partnered with the Danish Institute for
Human Rights to further enhance our existing human rights strategy.
In conjunction with the Institute, we have carried out an analysis of
our business model and geographical footprint to identify where we
can strengthen respect for human rights and evaluated those countries
where our activities might impact human rights and develop
recommendations to minimise negative and maximise positive impacts.

Corporate security
RB’s corporate security team is responsible for supporting the
implementation of strategies to secure RB people, assets and
operations. They have supported RB management to deal with
sensitive and relevant business matters. In January 2019, they assisted
the secure evacuation of employees in Nairobi following a terrorist
incident near to the RB office there.

113

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019C O R P O R AT E R E S P O N S I B I L I T Y, S U S TA I N A B I L I T Y,
E T H I C S A N D C O M P L I A N C E C O M M I T T E E R E P O R T CO N T I N U E D

Global Responsible Advocacy Policy
Advocacy means the interaction we have with NGOs, public
authorities or associations in general, at global, regional, national or
local level, regarding legislation, public policy or administrative
decisions. A new Advocacy Policy was launched during the year to
help employees and relevant contractors understand and comply with
our approach to conducting any advocacy activity in a transparent,
ethical and responsible way. Our advocacy activities typically include
dialogue around: product quality and safety; self-care and the role of
OTC (over-the-counter) medicines; health; hygiene; infant nutrition;
sustainability; and changes to legislation. The Committee assists the
Board in discharging its responsibilities regarding this policy, which
can be found at www.rb.com/responsibility/policies-and-reports.

Safety, Quality and Regulatory Compliance (SQRC) programmes
The Committee has continued its oversight of the SQRC remediation
and infrastructure programmes. The Product Lifecycle Management
programme was successfully piloted in our Bangpakong factory and
this has informed the development of a global template which was
designed and built during 2019. It now goes into the final stages of
testing before being fully deployed, with a planned completion date of
2023. We have continued to monitor quality, safety and sustainability
leading and lagging indicators which have driven real-time
improvement actions where needed and which are demonstrating
improved performance in areas such as quality and employee health
and safety audits. The Committee has also been briefed and provided
guidance on issues as they have occurred during the year.

We recognise that we have the responsibility of maintaining the

high quality our consumers expect, and our commitment to quality
runs though everything we do. In November 2019, we celebrated
World Quality Day aimed at instilling responsibility and pride for quality
into all areas of the business and this was coupled with the launch of
Quality Days at each of our manufacturing and commercial sites.

Performance review
During the year, the Committee reviewed its performance from the
2018 evaluation, which focused on the Committee’s role and
responsibilities, getting the right picture, quality of controls and
manner of working together with management. Positive feedback
had been received in all areas. The Committee and management
undertook to focus on the following areas in 2019:

•

ensuring reports provide the right level of detail and are
presented in a way that makes it easy for the Committee
to understand the important issues; and

looking sufficiently at the root cause and accountabilities
in the analysis of incidents.

The Committee reviewed its manner of Committee meeting
preparation so that more concise, focused pre-reads were submitted
to the Committee before meetings, and meetings themselves focused
on interactive discussion.

An external Board evaluation was carried out by MWM

Consulting Limited in 2019 and the Committee’s performance review
was undertaken in conjunction with that of the Board. Details are set
out on page 94.

Focus for 2020
Looking ahead, we will continue our focus on consumer safety and
creating a consumer experience that builds confidence and trust while
continuing to strengthen our operational foundations.

We continue to review our sustainability objectives and chart
progress against our targets. We are developing a new set of targets
that reach beyond 2020, to 2025 and 2030 for our most material
issues. We will share more details of this during the year. With the new
strategy announced by our CEO on 27 February 2020 (see page 8 for
details), 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 has committed to. We will monitor the
progress of a number of Group-wide initiatives, as well as the
establishment of proper governance and oversight.

Composition
The members of the Committee during the year were:

Composition

Tenure during the year

Pam Kirby (Chair)

Chair and member of the Committee for
the whole year

Nicandro Durante

Member for the whole year

Chris Sinclair

Member for the whole year

Mehmood Khan

Member for the whole year

The Deputy Company Secretary was Secretary to the Committee until
18 November 2019, when the Senior Assistant Company Secretary
assumed the role.

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 Committee is independent and that
Committee members as a whole have competence relevant to the
Company’s sector and industries in which it operates. 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 CRSEC matters. All
members of the Committee receive regular briefings from senior
executives on matters covering governance, regulatory and legislative
developments, and RB practices and policies.

114

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019Agenda items
The Committee has a number of standing agenda items which it
considers in line with its terms of reference:

•

Review of constitution, terms of reference and performance.

Assessment, benchmarking and recommendations on policies,
processes and procedures for corporate responsibility,
sustainability and compliance and ethical conduct.

• Monitoring and review of processes for risk assessment for

corporate responsibility, sustainability & compliance and
ethical conduct.

•

Agreeing targets and KPIs for corporate responsibility,
sustainability and compliance and ethical conduct. Review of
internal and external reports on progress towards set targets
and KPIs.

Reports from Management Committees in respect of corporate
responsibility, sustainability, ethics or compliance and to
investigate and take action in relation to issues raised or reported
to it.

Responsibilities
The Committee is part of the Group’s governance framework and
supports the Board in fulfilling its oversight responsibilities in ensuring
the integrity of the Group’s corporate responsibility and sustainability,
ethics and compliance strategies, policies, programmes and activities. Its
role and responsibilities are set out in its terms of reference, which can
be found at www.rb.com. In November 2019, the Board approved the
Committee’s proposed changes to its terms of reference, to take
account of the UK Corporate Governance Code 2018 and recommended
best practice. We review our terms of reference annually.

The Audit Committee has a monitoring function in respect of risk
management and internal control systems, especially financial controls,
but which also includes the assurance framework established by
management to identify and monitor risks identified by the CRSEC
Committee. The Committee liaises with the Audit Committee as
appropriate.

The Committee is expected to meet at least three times per year.

During 2019, the Committee held four scheduled meetings, and the
attendance of members at the meetings is set out in the table on page
91. The CEO and the CFO, the Chief SQRC Officer, the Group Head of
Audit, the SVP General Counsel/Company Secretary and the Chief
Ethics & Compliance Officer regularly attend meetings. Other Board
members are invited to attend all meetings. Other senior management
attend when deemed appropriate by the Committee. Time is allocated
at each meeting for private discussion with the Chief SQRC Officer, the
Chief Ethics and Compliance Officer and the Chief Internal Auditor
without other invitees being present, as well as a private meeting of
the Committee members.

Committee meetings usually take place ahead of Board meetings
and the Committee Chair provides to the Board an update of the key
issues discussed at each meeting. Copies of Committee papers are
provided to all Board Directors in advance of each meeting and
minutes of each Committee meeting are provided to the Board.

See more
www.rb.com

115

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019

C O R P O R AT E R E S P O N S I B I L I T Y, S U S TA I N A B I L I T Y,
E T H I C S A N D C O M P L I A N C E C O M M I T T E E R E P O R T CO N T I N U E D

Specific matters which were considered by the Committee at its meetings during the year are shown below:

Meeting

Topic

February 2019

• Review of the Committee’s performance evaluation

carried out in 2018

• SQRC Matters
• Review of reports for Product Safety Evaluation,
Product Integrity Reach and Product Lifecycle
Management

• Quality performance
• Brexit impact
• 2019 SQRC Priorities

May 2019

• SQRC Matters

– Quality review of Nijmegen facility in

The Netherlands

– Corporate Risk Assessment
– Review of Audit of Corporate Quality function
– Review of PLM plan and PIR control process
– Organisation review

• Ethics & Compliance

– Corporate Security review

• Ethics & Compliance
• Review of the Speak Up whistleblowing programme
• New RB Advocacy Policy
• 2019 Legal Compliance and Ethics Priorities
• Sustainability & External Affairs
•

IFCN Performance and Breast Milk Substitute Pledge

– New Policy for interactions with Healthcare

Professionals and Healthcare Entities
– Review of the Speak Up whistleblowing

programme

• Sustainability & External Affairs

–

IFCN Progress, including Policy and Breast Milk
Substitute Pledge compliance training

– Modern Slavery Act Statement

July 2019

• SQRC Matters

– Review of the Competition Law Compliance

– Review PLM plan
– SQRC Organisation
– Report of the Compliance Management

Committee

– Health Regulatory Review
– Employee Health & Safety Compliance Review

• Ethics & Compliance
– Speak Up Review
– Monitoring of Compliance Passport Training

November 2019

• Governance

–

Review of the Committee’s terms of reference
and recommendation to the Board for approval
Change of Secretary

• SQRC Matters

– PLM and PIR review
– SQRC Risk Register
– Regulatory update
– 2020 Audit Schedule Endorsement

Programme

– Roll out of Trade Sanctions and Anti-Money

Laundering Compliance Programme

– GDPR Project Implementation and Data Privacy

Compliance

• Sustainability & External Affairs

IFCN Update. Breast Milk Substitute Pledge

–
– Danish Institute for Human Rights update

• Ethics & Compliance
– Speak Up Review
– GDPR Update
– Refresh of RB Code of Conduct and associated

mandatory employee training

• Sustainability & External Affairs

– Sustainability and Human Rights update
– Breast Milk Substitute Pledge

116

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019D I R E C T O R S ’ R E M U N E R AT I O N R E P O R T

Contents of Directors’ Remuneration Report

117

121

Letter from the Chair

RB’s Remuneration Policy at a glance

Remuneration Committee governance

123
124 Directors’ Remuneration Policy
125 Annual Report on Remuneration

126

2019 performance and remuneration outcomes

Implementation of Directors’ Remuneration Policy for 2020

132
133 Other required disclosures

On behalf of the Board,
I am pleased to present the
Directors’ Remuneration
Report for the financial year
ended 31 December 2019.

Firstly, I would like to thank Shareholders for their approval of our
new Directors’ Remuneration Policy at our AGM on 9 May 2019. The
Committee were particularly pleased with the support for the new
Policy with a vote in favour of 87%, an increase on the previous policy
which attracted a vote of 76%. I would also like to thank Shareholders
for their time taken in providing feedback as we consulted with them
ahead of the 2019 AGM, which gave valuable input to the Committee
as we finalised the proposals which received Shareholder approval. In
addition, our Annual Report on Remuneration was approved at the
AGM with a vote in favour of 86%.

The substantial vote in favour of our Remuneration Policy reflects

the changes we made to further strengthen the link between
remuneration and RB’s strategic priorities and Shareholders’ interests,
which we outline in this Report.

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 and Shareholder and strategic
alignment. Combined with RB’s compass and business model, they
define how decisions are made, how people act and how we assess
and reward them.

117

Central to our remuneration
philosophy are the principles
of pay for performance and
Shareholder and strategic
alignment

Mary Harris
Chair of the Remuneration Committee

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) Regulations 2008 (as amended). 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
(July 2018) (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.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019

D I R E C T O R S ’ R E M U N E R AT I O N R E P O R T CO N T I N U E D

The Committee is aware of the sensitivity around executive pay and
in taking decisions throughout the year we have taken into account
Shareholders’ views and guidelines and the new UK Corporate
Governance Code, whilst ensuring that the Policy incentivises delivery
of the Company’s strategic priorities and creation of Shareholder
value. The Committee will also review the Remuneration Policy during
2020 and may propose further changes for Shareholder approval in
2021 depending on the outcome of this review; if this is the case the
Committee will consult with Shareholders later in the year.

Further information regarding the composition, role and work

of the Committee during 2019 can be found on page 123.

2020 LTIP performance conditions and targets
Within the Policy the Committee is in the process of reviewing the
weightings of the performance conditions and the performance
targets themselves that apply to LTIP awards in respect of the 2020-22
performance period.

This is to ensure that the weighting of the LTIP conditions and
targets better reflect the Company’s new strategic priorities following
the CEO’s recently announced findings of his strategic review, which
consists of three phases to rejuvenate sustainable growth to drive
mid-term outperformance.

Due to the timing of publication, the weightings and targets are

not finalised in time to set out in this report. We are currently
consulting with Shareholders on the performance conditions before
making the awards, and will disclose them externally when we make
the awards and in next year’s Annual Report.

Board changes
During 2019 RB announced two changes to the Executive Directors.

Laxman Narasimhan was appointed as Chief Executive Officer to
succeed Rakesh Kapoor, joining the Company as CEO-designate and
the Board as an Executive Director effective 16 July 2019, and
becoming Group CEO with effect from 1 September 2019. Rakesh
Kapoor remained with the company until his retirement date of
31 December 2019 to ensure a seamless transition.

Jeff Carr has been appointed as Chief Financial Officer and
Executive Director to succeed Adrian Hennah, who will be retiring.
It is intended that Jeff will join the Company and the Board on 9 April
2020. Adrian will be stepping down as Chief Financial Officer and
Executive Director when Jeff starts, remaining with the Company until
his retirement date of 21 October 2020 to ensure a seamless transition.
The remuneration arrangements for both the outgoing Executive

Directors and the incoming Executive Directors are in line with the
Remuneration Policy approved by Shareholders and published on
announcement. In particular for Laxman and for Jeff the salaries and
incentive opportunities are either in line with or lower than those paid
to their predecessors, and there has been a reduction in pension
contribution to 10% of salary, which is aligned with our wider
workforce in the UK. The other enhancements made to the
Remuneration Policy in 2019 also apply. Further detail on the packages
are set out in the Annual Report on Remuneration.

As you will have seen, Laxman Narasimhan recently announced the
findings of his strategic review of the Company. RB will focus on three
global business units of Hygiene, Health and Nutrition, as we fulfil our
purpose to protect, heal and nurture in the relentless pursuit of a
cleaner, healthier world.

The new strategy of the Company is intended to rejuvenate

sustainable growth and deliver Shareholder value. The Group’s key
strategic priorities in the mid-term are restoring organic growth on the
top line, focusing on achieving sustainable increased earnings growth
and maintaining disciplined capital allocation.

Remuneration Policy
Our Remuneration Policy strives to ensure that the management team
is rewarded appropriately for delivering against RB’s strategic priorities,
reflects the global nature of our business and delivers significant
benefits for Shareholders.

Substantial changes were made to the Remuneration Policy last
year and approved by Shareholders at the 2019 AGM and it is intended
that this Policy will operate unchanged in 2020 as the Committee is of
the view that it remains fit for purpose. As a reminder, some of the key
changes made to the Policy and to the implementation of the Policy
for 2019 were as follows:

•

Reinforcing Shareholder alignment – the introduction of a
two-year holding period for LTIP awards from 2019 onwards and
the introduction of bonus deferral with one-third of any bonus
paid being deferred into awards over RB shares for three years.

Reduction in pension levels for new hires to the Board – both the
CEO and CFO recruited to the Board in 2019 have been appointed
with a pension contribution of 10% of salary, in line with our
wider workforce in the UK.

• Malus and clawback – expanded to include corporate failure.

•

Shareholding requirements – shareholding requirements for the
recent new hires to the Board are 200,000 shares for the CEO
and 100,000 for the CFO, remaining the most demanding in the
UK market. There has also been the introduction of a formal
post-employment shareholding requirement, at 50% of the
shareholding requirement (or actual shareholding on leaving if
lower) for two years after departure.

LTIP performance measures – the introduction of two new LTIP
performance measures for 2019 awards – like-for-like Net
Revenue growth and return on capital employed (ROCE) – to be
used alongside earnings per share (EPS).

In addition, the Committee made further reductions to the CEO LTIP
award. The 2019 award made to Laxman Narasimhan as incoming CEO
was 150,000 share options and 75,000 shares, a substantial reduction
from awards made under the previous Policy of 400,000 share options
and 240,000 shares. The Committee has also implemented an
adjustment mechanism to annually review the numbers of shares and
options granted.

To reinforce our remuneration 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.

118

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 20192020 remuneration
There is no change in base salaries for the CEO and the CFO for 2020.
Laxman’s salary is £950,000, unchanged since his appointment, and
Adrian’s salary remains at £680,000. When Jeff joins RB his salary will
also be £680,000, reflecting his extensive experience across consumer
and retail companies.

There are also no changes to the bonus opportunity for the CEO

and CFO, remaining at 120% and 100% of salary at target respectively.
The 2020 LTIP award for Laxman will be in line with the 2019 LTIP

award, consisting of 150,000 share options and 75,000 shares.
The Committee is mindful of current investor sentiment around LTIP
award levels where the share price has fallen year-on-year. As the LTIP
award is made as a fixed number of shares and options as opposed
to as a fixed percentage of salary, individuals at RB are not awarded
a greater number of shares or options when the share price is lower
year-on-year. As previously disclosed, Jeff’s initial LTIP award for the
2020-22 performance period will be 80,000 share options and
40,000 shares and Adrian will not be granted an LTIP award in 2020.

Annual bonus in respect of 2019 performance
RB operates an annual bonus plan that is strongly aligned to
performance, measured against stretching targets set by the
Committee at the start of the year for Net Revenue growth and profit
before tax.

2019 was a difficult year for the Company. The like-for-like Net
Revenue growth was 0.8%, made up of -1.0% in Health and +3.6% in
Hygiene Home. The growth in adjusted profit before income tax was
2.0%. As set out in more detail on page 126 these results reflect
performance towards the bottom end of the performance ranges set
for the 2019 annual bonus.

As a result, the formulaic outcome of the 2019 annual bonus for

the Executive Directors is 12% of maximum which is in line with all
other employees on the same Group-wide measures. This is a
substantial reduction in comparison to last year. In line with the
Remuneration Policy, for Laxman and Adrian, one-third of the annual
bonus will be deferred into an award over RB shares for three years
and two-thirds will be paid in cash.

In addition to the annual bonus plan, Laxman will receive a
buyout in respect of the annual bonus that was forfeited on leaving
PepsiCo of £670,652. While this payment is included in the 2019 single
figure, it relates to legacy arrangements implemented by his previous
employer. As with the RB annual bonus, one-third of the payment will
be deferred into an award over RB shares for three years and
two-thirds will be paid in cash.

Vesting of the 2017-19 LTIP
The 2017-19 LTIP award was subject to EPS growth over the three-year
performance period. The EPS growth targets were set at 6% per
annum for threshold vesting with 10% per annum required for
maximum vesting. Earnings per share growth for LTIP purposes, over
the three-year period from 2017 to 2019, was 3.8% per annum, on
an adjusted diluted basis. This results in zero vesting when measured
against the vesting schedule approved by Shareholders.

As previously disclosed, Laxman received a buyout in respect of

long-term incentive awards he forfeited on leaving PepsiCo. To replace
his forfeited awards on a like-for-like basis in terms of form of award,
time horizons and actual pay-out levels, he was awarded RB shares
and a cash award which vest based on PepsiCo performance to 2019.
The cash award has vested at 102% of target and the share award
vested at 75.6% of target. Whilst these awards are included in the
2019 single figure, they relate to legacy arrangements implemented
by his previous employer.

Overall assessment of performance
As we do every year, the Remuneration Committee has also reviewed
the overall performance of the Company and of the Executive
Directors to ensure alignment of pay with performance.

This broad performance assessment included consideration of the

quality of earnings, the shareholder experience and the performance
of Mead Johnson Nutrition (MJN) measured against the expectations
of the Board at the time of the acquisition. In light of this review of the
2019 performance the Committee determined it appropriate to adjust
the annual bonus outcome for Rakesh Kapoor in order to ensure it
better reflected this overall performance of the Company, during 2019.
As a result Rakesh will not receive a 2019 annual bonus.

The bonus for Adrian and Laxman is in line with the formulaic

outcome of 12% of maximum.

The Remuneration Committee noted that the formulaic outcome
for the vesting of the LTIP for the period 2017-19 was zero. It was not
felt appropriate to adjust this outcome and as such there is zero LTIP
vesting for the Executive Directors.

In addition, the Remuneration Committee reviewed the
impairment of goodwill in respect of the MJN acquisition. As this
reduces the capital employed it has the potential to increase the
calculation of ROCE. However, the Committee will ensure that the
impairment does not lead to an increase in vesting in respect of the
proportion of the LTIP related to ROCE in future years.

The final part of the annual assessment is for the Committee to
consider the potential use of malus and clawback. As set out in our
Remuneration Policy, these are aligned with the terms seen in the UK
market and apply in cases of gross misconduct, a material
misstatement or an error in the calculation, and, in the case of most
recent awards, corporate failure. The Remuneration Committee has
carefully considered all of the relevant factors and is satisfied that none
of the above terms has been triggered and therefore no malus and
clawback have been applied at this time.

2019 single figure
The impact of this bonus payment and LTIP vesting is a total single
figure of £1.0 million for Laxman (£4.6 million including the buyout of
legacy arrangements from his previous employer) and £1.2 million for
Adrian. This figure for Laxman reflects the period since he joined RB,
and includes one-off relocation benefits provided. For the period until
he stepped down from the Board the single figure for Rakesh was
£0.9 million, comprising salary, benefits and pension. The chart below
illustrates the breakdown of the single figure (excluding buyout).

Single figure illustration (£m)

CEO

CFO

Former
CEO

0.5

1.0

1.5

Fixed

Annual bonus (cash)

Annual bonus (shares)

LTIP

119

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019D I R E C T O R S ’ R E M U N E R AT I O N R E P O R T CO N T I N U E D

Chair and NED fee increases
During 2019 the Chairman and Non-Executive Director fees have been
reviewed taking into account the additional time commitment required
to meet the scope and responsibilities of the roles, which have
increased over recent years.

The fee for the Chairman was set in 2017, in advance of his
appointment at the 2018 AGM, at £500,000 with 25% of the fee paid
in shares. This fee level was set at the bottom end of FTSE 30 market
practice. Taking into account the significant additional time
commitments required for the role beyond those anticipated at the
time of appointment and performance in the role to date, the fee was
increased to £550,000 with effect from 2020, with 25% of the fee
being paid in shares. This is still below the median for the Chair of
FTSE 30 companies.

The Non-Executive Directors receive a base fee together with
additional fees paid based on Committee membership. The base fees
were last reviewed in 2018 and the additional fees have not been
increased since 2013. Since that time the levels of responsibility and
time commitments of the role of NEDs has increased, given the
changes to the Corporate Governance Code and expectations of
Shareholders, as well as the broader business scope of the Company.
In particular, the workload of the Board Committees has increased
markedly since 2013 as the responsibilities and expectations of those
Committees have increased.

Following this review, no change is being made to the amount of
the base fee paid to NEDs. However, there is a change to the fees paid
in respect of additional responsibilities, increasing by £5,000 for
Committee Chairs and Committee members and by £10,000 for the
SID, with effect from 1 January 2020. With effect from 26 July 2019, a
new role of the designated NED for engagement with the Company’s
workforce was created. Given the additional responsibilities and time
commitments that come with this, an additional fee of £20,000 is paid
for the role with effect from 1 January 2020.

The base fee for the NEDs continues to have a proportion
required to be invested in RB shares; however, this is increasing by
£5,000 to £21,750, with the cash element of the base fee reducing by
the same amount, such that around 24% of the base fee is now
required to be invested in RB shares.

Context for remuneration in the wider workforce
During the year, the Committee reviewed the revised UK Corporate
Governance Code (the Code) which requires the Committee to review
workforce remuneration and related policies and the alignment of
incentives and rewards with culture, taking these into account when
setting the policy for Executive Director remuneration.

The Remuneration Committee has had the opportunity to
understand the remuneration of the wider workforce and has been
provided with an overview of workforce remuneration and related
policies, as well as the alignment of incentives and rewards with
culture. Information provided to the Remuneration Committee
includes salary structures, bonus design and targets, the long-term
incentive plan, share ownership, RB’s International Transfer Policy and
RB’s all-employee Share Plans.

The Committee is pleased to note from this review that the
Company’s remuneration policies are aligned with those of the
Executive Directors, with a cascade throughout the organisation.

The Remuneration Committee was very supportive and pleased

with the changes made during the year including formal accreditation
by the Living Wage Foundation, enhancement of RB’s global maternity
policy to 26 weeks’ paid leave and an increase in paid paternity leave
to four weeks. In addition, the Remuneration Committee was
delighted that RB’s all employee share plan won Best International
Share Plan at the ProShare Awards, recognition of the design and
communications of the Plan resulting in our high take-up rate of more
than 55% of our global employees participating.

Further details on wider workforce remuneration, including

enhanced disclosure, are set out on page 130.

Finally, since 26 July 2019, I have been the designated NED for
engagement with the Company’s workforce and have been able to
feed back the views of the workforce to the Remuneration Committee
as well as the wider Board.

Conclusion
Our Remuneration Policy reflects Shareholders’ views and guidelines
and the UK Corporate Governance Code. It continues to drive the
appropriate behaviours and performance to support the Company’s
business strategy and delivery of shareholder value. I trust that I can
count on your support at the upcoming AGM.

I would also like to acknowledge and thank my fellow Committee

members for their diligence and service during the year.

Mary Harris
Chair of the Remuneration Committee
26 March 2020

120

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019R E M U N E R AT I O N AT A G L A N C E

RB’s compass

RB’s strategic priorities

RB’s remuneration philosophy

d
e
r
a
h
s

s
s
e
c
c
u

c onsumers
u t
d p eople f rst

Do the
right thing.
Always.

Strive f o r
excelle n c e

o
r
u
n

o
u
t
n
ities
e
w

Rejuvenate RB to deliver
shareholder value

Restore organic top-line growth

Achieve sustainable increased
medium term earnings growth

Maintain disciplined capital
allocation

Pay for
performance

Strategic
alignment

Shareholder
alignment

Combining RB’s compass, strategy and remuneration philosophy drives RB’s remuneration principles

1 High proportion of long-term variable pay
• Drive outperformance and shareholder value
• Stretching performance targets

3 Market Leading Share Ownership Policy
• Align the interests of management and Shareholders
• A culture of ownership

2 Attract and retain the best global talent
• Engage highly performance-driven individuals
• Reflect global competitive practice across our industry peer group

4 Ensure alignment with strategy across the business
• Alignment of performance metrics with strategic priorities
• Alignment across the business of metrics and ownership

Element

Key features of Policy

How we implemented
for 2020

Link to strategy

2020

2021

2022

2023

2024

2025

Salary, benefits and
pension

Annual bonus (APP)

• Salaries and benefits
set competitively
against peers

• Salary increases and
pension contribution
set in context of wider
workforce

• Target bonus of 120%
for CEO and 100%
for CFO

• One-third deferred
into awards over RB
shares for three years.
• Malus and clawback
provisions apply

• No salary increases

for 2020

• Pension contribution

set at 10% of salary

• To enable the total
package to support
recruitment and
retention

• Targets set for Net

• To drive strong

Revenue growth and
adjusted profit before
income tax growth.
• Threshold performance

results in zero payout,
with maximum of
3.57x target

LTIP

Performance
shares

Performance
options

• Three-year

performance period
and two-year holding
period

• Malus and clawback
provisions apply until
two years after vesting

• Options have seven
years to exercise
post-vesting

• We are currently
consulting with
Shareholders on the
measures and
weightings for the
2020 awards, in order
that KPIs are aligned
with strategic
priorities.

Shareholding
requirements

• CEO: 200,000 shares
• CFO: 100,000 shares

• Period of eight years
from appointment to
achieve

• Two-year shareholding

requirement
post-departure

• Promotes long-term
alignment with
Shareholders

• Promotes focus on
management of
corporate risks

performance with
significant reward for
overachievement of
annual targets linked
to RB’s strategic
priorities

• Use of deferral for

longer-term
Shareholder alignment

• To incentivise and
reward long-term
performance and align
the interests of
Executive Directors
with those of
Shareholders
• Two-year holding

period for longer-term
Shareholder alignment

Award
granted

Cash
APP
paid

Deferred
APP
vests

Award
vests

Holding
period
ends

121

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019

D I R E C T O R S ’ R E M U N E R AT I O N R E P O R T CO N T I N U E D

R E M U N E R AT I O N AT A G L A N C E : PAY O U T C O M E S F O R T H E Y E A R

2019 Fixed Remuneration

Base salary

CEO
£437,138

CFO
£680,000

Former CEO
£653,489

Pension

CEO
10% of salary

CFO (retiring 2020)
25% of pensionable
salary

Former CEO
30% of pensionable
salary

Annual performance plan

Long-term incentive plan

The performance outcomes for the annual bonus were below target
and have resulted in a payout of 12% of maximum, of which a third
is deferred, by way of an award over RB shares.

Earnings per share growth, as measured for LTIP purposes, over the
three-year period was 3.8% per annum. As this is below the threshold
required of 6% per annum the LTIP will not vest for the period
2017-19.

Performance
measure

Threshold
(zero bonus)

Net Revenue
growth

0.5%

Profit before
tax growth

0.0%

Performance range

Achieved

Base salary

Target

Multiplier

Delivery

CEO

CFO

£437,138

£680,000

Former CEO

£653,489

120%

100%

120%

Cash

0.42

2/3

1/3

Maximum
(3.57 x target)

Actual

EPS performance

5.0%

0.8%

6.5%

2.0%

2.80

5.70

12%

10%

2.80

11.7

Vesting
threshold
(6%)

3.80

2017

2018

2019

Total

CAGR

Laxman Narasimhan also received a buyout in respect of legacy
arrangements from his previous employer.

The single figure for 2019 is therefore comprised of the elements in
the graph below.

Single figure illustration (£m)

Shareholding of Executive Directors vs requirement
RB operates a market leading shareholding requirement with an eight
year timeframe to achieve. The chart below illustrates the progress
towards this of the executive directors.

CEO

CFO

Former
CEO

CEO
Shareholding
requirement
Current
shareholding

CFO
Shareholding
requirement
Current
shareholding

0.5

1.0

1.5

Fixed

Annual bonus (cash)

Annual bonus (shares)

LTIP

In addition Laxman Narasimhan also received a buyout in respect
of legacy arrangements from his previous employer, as detailed on
page 127.

50,000

100,000

150,000

200,000

Shares held

2019 vesting1

Shares purchased after year end

1 2019 LTIP includes the estimated after tax value of buyout award.

122

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019R E M U N E R AT I O N C O M M I T T E E G OV E R N A N C E

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 Harris (Chair)
Nicandro Durante

Chris Sinclair
Elane Stock

Our role

The Committee’s purpose is to assist the Board of Directors in fulfilling its oversight responsibility by
ensuring that the 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;
–
–
– terms and conditions of employment including the Executive Directors’ service agreements;
– participation in any of the Company’s bonuses and LTIPs; and
– the targets for any of the Company’s performance-related bonuses and LTIPs.
reviews wider workforce remuneration and related policies and the alignment of incentives and
reward with culture.

individual remuneration and compensation arrangements;
individual benefits including pension and superannuation arrangements;

•

The Executive Directors and the Company Chairman are responsible for evaluating and making
recommendations to the Board of Directors on the remuneration of the Non-Executive Directors.

Meetings

During the year the Committee held five scheduled meetings and six additional meetings. The attendance
of members at meetings is set out in the table on page 91.

Peer group

The Chief Human Resources Officer was Secretary to the Committee throughout the year. Meetings were
also attended by the CEO, CFO, SVP General Counsel and Company Secretary and the Group Head of
Reward by invitation. Deloitte acted as advisor to the Committee throughout the year.

Members of the Remuneration Committee and any person attending its meetings do not participate in
any discussion or decision on their own remuneration.

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 as a reference
point in ensuring that performance targets are appropriately stretching and when reviewing the
Company’s relative performance. This peer group is the same group used to benchmark remuneration
of senior managers across the Company. The companies included are:

Abbott Laboratories
Bayer
Campbell Soup1
Church and Dwight
Clorox

Coca-Cola1
Colgate
Danone
GSK
Henkel

Johnson & Johnson
Kellogg1
Kimberly-Clark1
Kraft Heinz
Nestlé

Novartis
PepsiCo1
Pfizer
Procter & Gamble
Sanofi
Unilever

1 Companies used for remuneration benchmarking only and not for performance comparison.

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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019D I R E C T O R S ’ R E M U N E R AT I O N R E P O R T CO N T I N U E D

The table below summarises the key activities at the Committee’s meetings in 2019:

Meeting

Topic

January 2019

February 2019

March 2019

May 2019

June 2019

July 2019

September 2019

October 2019

November 2019

• Determined exit arrangements for Rakesh Kapoor

• Reviewed performance to 2018 in respect of bonus outcomes and LTIP vesting
• Reviewed draft Remuneration Policy and Shareholder consultation
• Approved 2019-21 LTIP measures, definitions and targets

• Considered Shareholder feedback
• Final approval of 2018 bonus and 2016-18 LTIP vesting
• Final approval of new Executive Directors’ Remuneration Policy
• Approved revised LTIP and Deferred Bonus Plan rules, in line with Policy

• Reviewed 2019 AGM voting
• Approved LTIP awards and associated plan documents

• Determined remuneration package for Laxman Narasimhan

• Reviewed wider workforce remuneration and demographics
• Reviewed corporate governance, shareholder guidelines and market practice

• Reviewed wider workforce remuneration and demographics
• Approved all-employee share plan

• Determined exit arrangements for Adrian Hennah
• Determined remuneration package for Jeff Carr

• Determined 2020 remuneration packages for Executive Directors and Executive Committee members
• Determined Chairman fees
• Reviewed updates to corporate governance and Shareholder guidelines
• Agreed Shareholder consultation
• Reviewed shareholding for senior employees with share ownership requirements
• Reviewed Remuneration Committee terms of reference

December 2019

• Approved 2020 bonus targets

RB’s Remuneration Policy
RB’s Remuneration Policy reflects the philosophy of pay for
performance, Shareholder alignment and strategic alignment over the
short, medium and long term. The full Policy was approved by
Shareholders at the AGM on 9 May 2019, and can be found in the
2018 Directors’ Remuneration Report, including notes, on pages
98 to 106. It is also available on our website in the Corporate
Governance section.

When determining the Policy, provision 40 of the Corporate

Governance Code was taken into account as follows:

•

Predictability – the total of fixed pay, variable pay (target and
maximum) illustrated in the scenarios of total remuneration in our
Policy provide an estimate of the potential future remuneration of
the Executive Directors, including the total remuneration if a 50%
share price growth is achieved.

Proportionality – there is a clear link between pay for
performance and link to business strategy, with stretching
financial targets applied to annual bonus payouts and
LTIP vesting.

Clarity – arrangements are transparent, reflect Shareholder
alignment and RB’s strategic priorities, thereby effectively
engaging with the wider workforce and Shareholders.

The Committee consulted with Shareholders as part of the design
phase of the policy.

Simplicity – the Policy is simple and clear, comprised of fixed pay,
such as pay and benefits, pension schemes that are offered to
most of the workforce, plus variable pay which incorporates the
annual bonus, LTIP (share options and performance share awards),
and a clear Share Ownership Policy for senior members of the
business. Variable pay is set against financial targets to incentivise
short- and long-term financial performance and alignment
with Shareholders.

Risk – the malus and clawback provisions which apply to annual
bonus and LTIP awards encourage the right behaviours which
lead to long-term shareholder alignment and sustained value
creation. The Committee has discretion to adjust the formulaic
bonus outcomes both upwards and downwards.

• Alignment to culture – financial targets apply to the Annual
Bonus and LTIP awards across the wider workforce to drive
business performance. These targets are reviewed on an annual
basis. Malus and clawback provisions apply to annual bonus and
LTIP, and together with deferred annual bonus, holding periods
and share ownership for the Executive Directors (and any other
relevant senior employees), drive the right behaviours expected
within RB. The remuneration arrangements of the wider
workforce reinforce employee engagement.

In light of the recent strategic review, the Committee will review the
Remuneration Policy during 2020 and may propose further changes
for Shareholder approval in 2021, depending on the outcome of this
review. If this is the case the Committee will consult with Shareholders
later in the year.

•

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Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019
Annual Report on Remuneration
The rest of this report sets out how we have implemented the
Remuneration Policy approved by Shareholders in 2019, as well
as how we intend to implement it in 2020.

the grant of these awards. The Replacement Awards will be satisfied
by shares purchased in the market.

On the same day, Laxman also received Replacement Awards in

the form of cash awards:

Remuneration arrangements for the new Chief Executive
Officer and Chief Financial Officer
In establishing the remuneration arrangements for the incoming CEO
and CFO, all arrangements are in line with the Remuneration Policy.

CEO
Laxman Narasimhan joined the Company as CEO-designate and the
Board as an Executive Director effective 16 July 2019, and became
Group CEO with effect from 1 September 2019. The remuneration was
fully disclosed upon announcement of his appointment on 12 June
2019 and the buyout awards fully disclosed after they were made on
6 August 2019.

His base salary was set on appointment as £950,000 and has
remained unchanged for 2020. He has a target APP of 120% of salary,
and a maximum opportunity of 3.57x, with one-third of any APP
payment deferred for three years. Laxman’s pension contribution is
10% of salary, in line with the wider workforce in the UK.

Laxman’s shareholding requirement is 200,000 shares, with a
post-employment shareholding requirement of 100,000 shares, or his
actual shareholding at the date of departure if lower, for two years
after departure.

On 5 August 2019, Laxman received a grant under the RB LTIP of

75,000 performance share awards and 150,000 share options. This
award vests based on performance conditions over the three-year
performance period 2019-21 and is subject to a further two-year
holding period, following the end of the performance period. He will
receive an LTIP award in 2020 for the performance period 2020-22,
which will also be 75,000 performance share awards and 150,000
share options.

In addition, on 5 August 2019, Laxman received further share

awards as Replacement Awards in respect of incentives which he
forfeited on resigning from PepsiCo, his previous employer. These were
made on a like for like basis in terms of the form of award, time
horizons, and performance conditions. These were all disclosed at the
time of the award and are detailed below.

He was granted Replacement Awards with a target amount of

89,300 shares:

• Of this, 40,890 performance shares were awarded in relation to

the long-term incentive award over PepsiCo shares granted to
Laxman in March 2017, and vesting based on PepsiCo’s
performance over the three-year period ended in December 2019.
40,890 shares may vest in March 2020 based on target
performance, with full vesting of 71,557 shares if conditions are
met in full.

•

48,410 performance shares were awarded in relation to the
long-term incentive award over PepsiCo shares granted to Laxman
in March 2018, and vesting based on PepsiCo’s performance over
the three-year period ending in December 2020. 48,410 shares
may vest in March 2021 based on target performance, with full
vesting of 84,717 shares if conditions are met in full.

These two Replacement Awards will accrue RB dividend equivalents
from the time of grant to the time of vesting. There will be no
retesting of any of the above awards. No consideration was paid for

•

A target cash amount of £1,043,959 was awarded in relation to
the long-term cash award granted to Laxman in March 2017, and
vesting based on PepsiCo’s performance over the three-year
period ended in December 2019 and payable in March 2020.

A target cash amount of £1,252,751 was awarded in relation to
the long-term cash award granted to Laxman in March 2018, and
vesting based on PepsiCo’s performance over the three-year
period ending in December 2020 and payable in March 2021.

The maximum extent to which the performance conditions can
be satisfied is 200%, such that the maximum cash amount that
Laxman may receive will be £2,087,918 in March 2020 and
£2,505,502 in March 2021.

The vesting of these awards will be disclosed in the Annual Report on
Remuneration for the relevant year, with those vesting in March 2020,
included in this year’s report and single figure table.

In addition to the above, RB will make a payment in respect of the

PepsiCo annual bonus for 2019 which Laxman forfeited when he
resigned. This payment was calculated based on his target bonus for
the period in which he was employed with the PepsiCo performance
outcome applied to this, based on disclosure of other named officers
in their proxy statement. Two-thirds will be paid in cash and one-third
deferred by way of an award over RB shares deferred for three years.
This payment is included in the single figure table.

Finally, as Laxman was previously employed in the US, relocation
benefits have been provided to cover the costs of his move to the UK,
including flights, immigration, temporary accommodation, shipping of
household goods, etc. These were all provided in line with RB’s
International Transfer Policy, which we apply to all of our transferees,
and the Company also pays any tax due on the benefit on the
employee’s behalf. The costs of these benefits provided in 2019 are
included in the single figure table in this report. As Laxman’s family
will permanently relocate in 2020, at the end of the school year, there
will also be some costs paid in 2020 which will be disclosed in next
year’s report.

CFO
Jeff Carr has been appointed as Chief Financial Officer and Executive
Director to succeed Adrian Hennah, who will be retiring. Jeff will join
the Company and the Board on 9 April 2020.

His base salary was set the same as his predecessor, at £680,000

reflecting his extensive experience across consumer and retail
companies. He has a target APP of 100% of salary, and a maximum
opportunity of 3.57x, with one-third of any APP payment deferred for
three years. Jeff’s pension contribution will be 10% of salary, in line
with the wider workforce in the UK.

Jeff’s shareholding requirement is 100,000 shares, with a
post-employment shareholding requirement of 50,000 shares, or his
actual shareholding at the departure date if lower, for two years
after departure.

He will receive an LTIP award in 2020 for the performance period
2020-22, which will be 40,000 performance share awards and 80,000
share options. This award will vest based on performance conditions
over the three-year performance period and will be subject to a further
two-year holding period, following the end of the performance period.

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D I R E C T O R S ’ R E M U N E R AT I O N R E P O R T CO N T I N U E D

As Jeff is moving from the Netherlands to the UK, he is eligible for
relocation benefits.

There was no buyout of bonus or LTIP associated with Jeff’s

appointment.

2019 performance and remuneration outcomes
Base salary
Base salaries are reviewed taking into account the salary increases for
the wider workforce and individual performance.

For additional context, the Remuneration Committee also reviews

market practice for similar roles in the Company’s remuneration peer
group, comprising 21 international companies and listed on page 123.

The Committee approved base salary increases of 3% for both
the CEO and the CFO with effect from 1 January 2019, to £973,565
and £680,000 respectively. During 2019, the Remuneration
Committee reviewed salaries and determined that there would be
no salary increases for 2020.

The table below sets out base salaries with effect from

1 January 2020:

Executive Director
Laxman Narasimhan
Adrian Hennah
Jeff Carr (from 9 April)
Rakesh Kapoor

Base salary
from
1 January
2020

Base salary
2019

Percentage
increase

£950,000
£680,000
n/a
£973,565

£950,000
£680,000
£680,000
n/a

0%
0%
n/a
n/a

The average salary increase for our UK employees was c. 3%, effective
1 January 2020.

Annual bonus in respect of 2019 performance
Prior to the start of the year, the Remuneration Committee set
stretching performance targets for the Executive Directors in 2019. As
set out in last year’s report, these were based on Net Revenue growth
and adjusted profit before tax growth, both measured in GBP at a
constant exchange rate.

In line with the Remuneration Policy, the CEO and the CFO had

target bonus opportunities of 120% of salary and 100% 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.

Performance
multiplier

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 including to zero, 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).

• With effect from 2019, one-third of any APP is deferred into RB

shares, to strengthen alignment with Shareholders.

2019 bonus outcomes
2019 was a difficult year for the Company. The like-for-like Net
Revenue growth was 0.8%, made up of -1.0% in Health and +3.6%
in Hygiene Home. The growth in adjusted profit before income tax
was 2.0%.

The chart below illustrates this performance compared to the

stretching targets set.

Performance
measure

Threshold
(zero bonus)

Net Revenue
growth

0.5%

Profit before
tax growth

0.0%

Performance range

Achieved

Maximum
(3.57 x target)

Actual

5.0%

0.8%

6.5%

2.0%

As illustrated above, the 2019 growth in Net Revenue (NR) and profit
before tax (PBT) growth were towards the bottom end of the ranges
set. The NR and PBT results combined give an overall multiplier of
0.42x target – this is 12% of maximum.

The Remuneration Committee has also carried out a broader
review of the overall performance of the Company during 2019, as
referred to on page 119. In light of this the Committee determined it
appropriate to adjust the annual bonus outcome for Rakesh Kapoor
in order to ensure it better reflected this overall performance of the
Company, during 2019. As a result Rakesh will not receive a 2019
annual bonus.

The bonus for Adrian Hennah and Laxman Narasimhan is in line

with the formulaic outcome of 12% of maximum.

Under the Remuneration Policy, one-third of the annual bonus

The two individual multipliers are then multiplied together to
provide the total performance multiplier.

will be delivered by way of an award over RB shares and deferred for
a three-year period. The bonuses are as follows:

Net Revenue
multiplier
(up to 1.89x)

Adjusted profit
before tax
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.

Base
salary x

Target
bonus x

Performance

multiplier =

Total
bonus =

Deferred
into
shares

Cash

£437,138 x 120% x

0.42 = £220,318 = £146,879 £73,439

£680,000 x 100% x

0.42 = £285,600 = £190,400 £95,200

£653,489 x 120% x

0 =

£0

Laxman
Narasimhan

Adrian
Hennah

Rakesh
Kapoor1

1 For the period as Board Director from 1 January 2019 to 2 September 2019.

•

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Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019
Vesting of bonus replacement award
The table below details the replacement bonus which will be paid to Laxman Narasimhan in respect of forfeiting his PepsiCo bonus when he
joined RB. The table below shows the cash payment, and the amount that will be deferred by way of an award over RB shares.

This bonus relates to legacy arrangements implemented by his previous employer and was calculated based on the bonus he forfeited upon

leaving PepsiCo, based on its 2019 performance and pro-rated for time worked in PepsiCo.

Laxman Narasimhan

Total value

Cash

into shares

Deferred

£670,652

£447,101

£223,551

Vesting of the 2017 LTIP – performance versus targets
The RB LTIP is designed to align participants with Shareholders through making awards with stretching performance conditions denominated in
both share options and performance share awards.

Vesting of awards under the 2017 LTIP, granted in December 2016, was dependent on adjusted diluted EPS growth over the three-year

period 2017-19. Threshold vesting of 20% required EPS growth of 6% per annum, with full vesting requiring EPS growth of 10% per annum,
i.e. equivalent to 33% growth over the period.

Earnings per share growth for 2019 measured on an adjusted diluted basis grew by 2.8%. As disclosed in previous years, the 2017 and 2018
EPS growth for LTIP purposes was calculated to exclude any one off benefit from MJN and related transactions. The EPS growth for LTIP purposes
for the period 2017-2109 was 11.7%, equivalent to compound average annual growth of 3.8% per annum. This EPS growth performance results
in vesting of 0% being achieved when measured against the vesting schedule approved by Shareholders.

This performance is reflected in the value of the LTIP vesting as shown in the table below.

Further details on LTIP vesting (audited)
Based on the performance assessment above, the 2017 LTIP awards to the CEO and the CFO will not vest as detailed below:

CEO awards – Rakesh Kapoor
Share awards
Options

CFO awards – Adrian Hennah
Share awards
Options

Interests

held

Exercise
price

Vesting

Interests
vesting

Share
price1

Estimated
value

150,000
300,000

n/a
£67.68

0%
0%

0
0

£60
£60

0
0

Interests
held

Exercise
price

Vesting
%

Interests
vesting

Share
price1

Estimated
value

38,250
76,500

n/a
£67.68

0%
0%

0
0

£60
£60

0
0

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 2019 of £60.00. The actual value

at vesting will be disclosed in the 2020 Annual Report.

Vesting of buyout arrangements
Upon joining RB, Laxman Narasimhan received awards to compensate for remuneration arrangements forfeited on leaving his previous employer.
These awards relate to legacy arrangements implemented by his previous employer, remain subject to PepsiCo performance conditions and
mirror the form and the time horizons of forfeited awards.
The awards will vest as set out in the table below.

Target

Exercise
price

Vesting
%

Interests
vesting

Share
price1

Value2

CEO awards – Laxman Narasimhan
Cash
Share awards2

£1,043,959
40,890

n/a
n/a

102%
75.6%

n/a
31,257

n/a £1,064,838
£58.65 £1,833,223

1 The share award vested on 23 March 2020. The closing share price on this date was £58.65.
2 These awards accrued dividend equivalents of 344 RB shares during the vesting period which have been included in the shares vesting shown above.

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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019D I R E C T O R S ’ R E M U N E R AT I O N R E P O R T CO N T I N U E D

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 2019,
based on the information set out in the previous sections. This is compared to the prior year figure:

Base salary
Taxable benefits3
Pension benefit4
Annual bonus5
LTIP6
Buyout arrangements7

Total (including buyout arrangements)
– Fixed Remuneration
– RB Variable Remuneration (excl. buyouts)
Total (excluding buyout arrangements)

Current Executive Directors

Former Executive Director

Laxman Narasimhan1

Adrian Hennah

Rakesh Kapoor2

2019
£

2018
£

2019
£

2018
£

2019
£

2018
£

437,138
328,732
43,714
220,318
0
3,568,713

4,598,615
809,584
220,318
1,029,902

680,000
99,201
168,000
285,600
0

660,000
46,315
163,000
1,776,060
1,800,338

653,489
89,846
194,436
0
0

945,209
94,520
281,163
3,391,410
9,601,800

1,232,801
947,201
285,600
1,232,801

4,445,713

937,771 14,314,102
937,771
0

4,445,713

937,771 14,314,102

1. Joined the Board on 16 July 2019 as CEO-designate. Became CEO on 1 September 2019.
2. Stepped down from the Board on 2 September 2019. Shows the single figure for the period from 1 January 2019 to 2 September 2019.
3. Benefits for Laxman Narasimhan include values for one off relocation expenses and for ongoing annual benefits. The relocation expenses include temporary accommodation, flights to the
UK, immigration support, shipping of personal effects, etc. They were provided in line with RB’s international transfer policy which applies to all transferees. The ongoing annual benefits
include a car and healthcare. For Rakesh Kapoor and Adrian Hennah benefits include car/car allowance, healthcare and one off payment of legal fees related to their retirement agreements.
Where relevant the costs above include a gross up for tax.

4. 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.

5. Annual bonus is based on formulaic outcome of 12% of maximum, as set out on page 126. One-third of this is deferred into share awards. The bonus for Rakesh Kapoor is zero.
6. These values have been restated from last year, which used an average share price of £ 64.76 over Q4 2018 to estimate the value of the vesting. The actual values shown above are based

on the share price on the date of vesting of £ 61.55 on 9 May 2019. The LTIP vesting in 2019 is zero and therefore there is no share price appreciation included in this value.

7. The buyout includes replacement bonus and LTIP awards, related to legacy arrangements implemented by his previous employer, as detailed on page 127. As the share price at the date of

vesting was lower than the share price at the date of the award, none of this value is related to share price appreciation.

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. Since
2019, we also have post-employment shareholding requirements for a further two years. The table below shows the shareholding of each
Executive Director against their respective shareholding requirement as of 31 December 2019:

Laxman Narasimhan
Adrian Hennah2
Rakesh Kapoor3

Other interests in shares and options under the LTIP

Performance shares

Options held

Shares owned
outright

17,4211
147,900
710,987

To vest
in 2020

31,257
0
0

Unvested,
subject to
performance

Vested
but not
exercised

To vest
in 2020

Unvested,
subject to
performance

159,717
78,250
66,666

0
59,204
1,159,176

0
0
0

150,000
156,500
66,666

Shareholding
requirement
(number of
shares)

200,000
200,000
600,000

1 At 31 December 2019 shares owned outright was zero. The amount shown above were purchased on 3 March 2020.
2 Adrian Hennah’s awards will be subject to pro-rating on his termination date in 2020, in line with the rules of the LTIP.
3 As Rakesh Kapoor stepped down as an Executive Director, and his employment terminated on 31 December 2019, during the performance period of previous long-term awards,

the unvested performance shares and options subject to performance have been pro-rated in line with the rules of the LTIP.

The Executive Directors also participate in the all-employee Sharesave Scheme. Details of options held under this plan are set out on page 137.

Shareholding of Executive Directors vs requirement

CEO
Shareholding
requirement
Current
shareholding

CFO
Shareholding
requirement
Current
shareholding

50,000

100,000

150,000

200,000

Shares held

2019 vesting1

Shares purchased after year end

1 ‘2019 vesting’ shows the estimated number of shares which will vest in respect of performance to 2019, after tax.

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Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019

Payments to Rakesh Kapoor
As disclosed in last year’s Annual Report, Rakesh Kapoor remained employed by the Company until 31 December 2019, with no change to his
remuneration package. Rakesh stepped down from the Board on 2 September 2019 and as such the single figure table sets out the remuneration
for the period to 2 September 2019. The table below details the remuneration paid for the remainder of 2019 while he remained employed.

Base salary
Taxable benefits
Annual bonus
LTIP
Pension benefit

Total

320,076
26,082
0
0
95,234

441,392

2019 LTIP awards
LTIP (audited)
The 2019 LTIP awards were made following the approval of the Company’s Remuneration Policy in May 2019. The structure for these awards
made to the Executive Directors was in line with the approved Policy. The table below sets out the LTIP awards which were made to Adrian
Hennah on 10 May 2019, and the awards made to Laxman Narasimhan on 5 August 2019. 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. Rakesh
Kapoor was not granted a 2019 LTIP award.

Shares over
which awards
granted

Market price
at date of
award1

Date of grant

Exercise price2

Face value3

Performance
period

Exercise/vesting
period

Holding period

Performance shares
Laxman Narasimhan

5 August 2019

75,000

£59.72

n/a £4,479,000

Adrian Hennah

10 May 2019

40,000

£61.45

n/a £2,458,000

Share options
Laxman Narasimhan

5 August 2019

150,000

£59.72

£63.72

£0

Adrian Hennah

10 May 2019

80,000

£61.45

£60.83

£49,600

1 Jan 2019-
31 Dec 2021
1 Jan 2019-
31 Dec 2021

May 2022

1 January 2024

May 2022

1 January 2024

May 2022-
May 2028
May 2022-
May 2028

1 January 2024

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 based on

the face value of the potential gain at award assuming full vesting, calculated as the difference between market price and exercise price. The face value of shares under option is £8,958,000
for Laxman Narasimhan and £4,916,000 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, Net Revenue and ROCE, aligned with the Company’s strategic priorities. EPS is measured on a total adjusted diluted basis, as
shown in the Group’s financial statements, as this provides an independently verifiable measure of performance. It is measured over the
three-year period and requires significant compound annual growth in EPS in order for the awards to vest. Net Revenue is measured as
like-for-like growth over three years. ROCE is measured based on the final year of the performance period and is a measure of how efficient
the Group is at converting its capital into earnings.

However, the Remuneration Committee maintains the discretion to make adjustments to the measures if this is considered to be

appropriate. Any adjustments will be disclosed in the Annual Report on Remuneration.

Awards granted in 2019 will vest on the following schedule, which requires significant outperformance of stretching targets relating to:
growth in EPS (50% actual FX, 50% constant FX), growth in Net Revenue and ROCE. The four targets are equally weighted, and each element
is considered independently. They are presented in the table below:

EPS growth (3-year CAGR)
(50% weighting – 25% actual FX; 25% constant FX)

Net Revenue growth (3-year CAGR)
(25% weighting)

ROCE (final year)
(25% weighting)

Threshold
(20% vesting)

Maximum
(100% vesting)

10.8%

12.8%

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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019D I R E C T O R S ’ R E M U N E R AT I O N R E P O R T CO N T I N U E D

The following buyout awards were also granted to Laxman Narasimhan and remained subject to PepsiCo’s performance schedule:

Share awards

March 2020 vest

March 2021 vest

Shares over
which awards
granted1

Market price
at date of
award2

Face value

71,557

£59.72 £4,273,384

84,717

£59.72 £5,059,299

Performance
period

1 Jan 2017-
31 Dec 2019

1 Jan 2018-
31 Dec 2020

Vesting

March 2020

March 2021

1 Dividend equivalents to also be added at vesting.
2 The market price on the date of award is the closing share price on the date of grant.

The table below shows the replacement cash awards to Laxman Narasimhan. A target cash amount of £1,043,959 was awarded in relation to
the long-term cash award granted to Laxman in March 2017, and vesting based on PepsiCo’s performance over the three-year period ending in
December 2019 and payable in March 2020. A target cash amount of £1,252,751 was awarded in relation to the long-term cash award granted
to Laxman in March 2018, and vesting based on PepsiCo’s performance over the three-year period ending in December 2020 and payable in
March 2021. The maximum extent to which the performance conditions can be satisfied is 200%, and is shown in the table below:

Long-term cash awards

March 2020 vest

March 2021 vest

Value
(at maximum)

£2,087,918

£2,505,502

Wider workforce pay arrangements
RB cascades our Reward Policy fairly and consistently throughout the organisation and the Remuneration Committee takes into account the
arrangements for the wider workforce when setting Executive Director remuneration. The appointment of Mary Harris as Designated NED for
engagement with the Company’s workforce further strengthens this alignment.

The Remuneration Committee has reviewed the remuneration arrangements for the wider workforce throughout the year and these are

summarised below.

Total Cash
RB’s pay for performance philosophy is applied consistently through the organisation, with employee’s paid for their role and location, with
internal pay equity, pay ranges and external market benchmarks taken into account. The reward philosophy is for total cash to be competitive
for on-target performance but with a high proportion of variable pay to drive outperformance and creation of shareholder value.

•

Salary increases are determined by individual performance ratings with any adjustments based on benchmarking, with country specific
conditions such as inflation also taken into account.

• Our Annual Performance Plan is operated consistently across the organisation, and has more than 14,000 employees participating.

As employees progress and are promoted their target bonus and maximum multiplier typically increases.

•

In line with the Executive Directors, bonus pay-outs are based on RB’s financial performance, with all employees being incentivised on Net
Revenue and a profit measure, which varies based on role. In addition some roles have a third measure related to market share, Net Working
Capital or innovation.

• We also operate local bonus plans, for example for employees in sales and factories.

In the UK, RB has been voluntarily paying the living wage for a number of years and in January 2020 we formally joined nearly 6,000 Living
Wage Employers who are recognised as paying a living wage to employees and contractors. This is our commitment to employees and staff
that they will receive a wage that exceeds not just the minimum wage but recognises the actual cost of living in the UK.

Share Ownership
RB grants LTIP awards to members of the Executive Committee, Group Leadership Team and Senior Management Team to support the
remuneration philosophy of incentivising superior long-term business results and shareholder value creation.

Awards are made as a fixed number of shares and share options applied consistently depending on an employee’s level in the organisation.

Adjustments are made to the award level based on performance and talent ratings.

The awards use the same performance measures as for the Executive Directors, i.e. Net Revenue, EPS and ROCE.

•

130

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019To further align the interests of management and Shareholders,
the Share Ownership Policy which applies to the CEO and CFO also
cascades to members of the Executive Committee and Group
Leadership Team. Shareholding requirements are expected to be
met within eight years of appointment and the Committee reviews
progress on an annual basis. The total shareholding amongst this
population is around £100m and averages more than 6x salary
per employee.

RB also operates an award-winning all-employee share plan
to foster the culture of ownership amongst employees. This gives
employees the opportunity to save over a three year period to
purchase RB shares at a discount to the share price.

•

55% of RB employees are currently participating in one of the
three share plans.

• We are delighted to have won the ProShare awards for Best

•

Provides extra support for parents of premature babies by
increasing paid maternity leave by the number of full weeks
between the date of birth and 37th week. It also allows the
flexibility for additional paternity leave at full pay in this event.

Supports new and breastfeeding mothers returning to work,
with the launch of 100+ new wellness suites worldwide.

Should they wish, returning mothers will also have access to a
mentor for six months.

Recognises that today’s families come in all shapes and sizes,
so the same principles apply to all LGBTQ+ employees, as well
as and including adopting and surrogacy families.

Gender Pay Gap
The Board also review the Company’s gender pay gap.

International Share Plan and the Most Effective Communication
of an Employee Share Plan for 5,001 – 50,000 employees, as well
as Best International All-Employee Share Plan by the Employee
Share Ownership Centre.

•

The median gender pay gap in the UK for the year to April 2019
is -3.8% at median and 6.8% at the mean.

This compares to the year to April 2018 when the gender pay gap
was -4.5% at median and 7.9% at mean.

Other benefits
RB’s unique International Transfer Policy is key to ensuring global
mobility, which is a critical part of RB’s career development and our
culture. Employees transfer consistently on a local terms basis, to
remove inequities of home/host practices, with benefits such as
international healthcare, international pension, school fees, tax return
support and home leave provided to foster ongoing mobility.

RB regularly reviews the core benefits provided in each country
to ensure they remain appropriate and in line with our philosophy of
providing market competitive benefits.

• We provide life insurance to the vast majority of our global
employee population. Where life insurance is not currently
provided we are currently working to implement it.

•

RB also provides health insurance, where it is not provided for by
the state, for most of our global employee population.

A pension/gratuity scheme is offered to more than 70% of our
global employees. Exceptions to this are countries where pension
provision is not prevalent in the local market and/or is provided by
the State.

At RB we work to ensure diversity and inclusion at all levels and as part
of our global commitment to the well-being and success of all our
employees, in 2019 we introduced a new approach to parental leave.
This supportive and inclusive policy extends paid maternity and
paternity leave for families of all kinds, providing employees with
the Freedom to Succeed.
The new policy:

•

Extends paid maternity leave from 16 weeks to 26 weeks. That’s
six months to rest and bond with newborns, with the option to
take a further 26 weeks unpaid.

Increases paternity leave for new fathers and partners to a
minimum of four weeks paid leave with the option to take
a further four weeks unpaid.

In addition, RB has set targets to increase the number of women in
senior leadership positions. In the interests of transparency, in our
gender pay gap report this year we will also voluntarily disclose our
gender pay gap for the US, China, India and Mexico. Together with
the UK, this covers around 50% of our global employees. A summary
is below:

US
China
India
Mexico

Gender Pay gap

Mean
difference

Median
difference

-9.6%
2.0%
13.2%
19.0%
-56.0% -138.0%
-32.0%

4.8%

Further data and information on the initiatives RB is taking on diversity
and inclusion are set out in our gender pay report.

CEO pay ratio
The table below provides pay ratios of the Chief Executive Officer’s
total remuneration to the remuneration of UK employees at the lower
quartile, median and upper quartile. This is in line with Corporate
Governance Code reporting requirements.

In line with the requirements, the total pay and benefits paid to

both Laxman Narasimhan and Rakesh Kapoor whilst in the role of CEO
have been combined to calculate the total CEO pay. It should be noted
that for Laxman this includes both the one off relocation benefits and
the buyout in respect of legacy arrangements provided by his previous
employer. The disclosure will, over time, cover a ten-year rolling period.

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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019D I R E C T O R S ’ R E M U N E R AT I O N R E P O R T CO N T I N U E D

We have also set out in the table the separate pay ratio for Laxman
and for Rakesh using the single figure disclosed on page 128.

CEO

Year

Method

25th percentile
pay ratio

Median pay
ratio

75th percentile
pay ratio

Laxman
Narasimhan
Rakesh
Kapoor

Total CEO

2019 Option A

1:138

1:100

1:28

1:158

1:20

1:115

1:61

1:12

1:70

The calculations reflect the application of RB’s reward policy across
the organisation as set out in the section on wider workforce
pay arrangements.

In particular, the Remuneration Committee believes the pay ratio

is consistent with the Company’s wider policies on employee pay,
reward and progression. RB ensures that employees are paid fairly for
their role, based on the location they work in and their performance in
role. As such, the base salary, annual bonus and benefits are based on
the same principles for the identified employees as they are for
Laxman Narasimhan and Rakesh Kapoor.

The table below summarises the identified employees:

25th percentile

Median pay 75th percentile

Total employee pay and
benefits
Salary component

£33,224
£27,170

£45,795
£38,380

£75,561
£58,721

Each identified employee was a full-time employee in 2019 and
received a base salary and employer pension contribution. The
employee identified as the 25th percentile was also paid overtime and
shift pay. The employees identified as the median and 75th percentile
received an annual bonus and healthcare coverage and the employee
at the 75th percentile also received a car allowance.

Implementation of Directors’ Remuneration Policy for 2020
Salary
As set out earlier in this report, there were no changes to the salaries
for 2020 for the CEO and the CFO. The CEO’s salary is £950,000 and
the CFO’s is £680,000.

Pension
The CEO is eligible to receive a pension contribution, or equivalent
cash allowance, of 10% of salary in line with the wider UK workforce.
The incoming CFO, Jeff Carr, is eligible to receive a pension
contribution or equivalent cash allowance of 10% of salary. Adrian
Hennah, the current CFO, will continue to receive 25% of pensionable
salary until he leaves RB on 21 October 2020.

Annual bonus in respect of 2020 performance
For 2020, there will be no change to the annual bonus opportunity of
the CEO and the CFO.

Bonuses for 2020 will be based on RB’s Net Revenue growth and

adjusted profit before income tax 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 126.

We have not disclosed the performance target ranges for 2020 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 31 December 2020.

2020 LTIP awards
The Remuneration Policy sets out the operation of the LTIP.

Last year the Committee undertook a thorough review of the

performance measures which LTIP vesting is subject to. For the 2019
LTIP awards these were 25% based on Net Revenue, 25% based on
EPS calculated on constant FX, 25% based on EPS calculated on actual
FX and 25% based on ROCE.

In calculating the ratio we have used Option A, in line with

Since becoming CEO, Laxman Narasimhan has carried out a

shareholder guidelines. For identifying the three employees at the
lower quartile, median and upper quartile, the following methodology
has been used:

•

All UK employees’ total remuneration as at 31 December 2019
has been considered, excluding leavers and employees who were
absent for more than 20 days during the financial year, as these
would distort the ratio.

Full-time equivalent salary, variable pay, allowances and benefits
(using the part-time values and converting this to a full-time
equivalent) have been calculated. In order to calculate the value
of taxable benefits we have taken the P11D value, due to ease of
accessing data. Actual pension contributions have been used,
and, where appropriate, converted to full-time equivalents.

strategic review of the Company. This was announced in February
2020. RB will focus on three business units of Hygiene, Health and
Nutrition, as we fulfil our purpose to protect, heal and nurture in the
relentless pursuit of a cleaner, healthier world.

The new strategy of the Company is intended to rejuvenate

sustainable growth and deliver shareholder value. The Group’s key
strategic priorities in the mid-term are restoring organic growth on the
top line, focusing on achieving sustainable increased earnings growth
and maintaining disciplined capital allocation.

As a result of this strategic review, within the Remuneration Policy

the Remuneration Committee is in the process of reviewing the
weightings of the performance conditions and the performance
targets themselves that apply to LTIP awards in respect of the 2020-22
performance period.

This is to ensure that the LTIP conditions and targets better reflect

the Company’s strategic priorities. Due to the timing of publication
the weightings and targets are not finalised in time to set out in
this report.

We are currently consulting with Shareholders on the

performance conditions before making the awards, and will disclose
them externally when we make the awards and in next year’s
Annual Report.

132

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019•

•

Other required disclosures
Remuneration arrangements for the departing Chief Executive
Officer and Chief Financial Officer
Rakesh Kapoor stepped down as CEO and from the Board on
2 September 2019 and retired from the Company on 31 December
2019. His remuneration arrangements were detailed on page 112
of last year’s Annual Report.

The single figure table on page 128 of this report sets out the

value of his package in respect of service whilst a Board member. For
the remainder of the year his remuneration continued unchanged,
with his salary, pension, benefits and bonus opportunity remaining the
same, and detailed on page 129.

Rakesh has outstanding LTIP awards, which will be pro-rated for
service and are detailed on page 136. These awards are subject to the
original performance conditions and time horizon.

The Board announced on 21 October 2019 that Adrian Hennah

will be stepping down as Chief Financial Officer and Executive Director
when his successor starts, remaining with the Company until his
retirement date of 21 October 2020 to ensure a seamless transition.

Our approach for 2019 remuneration was unaffected and is as set

out in this report. For 2020, our approach is set out in detail below:

Base salary
Taxable benefits
Annual bonus

CEO
% change
2018-19

2%
259%
-95%

Other
employees
% change
2018-19

5%
8%
-71%

It should be noted that the taxable benefits include the value of the
one off relocation benefits (and tax gross up) in respect of Laxman
Narasimhan’s move to the UK. As with the change in annual bonus
for the CEO, the change in bonus for other employees reflects the
performance of the company in 2019 which resulted in lower bonuses
in 2019 compared to 2018.

Relative importance of spend on pay
The table below shows Shareholder distributions (i.e. dividends) and
total employee pay expenditure for 2018 and 2019, along with the
percentage change in both.

2019
£m

1,227
1,883

2018
£m

% change
2018-19

1,187
1,767

3.4%
6.6%

Salary, benefits and pension will be paid up to the retirement date
of 21 October 2020.

Total Shareholder distribution
Total employee expenditure

There will be no payments in lieu of notice.

Eligible for an annual bonus payment in respect of the 2020
financial year, which will be subject to RB performance over 2020,
pro-rated for time employed and payable at the time bonuses are
paid to other RB employees. One-third of this bonus will be
deferred in RB shares.

The 2018-20 and 2019-21 LTIP awards will remain subject to
performance against the original performance conditions over the
respective three-year performance periods. Both of these awards
will then be subject to a two-year holding period following the
end of the respective performance periods.

These LTIP awards will be reduced pro-rata to reflect the
proportion of the performance period that Adrian is
employed for.

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 graphs below shows the TSR of the Company and the UK FTSE
100 Index over the period since 1 January 2010. This shows the
growth in the value of a hypothetical holding of £100 invested on
31 December 2009. 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.

The table below sets out the single figure of total remuneration

for the role of CEO over the last ten years.

•

There will be no 2020-22 LTIP award made to Adrian.

Total Shareholder Return since 1 January 2010

All payments will be made in line with our Shareholder-approved
Policy, and will be set out in the 2020 Annual Report.

Percentage change in CEO remuneration
The table below shows the percentage change in CEO and CFO
remuneration (salary, benefits and annual bonus) from the prior year
compared to the average percentage change in remuneration for all
UK employees.

The analysis is based on a consistent set of employees, i.e. the
same individuals or roles appear in the 2018 and 2019 populations.

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.

For 2019, the amounts shown for the CEO reflect the aggregate

value of the service of Rakesh Kapoor and Laxman Narasimhan for
their respective periods as CEO.

£ value of £100 invested at 1 January 2010

300

250

200

150

100

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

FTSE 100

Based on three-month average share price at start and end of period.

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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019D I R E C T O R S ’ R E M U N E R AT I O N R E P O R T CO N T I N U E D

(£000)

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

CEO single figure of remuneration
Laxman Narasimhan
Rakesh Kapoor
Bart Becht
Annual bonus (as a percentage of maximum)
LTIP vesting

£8,411

£4,497
£17,150 £18,076
31%
100% 100% 100%

76%

£6,840 £12,787 £25,527 £15,289

£8,999 £14,314

£4,5991
£938

53% 100%
40%

72% 100%
80%
40%

0%
50%

84%
65%

12%2
0%

1 Includes buyouts in respect of legacy arrangements from previous employer.
2 Zero for Rakesh Kapoor.

Single total figure of 2019 remuneration for Non-Executive Directors and implementation for 2020 (audited)
The following Non-Executive Director fee policy was in place for the year ended 31 December 2019. The table also sets out the fees that will
apply from 1 January 2020.

Role

Base fees
Chairman
Non-Executive Director

Additional fees
Chair of Committee
Member of Committee
Designated NED, for engagement with the Company’s workforce
Senior Independent Director

2019 fees

2020 fees

Cash fee

Fee delivered
in RB shares

Cash fee

Fee delivered
in RB shares

£375,000
£75,250

£125,000
£16,750

£412,500
£70,250

£137,500
£21,750

£30,000
£15,000
£15,000
£20,000

–
–
–
–

£35,000
£20,000
£20,000
£30,000

–
–
–
–

The table below sets out a single figure for the total remuneration received by each Non-Executive Director for the year ended 31 December
2019 and the prior year:

Chris Sinclair
Nicandro Durante
Mary Harris
Pam Kirby
Warren Tucker
Andrew Bonfield1
Mehmood Khan1
Elane Stock1
Sara Mathew

2019 fees

2018 fees

Cash

Total

Cash

Total

£375,000
£125,250
£111,717
£120,250
£90,250
£96,875
£81,875
£84,667
£45,125

£125,000
£16,750
£16,750
£16,750
£16,750
£25,125
£25,125
£22,333
£8,375

£500,000
£142,000
£128,467
£137,000
£107,000
£122,000
£107,000
£107,000
£53,500

£278,128
£105,250
£105,250
£120,250
£90,250
£53,500
£53,500
£32,883

£88,087
£16,750
£16,750
£16,750
£16,750
–
–
–

£366,215
£122,000
£122,000
£137,000
£107,000
£53,500
£53,500
£32,883

1 Directors appointed in the second half of 2018 had the relevant portion of their fees applied in the purchase of shares in relation to 2018 and 2019.

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.

134

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019Summary of Shareholder voting at the 2019 AGM
The following table shows the results of the voting on the 2018 Directors’ Remuneration Report and 2019 Directors’ Remuneration Policy at the
2019 AGM:

Approve the 2018 Directors’ Remuneration Report

455,970,845

Votes for

For %

86%

Votes against

Against %

Total Votes withheld

71,561,475

14% 527,532,320

1,368,921

Approve the Directors’ Remuneration Policy

461,396,628

87% 66,134,073

13% 527,530,701

1,370,761

The Committee has had extensive discussions with Shareholders with a view to obtaining Shareholder support for our remuneration
arrangements. In particular, last year, following a comprehensive consultation with our major Shareholders, we made a number of changes to the
Remuneration Policy, to further align Executive Directors’ remuneration with Shareholders’ interests. This resulted in Shareholders supporting the
2018 Directors’ Remuneration Report and the Directors’ Remuneration Policy, with a significantly increased margin of support compared to the
previous vote on Policy in 2016.

The Chair of the Remuneration Committee continues to have ongoing dialogue with Shareholders.

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

Date of appointment

Andrew Bonfield
Nicandro Durante
Mary Harris
Mehmood Khan
Pam Kirby
Sara Mathew
Chris Sinclair
Elane Stock
Warren Tucker

1 July 2018
1 December 2013
10 February 2015
1 July 2018
10 February 2015
1 July 2019
10 February 2015 (appointed Chairman from 3 May 2018)
1 September 2018
24 February 2010

Length of service as at
31 December 2019

Years

Months

1
6
4
1
4
0
4
1
9

6
1
11
6
11
6
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, for Laxman Narasimhan was 16 July 2019 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 (and is permitted to retain) £129,500 in respect of his directorship of RELX plc.

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 2019, Deloitte LLP also provided the Group with
advice in numerous areas, including corporate and employment taxes, safety consulting, D&I assurance and technology and programme
management support. 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. Deloitte’s total fees for the provision of remuneration services
were £481,200 on the basis of time and materials.

It should be noted that although we are required to only disclose the value of fees for services which materially assisted the Remuneration
Committee, as with previous years, we have disclosed the full value of remuneration services from Deloitte which includes advice to management
and to the Remuneration Committee.

135

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019D I R E C T O R S ’ R E M U N E R AT I O N R E P O R T CO N T I N U E D

Directors’ interests in shares and options under the LTIP (audited)

LTIP

Notes Grant date

At 1.1.19

Granted
during the
year

Exercised/
vested
during the
year

Lapsed
during the
year

At
31.12.19

Option
price (£)

Market
price at
date of
award (£)

Market
price at
date of
exercise/
vesting (£)

Exercise/vesting
period

Laxman Narasimhan
Options
Performance-based share
awards

Adrian Hennah
Options

Performance-based share
awards

Rakesh Kapoor
Options

Performance-based share
awards

3 05.08.19

– 150,000

4 05.08.19
4 05.08.19
3 05.08.19

71,557
–
–
84,717
– 75,000

–

–
–
–

13.2.13
13.2.13
11.12.13
1.12.14
2.12.15
1
1.12.16
2
2 30.11.17
3 10.05.19

704
73,312
92,540
45,000
90,000
76,500
76,500
–

–
–
–
–
–
–
–
80,000

–
73,312
92,540
45,000
–
–
–

– 150,000

63.72

–

May 22-Aug 29

–
–
–

71,557
84,717
75,000

59.72
59.72
59.72

Mar 20
Mar 21
May 22

–
–
–
–

704
0
0
0
31,500 58,500
76,500
76,500
80,000

–
–

42.61
41.44
46.51
50.57
63.25
67.68
64.99
61.55

–
–
–
–
–
–
–

– May 16-Feb 23
63.73 May 16-Feb 23
63.73 May 17-Dec 23
63.73 May 18-Dec 24
– May 19-Dec 25
– May 20-Dec 26
– May 21-Nov 27
May 22- May 29

2.12.15
1
2
1.12.16
2 30.11.17
3 10.05.19

45,000
38,250
38,250
–

–
–
–
40,000

29,250
–
–
–

15,750
–
–
–

0
38,250
38,250
40,000

–
–
–
–

64.15
66.28
64.86
61.45

61.11
–
–
–

May 19
May 20
May 21
May 22

5.12.11 164,514
3.12.12 329,028
11.12.13
627
11.12.13 205,007
1.12.14 200,000
2.12.15 400,000
1
2
1.12.16 300,000
2 30.11.17 200,000

2.12.15 240,000
1
2
1.12.16 150,000
2 30.11.17 100,000

–
–
–
–
–
–
–
–

– 164,514
–
– 329,028
–
–
627
–
– 205,007
–
200,000
–
– 140,000 260,000
– 300,000
–
66,667 133,333
–

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

– 156,000 84,000
–
–
–
–

33,334

–
– 150,000
66,666

–
–
–

64.15
66.28
64.86

61.11
–
–

May 19
May 20
May 21

Notes
1 As disclosed in last year’s report, vesting of the award made in December 2015 was 65% for the CEO and the CFO. This vested following the AGM in 2019 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 the three financial years prior to the vesting date.

EPS CAGR for awards granted in 2016-17
Proportion of awards vesting (%)

<6%
Nil

6%
20%

Between 6% and 10% ≥10%
100%

Straight-line vesting between
20% and 100%

136

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 20193 Vesting of the LTIP is subject to the achievement of the following compound average annual growth (CAGR) in Adjusted EPS, Net revenue and ROCE over the three financial years prior to

the vesting date.

EPS growth (3-year CAGR)
(50% weighting – 25% actual FX; 25% constant FX)

Net Revenue growth (3-year CAGR)
(25% weighting)

ROCE (final year)
(25% weighting)

Threshold (20% vesting) Maximum (100% vesting)

10.8%

12.8%

4 Buyout awards as disclosed on page 125. These vest subject to PepsiCo performance and accrue dividends.

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

Laxman Narasimhan

Adrian Hennah

Rakesh Kapoor

Granted
during the
year

Exercised
during the
year

Lapsed
during the
year

At
31.12.19

Option
price (£)

Market
price at
exercise
(£)

Exercise period

379

–
–
316

–

403
–
–

–

–
–
–

–

379

–
307
316

509

47.44

37.20
48.71
47.44

58.86

–

Feb 23-Jul 23

63.83
–
–

Feb 19-Jul 19
Feb 21-Jul 21
Feb 25-Jul25

–

Feb 22-Jul 22

Grant date

At 1.1.19

02.09.19

04.09.13
01.09.15
02.09.19

02.09.16

–

403
307
–

509

There have been no changes to the Directors’ interests as set out in the above tables between 31 December 2019 and 26 March 2020.

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 26 March 2020 had the following beneficial interests in the ordinary shares of
the Company:

Andrew Bonfield
Nicandro Durante
Mary Harris
Adrian Hennah
Laxman Narasimhan
Mehmood Khan
Pam Kirby
Sara Mathew1
Chris Sinclair
Elane Stock
Warren Tucker

26 March
2020

31 December
2019

31 December
2018

226
718
2,323
147,900
33,780
227
3,596
75
5,138
2,061
3,614

226
718
2,323
147,900
0
227
3,596
75
5,138
2,061
3,614

0
579
2,114
104,190
0
0
3,452
–
4,062
0
2,471

1 Sara Mathew held her shares in the form of 378 American Depository Receipts. Each ADR is equivalent to five ordinary shares at 10 pence each in the Company.
2 No person who was a Director (or a Director’s connected person) on 31 December 2019 and at 26 March 2020 had any notifiable share interests in any subsidiary.
3 The Company’s Register of Directors’ Interests (which is open to inspection) contains full details of Directors’ shareholdings and options to subscribe for shares.

As approved and signed on behalf of the Board of Directors,

Mary Harris
Chair of the Remuneration Committee
26 March 2020

137

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019

R E P O R T O F T H E D I R E C T O R S

Introduction
The Directors present their report, together with the Financial
Statements of the Group for the year ended 31 December 2019,
in accordance with s415 of the Companies Act 2006 (CA 2006).

In accordance with s414C of CA 2006 certain matters required

to be included in this Directors’ Report are included in the Strategic
Report on pages 01 to 77. The Strategic Report includes an indication
of the likely future developments of the business, research and
development activities of the Group and details of important events
affecting the Company. The Corporate Governance Report can be
found on pages 86 to 96 and is deemed to be incorporated into this
Directors’ Report by reference.

Further disclosure requirements contained in CA 2006, Schedule 7
of the Large and Medium-sized Companies and Groups (Accounts and
Reports) Regulations 2008, Part 3 of the Companies (Miscellaneous
Reporting) Regulations 2018 and the Financial Conduct Authority’s (FCA)
Listing Rules, Disclosure Guidance and Transparency Rules, which are
deemed to form part of the management report can be found on the
following pages of the Annual Report for the year ended 31 December
2019, and are incorporated into this Directors’ Report by reference:

Acquisitions and disposals

Awards under employee share schemes

Corporate Governance Statement including internal
control and risk management statements

Statement of Directors’ Responsibilities, including
disclosure of information to the Auditor

Disclosure of greenhouse gas (GHG) emissions

Employment policy and employee involvement

Engagement with employees, suppliers, customers
and others

Page

200

196-199

86-96

141

139-140

12-47 and 56-57

Environmental, social and governance (ESG) matters

12-47 and 56-57

Financial risk management and financial instruments

179-186

Future developments in the business

Post Balance Sheet events

Research and development activities

Shareholder information

1-77

203

12-47 and 56-57

223-225

Sustainability and corporate responsibility

12-47 and 56-57

Viability Statement

Information on subsidiaries of the Company, including overseas
branches, can be found in Note 11 (Subsidiary Undertakings) to the
Parent Company Financial Statements (pages 205 to 222). Information
on the Board’s stakeholder engagement and activities is set out in the
s172 Statement found on pages 46 to 47.

There is no additional information requiring disclosure under

Listing Rule 9.8.4R.

Results and dividends
The Consolidated Income Statement can be found on pages 152 to
153. The loss for the year attributable to equity Shareholders of the
Company amounted to -£4,199 million.

In July 2019, the Directors resolved to pay an interim dividend of
73.0 pence per ordinary share (2018: 70.5 pence), which was paid to
Shareholders on 26 September 2019.

The Directors recommend a final dividend for the year of 101.6

pence per share (2018: 100.2 pence) which, together with the interim

dividend, makes a total for the year of 174.6 pence per share (2018:
170.7 pence). During the year no Shareholders waived their right to
receive dividend payments.

The final dividend, if approved by the Shareholders at the

forthcoming Annual General Meeting of the Company, will be paid on
28 May 2020 to Shareholders on the register at the close of business
on 17 April 2020.

Directors
The members of the Board and biographical details of the Directors
are set out on pages 78 to 83 and form part of this report. Rakesh
Kapoor retired as Chief Executive Officer of the Company on
2 September 2019.

Appointment of Directors
The Board’s power to appoint Directors is contained in the Company’s
Articles of Association (the Articles) and all appointments are made in
accordance with the UK Corporate Governance Code 2018 (the Code).
Under the terms of reference of the Nomination Committee, all
Director appointments must be recommended by the Nomination
Committee for approval by the Board of Directors.

All Directors must submit themselves for re-election each year
at the AGM. At the 2020 AGM all Directors will offer themselves for
election or re-election in compliance with the Code, except Warren
Tucker who will retire immediately after the AGM and Adrian Hennah
who is stepping down from the Board on 9 April 2020. Details of the
Directors standing for election or re-election can be found in the 2020
Notice of Annual General Meeting. Information on the service
agreements of Executive Directors can be found in the Directors’
Remuneration Report on pages 117 to 137. The letters of appointment
of the Non-Executive Directors are available for inspection at the
Company’s registered office.

Powers of Directors
The Board of Directors is responsible for the management of the
business of the Company and may exercise all powers of the Company
subject to the provisions of the Company’s Articles and the CA 2006.
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 on the Company’s website
at www.rb.com or can be obtained upon written request from
the Company Secretary or the UK Registrar of Companies,
Companies House.

Directors’ insurance and indemnities
The Company indemnifies the Directors and Officers of the Company
and any Group subsidiary to the extent permitted by s236 of 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 Director or Officer if that individual was found
to have acted fraudulently or dishonestly. The Directors’ and Officers’
liability insurance cover was maintained throughout the year ended
31 December 2019 at the Company’s expense.

Directors’ interests
A statement of Directors’ interests in the share capital of the Company
is shown on page 137 of the Directors’ Remuneration Report. Details
of Executive Directors’ options to subscribe for shares in the Company
are included on page 136 in the audited part of the Directors’
Remuneration Report.

138

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019During 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 are disclosed in the Directors’
Remuneration Report on pages 117 to 137.

No Director has a material interest in any ‘contract of significance’
(as defined by the FCA) to which the Company, or any of its subsidiary
undertakings, is a party as at 31 December 2019.

Share capital
As at 31 December 2019, the Company’s issued share capital consisted
of 736,535,179 ordinary shares of 10 pence each of which
709,746,644 were with voting rights and 26,788,535 ordinary shares
were held in treasury. Each share carries the right to one vote at
general meetings of the Company. 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.

The rights and obligations attached to the ordinary shares are
contained in the Company’s Articles. 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.

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.

Allotment of shares
At the 2019 AGM, authority was granted to the Directors under s551
of CA 2006 to allot shares or grant rights to subscribe for, or convert
any security into shares of the Company. The authority granted to the
Directors will expire at the conclusion of this year’s AGM. At the 2020
AGM, a resolution will be proposed to the Shareholders to renew the
Directors’ authority to allot 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 2021, whichever is the sooner.

Under s561 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, the Investment Association Share Capital Management
Guidelines and the Pensions and Lifetime Savings Associations’

Corporate Governance Policy and Voting Guidelines 2019, 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.

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 the Directors at the 2019 AGM for the
purposes of s701 of CA 2006 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 2019.

At the 2020 AGM, the Directors will seek to renew the authority

granted to them. Such authority, if approved, will be limited to a
maximum of 70 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

this authority in treasury to satisfy outstanding awards under
employee share incentive plans.

Change of control and significant agreements
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 is required to disclose

about persons with whom it has contractual or other arrangements
with, which are essential to the business of the Company.

Employees
During 2019, the Group employed an average of 42,400 (2018:
42,400) employees worldwide, of whom 4,025 (2018: 3,654) 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.

Employment applications are considered on the basis of a

person’s aptitude and ability, and fair consideration is given to all
applications regardless of disability. Where an employee becomes
disabled during their employment, every practical effort is made to
assist the employee in continuing their employment and to arrange
appropriate training.

139

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019R E P O R T O F T H E D I R E C T O R S CO N T I N U E D

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. 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.

A continuing programme of training and development reinforces
the Group’s commitment to employee development. The Group aims
to provide all employees with equal opportunities and the freedom to
succeed at work and recognises the importance of employee health
and well-being. RB’s values create an inclusive environment for
employees to act with integrity, responsibility and consistency and
have been further enhanced in early 2020 with our renewed purpose,
fight and compass set out on pages 10 to 11.

Employee matters, incentives and share ownership
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, videos and Q&A sessions are held
for employees around the world on publication of the Group’s
financial results to provide employees with awareness of the financial
and economic factors affecting the Company’s performance, and so
that employee views are fed back to management and taken into
account when decisions are made.

The Company operates three all employee share plans, through

these schemes, 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. We currently have
more than 55% of eligible employees participating. Further details on
employee share plans and awards made under executive share plans
can be found in Note 24 on page 196 of the Financial Statements.

Political donations
During the year, the Company and its subsidiaries did not make any
political donations or incur any expenditure, nor were any
contemplated. In keeping with previous practice, at the forthcoming
AGM Shareholders will be asked in accordance with s366 and s376 of
CA 2006 to approve, on a precautionary basis, for the Company and
its subsidiaries to make political donations and incur political
expenditure for period ending 31 December 2020.

Financial instruments and risk
The financial risk management objectives and policies of the Group are
set out in Note 14, page 179 of the Financial Statements. The Note
sets out information on the Company’s policy for hedging each major
types of forecasted transactions for which hedge accounting is used,
and our exposure to currency, price risk, credit risk, liquidity risk and
cash flow risk.

Amendment to Articles of Association
The Articles of the Company were adopted in 2012 and amended
in 2015. Any amendments to the Articles may be made in
accordance with the provisions of CA 2006 by special resolution
of the Shareholders.

Independent Auditor
The External Auditor, KPMG LLP (KPMG), has indicated its willingness
to continue in office and a resolution proposing the reappointment of
KPMG, and to authorise the Audit Committee to determine its
remuneration for the financial year ending 31 December 2020, will be
proposed at the forthcoming AGM. In accordance with section 418(2)
of the CA 2006, each of the Directors holding office at the date of this
report confirm that:

•

so far as the Director is aware, there is no relevant audit
information of which the Company’s Auditor is unaware; and

he or she has taken all of the steps that he or she ought to have
taken as a Director in order to make himself or herself aware of
any relevant audit information and to establish that the
Company’s Auditor is aware of that information.

Substantial shareholdings
As at 31 December 2019, pursuant to DTR 5 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

Massachusetts Financial
Services Company and/or
its subsidiaries

Date of last TR-1
notification

Nature of
interest

% of voting
rights

16 January 20131

Indirect

5.00

1 Under a s.793 CA 2006 request, Massachusetts Financial Services Company confirmed
on 3 February 2020 that its aggregate holding had decreased to 49,321,030 shares.
The voting percentage was not disclosed.

As at 26 March 2020, the Company has not received any further
notifications under DTR 5 of the Disclosure Guidance and Transparency
Rules.

Application of the UK Corporate Governance Code 2018
We report against the requirements of the UK Corporate Governance
Code 2018 (the Code) issued by the Financial Reporting Council.
Details of how the Company has applied the Code principles and
provisions can be found in the Corporate Governance Report on
pages 86 to 96.

Annual General Meeting (AGM)
The forthcoming AGM of Reckitt Benckiser Group plc will be held on
12 May 2020 at 3.00pm at 103-105 Bath Road, Slough, Berkshire,
SL1 3UH.

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 so 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
26 March 2020

14 0

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019S TAT E M E N T O F D I R E C T O R S ’ R E S P O N S I B I L I T I E S
I N R E S P E C T O F T H E A N N U A L R E P O R T A N D T H E F I N A N C I A L S TAT E M E N T S

Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors’ Report,
Directors’ Remuneration Report and Corporate Governance Statement
that comply with that law and those regulations.

The Directors are responsible for the maintenance and integrity

of the corporate and financial information included on the Company’s
website. Legislation in the UK governing the preparation and
dissemination of Financial Statements may differ from legislation
in other jurisdictions.

Responsibility statement of the Directors in respect of the
annual financial report
We confirm that to the best of our knowledge:

•

the Financial Statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss of the
Company and the undertakings included in the consolidation
taken as a whole; and

the Annual Report and Financial Statements includes a fair review
of the development and performance of the business and the
position of the issuer and the undertakings included in the
consolidation taken as a whole, together with a description
of the principal risks and uncertainties that they face.

We consider the Annual Report and Financial Statements, taken
as a whole, is fair, balanced and understandable and provides the
information necessary for Shareholders to assess the Group’s position
and performance, business model and strategy.

Rupert Bondy
Company Secretary
Reckitt Benckiser Group plc
103-105 Bath Road
Slough, Berkshire SL1 3UH

26 March 2020

The Directors are responsible for preparing the Annual Report and the
Group and Parent Company Financial Statements in accordance with
applicable law and regulations.

Company law requires the Directors to prepare Group and Parent
Company Financial Statements for each financial year. Under that law
they are required to prepare the Group Financial Statements in
accordance with International Financial Reporting Standards as
adopted by the European Union (IFRSs as adopted by the EU) and
applicable law and have elected to prepare the Parent Company
Financial Statements in accordance with UK accounting standards,
including FRS 102, ‘The Financial Reporting Standard applicable in the
UK and Republic of Ireland’.

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 their
profit or loss for that period. In preparing each of the Group and
Parent Company Financial Statements, the Directors are required to:

•

select suitable accounting policies and then apply them
consistently;

• make judgements and estimates that are reasonable, relevant,

reliable and prudent;

•

for the Group Financial Statements, state whether they have been
prepared in accordance with IFRSs as adopted by the EU and
IFRSs as issued by the International Accounting Standards Board
(IASB) and due to a requirement of the US SEC, state they have
been prepared in accordance with IFRSs as issued by the
International Accounting Standards Board (IASB);

for the Parent Company Financial Statements, state whether
applicable UK accounting standards have been followed, subject
to any material departures disclosed and explained in the parent
Company Financial Statements;

assess the Group and Parent Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern; and

use the going concern basis of accounting unless they either
intend to liquidate the Group or the Parent Company or to cease
operations, or have no realistic alternative but to do so.

The Directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Parent Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Parent Company and enable them to ensure
that its Financial Statements comply with the Companies Act 2006.
They are 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, and
have general responsibility for taking such steps as are reasonably
open to them to safeguard the assets of the Group and to prevent
and detect fraud and other irregularities.

141

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019FINANCIAL
STATEMENTS

Contents of Financial Statements
Independent Auditor’s Report

143

152

Financial Statements

Subsidiary Undertakings

212
223 Shareholder Information

142

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019I N D E P E N D E N T A U D I T O R ’ S R E P O R T
T O T H E M E M B E R S O F R E C K I T T B E N C K I S E R G R O U P P L C

1 Our opinion is unmodified
We have audited the Financial Statements of Reckitt Benckiser Group
plc (the “Parent Company”) and its subsidiaries (together the “Group”)
for the year ended 31 December 2019 which comprise the Group
Income Statement, Group Statement of Comprehensive Income,
Group Balance Sheet, Group Statement of Changes in Equity, Group
Cash Flow Statement, and the related Notes, including the accounting
policies in Note 1 to the Financial Statements, and the Parent Company
Balance Sheet, Parent Company Statement of Changes in Equity and
the related Notes, including the accounting policies in Note 1 to the
Parent Company Financial Statements.

In our opinion:

Basis for opinion
We conducted our audit in accordance with International Standards on
Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are
described below. We believe that the audit evidence we have obtained
is a sufficient and appropriate basis for our opinion. Our audit opinion
is consistent with our report to the Audit Committee.

We were first appointed as auditor by the Shareholders on 3 May
2018. The period of total uninterrupted engagement is for the two
financial years ended 31 December 2019. We have fulfilled our ethical
responsibilities under, and we remain independent of the Group in
accordance with, UK ethical requirements including the FRC Ethical
Standard as applied to listed public interest entities. No non-audit
services prohibited by that standard were provided.

•

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 2019 and of the Group’s loss for the year
then ended;

the Group Financial Statements have been properly prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union (“IFRS as adopted by the EU”);

the Parent Company Financial Statements have been properly
prepared in accordance with UK accounting standards, including
FRS 102 The Financial Reporting Standard applicable in the UK
and Republic of Ireland; and

Overview

Materiality:
Group Financial
Statements as a
whole

Coverage

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.

Recurring risks

Additional opinion in relation to IFRS as issued by the IASB:
As explained in Note 1 to the Group Financial Statements, in addition
to complying with its legal obligation to apply IFRS as adopted by the
EU, the Group has also applied IFRS as issued by the International
Accounting Standards Board (“IASB”).

In our opinion the Group Financial Statements have been properly
prepared in accordance with IFRS as issued by the IASB.

£150 million (2018: £140 million)
4.8% (2018: 4.6%) of Group loss before tax
normalised to exclude exceptional adjusting
items as disclosed in Note 3

81% (2018: 82%) of Group Net Revenue
87% (2018: 77%) of total profits and losses
that made up Group loss before tax

vs 2018

Recoverability of goodwill and
indefinite life intangible assets
relating to Infant and Child
Nutrition (“IFCN”)

Provision for uncertain tax positions

Revenue recognition in relation to
trade spend

Recoverability of Parent Company’s
investment in subsidiaries

143

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019I N D E P E N D E N T A U D I T O R ’ S R E P O R T
T O T H E M E M B E R S O F R E C K I T T B E N C K I S E R G R O U P P L C
CO N T I N U E D

2 Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the Financial Statements and
include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, 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. We
summarise below the key audit matters, in decreasing order of audit significance, in arriving at our audit opinion above, together with our key
audit procedures to address those matters and, as required for public interest entities, our results from those procedures. These matters were
addressed, and our results are based on procedures undertaken, in the context of, and solely for the purpose of, our audit of the Financial
Statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate
opinion on these matters.

Recoverability of goodwill and
indefinite life intangible assets
relating to IFCN

(£10,913 million; 2018:
£16,407 million)

Refer to page 108 (Audit Committee
Report), Note 1 on page 159
(accounting policy) and Note 9
on pages 172 to 175 (financial
disclosures).

The risk

Our response

Forecast-based valuation:

Our procedures included:

The recoverability of goodwill and
indefinite life intangible assets relating to
the Infant and Child Nutrition (“IFCN”)
cash generating unit (“CGU”) is assessed
using forecast financial information
within a discounted cash flow model
(“the model”).

The model is highly sensitive to changes
in key assumptions, relating to forecast
financial performance, in particular Net
Revenue growth and operating margins,
as well as external factors such as future
growth of the category as a whole,
discount rates and terminal growth rates.

In the current year the Group has
recognised an impairment loss of
£5,037 million against IFCN goodwill.
This primarily reflects:

•

the accelerated deterioration in birth
rates and GDP growth in China, a
significant IFCN market;

increased competition from domestic
Chinese companies, driven by
regulation and changing consumer
tastes; and

increased competitive pricing in
bidding for The Special Supplemental
Nutrition Program for Women, Infants
and Children (known as “WIC”) state
contracts in the USA, a significant
IFCN market.

The valuation of the IFCN CGU – and
consequent impairment loss – is subject to
a high degree of estimation uncertainty.

Where a substantial impairment must
be recognised, there may be incentive
for the Group to use assumptions that
are excessively cautious, leading to
an overstatement of the impairment.
Conversely, if assumptions are
over-optimistic, the impairment
loss may be understated.

Methodology implementation: With the assistance of
our own modelling specialists, we critically assessed the
interaction of key assumptions and drivers within the model
to ensure that the output calculated as intended, and that
the methodology behind the calculation was reasonable.

Sensitivity analysis: We considered the sensitivity of each
assumption, identified changes to these assumptions since
previous forecasts, and focused our attention on those
assumptions we considered to be most sensitive,
judgemental or otherwise prone to management bias.

Historical comparisons:

• We compared the performance of IFCN since

acquisition against plan and evaluated this in relation
to forecast growth.

• We challenged the Group on the integrity of the

Group’s innovation pipeline, and its ability to deliver
forecast Net Revenue growth by assessing the Group’s
past experience in bringing new or improved products
to market, and evaluated how that experience can be
applied to the IFCN product category.

• We critically challenged the operating margin

projections by reference to those achieved historically,
forecast volume growth and with reference to the
marketing and R&D spend required to deliver forecast
Net Revenue growth.

Benchmarking assumptions:

• We critically evaluated the delta between Net Revenue
growth assumptions within the model and external
market data relating to projected growth for the
product category as a whole. For China in particular,
we considered the extent to which category growth
assumptions reflected the latest sentiment on birth
rates, GDP growth, and the rise of domestic
competitors.

• We benchmarked Gross Margin assumptions against
industry competitors, and external market volume
growth forecasts. We also benchmarked the terminal
growth rate assumptions against long-term estimates
of GDP growth and inflation in key markets, and
considered the appropriateness of real growth in light
of global declining birth rates.

14 4

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 20192 Key audit matters: our assessment of risks of material misstatement continued

The risk

Our response

Recoverability of goodwill and
indefinite life intangible assets
relating to IFCN (continued)

The effect of these matters is that, as part
of our risk assessment, we determined that
there exists a reasonably possible set of
changes in these key assumptions that
would result in a change to the IFCN
valuation and associated impairment loss
well in excess of our materiality for the
Financial Statements as a whole and
possibly many times that amount.

It is also important that disclosures give
relevant information and reflect
uncertainties inherent in the impairment
assessment and its outcome.

Personnel interviews: We compared judgements made
centrally to direct discussion with local country General
Managers and Finance Directors. We considered and
challenged the Group’s assumptions with reference to
alternative views provided locally.

Extended scope: We responded to the risk of
management bias through enhanced market benchmarking,
increased professional scepticism where market and internal
forecasts deviated, and extending the scope of our
valuation specialists to assist in the challenge of key country
cash flow assumptions.

Our valuation expertise: We independently derived a
reasonable range of appropriate discount rates with the
assistance of our valuation specialists, compared these
to those calculated by the Group and identified any
differences in assumptions between the calculations. We
challenged the Group on any such differences and assessed
the discount rate in relation to our appropriate range and
those utilised in previous valuations.

Assessing transparency: We considered the adequacy of
the disclosures provided by Note 9 of the Group Financial
Statements in relation to relevant accounting standards. We
paid particular attention to transparency of disclosure of the
events and circumstances that led to the recognition of the
impairment loss in 2019, and ensuring the sensitivity
disclosures appropriately reflect uncertainty inherent in the
assessment of recoverable amount, as well as reasonably
plausible changes in key assumptions. This included
assessing whether reasonable possible outcomes that could
have resulted in a lower impairment were made clear.

Our results
We found the resulting estimate of the carrying value of
goodwill and indefinite life intangible assets after recording
the impairment loss in the current year to be acceptable
(2018 result: acceptable) and the disclosures, including
the reasonable possible outcomes, to be acceptable
(2018: acceptable).

145

2 Key audit matters: our assessment of risks of material misstatement continued

Provision for uncertain tax
positions (UTPs)

(£891 million; 2018: £1,002 million)

Refer to page 108 (Audit Committee
Report), Note 1 on page 159
(accounting policy) and Note 21 on
page 190 (financial disclosures).

The risk

Our response

Subjective estimate:

Our procedures included:

Our tax expertise: We used our own international and
local tax specialists to assist us to:

•

Inspect and assess the centrally prepared transfer
pricing policies to determine whether they reflect the
risks, activities and substance of each of the entities
within the supply chain; and

Assess the Group’s tax positions, its correspondence
with the relevant tax authorities, and to analyse and
challenge the assumptions used to determine
provisions for tax uncertainties based on our
knowledge and experiences of the application
of the tax legislation.

Historical comparisons: We assessed the historical
accuracy of the provision level following any recent court
judgements and results of relevant tax authority audits and
considered the impact on the remaining provision.

Assessing transparency: We assessed the adequacy
of the Group’s disclosures in respect of uncertain
tax positions.

Our results
We found the level of tax provisioning to be acceptable
(2018 result: acceptable).

Due to the Group operating across a
number of different tax jurisdictions, and
the complexities of transfer pricing and
other international tax legislation, it is
subject to periodic challenge by local tax
authorities on a range of tax matters
arising in the normal course of business.

These challenges by the local tax
authorities include but are not limited to:

•

transfer pricing arrangements relating
to the Group’s operating model;

transfer pricing arrangements relating
to the ownership of intellectual
property rights that are used across
the Group;

deductibility of interest on
intra-Group borrowings; and

the European Commission’s ongoing
State Aid investigations into transfer
pricing ruling practices of certain
member states.

Provision for uncertain tax positions
requires the Directors to make judgements
and estimates in relation to tax issues
and exposures.

The effect of these matters is that, as part
of our risk assessment, we determined that
the estimates of uncertain tax positions has
a high degree of estimation uncertainty,
with a potential range of reasonable
outcomes greater than our materiality for
the Financial Statements as a whole.

14 6

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 20192 Key audit matters: our assessment of risks of material misstatement continued

Revenue recognition in relation
to trade spend

Net Revenue (12,846 million; 2018:
12,597 million)
Trade spend accrual (£1,095 million;
2018: £1,025 million)

Refer to page 108 (Audit Committee
Report), Note 1 on page 159
(accounting policy) and Note 20 on
page 190 (financial disclosures).

The risk

Our response

Subjective estimate:

Our procedures included:

The Group regularly enters into complex
arrangements providing pricing, placement
and other promotional rebates and
allowances to its customers. These trade
spend arrangements can vary in complexity
by market, product category and customer.

Revenue is measured net of outflows
arising from such arrangements which – for
agreements or practices spanning a period
end – requires an estimate of the extent
and value of future activity. These
estimates can be subjective and require the
use of assumptions that are susceptible to
management bias.

The effect of these matters is that, as part
of our risk assessment, we determined that
the estimation of trade spend accruals has
a high degree of estimation uncertainty,
with a potential range of reasonable
outcomes greater than our materiality for
the Financial Statements as a whole.

Accounting policies: We assessed the appropriateness
of the Group’s revenue recognition accounting policies,
including the recognition criteria for trade spend.

Tests of detail: For both risk-based and representative
samples of trade spend accruals, we:

•

recalculated the estimate to assess whether it was
mathematically accurate;

identified the key assumptions in the calculation
of each accrual selected, such as forecast volumes;

agreed those assumptions to relevant documentation,
such as invoices received after the balance sheet date,
customer agreements or third-party consumption
data; and

considered whether the assumptions utilised were
acceptable within the context of relevant external data
points and the Group’s historic experience of
comparable trade spend arrangements.

Tests of detail: We tested the completeness of trade
spend accruals by identifying promotional activity in the
subsequent financial period and assessed whether these
required an accrual at the Balance Sheet date.

Assessing transparency: We assessed the adequacy of
the Group’s disclosures in relation to the degree of
estimation involved in arriving at the trade spend accrual
and the amount of trade spend recognised.

Our results
We found the trade spend accrual and related Net Revenue
recognised to be acceptable (2018 result: acceptable).

Recoverability of Parent
Company’s investment in
subsidiaries

(£14,963 million, 2018:
£14,949 million)

Note 1 on page 207 (accounting
policy) and Note 2 on page 209
(financial disclosures).

Low risk, high value:

Our procedures included:

The carrying amount of the Parent
Company’s investment in subsidiaries
represents 99.7% (2018: 99.7%) of the
Parent Company’s total assets. Its
recoverability is not at a high risk of
significant misstatement or subject to
significant judgement. However, due to its
materiality in the context of the Parent
Company Financial Statements, this is
considered to be the area that had the
greatest effect on our overall Parent
Company audit.

Tests of detail: We compared the carrying amount of
100% of the total investment balance with the direct
subsidiary draft balance sheet to identify whether their
net assets, being an approximation of their minimum
recoverable amount, were in excess of their carrying
amount and assessing whether the direct subsidiary has
historically been profit-making.

Comparing valuations: We performed a reconciliation
to market capitalisation, as the subsidiary owns the entire
Group excluding its parent.

Our results
We found the assessment of the Parent Company’s
recoverability of the investment in subsidiaries to be
acceptable (2018 result: acceptable).

We continue to perform procedures over liabilities and contingent liabilities arising from investigations by the US Department of Justice (DoJ) and
in respect to the South Korea Humidifier Sanitiser (HS) issue. However, following settlement with the DoJ during the year and payments made in
relation to the HS issue, we have not assessed this as one of the most significant risks in our current year audit and, therefore, it is not separately
identified in our report this year as a key audit matter.

147

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019

I N D E P E N D E N T A U D I T O R ’ S R E P O R T
T O T H E M E M B E R S O F R E C K I T T B E N C K I S E R G R O U P P L C
CO N T I N U E D

2 Key audit matters: our assessment of risks of material
misstatement continued
Likewise, we also continue to perform procedures over the
classification of exceptional items. However, with RB2.0 having broadly
concluded in 2019 we have not assessed this as one of the most
significant risks in our current year audit and, therefore, it is not
separately identified in our report this year as a key audit matter.

3 Our application of materiality and an overview of the scope
of our audit
Materiality
Materiality for the Group Financial Statements as a whole was set at
£150 million (2018: £140 million), determined with reference to a
benchmark of Group loss before tax normalised to exclude this year’s
exceptional adjusting items of £5,240 million as disclosed in Note 3 to
an adjusted profit of £3,133 million (2018: Group profit before tax
normalised to exclude exceptional and other adjusting items of £311
million to an adjusted profit of £3,033 million) as defined in Note 3, of
which it represents 4.8% (2018: 4.6%). The Group team performed
procedures on the items excluded from normalised Group loss
before tax.

Materiality for the Parent Company Financial Statements as a whole
was set at £75 million (2018: £75 million) determined with reference to
a benchmark of Parent Company total assets of £15,011 million (2018:
£14,997 million) of which it represents 0.5% (2018: 0.5%).

We agreed with the Audit Committee that we would report to the
committee any corrected or uncorrected identified misstatements
exceeding £7.5 million (2018: £7.0 million) in addition to other
identified misstatements that warranted, in our view, reporting on
qualitative grounds. We also report to the Audit Committee on
disclosure matters that are identified when assessing the overall
presentation of the Financial Statements.

Scope
The Group operates in more than 60 countries across six continents
with the largest footprint being in the US and China, and from
1 January 2018 the Group has been organised into two business
units being Health and Hygiene Home.

We scoped the audit by obtaining an understanding of the Group and
its environment and assessing the risk of material misstatement at the
Group and component level. We have considered components on the
basis of their contribution to Group revenue and Group loss before tax
including whether we had sufficient coverage over each business unit
and the specific risks in the components. Of the Group’s 388 (2018:
368) reporting components, component teams in 22 countries (2018:
23 countries) subjected 44 (2018: 44) to full scope audits for Group
purposes and 10 (2018: 3) to specified risk-focused audit procedures
including procedures over revenue, trade spend, inventory, cost of
sales, PPE, and cash and none (2018: 1) to an audit of account balance
over inventory, cost of sales, PPE and cash. The components for which
we specified risk-focused audit procedures (2018: and audit of account
balance) were not individually financially significant enough to require
an audit for Group reporting purposes, but did present specific
individual risks that needed to be addressed.

14 8

Group loss before tax normalised
to exclude exceptional adjusting items
£3,133m (2018: £3,033 million)

Group materiality
£150 million
(2018: £140 million)

£150 million
Whole financial
statements materiality
(2018: £140 million)

£50 million
Range of materiality at
54 components
(£7.5 million – £50 million)
(2018: £7.5 million to
£75 million)

£7.5 million
Misstatements reported
to the audit committee
(2018: 7 million)

Group profits and losses
that made up Group loss
before tax

13%

23%

87%

(2018: 77%)

72%

79%

86%

Group loss before tax normalised
to exclude exceptional adjusting items

Group materiality

Group net revenue

19%

18%

81%

(2018: 82%)

81%

Group total assets

14%

10%

86%

(2018: 90%)

88%

85%

Key:

Full scope for Group audit
purposes 2019

Specified risk-focused
procedures 2019

Full scope for Group audit
purposes 2018

Specified risk-focused
procedures 2018

Residual components 2019

Audit of account balances 2018

Residual components 2018

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019
3 Our application of materiality and an overview of the scope
of our audit continued
The remaining 19% (2018: 18%) of Group revenue, 13% (2018: 23%)
of total profits and losses that made up Group loss before tax and
14% (2018: 10%) of Group total assets is represented by a number of
other reporting components, none of which individually represented
more than 2% (2018: 1%) of any of Group Net Revenue, Group profit
or loss before tax or Group total assets. For these residual 334 (2018:
320) components, we performed analysis at an aggregated Group
level and performed unpredictable procedures at the component level
to re-examine our assessment that there were no significant risks of
material misstatement within these.

Team Structure
The Group team led a global planning conference to discuss key audit
risks and to obtain input from component and other participating
locations.

The Group team instructed component auditors as to the significant
areas to be covered, including the relevant risks detailed above and the
information to be reported back. The Group team reviewed and
approved the component materialities, which ranged from £7.5 million
to £50 million (2018: £7.5 million to £75 million), having regard to the
mix of size and risk profile across the components.

The work on 51 of the 54 (2018: 45 of the 48) components in scope
was performed by component auditors and the rest, including the
audit of the Group’s treasury company, were performed by the
Group team.

The Senior Statutory Auditor or a senior member of the Group team
visited 19 (2018: 21) countries, representing 50 (2018: 46) reporting
components of the 54 (2018: 48) in scope for Group reporting
purposes. The visits included assessing the audit risk and strategy and
attending a balance sheet review with Group and/or business unit
management, local management and component auditors. Video and
telephone conference meetings were also held with these component
auditors and 3 that were not physically visited throughout the conduct
of the audit. This included attending the year end clearance meetings.
At these visits and meetings, the findings reported to the Group team
were discussed in more detail. In addition we reviewed the component
auditors’ key working papers, including assessing the trade spend
risk identified against the procedures performed, and any further
work required by the Group team was then performed by the
component auditor.

We attended via site visit or telephone calls balance sheet review
meetings for 4 (2018: 6) components not in scope for the Group audit
as part of our unpredictable procedures, to reconfirm our risk
assessment and to further enhance our understanding of the business.

The Group team routinely reviews the audit documentation of all
component audits. Following the outbreak of COVID-19, we were
unable to visit 4 components in China and for which remote access to
audit documentation is prohibited. We instead extended our oversight
of those component teams through extended telephone discussions
over the audit procedures performed.

4 We have nothing to report on going concern
The Directors have prepared the Financial Statements on the going
concern basis as they do not intend to liquidate the Parent Company or
the Group or to cease their operations, and as they have concluded

that the Parent Company’s and the Group’s financial position means
that this is realistic. They have also concluded that there are no
material uncertainties that could have cast significant doubt over their
ability to continue as a going concern for at least a year from the date
of approval of the Financial Statements (“the going concern period”).

Our responsibility is to conclude on the appropriateness of the
Directors’ conclusions and, had there been a material uncertainty
related to going concern, to make reference to that in this audit report.
However, as we cannot predict all future events or conditions and as
subsequent events may result in outcomes that are inconsistent with
judgements that were reasonable at the time they were made, the
absence of reference to a material uncertainty in this auditor’s report is
not a guarantee that the Group and the Parent Company will continue
in operation.

In our evaluation of the Directors’ conclusions, we considered the
inherent risks to the Group’s and the Parent Company’s business
model and analysed how those risks might affect the Group’s and the
Parent Company’s financial resources or ability to continue operations
over the going concern period.

The risks that we considered most likely to adversely affect the Group’s
and the Parent Company’s available financial resources over this period
were:

•

In relation to the COVID-19 pandemic, disruption at one or more
of the Group’s key production facilities, the viability of key
suppliers and customers, and the impact on consumer demand
for the Group’s brands;

A product safety issue leading to reputational damage with
customers, consumers or regulators; and

The impact of a significant business continuity issue affecting the
Group’s manufacturing facilities or those of its suppliers.

As these were risks that could potentially cast significant doubt on the
Group’s and the Parent Company’s ability to continue as a going
concern, we considered sensitivities over the level of available financial
resources indicated by the Group’s financial forecasts taking account
of reasonably possible (but not unrealistic) adverse effects that could
arise from these risks individually and collectively and evaluated the
achievability of the actions the Directors consider they would take to
improve the position should the risks materialise. We also considered
less predictable but realistic second order impacts, such as erosion of
customer or supplier confidence or a cyber-security attack, which
could result in a rapid reduction of available financial resources.

Based on this work, we are required to report to you if:

• we have anything material to add or draw attention to in relation
to the directors’ statement in Note 1 to the Financial Statements
on the use of the going concern basis of accounting with no
material uncertainties that may cast significant doubt over the
Group and the Parent Company’s use of that basis for a period of
at least twelve months from the date of approval of the Financial
Statements; or

•

the related statement under the Listing Rules set out on page 141
is materially inconsistent with our audit knowledge.

We have nothing to report in these respects, and we did not identify
going concern as a key audit matter.

149

5 We have nothing to report on the other information in the
Annual Report
The Directors are responsible for the other information presented in
the Annual Report together with the Financial Statements. Our opinion
on the Financial Statements does not cover the other information and,
accordingly, we do not express an audit opinion or, except as explicitly
stated below, any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so,
consider whether, based on our Financial Statements audit work,
the information therein is materially misstated or inconsistent with
the Financial Statements or our audit knowledge. Based solely on
that work we have not identified material misstatements in the
other information.

Strategic report and Directors’ report
Based solely on our work on the other information:

• we have not identified material misstatements in the Strategic

report and the Directors’ report;

•

in our opinion the information given in those reports for the
financial year is consistent with the Financial Statements; and

in our opinion those reports have been prepared in accordance
with the Companies Act 2006.

Directors’ remuneration report
In our opinion the part of the Directors’ remuneration report to be
audited has been properly prepared in accordance with the Companies
Act 2006.

Disclosures of emerging and principal risks and longer-term
viability
Based on the knowledge we acquired during our Financial Statements
audit, we have nothing material to add or draw attention to in
relation to:

•

the Directors’ confirmation within the Viability Statement on page
77 that they have carried out a robust assessment of the
emerging and principal risks facing the Group, including those
that would threaten its business model, future performance,
solvency and liquidity;

the risk management and principal risk disclosures describing
these risks and explaining how they are being managed and
mitigated; and

the Directors’ explanation in the Viability Statement of how they
have assessed the prospects of the Group, over what period they
have done so and why they considered 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.

Under the Listing Rules we are required to review the Viability
Statement. We have nothing to report in this respect.

Our work is limited to assessing these matters in the context of only
the knowledge acquired during our Financial Statements audit. As we
cannot predict all future events or conditions and as subsequent
events may result in outcomes that are inconsistent with judgements
that were reasonable at the time they were made, the absence of
anything to report on these statements is not a guarantee as to the
Group’s and Parent Company’s longer-term viability.

Corporate governance disclosures
We are required to report to you if:

• we have identified material inconsistencies between the

knowledge we acquired during our Financial Statements audit
and the Directors’ statement that they consider that the annual
report and Financial Statements taken as a whole is fair, balanced
and understandable and provides the information necessary for
Shareholders to assess the Group’s position and performance,
business model and strategy; or

•

the section of the annual report describing the work of the Audit
Committee does not appropriately address matters
communicated by us to the Audit Committee.

We are required to report to you if the Corporate Governance
Statement does not properly disclose a departure from the provisions
of the UK Corporate Governance Code specified by the Listing Rules
for our review.

We have nothing to report in these respects.

6 We have nothing to report on the other matters on which we
are required to report by exception
Under the Companies Act 2006, we are required to report to you if, in
our opinion:

•

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

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; or

certain disclosures of Directors’ remuneration specified by law are
not made; or

• we have not received all the information and explanations we

require for our audit.

We have nothing to report in these respects.

150

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 20197 Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 141,
the Directors are responsible for: the preparation of the Financial
Statements including being satisfied that they give a true and fair view;
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; assessing the Group and
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 they either intend to liquidate the
Group or the Parent Company or to cease operations, or have no
realistic alternative but to do so.

Auditor’s responsibilities
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 other irregularities (see below), or error, and
to issue our opinion in an auditor’s report. Reasonable assurance is a
high level of assurance, but does not guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud,
other irregularities or error and are considered material if, individually
or in aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of the
Financial Statements.

A fuller description of our responsibilities is provided on the FRC’s
website at www.frc.org.uk/auditorsresponsibilities.

Irregularities – ability to detect
We identified areas of laws and regulations that could reasonably be
expected to have a material effect on the Financial Statements from
our general commercial and sector experience and through discussion
with the Directors and other management as required by auditing
standards, and from inspection of the Group’s regulatory and legal
correspondence and discussed with the Directors and other
management the policies and procedures regarding compliance with
laws and regulations. We communicated identified laws and
regulations throughout our team and remained alert to any indications
of non-compliance throughout the audit. This included communication
from the Group team to component audit teams of relevant laws and
regulations identified at the Group level.

The potential effect of these laws and regulations on the Financial
Statements varies considerably.

Firstly, the Group is subject to laws and regulations that directly affect
the Financial Statements including financial reporting legislation
(including related companies legislation), distributable profits
legislation and taxation legislation and we assessed the extent of
compliance with these laws and regulations as part of our procedures
on the related financial statement items.

anti-bribery (reflecting that the Group operates in a number of
countries where there is an opportunity to engage in bribery given
the lack of regulation by the local governments), interaction with
healthcare professionals (reflecting the nature of the Group’s products
in the Health business unit), competition law (reflecting the nature of
Group’s business and market positions), consumer product law such as
product safety and product claims (reflecting the nature of the Group’s
diverse product base), data privacy legislation (reflecting the Group’s
growing amounts of personal data held) and intellectual property
legislation (reflecting the potential for the Group to infringe
trademarks, copyright and patents). Auditing standards limit the
required audit procedures to identify non-compliance with these laws
and regulations to enquiry of the Directors and other management
and inspection of regulatory and legal correspondence, if any.
Through these procedures, we became aware of actual or suspected
non-compliance of a scale and nature that is unexceptional for a group
of this size and considered the effect as part of our procedures on the
related financial statement items. The identified actual or suspected
non-compliance was not sufficiently significant to our audit to result
in our response being identified as a key audit matter.

Owing to the inherent limitations of an audit, there is an unavoidable
risk that we may not have detected some material misstatements in
the Financial Statements, even though we have properly planned and
performed our audit in accordance with auditing standards. For
example, the further removed non-compliance with laws and
regulations (irregularities) is from the events and transactions reflected
in the Financial Statements, the less likely the inherently limited
procedures required by auditing standards would identify it. In
addition, as with any audit, there remained a higher risk of non-
detection of irregularities, as these may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal
controls. We are not responsible for preventing non-compliance
and cannot be expected to detect non-compliance with all laws
and regulations.

8 The purpose of our audit work and to whom we owe our
responsibilities
This report is made solely to the Parent Company’s members, as a
body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006 and the terms of our engagement by the Parent Company. Our
audit work has been undertaken so that we might state to the Parent
Company’s members those matters we are required to state to them in
an auditor’s report, and the further matters we are required to state to
them in accordance with the terms agreed with the Parent Company,
and for no other purpose. To the fullest extent permitted by law, we
do not accept or assume responsibility to anyone other than the Parent
Company and the Parent Company’s members, as a body, for our
audit work, for this report, or for the opinions we have formed.

Secondly, the Group is subject to many other laws and regulations
where the consequences of non-compliance could have a material
effect on amounts or disclosures in the Financial Statements, for
instance through the imposition of fines or litigation or the loss of the
Group’s license to operate. We identified the following areas as those
most likely to have such an effect: health and safety (reflecting
the nature of the Group’s production and distribution process),

Richard Broadbelt (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London E14 5GL
26 March 2020

151

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019G R O U P I N C O M E S TAT E M E N T

For the year ended 31 December

CONTINUING OPERATIONS
Net Revenue
Cost of sales

Gross profit
Net operating expenses
Impairment of goodwill and other intangible assets

Operating (Loss)/Profit

Adjusted Operating Profit
Adjusting items2

Operating (Loss)/Profit

Finance income
Finance expense

Net finance expense

(Loss)/Profit before income tax
Income tax expense

Net (loss)/income from continuing operations

Net loss from discontinued operations

Net (loss)/income

Attributable to non-controlling interests
Attributable to owners of the parent company

Net (loss)/income

Basic (loss)/earnings per ordinary share
From continuing operations (pence)
From discontinued operations (pence)

From total operations (pence)

Diluted (loss)/earnings per ordinary share
From continuing operations (pence)
From discontinued operations (pence)

From total operations (pence)

1 Restated for the adoption of IFRS 16 (see Note 31).
2 Adjusting items include impairment of goodwill and other intangible assets of £5,116 million (See Note 3).

2019
£m

2018
(Restated)1
£m

Note

3
9

6
6

8
8

12,846
(5,068)

7,778
(4,616)
(5,116)

(1,954)

3,367
(5,321)

(1,954)

161
(314)

(153)

(2,107)
(665)

(2,772)

(898)

(3,670)

13
(3,683)

(3,670)

(393.0)
(126.7)

(519.7)

(393.0)
(126.7)

(519.7)

12,597
(4,962)

7,635
(4,577)
–

3,058

3,369
(311)

3,058

78
(416)

(338)

2,720
(536)

2,184

(5)

2,179

20
2,159

2,179

306.6
(0.7)

305.9

305.2
(0.7)

304.5

152

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019G R O U P S TAT E M E N T O F C O M P R E H E N S I V E I N C O M E

For the year ended 31 December

Net (loss)/income
Other comprehensive (expense)/income
Items that may be reclassified to income statement in subsequent years
Net exchange (losses)/gains on foreign currency translation, net of tax
Gains/(losses) on net investment hedges, net of tax
(Losses)/gains on cash flow hedges, net of tax

Items that will not be reclassified to income statement in subsequent years
Remeasurements of defined benefit pension plans, net of tax
Revaluation of equity instruments – FVOCI

Other comprehensive (expense)/income, net of tax

Total comprehensive (expense)/income

Attributable to non-controlling interests
Attributable to owners of the parent company

Total comprehensive (expense)/income

Total comprehensive (expense)/income attributable to owners of the parent company
arising from:
Continuing operations
Discontinued operations

1 Restated for the adoption of IFRS 16 (see Note 31).

Note

7
7
7

7
7

2019
£m

2018
(Restated)1
£m

(3,670)

2,179

(579)
70
(9)

(518)

14
(13)

(517)

(4,187)

12
(4,199)

(4,187)

(3,301)
(898)

(4,199)

67
(44)
8

123
–

123

154

2,333

20
2,313

2,333

2,318
(5)

2,313

153

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019
G R O U P B A L A N C E S H E E T

As at 31 December

ASSETS
Non-current assets
Goodwill and other intangible assets
Property, plant and equipment
Equity instruments – FVOCI
Deferred tax assets
Retirement benefit surplus
Other non-current receivables

Current assets
Inventories
Trade and other receivables
Derivative financial instruments
Current tax recoverable
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 company
Attributable to non-controlling interests

Total equity

1 Restated for the adoption of IFRS 16 (see Note 31).

2019
£m

2018
(Restated)1
£m

2017
(Restated)1
£m

Note

9
10
14
11
22
13

12
13
14

16
17
20
14
21

16
11
22
17

21
20

25
25

24,261
2,140
58
224
268
155

30,278
2,162
53
209
191
109

27,106

33,002

1,314
2,079
30
61
1,549

5,033
–

5,033

1,276
2,097
38
48
1,483

4,942
10

4,952

29,487
2,068
41
118
90
99

31,903

1,201
2,004
18
58
2,125

5,406
18

5,424

32,139

37,954

37,327

(3,650)
(178)
(4,820)
(138)
(145)

(8,931)

(8,545)
(3,513)
(351)
(56)
–
(969)
(367)

(2,269)
(537)
(4,811)
(42)
(10)

(7,669)

(9,950)
(3,619)
(318)
(74)
–
(1,105)
(448)

(1,394)
(517)
(4,629)
(19)
(65)

(6,624)

(11,797)
(3,443)
(393)
(81)
(12)
(1,012)
(408)

(13,801)

(15,514)

(17,146)

(22,732)

(23,183)

(23,770)

9,407

14,771

13,557

74
245
(14,229)
(2)
(78)
23,353

9,363
44

9,407

74
245
(14,229)
7
430
28,197

14,724
47

14,771

74
243
(14,229)
(1)
407
27,023

13,517
40

13,557

The Financial Statements on pages 152 to 203 were approved by the Board of Directors and signed on its behalf on 26 March 2020 by:

Christopher Sinclair
Director

Laxman Narasimhan
Director

15 4

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019

G R O U P S TAT E M E N T O F C H A N G E S I N E Q U I T Y

Share
capital
£m

Share
premium
£m

Merger
reserves2
£m

Other
reserves3
£m

Retained
earnings
£m

Notes

Total
attributable to
owners of the
parent
company
£m

Non-
controlling
interests
£m

Total
equity
£m

13,573

(16)

13,557

2,179

154

2,333

105
14

(12)
(1,200)

(33)

–

–
–

–

–
(13)

–

–
–

–

–
–

–

243

(14,229)

–

406

–

27,039

13,533

(16)

243

(14,229)

406

27,023

13,517

–

2
–

–

–
–

–

–
–

–

–
–

–

–
–

–

–
–

–

2,159

123

154

2,282

2,313

103
14

105
14

(12)
(1,187)

(33)

245

(14,229)

437

28,197

14,724

(1,108)

(1,106)

(13)

(1,119)

14,771

(3,670)

–

(3,683)

(517)

(516)

(1)

(517)

(3,682)

(4,199)

(4,187)

–
–

–

61
18

4
(1,227)

(18)

–
–

–
(15)

–

61
18

4
(1,242)

(18)

(1,162)

(15)

(1,177)

–

–
–

–

–
–

–

–
–

–

Balance at 1 January
2018 (Reported)

Effect of IFRS 16

Balance at 1 January
2018 (Restated)1
Comprehensive income
Net income1
Other comprehensive
income

Total comprehensive
income1

Transactions with
owners
Treasury shares re-issued
Share-based payments
Current tax on share
awards
Deferred tax on share
awards
Cash dividends
Transactions with
non-controlling interests

Total transactions with
owners

Balance at 31 December
2018 (Restated)1

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
Cash dividends
Transactions with
non-controlling interests

Total transactions with
owners

Balance at 31 December
2019

23
24

7
27

23
24

7
27

245

(14,229)

(80)

23,353

9,363

9,407

1 Restated for the adoption of IFRS 16 (see Note 31).
2 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.

3 Refer to Note 25 for an explanation of other reserves.

155

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019Note

23
16
16
27

15
16

2019
£m

2018
(Restated)1
£m

3,408
(371)
161
(647)
(1,140)

1,411

(306)
(137)
37
(18)
(18)

(442)

61
1,548
(1,122)
(1,227)
(15)
(75)

3,400
(396)
75
(567)
12

2,524

(342)
(95)
24
–
(9)

(422)

105
697
(2,314)
(1,187)
(13)
24

(830)

(2,688)

139
1,477
(69)

1,547

1,549
(2)

1,547

(586)
2,117
(54)

1,477

1,483
(6)

1,477

G R O U P C A S H F L O W S TAT E M E N T

For the year ended 31 December

CASH FLOWS FROM OPERATING ACTIVITIES
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 equity instruments – FVOCI

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES
Treasury shares re-issued
Proceeds from borrowings
Repayment of borrowings
Dividends paid to owners of the parent company
Dividends paid to non-controlling interests
Other financing activities

Net cash used in financing activities

Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Exchange losses

Cash and cash equivalents at end of the year

Cash and cash equivalents comprise:
Cash and cash equivalents
Overdrafts

1 Restated for the adoption of IFRS 16 (see Note 31).

156

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019N O T E S T O T H E F I N A N C I A L S TAT E M E N T S

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 (IFRS), IFRS
Interpretations Committee (IFRIC) interpretations, and with those parts
of the Companies Act 2006 applicable to companies reporting under
IFRS. The Financial Statements are also in compliance with IFRS as
issued by the International Accounting Standards Board (IASB).

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 or other comprehensive income. 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.

The preparation of Financial Statements that conform to IFRS 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.

New Standards, Amendments and Interpretations
The following standards issued by the IASB and endorsed by the EU
have been adopted by the Group from 1 January 2019:

IFRS 16 Leases
On 1 January 2019, the Group adopted IFRS 16 Leases, using the full
retrospective approach to previous periods and applying IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors.
Comparative reported numbers relating to 2018 and 2017 have been
restated. Deferred tax adjustments relating to the restatement have
not been made as they are not material. The impact of the restatement
is included in Note 31.

The standard requires recognition of a ‘right of use’ asset, representing
the right to use the underlying asset and a liability, representing the
obligation to make lease payments, for almost all lease contracts. The
impact on the Income Statement is that former lease-operating
expenses are replaced by depreciation and interest. Total expenses
(depreciation for ‘right of use’ assets and interest on lease liabilities)
are higher in the earlier years of a typical lease and lower in the later
years, in comparison with former accounting for operating leases. The
main impact on the Statement of Cash Flows is higher cash flows from
operating activities, since cash payments for the principal part of the
lease liability are classified in the net cash flow from financing
activities.

For leases in place on 1 January 2019 IFRS 16 is only applied for
contracts that constituted a lease under IAS 17 Leases or IFRIC 4
Determining Whether an Arrangement Contains a Lease.

The following amendments and interpretations issued by the IASB
and endorsed by the EU have been adopted by the Group from
1 January 2019:

IFRIC 23 Uncertainty over Income Tax Treatments
On 1 January 2019 the Group adopted IFRIC 23 Uncertainty over
Income Tax Treatments. IFRIC 23 further clarifies the accounting for
uncertainty in income taxes under IAS 12. The adoption did not lead to
any changes to the opening balance of retained earnings and had no
material impact on the Income Statement.

A number of new standards are effective for annual periods beginning
on or after 1 January 2020 and earlier application is permitted;
however, the Group has not early adopted the new or amended
standards in preparing these consolidated Financial Statements.

The following amended standards and interpretations are not
expected to have a significant impact on the Group’s consolidated
Financial Statements.

•

Amendments to References to Conceptual Framework in IFRS
Standards.

Definition of a Business (Amendments to IFRS 3).

Definition of Material (Amendments to IAS 1 and IAS 8).

Interest Rate Benchmark Reform (Amendments to IFRS9, IAS39
and IFRS7).

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 01 to 77.

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.

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.

157

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019N O T E S T O T H E F I N A N C I A L S TAT E M E N T S CO N T I N U E D

1 Accounting Policies continued
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.

Income statement 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.

Revenue
Revenue from the sale of products is recognised in the Group Income
Statement as and when performance obligations are satisfied by
transferring control of the product or service to the customer.

Net Revenue is defined as the amount invoiced to external customers
during the year and comprises, as required by IFRS 15, 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, is governed by sales
agreements with the Group’s 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 the Group’s historical experience. These
accruals are reported within Trade and other payables.

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 Group Executive Committee.

Adjusting Items, including Exceptional Items
The Group makes reference to adjusting items in presenting the
Group’s principal adjusted earnings measures.

The results of the subsidiaries acquired are included in the consolidated
Financial Statements from the acquisition date.

These comprise exceptional items, other adjusting items, and the
reclassification of finance expenses on tax balances.

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, including exchange gains or losses on
foreign currency translation, 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 the income statement.

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.

Purchases of non-controlling interests are accounted for as
transactions with the owners and therefore no goodwill is recognised
as a result of such transactions.

Exceptional items are material, non-recurring items of expense or
income, which are relevant to an understanding of the underlying
performance and trends of the business. 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.

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Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 20191 Accounting Policies continued
Other adjusting items are charges that the Group adjust for because
their pattern of recognition is largely uncorrelated with the underlying
performance of the business. 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.

Adjusting items include a reclassification of finance expenses on tax
balances into income tax expense, to align with the Group’s tax
guidance. As a result, these expenses are presented as part of income
tax in the adjusted profit before income tax measure.

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 (GCGU), 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
or GCGUs 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) Software
Expenditure relating to the acquisition of computer software licenses
and systems are capitalised at cost. The assets are amortised on a
straight-line basis over a period of seven years for systems and five
years or less for all other software licences.

(iv) 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.

(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.

Amortisation of intangible assets in (ii) to (v) is charged to net
operating expenses.

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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019N O T E S T O T H E F I N A N C I A L S TAT E M E N T S CO N T I N U E D

1 Accounting Policies continued
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.

Leases
The Group has various lease arrangements for buildings (such as
offices and warehouses), cars, and IT and other equipment. Lease
terms are negotiated on an individual basis locally and furthermore
subjected to domestic rules and regulations. This results in a wide
range of different terms and conditions. At the inception of a lease
contract, the Group assesses whether the contract conveys the right to
control the use of an identified asset for a certain period in exchange
for a consideration, in which case it is identified as a lease. The Group
recognises a right of use asset and a corresponding lease liability with
respect to all lease arrangements in which it is the lessee, except for
short-term leases (defined as leases with a lease term of 12 months or
less) and leases of low value assets. For these leases, the Group
recognises the lease payments as an operating expense on a
straight-line basis over the term of the lease. Lease related assets and
liabilities are measured on a present value basis. Lease related assets
and liabilities are subjected to re-measurement when either terms are
modified or lease assumptions have changed. Such an event results in
the lease liability being re-measured to reflect the measurement of the
present value of the remaining lease payments, discounted using the
discount rate at the point of the change. The lease assets are adjusted
to reflect the change in the re-measured liabilities.

Right of use assets
Right of use assets are measured at cost and at the inception of the
lease may include the following components:

•

The initial measurement of the lease liability;

Prepayments before commencement date of the lease;

Initial direct costs; and

Costs to restore.

The right of use assets are reduced for lease incentives relating to the
lease. The right of use assets are depreciated on a straight-line basis
over the duration of the contract. In the event that the lease contract
becomes onerous, the right of use asset is impaired for the part which
has become onerous.

Lease liabilities
Lease liabilities include the net present value of the following components:

•

Fixed payments excluding lease incentive receivables;

Future contractually agreed fixed increases; and

Payments related to renewals or early termination, when options
to renew or for early termination are reasonably certain to be
exercised.

The lease payments are discounted using the interest rate implicit in
the lease. If such a rate cannot be determined, the lessee’s incremental
borrowing rate is used, being the rate that the lessee would have to
pay to borrow the funds necessary to obtain an asset of similar value
in a similar economic environment with similar terms and conditions.
The discount rate that is used to calculate the present value reflects
the interest rate applicable to the lease at inception of the contract.
Lease contracts entered into in a currency different than the local
functional currency are subjected to periodic foreign currency
revaluations that are recognised in the Income Statement in net
finance expenses.

The lease liabilities are subsequently increased by the interest costs on
the lease liabilities and decreased by lease payments made.

Impairment of Assets
Assets that have indefinite lives, including goodwill and brands, are
tested annually for impairment at the level where cash flows are
considered to be largely independent. This testing is performed at
either the CGU or GCGU level. 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 value
in use and its fair value less costs of disposal.

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 discount rates used
in the asset impairment reviews are based on weighted-average costs
of capital (WACCs) specific to each CGU and GCGU, subsequently
converted to the implied pre-tax rates.

16 0

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 20191 Accounting Policies continued
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 and Other Receivables
Trade and other receivables are initially recognised at fair value less
transaction costs and subsequently held at amortised cost, less
provision for discounts and doubtful debts. Allowance losses are
calculated by reviewing lifetime expected credit losses using historic
and forward-looking data on credit risk.

Trade and Other Payables
Trade and other payables are initially recognised at fair value including
transaction costs and subsequently carried at amortised cost.

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,
where permitted by IFRS 9, any directly 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.

At the inception of designated hedge relationships, the Group
documents its risk management objectives and strategy for
undertaking various hedging transactions. The Group also documents
its assessment, both at hedge inception and on an ongoing basis, of
whether the derivatives that are used in hedging transactions are
highly effective in offsetting changes in cash flows or fair values of
hedged items.

The group designates certain derivatives as either:

•

hedges of a particular risk associated with a recognised asset or
liability or a highly probable forecast transaction (cash flow
hedges); or

hedges of the fair value of recognised assets or liabilities or a firm
commitment (fair value hedges).

Derivatives designated as cash flow hedges: the effective portion of
changes in the fair value of derivatives that are designated and qualify
as cash flow hedges is recognised in other comprehensive income and
accumulated in the hedging reserve. Any gain or loss relating to the
ineffective portion is recognised immediately in the Income Statement.

When the hedged forecast transaction subsequently results in the
recognition of a non-financial item such as inventory, the amount
accumulated in the hedging reserve and the cost of hedging reserve is
included directly in the initial cost of the non-financial item when it is
recognised. For all other transactions, the amounts accumulated in the
hedging reserve are recycled to the Income Statement in the period (or
periods) when the hedged item affects the Income Statement.

If the hedge no longer meets the criteria for hedge accounting or the
hedging instrument is sold, expires, is terminated, or is exercised, then
hedge accounting is discontinued prospectively. The amount that has
been accumulated in the hedging reserve remains in equity until it is
either included in the cost of a non-financial item or recycled to the
Income Statement.

Derivatives designated as fair value hedges: fair value hedges are used
to manage the currency and/or interest rate risks to which the fair
value of certain assets and liabilities are exposed. Changes in the fair
value are recognised in the Income Statement, together with any
changes in the fair value of the hedged asset or liability that are
attributable to the hedged risk. If such a hedge relationship no longer
meets hedge accounting criteria, fair value movements on the
derivative continued to be taken to the Income Statement while any
fair value adjustments made to the underlying hedged item to that
date are amortised through the Income Statement over its remaining
life using the effective interest rate method.

Changes in the fair value of any 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.

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1 Accounting Policies continued
Equity Instruments (FVOCI)
Equity Instruments (FVOCI) are investments that are neither held for
trading nor classified as investments in subsidiaries, associates or joint
arrangements. Subsequent to their initial recognition, Equity
Instruments (FVOCI) are stated at their fair value. Gains and losses
arising from subsequent changes in the fair value are recognised in the
Income Statement or in other comprehensive income on a case by case
basis. Accumulated gains and losses included in other comprehensive
income are not recycled to the Income Statement. Dividends from
other investments are recognised in the Income Statement.

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.

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. Where it is
possible that a settlement may be reached or it is not possible to make
a reliable estimate of the estimated financial impact, appropriate
disclosure is made but no provision recognised.

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.

Dividend Distribution
Dividends to owners of the parent company 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 preparing these consolidated Financial Statements, management
has made judgements and estimates that affect the application of the
Group’s accounting policies and the reported amounts of assets,
liabilities, income and expenses. Actual amounts and 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.

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.

Repurchase and Reissuance of Ordinary Shares
When shares recognised as equity are repurchased, the amount of the
consideration paid, including directly attributable costs, is recognised
as a charge to equity. Repurchased shares are classified as Treasury
shares and are presented in retained earnings. When Treasury shares
are sold or reissued subsequently, the amount received is recognised
as an increase in equity and any resulting surplus is presented within
share premium or deficit presented within retained earnings.

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.

162

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 20191 Accounting Policies continued
Critical judgements in applying the Group’s accounting policies
Over the course of the year, management has made a number of
critical judgements in the application of the Group’s accounting
policies. These include the following:

• Management has identified matters that may incur liabilities in

the future however does not recognise these liabilities when 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
Each year, management is required to make a number of assumptions
regarding the future. The related year-end accounting estimates will,
by definition, seldom equal the final actual results. The estimates
and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within
the next financial year are addressed below.

•

Under IFRS, goodwill and other indefinite life intangible assets
must be tested for impairment on at least an annual basis. As
disclosed further in Note 9, this testing generally requires
management to make multiple estimates, for example around
individual market pressures and forces, future price and volume
growth, future margins, terminal growth rates and discount rates.
In 2019, the Group recognised impairment losses of £5,116m
(2018: zero), with £5,037m relating to IFCN goodwill. In addition
to the above, the IFCN impairment assessment incorporated
estimates relating to future China birth rates and future WIC
tendering in the US. Refer to Note 9 for further information,
including details on the sensitivity of the IFCN value-in-use model
to reasonable changes in key assumptions.

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 variance is charged or credited to the Income Statement in the
period in which it is determined (Note 7).

The Group operates in an international tax environment and is
subject to tax examinations 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 management applies judgement in the
recognition and measurement of the uncertainty based on the
relevant circumstances. In particular, the range of possible
outcomes relating to transfer pricing exposures can be wide.
The accounting estimates and judgements considered include:

–

Status of the unresolved matter;

Clarity of relevant legislation and related guidance;

•

–

Pre-clearances issued by taxing authorities;

Advice from in-house specialists and opinions of
professional firms;

Resolution process and range of possible outcomes;

Past experience and precedents set by the particular
taxing authority;

Decisions and agreements reached in other jurisdictions
on comparable issues;

Unutilised tax losses, tax credits and availability of mutual
agreement procedures between tax authorities; 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 recognised in respect of
uncertain tax positions at 31 December 2019 are £891m
(Note 21).

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. There is a timing difference between that initial
estimation and final settlement of trade spend with our
customers – the result of which could lead to variations between
the two. As at 31 December 2019, the Group has recognised total
accruals of £1,095m (2018: £1,025m) in respect of amounts
payable to trade customers and government bodies for trade
spend. Refer to Note 20 for further information.

The Group recognises legal provisions in line with the Group’s
provisions policy. The level of provisioning in relation to civil and/
or criminal investigations is an area where management and legal
judgement is important, with individual provisions being based on
best estimates of the potential loss, considering all available
information, external advice and historical experience. As at
31 December 2019, the Group recognised legal provisions of
£151m (2018: £461m). This included exceptional legal provisions
of £126 million (2018: £431 million) in relation to a number of
historical regulatory matters in a number of markets,
predominantly the HS issue in South Korea and the DoJ
investigation in the US. Refer to Note 17 for further information.

The value of the Group’s defined benefit pension plan obligations
is dependent on a number of key assumptions. These
assumptions include 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.

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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019

N O T E S T O T H E F I N A N C I A L S TAT E M E N T S CO N T I N U E D

2 Operating Segments
The Group’s operating segments comprise of RB Health and RB Hygiene Home business units reflecting the way in which information is
presented to and reviewed by the Group’s Chief Operating Decision Maker (CODM) for the purposes of making strategic decisions and assessing
group-wide performance.

The CODM is the Group Executive Committee. This Committee is responsible for the implementation of strategy (approved by the Board), the
management of risk (delegated by the Board) and the review of group operational performance and ongoing business integration.

The Executive Committee assesses the performance of these 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 each is managed on a centralised basis.

The segment information provided to the Executive Committee for the operating segments for the year ended 31 December 2019 and
31 December 2018 is as follows:

Health
£m

7,815

(232)

Hygiene
Home
£m

Total
£m

5,031

12,846

(117)

(349)

2,088

1,279

3,367
(5,321)

(1,954)
(153)

(2,107)

(665)

(2,772)

Total
£m

Hygiene
Home
£m

4,835

12,597

(109)

1,156

(325)

3,369
(311)

3,058
(338)

2,720

(536)

2,184

Heath
£m

7,762

(216)

2,213

Year ended 31 December 2019

Net Revenue

Depreciation & amortisation

Adjusted Operating Profit
Adjusting items

Operating Loss
Net finance expense

Loss before income tax

Income tax expense

Net loss from continuing operations

Year ended 31 December 2018 (Restated)1

Net Revenue

Depreciation & amortisation

Adjusted Operating Profit1
Adjusting items

Operating Profit1
Net finance expense

Profit before income tax1

Income tax expense

Net income from continuing operations

1 Restated for the adoption of IFRS 16 (see Note 31).

16 4

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 20192 Operating Segments continued
The Company is domiciled in the UK. The split of Net Revenue from external customers and Non-Current Assets (other than equity instruments
– FVOCI, deferred tax assets and retirement benefit surplus assets) between the UK, the US and Greater China (US and Greater China being the
two biggest countries outside the country of domicile) and that from all other countries is:

2019

Net Revenue
Goodwill and other intangible assets
Property, plant and equipment
Other non-current receivables

2018 (Restated)2

Net Revenue
Goodwill and other intangible assets
Property, plant and equipment
Other non-current receivables

1 Greater China represents Mainland China, Hong Kong and Taiwan.
2 Restated for the adoption of IFRS 16 (see Note 31)

UK
£m

743
2,006
291
8

UK
£m

737
1,962
269
3

US
£m

3,227
9,955
532
62

US
£m

3,176
11,048
582
67

Greater
China1
£m

1,534
4,948
141
2

Greater
China1
£m

1,431
8,249
122
3

All other
countries
£m

7,342
7,352
1,176
83

All other
countries
£m

7,253
9,019
1,189
36

Total
£m

12,846
24,261
2,140
155

Total
£m

12,597
30,278
2,162
109

Major customers are typically large grocery chains, mass markets and multiple retailers. The Group’s customer base is diverse with no individual
customer accounting for more than 10% of Net Revenue (2018: no individual customer accounting for more than 10%).

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

2019
£m

2018
(Restated)1
£m

(3,417)

(3,218)

(257)
(740)

(997)
3
(205)

(230)
(822)

(1,052)
4
(311)

(4,616)

(4,577)

1 Restated for the adoption of IFRS 16 (see Note 31). Presentation of distribution, research & development and other costs has been updated to be on a consistent basis with 2019.

A net foreign exchange loss of £2 million (2018: £1 million loss) 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.

The Group makes reference to adjusting items in presenting the Group’s principal adjusted earnings measures. These comprise exceptional items,
other adjusting items, and the reclassification of finance expenses on tax balances.

165

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019N O T E S T O T H E F I N A N C I A L S TAT E M E N T S CO N T I N U E D

3 Analysis of Net Operating Expenses continued
The table below provides a reconciliation of the Group’s reported statutory earnings measures to its adjusted earnings measures for the year
ended 31 December 2019:

Year ended 31 December 2019

Operating (Loss)/Profit
Net finance expense

(Loss)/profit before income tax
Income tax (expense)/credit

Net (loss)/income for the year from continuing operations
Less: Attributable to non-controlling interests

Continuing net (loss)/income for the year attributable to owners of
the parent company
Net loss for the year from discontinued operations

Total net (loss)/income for the year attributable to owners of
the parent company

Adjusting:
Exceptional
items
£m

Adjusting:
Other items
£m

Adjusting:
Finance
expense
reclass
£m

Reported
£m

(1,954)
(153)

(2,107)
(665)

(2,772)
(13)

5,2402
–

5,240

(45)2

5,195
–

(2,785)
(898)1

5,195
898

(3,683)

6,093

813
–

81
(18)3

63
–

–
(35)4

(35)
354

–
–

–

Adjusted
£m

3,367
(188)

3,179
(693)

2,486
(13)

2,473
–

2,473

1. Exceptional items within discontinued operations of £898 million relate to the current year charge of the settlement amount for US Department of Justice (“DoJ”) and the US Federal Trade

Commission investigations. Refer to Note 30 for further details.

2. Exceptional items within Operating Profit of £5,240 million relate to:

• MJN integration/RB2.0 costs of £113 million;
• Restructuring and other projects of £11 million;
• IFCN impairment of goodwill of £5,037 million; and
• Oriental Pharma impairment of intangible assets of £79 million.
Included within income tax expense is a £45 million tax credit for these exceptional costs.

3. Other adjusting items of £81 million relate to the amortisation of certain intangible assets recognised as a result of the acquisition of MJN, charged during the period ended 31 December

2019. In addition, there is a £18 million income tax credit in respect of these costs.

4. Adjusting items of £35 million relate to the reclassification of interest on income tax balances from finance expense to income tax expense in the adjusting measure.

The table below provides a reconciliation of the Group’s reported statutory earnings measures to its adjusted earnings measures for the year
ended 31 December 2018:

Year ended 31 December 2018 (Restated)5

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

Continuing net income for the year attributable to owners of
the parent company
Net loss for the year from discontinued operations

Total net income for the year attributable to owners of
the parent company

Adjusting:
Exceptional
items
£m

Adjusting:
Other items
£m

2332
–

233
(50)2

183
–

183
5

188

783
–

78
(17)3

61
–

Reported
£m

3,058
(338)

2,720
(536)

2,184
(20)

2,164

(5)1

2,159

Adjusting:
Finance
expense
reclass
£m

–
294

29
(29)4

–
–

–

Adjusted
£m

3,369
(309)

3,060
(632)

2,428
(20)

2,408
–

2,408

1. Exceptional items within discontinued operations relate to a foreign exchange loss of £17 million on the provision booked in prior year for ongoing investigations by the US Department

of Justice (“DoJ”) and the US Federal Trade Commission, offset by further consideration from McCormick & Company, Inc. of £12 million relating to the 2017 sale of RB Food.

2. Exceptional items within Operating Profit of £233 million relate to:

• MJN integration/RB2.0 costs of £185 million; and
• Restructuring, Supercharge and other projects of £48 million.
Included within income tax expense is a £50 million tax credit for these exceptional costs.

3. Other adjusting items of £78 million relate to the amortisation of certain intangible assets recognised as a result of the acquisition of MJN, charged during the period ended 31 December

2018. In addition, there is a £17 million income tax credit in respect of these costs.

4. Adjusting items of £29 million relate to the reclassification of interest on income tax balances from finance expense to income tax expense in the adjusting measure.
5. Restated for adoption of IFRS16 (Note 31)

166

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019

4 Auditor Remuneration
During the year, the Group (including its overseas subsidiaries) obtained the following services from the Company’s Auditor and its associates.

2019
£m

2018
£m

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 Auditor and its associates for other 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

Total staff costs

Executive Directors’ aggregate emoluments are disclosed in the Directors’ Remuneration Report.

Compensation awarded to key management (the Executive Committee) was:

Short-term employee benefits
Post-employment benefits
Share-based payments

Staff Numbers
The monthly average number of people employed by the Group, including Directors, during the year was:

North America
Europe/ANZ
DvM

Note

22
24

4.6
8.0
0.6

13.2

1.3

14.5

2019
£m

1,558
246
60
18

1,882

2019
£m

13
–
5

2019
‘000

4.3
13.3
24.8

42.4

3.6
5.9
0.3

9.8

0.1

9.9

2018
£m

1,471
227
53
16

1,767

2018
£m

16
1
1

2018
‘000

4.3
13.3
24.8

42.4

167

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019N O T E S T O T H E F I N A N C I A L S TAT E M E N T S CO N T I N U E D

6 Net Finance Expense

Finance income
Interest income on cash and cash equivalents
Movement on put option liability
Other finance income

Total finance income

Finance expense
Interest payable on borrowings
Finance credit/(expense) on tax balances
Movement on put option liability
Other finance expense

Total finance expense

Net finance expense

1 Restated for the adoption of IFRS 16 (see Note 31).

All net finance expense relates to continuing operations only.

7 Income Tax 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 expense

2019
£m

96
25
40

161

(331)
35
–
(18)

(314)

(153)

2019
£m

640
36

676

(10)
(1)

(11)

665

2018
(Restated)1
£m

78
–
–

(352)
(29)
(10)
(25)

(416)

(338)

2018
£m

545
50

595

(59)
–

(59)

536

Current tax includes tax incurred by UK entities of £95 million (2018: £55 million). This is comprised of UK corporation tax of £79 million (2018:
£32 million) and overseas tax suffered of £16 million (2018: £23 million). UK current tax is calculated at 19% (2018: 19%) 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.

Cash tax paid in the year was £647 million (2018: £567 million). The variance between the current year tax charge of £640 million and cash tax
paid is attributable to movements on non-current tax liabilities (shown in Note 21) and timing differences arising between accrual and payment
of income tax liabilities.

Origination and reversal of temporary differences includes adjustments in respect of prior periods of £12 million expense (2018: £22 million
expense).

16 8

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 20197 Income Tax Expense continued
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

(Loss)/Profit before income tax
Tax at the notional UK corporation tax rate of 19% (2018: 19%)
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
Reassessment of prior year estimates
Impact of changes in tax rates
Adjusting items
Other permanent differences

Income tax expense/(benefit)

1 Restated for the adoption of IFRS 16 (see Note 31).

2019
£m

(2,107)
(400)

2018
(Restated)1
£m

2,720
517

77
(46)
(42)
71
48
(1)
965
(7)

665

(79)
78
(44)
74
(10)
–
4
(4)

536

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 and changes in tax laws, regulations and related interpretations.

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.

Unrecognised tax losses and other unrecognised tax assets arising in 2019 primarily relates to income offset by previously unrecognised losses.

Withholding and local taxes includes a provision for deferred tax on unremitted earnings (Note 11). This charge is expected to arise on planned
repatriations of retained earnings from overseas subsidiaries in future periods.

The reassessment of prior year estimates includes settlement reached following conclusion of tax authority review and differences between final
tax return submissions and liabilities accrued in these financial statements.

Adjusting items principally relate to the non-deductible impairment of goodwill in IFCN.

We conduct business operations in a number of countries, and are therefore subject to tax and intercompany pricing laws in multiple
jurisdictions. We have in the past faced, and may in the future face, audits and challenges brought by tax authorities, and we are involved in
ongoing tax investigations in a number of countries. If material challenges were to be successful, our effective tax rate may increase, we may be
required to modify structures at significant costs to us, we may also be subject to interest and penalty charges and we may incur costs in
defending litigation or reaching a settlement. Any of the foregoing could materially and adversely affect our business, financial position and
results of operations.

EC State Aid
On 25 April 2019 the European Commission (“EC”) released its decision concluding that the UK Controlled Foreign Company (“CFC”) Legislation
up to 31 December 2018 partially represented State Aid. On 12 June 2019 the UK government applied to annul the EC decision.

The Group’s application to annul the EC decision on the CFC Group Financing Exemption was registered in the General Court on 4 November
2019. Our application has been stayed pending the outcome of appeals made by the UK government. Management’s assessment is that no
provision is required at this time.

169

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019N O T E S T O T H E F I N A N C I A L S TAT E M E N T S CO N T I N U E D

7 Income Tax Expense continued
The tax credit/(charge) relating to components of other comprehensive income is as follows:

Net exchange (losses)/gains on foreign currency translation
Gains/(losses) on cash flow and net investment hedges
Remeasurement of defined benefit pension plans (Note 22)
Revaluation of equity instruments – FVOCI

Other comprehensive (loss)/income

Current tax
Deferred tax (Note 11)

2019

Tax (charge)/
credit
£m

Before tax
£m

(579)
60
12
(13)

(520)

–
1
2
–

–
3

After tax
£m

Before tax
£m

(579)
61
14
(13)

(517)

59
(38)
149
–

170

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 (loss)/earnings per share
From continuing operations
From discontinued operations

Total basic (loss)/earnings per share
Diluted (loss)/earnings per share
From continuing operations
From discontinued operations

Total diluted (loss)/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 adoption of IFRS 16 (see Note 31).

2018

Tax (charge)/
credit
£m

8
2
(26)
–

(16)

6
(22)

(16)

2019
£m

4
–

After tax
£m

67
(36)
123
–

154

2018
£m

7
(12)

(5)

2019
pence

2018
(Restated)1
pence

(393.0)
(126.7)

(519.7)

(393.0)
(126.7)

(519.7)

349.0
–

349.0

349.0
–

349.0

306.6
(0.7)

305.9

305.2
(0.7)

304.5

341.1
–

341.1

339.6
–

339.6

Basic
Basic earnings per share is calculated by dividing the net (loss)/income attributable to owners of the parent company from continuing operations
(2019: £2,785 million loss; 2018: £2,164 million income) and discontinued operations (2019: £898 million loss; 2018: £5 million loss) by the
weighted average number of ordinary shares in issue during the year (2019: 708,688,420; 2018: 705,903,566).

170

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 20198 Earnings per share continued
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 2019 there were 7,970,362 (2018: 4,628,897) Executive Share Awards excluded from the dilution because
the exercise price for the options was greater than the average share price for the year or the performance criteria have not been met. In 2019,
there were potential dilutive ordinary shares of 6,736,386 Executive Share Awards and 1,355,909 Employee Sharesave Scheme Options excluded
from the dilution. As there is a net loss from continuing operations in 2019, the effect of these potentially dilutive shares is anti-dilutive.

On a basic basis
Dilution for Executive Share Awards1
Dilution for Employee Sharesave Scheme Options outstanding1

On a diluted basis

1 As there is a loss in 2019, the effect of potentially dilutive shares is anti-dilutive.

Adjusted earnings
Details of the adjusted net income attributable to owners of the parent company are as follows:

Continuing operations

Net (loss)/income attributable to owners of the parent company
Exceptional items, net of tax (Note 3)
Other Adjusting items, net of tax (Note 3)

Adjusted net income attributable to owners of the parent company

1 Restated for the adoption of IFRS 16 (see Note 31).

Discontinued operations

Net (loss) attributable to owners of the parent company
Exceptional items, net of tax (Note 3)

Adjusted net income attributable to owners of the parent company

2019
Average number
of shares

2018
Average number
of shares

708,688,420
–
–

705,903,566
2,908,086
192,973

708,688,420

709,004,625

2019
£m

(2,785)
5,195
63

2,473

2019
£m

(898)
898

–

2018
(Restated)1
£m

2,164
183
61

2,408

2018
£m

(5)
5

–

171

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019N O T E S T O T H E F I N A N C I A L S TAT E M E N T S CO N T I N U E D

9 Goodwill and other intangible assets

Brands
£m

Goodwill
£m

Software
£m

Other
£m

Total
£m

Cost
At 1 January 2018
Additions
Arising on business combinations
Disposals
Exchange adjustments

At 31 December 2018

Additions
Arising on business combinations
Disposals
Reclassifications
Exchange adjustments

At 31 December 2019

Accumulated amortisation and impairment
At 1 January 2018
Amortisation and impairment
Disposals
Exchange adjustments

At 31 December 2018

Amortisation and impairment
Disposals
Exchange adjustments

At 31 December 2019

Net book value
At 31 December 2018

At 31 December 2019

17,888
–
–
–
482

11,519
–
28
–
304

18,370

11,851

1
–
–
–
(560)

–
14
–
–
(349)

17,811

11,516

188
61
–
1

250

141
–
(1)

390

18
–
–
–

5,037
–
(1)

5,054

18,120

17,421

11,833

6,462

215
94
–
(10)
4

303

136
–
(3)
(11)
(9)

416

63
38
(8)
–

48
(3)
(2)

136

210

280

165
–
–
–
3

168

–
–
(1)
11
(3)

29,787
94
28
(10)
793

30,692

137
14
(4)
–
(921)

175

29,918

31
22
–
–

23
–
1

300
121
(8)
1

414

5,249
(3)
(3)

5,657

115

30,278

24,261

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.

Software includes intangible assets under construction of £55 million (2018: £47 million).

172

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 20199 Goodwill and other intangible assets continued
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, acquired MJN WIC contracts and a number
of small non-core brands are deemed to have a finite life and are amortised accordingly. Amortisation is recognised in net operating expenses.

The net book values of indefinite and finite life intangible assets are as follows:

Net book value

Indefinite life assets

Brands
Goodwill
Other

Total indefinite life assets

Finite life assets

Brands
Software
Other

Total finite life assets

Total net book value of intangible assets

2019
£m

2018
£m

16,989
6,462
49

17,616
11,833
42

23,500

29,491

432
280
49

761

504
210
73

787

24,261

30,278

Cash Generating Units
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.

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 other 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

Health

Power brands

Durex, Gaviscon, Mucinex, Nurofen, Scholl,
Strepsils, Clearasil, Dettol, Veet

Hygiene Home

Cillit Bang, Finish, Harpic, Lysol, Mortein,
Air Wick, Calgon, Vanish, Woolite

IFCN

Enfamil, Nutramigen

2019

Indefinite
life assets
£m

Goodwill
£m

Total
£m

Indefinite
life assets
£m

2018

Goodwill
£m

Total
£m

7,087

3,671

10,758

7,405

3,783

11,188

1,784

8,167

17,038

1,829

2,746

6,462

10,913

23,500

1,851

8,402

8,005

17,658

11,833

1,896

16,407

29,491

Within the Health GCGU, the cash flows of certain brands are separately identifiable. As a result, the carrying values of the associated indefinite
life assets have been tested for impairment as CGUs. This is in addition to the impairment testing over the Health GCGU. The CGUs tested
separately in 2019 are shown below. Brazilian Sexual Wellbeing was not tested in 2019 as changes to its factory brand mix meant that the
associated cash flows were no longer separately identifiable.

Indefinite life assets excluding goodwill (post impairment)

Sexual Wellbeing
Oriental Pharma

2019
£m

2,167
47

2018
£m

2,229
128

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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019N O T E S T O T H E F I N A N C I A L S TAT E M E N T S CO N T I N U E D

9 Goodwill and other intangible assets continued
Annual Impairment Review
Goodwill and other indefinite life intangible assets must be tested for impairment on at least an annual basis. An impairment loss is recognised
when the recoverable amount of a GCGU or CGU falls materially below its net book value at the date of testing.

The determination of recoverable amount, being the higher of value-in-use and fair value less costs to dispose, is inherently judgemental and
requires management to make multiple estimates, for example around individual market pressures and forces, future price and volume growth,
future margins, terminal growth rates and discount rates.

When forecasting the annual cashflows that support the recoverable amount calculations, the Group generally uses its short-term budgets and
medium-term strategic plans, with additional senior management and board-level review. Cashflows beyond the five-year period are projected
using steady or progressively declining growth rates followed by a terminal growth rate. These rates do not exceed the long-term average growth
rate for the products and markets in which the GCGU or CGU operates.

The cashflows are discounted back to their present value using a pre-tax rate considered appropriate for each GCGU and CGU. In 2019, as in
2018, these rates have been derived from management’s views on the relevant weighted average cost of capital, subsequently converted to the
pre-tax equivalent rate.

For the Health and Hygiene Home GCGUs as well as the Sexual Wellbeing CGU, any reasonably possible change in the key valuation assumptions
would not imply possible impairment. As in 2018, each of these assessments utilised a pre-tax discount rate of 10% and a terminal growth rate
of either 3% (Health and Sexual Wellbeing) or 2% (Hygiene Home).

Refer below for further details regarding the IFCN GCGU and the Oriental Pharma CGU.

IFCN
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). The
acquisition was treated as a business combination and hence both the assets acquired, and liabilities assumed, were brought onto the Group
Balance Sheet at their fair value.

In 2018, the IFCN impairment assessment indicated that the IFCN recoverable amount exceeded the net book value by less than 10 percent.
This was largely expected given the original 2017 fair valuation exercise and the 2018 disruption at our European manufacturing plant which
negatively impacted supply to a number of markets, in particular China. Given the lack of headroom, relevant sensitivity disclosures were
included in the 2018 Annual Report and Financial Statements.

As 2019 progressed, IFCN financials fell below forecasts. This was primarily due to:

•

increased competition in China, particularly from domestic infant nutrition companies;

an ongoing weakening of China market growth as a result of lower-than-expected birth rates;

disruption to Hong Kong cross-border trade, leading to a loss of customers using this channel;

tougher than expected trading conditions in ASEAN and LATAM;

increased investment within the IFCN supply chain in order to provide increased resilience and long-term flexibility; and

a longer and more challenging process relating to the integration of MJN within the wider RB Group.

In response to its assessment of these drivers, the Group revised down in late 2019 its short and medium-term expectations relating to IFCN net
revenue and margins. These updated expectations were incorporated into the 2019 IFCN impairment assessment, which was performed as of
31 December 2019.

The tables below show the expected growth rates included within both the 2019 impairment assessment and the 2018 impairment assessment.
In the 2019 assessment, management has assumed that net revenue growth over the medium-term (2025 to 2029) will be consistent with the
terminal growth rate (applied from 2030 onwards) and that margins will remain reasonably stable.

Annual growth in Net Revenue between 2020 and 20291
Annual growth in Gross Margin between 2020 and 20291

Annual growth in Net Revenue between 2019 and 20281
Annual growth in Gross Margin between 2019 and 20281

1 At constant exchange rates, excluding the impact of future foreign exchange movements.

174

2019

2% to 4%
2% to 4%

2018

3% to 6%
4% to 9%

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 20199 Goodwill and other intangible assets continued
The 2019 assessment indicated that the recoverable amount was equal to £9,890m. The recoverable amount was calculated on a value-in-use
basis using an implied pre-tax discount rate of 9.0% (2018: 10.0%) and an IFCN-specific terminal growth rate of 2.5% (2018: 3.0%).

As a result, the Group has recognised an impairment loss of £5,037m. In accordance with IFRS, this impairment loss has been fully recognised
against IFCN goodwill recognised on acquisition and subsequently reported within the Health operating segment.

Given its nature and size, the IFCN recoverable amount incorporates multiple key estimates. These are summarised in the table below.

Key estimates

Commentary

Greater China market

In the short to medium-term, management expects that Greater China will continue to be impacted by increased
competition and regulation combined with generally subdued domestic birth rates.

US market

Net Revenue

Margins

Discount rate

In the US, management expects to benefit from reasonably stable market conditions. Tendering for WIC contracts is
expected to remain highly competitive.

In the short to medium-term, management expects to achieve Net Revenue growth (excluding the impact of foreign
exchange movements) of between 2% and 4% per annum. This is expected to be achieved though ongoing
premiumisation, price growth and volume growth.

In the short to medium-term, management has assumed that IFCN will generally be able to maintain current actual
margins (both gross and operating).

As in prior years, management engaged a third-party expert to help calculate an IFCN-specific weighted-average cost
of capital (WACC) and the implied pre-tax discount rate. In addition, management performed benchmarking against
other comparable companies. For valuation purposes, management used the mid-point of the calculated range. The
current year movement in the discount rate is primarily due to the incorporation of additional risk and inflation-rate
differentials within the underlying cashflows rather than within the discount rate.

Terminal growth rate

As in prior years, management engaged a third-party expert to help calculate an IFCN-specific terminal growth rate.
Management is satisfied with the reasonableness of this rate when compared against independent market growth
projections and long-term country inflation rates.

Following the recognition of the impairment loss in 2019, there is now no headroom between the IFCN recoverable amount and the IFCN
carrying value. Consequently, any material deterioration in the macro or business-level assumptions supporting the IFCN recoverable amount
as of 31 December 2019 would necessitate the recognition of further impairment losses.

The table below shows the sensitivity of the 2019 valuation to reasonable changes in key assumptions. The table assumes no related response
by management (e.g. to drive further cost savings) and is hence theoretical in nature.

Expected Net Revenue growth rates (2020 to 2029) adjusted by 100 bps
Expected EBIT growth rates (2020 to 2029) adjusted by 100 bps
Terminal growth rate (applied from 2030) adjusted by 50 bps
Pre-tax discount rate adjusted by 50 bps

(£m)

+/- 1,000
+/- 700
+/- 700
+/- 800

Despite the recognition of the current year impairment loss, management remains confident about the long-term prospects of IFCN. Since 2017,
the strength of the IFCN innovation pipeline has improved and the benefits of this are expected to be seen over coming years. In addition,
management is working to progress and capitalise on multiple “white space” opportunities, the potential benefits of which have not been
incorporated into the 2019 IFCN valuation in accordance with IFRS.

Oriental Pharma
Following the 2019 impairment assessment (performed as of 31 December 2019), management recognised a £79 million impairment loss relating
to the Oriental Pharma CGU. The incurrence of this loss was due to lower than expected growth compared to 2019 forecasts and a subsequent
reassessment of future growth expectations.

The impairment loss was calculated on a value-in-use basis using a pre-tax discount rate of 15.0% (2018: 13.3%) and a terminal growth rate
of 3.0% (2018: 3.0%). The loss impacted intangible assets included within the Health operating segment. The remaining net book value is
£62 million.

175

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019N O T E S T O T H E F I N A N C I A L S TAT E M E N T S CO N T I N U E D

10 Property, Plant and Equipment

Cost
At 1 January 2018 (Restated)1
Additions
Disposals
Reclassifications
Exchange adjustments

At 31 December 2018 (Restated)1

Additions
Disposals
Reclassifications
Exchange adjustments

At 31 December 2019

Accumulated depreciation and impairment
At 1 January 2018 (Restated)1
Charge for the year
Disposals
Impairment
Reclassifications
Exchange adjustments

At 31 December 2018 (Restated)1

Charge for the year
Disposals
Impairment
Exchange adjustments

At 31 December 2019

Net book value
As at 31 December 2018 (Restated)1

As at 31 December 2019

1 Restated for the adoption of IFRS 16 (see Note 31).

Land and
buildings
£m

Plant and
equipment
£m

Right-of-use
Assets
£m

Assets under
construction
£m

1,062
24
(18)
35
14

1,117

14
(3)
67
(43)

1,696
61
(35)
121
14

1,857

53
(54)
164
(83)

1,152

1,937

282
54
(2)
5
2
2

343

57
(3)
–
(16)

958
169
(26)
1
(2)
–

1,100

180
(40)
2
(61)

381

1,181

774

771

757

756

386
58
(70)
–
–

374

69
(75)
–
(15)

353

72
60
(62)
–
–
–

66
(69)
–
(3)

304

289

236
244
–
(156)
3

327

239
(2)
(231)
(9)

324

–
–
–
–
–
–

–

–
–
–
–

–

327

324

Total
£m

3,380
387
(123)
–
31

3,675

375
(134)
–
(150)

3,766

1,312
283
(90)
6
–
2

1,513

303
(112)
2
(80)

1,626

2,162

2,140

At 31 December 2019, the Group’s right-of-use assets included land & buildings of £268 million (2018: £277 million) and other assets of
£21 million (2018: £27 million). The Group recognised depreciation of £54 million (2018: £49 million) on the land & buildings and depreciation
of £12 million (2018: £11 million) on the other assets.

The Group has commitments to purchase property, plant and equipment of £59 million (2018: £48 million).

11 Deferred Tax

Deferred tax

At 1 January 2019
(Charged)/credited to the Income Statement
Credited/(charged) to other comprehensive income
Exchange differences

At 31 December 2019

Accelerated
capital
allowances
£m

Intangible
assets
£m

Short-term
temporary
differences
£m

Retirement
benefit
obligations
£m

Tax losses
£m

(24)
(19)
–
1

(42)

(3,848)
18
–
120

(3,710)

409
(19)
1
(10)

381

24
22
–
(2)

29
9
2
(2)

Total
£m

(3,410)
11
3
107

(3,289)

176

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 201911 Deferred Tax continued

2019

Deferred tax assets
Deferred tax liabilities

Deferred tax

At 1 January 2018
Credited/(charged) to the Income Statement
Credited/(charged) to other comprehensive income
Charged directly to equity
Arising on business combinations
Exchange differences

At 31 December 2018

2018

Deferred tax assets
Deferred tax liabilities

Deferred tax

Accelerated
capital
allowances
£m

–
(42)

(42)

Accelerated
capital
allowances
£m

(29)
6
–
–
–
(1)

(24)

Accelerated
capital
allowances
£m

10
(34)

(24)

Intangible
assets
£m

(35)
(3,675)

(3,710)

Intangible
assets
£m

(3,811)
75
–
–
–
(112)

(3,848)

Intangible
assets
£m

(19)
(3,829)

(3,848)

Short-term
temporary
differences
£m

Retirement
benefit
obligations
£m

Tax losses
£m

199
182

381

38
6

22
16

Short-term
temporary
differences
£m

Retirement
benefit
obligations
£m

Tax losses
£m

446
(27)
4
(12)
(2)
–

409

11
12
–
–
–
1

58
(7)
(26)
–
–
4

Short-term
temporary
differences
£m

186
223

409

Retirement
benefit
obligations
£m

16
13

Tax losses
£m

16
8

Total
£m

224
(3,513)

(3,289)

Total
£m

(3,325)
59
(22)
(12)
(2)
(108)

(3,410)

Total
£m

209
(3,619)

(3,410)

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 temporary differences totalling £984 million (2018: £1,063 million) have
not been recognised at 31 December 2019 as it is not probable that taxable profit will be available, against which the deductible temporary
differences can be utilised. These assets will be recognised if utilisation of the losses and other temporary differences becomes sufficiently
probable.

12 Inventories

Raw materials and consumables
Work in progress
Finished goods and goods held for resale

Total inventories

2019
£m

334
62
918

2018
£m

286
91
899

1,314

1,276

The total cost of inventories recognised as an expense and included in cost of sales amounted to £4,818 million (2018: £4,732 million). This
includes inventory write-offs and losses of £166 million (2018: £150 million).

The Group inventory provision at 31 December 2019 was £93 million (2018: £159 million).

177

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019N O T E S T O T H E F I N A N C I A L S TAT E M E N T S CO N T I N U E D

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

Trade and other receivables

The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies:

Currency analysis

US dollar
Euro
Brazil real
Sterling
Other currencies

2019
£m

1,778
(62)

1,716
283
80

2,079

2019
£m

655
319
127
121
857

2018
£m

1,902
(67)

1,835
192
70

2,097

2018
£m

687
299
120
128
863

Trade and other receivables

2,079

2,097

The maximum exposure to credit risk at the year end is the carrying value of each class of receivable mentioned above.

a Trade Receivables
Trade receivables consist of amounts due from customers. The Group’s customer base is large and diverse and consequently there is limited
concentration of credit risk. Credit risk is assessed at a subsidiary and Group level and takes into account the financial positions of customers,
past experiences, future expectations and other relevant factors. Individual credit limits are imposed based on those factors.

The following table provides an ageing analysis of trade receivables at year end:

Ageing analysis

Not overdue
Up to 3 months overdue
Over 3 months overdue

Trade receivables

2019
£m

1,455
259
64

1,778

2018
£m

1,538
311
53

1,902

At 31 December 2019, a provision of £62 million (2018: £67 million) was recorded against certain trade receivables based on a forward-looking
assessment of the lifetime expected credit loss as required by IFRS 9. This assessment considered the ageing profiles of specific trade receivable
balances along with the risk of future customer defaults.

As at 31 December 2019, trade receivables of £261 million (2018: £297 million) were past due but not impaired. These receivables were not
impaired because having considered their nature and historical collection, recovery of the unprovided amounts is expected in due course.

b Other Receivables
Other Receivables includes recoverable sales tax of £202 million (2018: £121 million). This contains £3 million (2018: £4 million) of impaired assets
all aged over three months from a broad range of countries within the Group.

c Other Non-current Receivables
Other non-current receivables at 31 December 2019 of £155 million (2018: £109 million) includes non-current recoverable sales tax, long-term
prepayments and investments.

178

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 201914 Financial Instruments and Financial Risk Management
Financial Instruments by Category

At 31 December 2019

Assets as per the Balance Sheet
Trade and other receivables1
Derivative financial instruments – FX forward exchange contracts
Equity Instruments – FVOCI2
Cash and cash equivalents

Liabilities as per the Balance Sheet
Borrowings (commercial paper, bank loans & overdrafts)3
Lease obligations3
Bonds
Senior notes
Term loans
Derivative financial instruments – FX forward exchange contracts
Derivative financial instruments – Interest rate swaps
Trade and other payables4
Other non-current liabilities4,5

At 31 December 2018

Assets as per the Balance Sheet
Trade and other receivables1
Derivative financial instruments – FX forward exchange contracts
Equity Instruments – FVOCI2
Cash and cash equivalents

Liabilities as per the Balance Sheet
Borrowings (commercial paper, bank loans & overdrafts)3
Lease obligations3.6
Bonds
Senior notes
Term loans
Derivative financial instruments – FX forward exchange contracts
Derivative financial instruments – Interest rate swaps
Trade and other payables4
Other non-current liabilities4,5

Amortised
cost
£m

Derivatives
used for
hedging
£m

Fair value
through the
Income
Statement
£m

Equity
Instruments
– FVOCI
£m

Carrying
value total
£m

2,096
–
–
1,549

3,009
325
6,201
1,834
826
–
–
4,671
190

–
26
–
–

–
–
–
–
–
28
1
–
–

–
4
–
–

–
–
–
–
–
109
–
–
–

–
–
58
–

–
–
–
–
–
–
–
–
–

2,096
30
58
1,549

3,009
325
6,201
1,834
826
137
1
4,671
190

Derivatives
used for
hedging
£m

Fair value
through the
Income
Statement
£m

Equity
Instruments
– FVOCI
£m

Carrying
value total
£m

Amortised cost
£m

2,086
–
–
1,483

1,648
340
6,440
2,464
1,326
–
–
4,664
224

–
24
–
–

–
–
–
–
–
17
16
–
–

–
15
–
–

–
–
–
–
–
9
–
–
–

–
–
53
–

–
–
–
–
–
–
–
–
–

2,086
39
53
1,483

1,648
340
6,440
2,464
1,326
26
16
4,664
224

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. Equity instruments – FVOCI relate to an investment of less than 1% of the shares in issue of China Resources Pharmaceutical Group Limited (CRP) and an investment in Pharmapacks, LLC.
3. The categories in this disclosure are determined by IFRS 9. Borrowings largely relate to commercial paper. As at 31 December 2019, the Group had commercial paper in issue amounting to
$2,028 million (nominal values) at the rate of between 1.8% and 2.78% with maturities ranging from 2 January 2020 to 31 July 2020, and €1,750 million (nominal values) at the rate of
between negative 0.15% and negative 0.35% with maturities ranging from 23 January 2020 to 12 August 2020. Lease obligations are outside the scope of IFRS 9, but they remain within
the scope of IFRS 7. Therefore lease obligations have been shown separately.

4. Social security liabilities, other employee benefit liabilities, and interest accrued on tax balances are excluded as they are out of scope of IFRS 7.
5. Other non-current liabilities principally comprise put options over the non-controlling interests of certain Group subsidiaries in China of £135 million (2018: £148 million). Refer to Note 26

for further details.

6. Restated for the adoption of IFRS16 (Note 31).

179

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019N O T E S T O T H E F I N A N C I A L S TAT E M E N T S CO N T I N U E D

14 Financial Instruments and Financial Risk Management continued
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 following table categorises the Group’s financial assets and liabilities held at fair value by the valuation methodology applied in determining
their fair value.

At 31 December 2019
Assets as per the Balance Sheet
Derivative financial instruments – FX forward exchange contracts
Equity Instruments – FVOCI

Liabilities as per the Balance Sheet
Derivative financial instruments – FX forward exchange contracts
Derivative financial instruments – Interest rate swaps

At 31 December 2018
Assets as per the Balance Sheet
Derivative financial instruments – FX forward exchange contracts
Equity Instruments – FVOCI

Liabilities as per the Balance Sheet
Derivative financial instruments – FX forward exchange contracts
Derivative financial instruments – Interest rate swaps

Level 1
£m

Level 2
£m

Level 3
£m

Total
£m

137
1

Level 1
£m

Level 2
£m

Level 3
£m

26
16

30
58

137
1

Total
£m

39
53

26
16

The fair value of forward foreign exchange contracts was 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 Equity Instruments – FVOCI
was determined using both quoted share price information (level 1 classification) and other non-market information (level 3 classification).

The fair value of the interest rate swap contracts was calculated using discounted future cash flows at floating market rates (level 2 classification).

Except for the bonds and senior notes, the fair values of other financial assets and liabilities at amortised cost approximate their carrying values.
The fair value of the bonds as at 31 December 2019 is a liability of £6,325 million (2018: £6,175 million) and the fair value of the senior notes as
at 31 December 2019 is a liability of £1,950 million (2018: £2,432 million). The fair value of the bonds and senior notes was derived using quoted
market rates in an active market (level 1 classification).

18 0

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 201914 Financial Instruments and Financial Risk Management continued
Offsetting financial assets and financial liabilities
The Group has forward foreign exchange contracts and cash that are subject to enforceable master netting arrangements. The following tables
set out the carrying amounts of the recognised financial instruments that are subject to these agreements.

(a) Financial assets

At 31 December 2019

Forward foreign exchange contracts
Cash and cash equivalents

At 31 December 2018

Forward foreign exchange contracts
Cash and cash equivalents

(b) Financial liabilities

As at 31 December 2019

Forward foreign exchange contracts
Interest rate swaps
Bank overdrafts

As at 31 December 2018

Forward foreign exchange contracts
Interest rate swaps
Bank overdrafts

Gross
amounts of
recognised
financial
assets
£m

30
1,549

1,579

Gross
amounts of
recognised
financial
assets
£m

39
1,483

1,522

Gross
amounts of
recognised
financial
liabilities
£m

(137)
(1)
(2)

(140)

Gross
amounts of
recognised
financial
liabilities
£m

(26)
(16)
(6)

(48)

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

Net amount
£m

–
–

–

30
1,549

1,579

(28)
–

(28)

2
1,549

1,551

Net amounts
of financial
assets
presented in
the Balance
Sheet
£m

39
1,483

1,522

Financial
instruments
not set off in
the Balance
Sheet
£m

(21)
–

(21)

Net amount
£m

18
1,483

1,501

Gross
amounts of
recognised
financial
liabilities set
off in the
Balance
Sheet
£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

–
–
–

–

(137)
(1)
(2)

(140)

28
–
–

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

–
–
–

–

(26)
(16)
(6)

(48)

21
–
–

Net amount
£m

(109)
(1)
(2)

(112)

Net amount
£m

(5)
(16)
(6)

(27)

181

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019N O T E S T O T H E F I N A N C I A L S TAT E M E N T S CO N T I N U E D

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, speculative transactions are not undertaken.

The Board of Directors review 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) Currency risk
The Group operates internationally and enters into transactions in many currencies and as such 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.
Where the Group enters into hedges and applies hedge accounting, hedges are documented and tested for effectiveness on an ongoing basis
with any ineffectiveness recorded in the Income Statement.

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 2019 was £6,190 million payable (2018:
£4,486 million payable).

As at 31 December 2019, the Group had designated bonds totalling $500 million (2018: $500 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 investments in US dollars.
Possible sources of ineffectiveness include any impairments to the Group’s net investments in US dollars. The hedges are documented and are
assessed for effectiveness on an ongoing basis.

As at 31 December 2019, the Group had designated commercial paper totalling €1,472 million (2018: €1,000 million), for which the carrying
value was equal to the fair value, 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 investments in Euros. The hedges are documented and are assessed for effectiveness on an
ongoing basis.

The net gain or loss under these arrangements are recognised in other comprehensive income. The net effect on other comprehensive income
for the year ended 31 December 2019 was a £70 million gain (2018: £44 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 £77 million and £85 million respectively.

182

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 201914 Financial Instruments and Financial Risk Management continued
The Group held forward foreign exchange contracts designated as cash flow hedges primarily in Sterling, Euro, US dollar, Saudi Riyal, Australian
dollar and Hong Kong dollar. The notional value of the payable leg resulting from these financial instruments was as follows:

Cash Flow Hedge Profile

Sterling
Euro
US Dollar
Chinese Renminbi
Saudi Riyal
Australian dollar
Hong Kong dollar
Other

2019
£m

451
415
396
112
94
81
77
544

2018
£m

241
403
395
214
40
61
9
512

2,170

1,875

These forward foreign exchange contracts are expected to mature over the period January 2020 to December 2020 (2018: January 2019 to
December 2020).

Cash flow hedging is applied with the economic relationship and expected effectiveness being assessed at inception, with any ineffectiveness
recognised in the Income Statement. The ineffective portion recognised in the income statement arising from cash flow hedges is immaterial
(2018: immaterial).

Gains and losses recognised in the hedging reserve in other comprehensive income on forward exchange contracts in 2019 of £9 million loss
(2018: £8 million gain) are recognised in the Income Statement in the year or years during which the hedged forecast transaction affects the
Income Statement.

At 31 December 2019, the Group had forward contracts used for cash flow hedging with total fair value of £6 million liability (2018: £7 million
asset). 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 £9 million (2018: £25 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 Euro/Polish
Zloty, Euro/Sterling, Saudi Riyal/US dollar and US dollar/Sterling.

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 Income Statement, recognised in the Income
Statement in 2019 was a £158 million loss (2018: £65 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) 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
rates. The Group’s debt is obtained on a fixed or floating basis to align with fixed to floating debt requirements.

Interest rate swaps are held to hedge the interest rate risk associated with the $750 million 2020 Senior Note. The interest rate swaps convert the
fixed rate of 3% on the 2020 Senior Note to floating and have been designated as a fair value hedge. As at 31 December 2019 interest rate
swaps held at fair value totalled £1 million payable (2018: £16 million payable). The fair value adjustment applied to the bonds due to the hedge
designation totalled £1 million receivable (2018: £16 million receivable). The interest rate swaps are documented and assessed for ineffectiveness
on an ongoing basis, with any ineffectiveness recognised in the Income Statement. Possible sources of ineffectiveness include any changes to
credit ratings of the Group or counterparties to the interest rate swaps, differences in day counts between the interest rate swaps and the
coupons of the hedged senior notes, and modifications to the senior notes such as any repayments.

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.

183

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019N O T E S T O T H E F I N A N C I A L S TAT E M E N T S CO N T I N U E D

14 Financial Instruments and Financial Risk Management continued
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 £25 million (2018: £16 million) or decrease of
£25 million (2018: £16 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 assessment of lifetime expected credit losses relating
to 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. The financial institutions listed in the tables are not comparable year on year.

Counterparty

Financial institution A
Financial institution B
Financial institution C
Financial institution D
Financial institution E
Financial institution F
Financial institution G
Financial institution H
Financial institution I
Financial institution J

Counterparty

Credit
rating

AAA
AA-
A+
A
A+
A
A
A
A
A

Credit
rating

AA-
AAA
A+
A
A
A
A+
A
A
A

2019

Limit
£m

Exposure
£m

300
200
150
125
146
125
116
125
125
125

211
193
137
109
101
100
90
86
84
82

2018

Limit
£m

Exposure
£m

200
300
150
121
125
100
125
125
115
125

201
168
133
112
107
99
95
89
85
84

3. Liquidity risk
Liquidity risk is the risk that the Group cannot repay financial liabilities as and when they fall due. The Group’s liquidity risk is concentrated
towards bond, term loan and senior note principal repayments due between 2020 and 2044.

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 2019, the Group had long-term debt excluding lease liabilities £8,292 million (2018: £9,670 million), of which £8,292 million (2018:
£9,091 million) is repayable in more than two years. In addition, the Group has committed borrowing facilities totalling £5,500 million (2018:
£4,500 million), which expire after more than two years. These facilities were undrawn at year-end. 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.

All borrowing facilities are at floating rates of interest.

18 4

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 201914 Financial Instruments and Financial Risk Management continued
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 2019 calculated in accordance with the Articles of Association was £28,089 million (2018:
£44,228 million).

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 2019

Commercial paper
Bonds
Term loans
Senior notes
Interest rate swaps
Trade payables
Other payables

At 31 December 2018

Commercial paper
Bonds
Term loans
Senior notes
Other borrowings
Interest rate swaps
Trade payables
Other payables

Total
£m

(3,013)
(7,049)
(881)
(2,584)
(1)
(1,796)
(3,087)

Total
£m

(1,608)
(7,511)
(1,476)
(3,337)
(40)
(18)
(1,798)
(3,100)

Less than
1 year
£m

Between
1 and 2 years
£m

Between
2 and 5 years
£m

(3,013)
(176)
(21)
(637)
(1)
(1,796)
(2,875)

–
(176)
(21)
(54)
–
–
(55)

–
(4,670)
(839)
(162)
–
–
(135)

Less than
1 year
£m

Between
1 and 2 years
£m

Between
2 and 5 years
£m

(1,608)
(183)
(42)
(650)
(40)
(12)
(1,798)
(2,865)

–
(183)
(42)
(662)
–
(6)
–
(76)

–
(3,389)
(1,392)
(169)
–
–
–
–

Over
5 years
£m

–
(2,027)
–
(1,731)
–
–
(22)

Over
5 years
£m

–
(3,756)
–
(1,856)
–
–
–
(159)

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 date 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 2019

Forward exchange contracts
Outflow
Inflow

At 31 December 2018

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

(6,190)
6,084

–
–

Less than
1 year
£m

Between
1 and 2 years
£m

Between
2 and 5 years
£m

(4,480)
4,491

(6)
8

–
–

Over
5 years
£m

–
–

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.

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
other investments and financing derivative financial instruments (Note 16). Total equity includes share capital, reserves and retained earnings as
shown in the Group Balance Sheet.

185

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019N O T E S T O T H E F I N A N C I A L S TAT E M E N T S CO N T I N U E D

14 Financial Instruments and Financial Risk Management continued

Net debt (Note 16)
Total equity

1 Restated for the adoption of IFRS16 (Note 31).

2019
£m

10,749
9,407

20,156

2018
(Restated)1
£m

10,746
14,771

25,517

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 2019, the Group provided returns to Shareholders in the form of dividends. Refer to Note 27 for further details.

The Group monitors net debt and at year end the Group had net debt of £10,749 million (2018: £10,746 million). The Group seeks to pay down
net debt using cash generated by the business to maintain an appropriate level of financial flexibility.

The Group participates in a supply chain finance programme (SCF) under which certain suppliers to the Group are able to access a Supply Chain
Financing arrangement that enables them to fund their working capital. The principal purpose of this programme is to facilitate efficient payment
processing and enable the willing suppliers to sell their receivables due from the Group to a bank before their due date. The Group does not
incur any additional interest towards the bank on the amounts due to the suppliers. As part of this facility the Group has confirmed to certain
financial institutions that it will make payments of £351 million (2018: £322 million) to these suppliers as they fall due. These amounts are
recorded within Trade Payables on the Balance Sheet and all cash flows associated with the programme are included within operating cash flows
as they continue to be part of the normal operating cycle of the Group and their principal nature remains operating – i.e. payments for the
purchase of goods and services.

15 Cash and Cash Equivalents

Cash at bank and in hand
Short-term bank deposits

Cash and cash equivalents

2019
£m

543
1,006

1,549

2018
£m

635
848

1,483

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, £17 million (2018: £2 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
Senior notes
Lease liabilities3

Non-current

Bonds
Senior notes
Term loans
Lease liabilities3

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.
3. Restated for the adoption of IFRS16 (Note 31), 2018 current lease obligations include £1 million finance lease liabilities.

18 6

2019
£m

16
2,993
–
569
72

3,650

2019
£m

6,201
1,265
826
253

8,545

2018
(Restated)3
£m

40
1,608
–
560
61

2,269

2018
(Restated)3
£m

6,440
1,904
1,326
280

9,950

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 201916 Financial Liabilities – Borrowings continued

Maturity of debt (excluding lease liabilities)

Bank loans and overdrafts repayable:
Within one year or on demand

Other borrowings repayable:
Within one year:

Commercial paper
Senior notes

After one year and in less than five years:

Bonds
Senior notes
Term loans

After five years or longer:

Bonds
Senior notes

Gross borrowings (unsecured)

1. Restated for the adoption of IFRS16 (Note 31).

Analysis of net debt

Cash and cash equivalents
Overdrafts

Cash and cash equivalents(excluding overdrafts)

Borrowings (excluding overdrafts)
Derivative financial instruments (debt)
Lease liabilities2

Financing liabilities

Net debt at end of year

2019
£m

2018
(Restated)1
£m

2,993
569

4,326
–
826

1,875
1,265

11,854

11,870

1,608
560

2,930
579
1,326

3,510
1,325

11,838

11,878

2019
£m

1,549
(2)

1,547

(11,866)
(105)
(325)

2018
(Restated)1
£m

1,483
(6)

1,477

(11,872)
(10)
(341)

(12,296)

(12,223)

(10,749)

(10,746)

1 Restated for the Adoption of IFRS16 (Note 31).
2 Borrowings as at 31 December 2018 has been restated to present £1m of finance leases under IAS17 as lease liabilities under IFRS16

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:

2019 (£m)

Derivative financial instruments (debt)
Derivative financial instruments (non-debt)

At 31 December 2019

2018 (£m)

Derivative financial instruments (debt)
Derivative financial instruments (non-debt)

At 31 December 2018

Assets

Liabilities

Current

Non-Current

Current

Non-Current

4
26

–
–

–

(109)
(29)

(138)

–
–

–

Assets

Liabilities

Current

Non-Current

Current

Non-Current

15
23

–
1

(25)
(17)

(42)

–
–

–

Note that non-current derivative assets are presented within other non-current other receivables on the Balance Sheet.

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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019N O T E S T O T H E F I N A N C I A L S TAT E M E N T S CO N T I N U E D

16 Financial Liabilities – Borrowings continued

At 1 January 2019
Net increase/(decrease) in cash and cash equivalents
Proceeds from borrowings
Repayment of borrowings
Other financing cash flows
New lease liabilities
Exchange, fair value and other movements

At 31 December 2019

1 Restated for the Adoption of IFRS16 (Note 31).

17 Provisions for Liabilities and Charges

At 1 January 2018
Charged to the Income Statement
Arising on business combinations
Utilised during the year
Released to the Income Statement
Exchange adjustments

At 31 December 2018 (Restated)1
Charged to the Income Statement
Utilised during the year
Released to the Income Statement
Exchange adjustments

At 31 December 2019

1 Restated for the Adoption of IFRS16 (Note 31).

Provisions have been analysed between current and non-current as follows:

Current
Non-current

1 Restated for the Adoption of IFRS16 (Note 31).

Cash and
cash
equivalents
£m

1,477
139
–
–
–
–
(69)

Financing
liabilities
£m

(12,223)
–
(1,548)
1,122
75
(63)
341

2018
Net Debt
(Restated)1
£m

(11,095)
(586)
(697)
2,314
(24)
(48)
(610)

Net Debt
£m

(10,746)
139
(1,548)
1,122
75
(63)
272

1,547

(12,296)

(10,749)

(10,746)

Legal
provisions
£m

Restructuring
provisions
£m

Other
provisions
£m

Total
provisions
£m

501
38
–
(74)
(5)
1

461
82
(381)
(7)
(4)

151

26
44
–
(18)
(1)
1

52
19
(45)
(14)
–

71
30
31
(28)
(5)
(1)

98
24
(14)
(35)
(2)

2019
£m

178
56

234

598
112
31
(120)
(11)
1

611
125
(440)
(56)
(6)

234

2018
(Restated)1
£m

537
74

611

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 £151 million (2018: £461 million) including exceptional legal provisions of £126 million (2018: £431 million) in relation to a
number of historical regulatory matters in a number of markets, predominantly the HS issue in South Korea and the “DoJ” investigation. During
the year, a number of payments were made to claimants in respect of the HS issue in South Korea, and settlements of the DoJ investigation.

The restructuring provision relates principally to business integration costs associated with the acquisition of MJN and subsequent RB2.0
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 utilised within
five years.

18 8

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 201918 Lease liabilities

Maturity analysis – contractual undiscounted cash flows

Within one year
Later than one and less than five years
After five years

Total undiscounted lease liabilities at 31 December

Lease liabilities included in the statement of financial position at 31 December

Current
Non-Current

1 Restated for the Adoption of IFRS16 (Note 31).
2 Interest on lease liabilities amounted to £13 million in 2019 (2018: £13 million).

2019
£m

85
184
114

383

325

72
253

2018
(Restated)1
£m

73
203
123

399

340

60
280

19 Contingent Liabilities and Assets
HS South Korea
The Humidifier Sanitiser (“HS”) issue in South Korea was a tragic event. The Group continues to make both public and personal apologies to
victims. There are a number of further expected costs relating to the issue that either cannot be reliably estimated or are not considered probable
at the current time. In particular:
1. Round 4 lung injury: The South Korean government opened Round 4 to new applicants on 25 April 2016 for an indefinite period. It has

received 5,453 applications to participate in Round 4 as at 20 February 2020 and continues to receive applications. Oxy RB has continued to
make payments under a compensation plan during 2019 and made provision for the Round 4 Oxy RB Category I & II users categorised to
date. The number of additional victims in Round 4 cannot be reliably estimated at the current time as it is open for an indefinite period.
2. Asthma related injury and other potential lung or non-lung injuries: 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. From 23 July
2018, HS users can apply for asthma-only categorisation as part of Round 4. No provision has been made because:
a) no detailed underlying data has yet been made available in respect of general causation of asthma injuries by HS, although 397 victims

have been announced by the MOE as at 17 January 2020; and
it is not possible to estimate the total number of applicants across all rounds (including future asthma-only claims in Round 4) and
therefore the total number of potential victims with potential asthma injuries or for any other injuries that the MOE may decide
to recognise.

3. On 18 September 2019, a South Korean appellate court overturned a lower court’s decision and awarded damages of KRW 5 million

(approximately £3,200) to an Oxy RB HS user who had been classified as Category 3 claimant. The South Korean government classifies HS
claimants into 4 categories depending on the degree of causation between their lung injury and HS exposure. Category 1 and 2 HS
claimants are defined by law as those being “almost certain” or having a “high possibility” of having been injured by HS products, with
Category 3 claimants being considered to have only a “low possibility” of a connection between their lung injuries and HS exposure. The
appellate court became the first to rule that Category 3 plaintiffs can be entitled to damages from HS manufacturers. Oxy RB disagrees with
the court’s ruling and has appealed to the Supreme Court. There are currently 327 Category 3 claimants classified by the South Korean
government. We are currently unable to quantify the liability for Category 3 claimants, if any, at this juncture. Category 4 claimants are also
advocating that they should receive compensation.

4. On 26 July 2019, the South Korean government announced the recognition of toxic hepatitis as a HS injury. No data supporting the South
Korean government’s finding has been made available. The government plans to develop categorisation standards for HS-induced toxic
hepatitis and start categorising existing HS applicants after the standards have been developed.

5. On 15 November 2019, the South Korean government announced the recognition of child interstitial lung disease as a HS injury. The South
Korean government has not yet publicly made available the underlying data supporting its finding that the disease can be caused by HS
exposure. Although the South Korean government announced that it had established the criteria for categorising child interstitial lung
disease victims, the criteria have not yet been publicly disclosed.
The Group continues to assess and, where appropriate, pursue rights which Oxy RB may have to recover sums from other involved parties.

6.
7. On 9 August 2017, the Humidifier Sanitiser Injury Special Relief Act (“HS Law”) became effective, setting out a mechanism for providing
government support to HS victims, while also creating a Special Relief Fund (“SRF”) to support selected cases who did not receive
designation as a HS victim. The SRF was mainly funded by the HS companies, through a government levy authorized by the HS Law. Among
other provisions, the HS Law also lowered the burden of proof required for claimants in litigation against HS companies. A bill to amend the
HS Law was also passed by the Korean National Assembly on 6 March 2020, mainly affecting the HS injury definition and legal presumption
of causation, while also creating a unified fund to support both HS victims and SRF recipients. We currently expect the amendment to take
effect in late September 2020. As many of the amended terms are subject to court interpretation and much of the details are left to the
lower regulations to be later enacted, the impact of these amendments will require further monitoring and analysis.

Other
From time to time, the Group is involved in discussions in relation to ongoing tax matters in a number of jurisdictions around the world. Where
appropriate, the Directors make provisions based on their assessment of each case. See note 7.

189

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019N O T E S T O T H E F I N A N C I A L S TAT E M E N T S CO N T I N U E D

20 Trade and Other Payables

Trade payables
Other payables
Other tax and social security payable
Accruals

Trade and other payables

2019
£m

1,796
115
133
2,776

4,820

2018
£m

1,798
104
123
2,786

4,811

Included within accruals is £1,095 million (2018: £1,025 million) in respect of amounts payable to trade customers and government bodies for
trade spend.

Other Non-current Liabilities
Within other non-current liabilities of £367 million (2018: £448 million) is a financial liability of £135 million (2018: £148 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 as described in
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 £38 million (2018: £32 million), and interest accrued on tax balances of £154 million (2018: £191 million).

21 Current and Non-current Tax Liabilities

Current tax liabilities
Non-current tax liabilities

Total current and non-current tax liabilities

2019
£m

(145)
(969)

(1,114)

2018
£m

(10)
(1,105)

(1,115)

Included in Total current and non-current tax liabilities is an amount of £891m (2018: £1,002m) relating to tax contingencies primarily arising in
relation to transfer pricing.

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. In particular, international transfer pricing is an area of taxation that depends heavily on the underlying facts and circumstances and
generally involves a significant degree of judgement. Tax assets and liabilities are offset where there is a legally enforceable right to do so.

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 and following consultation was closed to further accrual from 31 December 2017. 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 US plans, including
paying all administrative costs and compliance with regulations. Both of these plans are unfunded.

19 0

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 201922 Pension and Post-Retirement Commitments continued
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 2019. 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 £6 million per annum.
It is expected that contributions to the UK defined benefit plan in 2020 will be £6 million (2019: £25 million).

During 2018, a UK High Court ruling (the ‘Lloyds Case’) clarified the requirement to equalise the Guaranteed Minimum Pension element of
benefits for men and women due to particular members of previously contracted out UK defined benefit pension schemes. This is likely to lead
to a small level of enhanced benefits in some circumstances. As no allowance had previously been made, accordingly a past service cost was
charged in 2018 (£4 million) reflecting the best estimate of the likely additional benefits that will be due to members. The current year charge
is nil. The final amount will be subject to agreement of the relevant pension trustees.

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 2019. For the Mead Johnson & Company, LLC Medical Plan, the most recent valuation was carried out at 31 December
2019. 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 2020 will be £7 million (2019: £8 million).

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 2019) and the US Medical plan valuations to 31 December 2019. The UK plans have a weighted average duration of the
deferred benefit obligation of 17.0 years (2018: 17.6 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

2019

2018

UK
%

US (Medical)
%

5.2
3.1
3.0
1.9
3.2
–

–
–
–
3.1
–
4.5-8.2

UK
%

5.4
3.2
3.0
2.7
3.4
–

US (Medical)
%

–
–
–
4.1
–
4.5-8.0

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

2019

UK
years

27.4
28.6

28.7
30.0

US
years

24.9
27.1

26.7
28.8

2018

UK
years

29.2
30.1

30.9
31.8

US
years

25.0
27.2

26.8
28.9

For the principal UK plan, the mortality assumptions were based on the standard SAPS mortality table 3NMA for males (scaled by 98%) and
table 3NFA for females (scaled by 117%). Allowance for future changes is made by adopting the 2018 edition of the CMI series with a long-term
improvement trend of 1.5% per annum from 2013 onwards. For the US plan the mortality assumptions were determined using the Pri-2012.
Total Dataset and projected with Mortality Improvement Scale MP-2019.

191

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019N O T E S T O T H E F I N A N C I A L S TAT E M E N T S CO N T I N U E D

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 liability for:

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:

2019

UK
£m

US (Medical)
£m

Present value of funded obligations
Fair value of plan assets

Surplus of funded plans
Present value of unfunded obligations
Irrecoverable surplus1

Net pension surplus/(liability)

(1,506)
1,741

235
–
(18)

217

–
–

–
(130)
–

(130)

1 There is no movement in irrecoverable surplus for 2019.

Group plan assets are comprised as follows:

Other
£m

(514)
534

20
(190)
–

(170)

Equities – quoted
Government bonds
Corporate bonds
Real Estate/property – unquoted
Other assets – unquoted

Fair value of plan assets

2019

UK
£m

US (Medical)
£m

Other
£m

205
1,020
369
127
20

1,741

–
–
–
–
–

–

227
137
101
61
8

534

Total
£m

(2,020)
2,275

255
(320)
(18)

(83)

Total
£m

432
1,157
470
188
28

2,275

2018

UK
£m

US (Medical)
£m

(1,472)
1,628

156
–
(18)

138

–
–

–
(126)
–

(126)

2018

UK
£m

US (Medical)
£m

205
941
326
135
21

1,628

–
–
–
–
–

–

2019
£m

(130)
(221)

(351)

217
51

268

(83)

Other
£m

(508)
523

15
(154)
–

(139)

Other
£m

235
130
129
20
9

523

2018
£m

(126)
(192)

(318)

138
53

191

(127)

Total
£m

(1,980)
2,151

171
(280)
(18)

(127)

Total
£m

440
1,071
455
155
30

2,151

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:

2019

2018

UK
£m

US (Medical)
£m

UK
£m

US (Medical)
£m

–
(650)
(856)

(47)
(2)
(81)

–
(759)
(713)

(1,506)

(130)

(1,472)

(45)
(2)
(79)

(126)

Active participants
Participants with deferred benefits
Participants receiving benefits

Present value of obligation

192

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 201922 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

At 1 January 2018
Current service cost
Past service cost
Interest expense/(income)

Remeasurements:
Return on plan assets, excluding
amounts included in interest income
Gain from changes in demographic
assumptions
Gains from change in financial
assumptions
Experience (gains)/losses

Exchange differences
Contributions – employees
Contributions – employers
Payments from plans:
Benefit payments

As at 31 December 2018

Current service cost
Interest expense/(income)

Remeasurements:
Return on plan assets, excluding
amounts included in interest income
Gain from changes in demographic
assumptions
Losses from change in financial
assumptions
Experience (gains)/losses

Exchange differences
Contributions – employers
Payments from plans:
Benefit payments

As at 31 December 2019

UK
£m

US (Medical)
£m

1,635
2
4
39

–

(24)

(89)
(22)

(135)

–
–
–

(73)

1,472

2
39

–

(51)

157
(26)

–
–

(87)

1,506

137
2
–
4

–

(8)
(10)

(18)

7
1
–

(7)

126

2
5

–

(2)

17
(5)

(6)
–

(7)

130

Other
£m

718
5
–
19

–

(1)

(40)
3

(38)

25
–
–

(67)

662

10
20

–

(1)

69
7

(23)
–

(40)

704

Total
£m

2,490
9
4
62

–

(25)

(137)
(29)

(191)

32
1
–

(147)

(1,702)
–
–
(41)

(41)

–

–
–

–
–
(30)

2,260

(1,628)

14
64

–
(43)

(43)

–

(132)

(54)

243
(24)

165

(29)
–

–

–
–

(132)

–
(25)

(134)

2,340

(1,741)

–
–
–
–

–

–
–

–

–
(1)
(6)

–

–
–

–

–
–

–

–
(7)

–

Other
£m

(574)
–
–
(19)

(19)

Total
£m

(2,276)
–
–
(60)

(60)

113

–

–
–

(22)
–
(16)

(523)

–
(18)

(18)

–

–
–

113

(22)
(1)
(52)

147

(2,151)

–
(61)

(61)

(45)

(177)

–

–
–

(45)

16
(4)

–

–
–

(177)

16
(36)

134

(534)

(2,275)

193

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019N O T E S T O T H E F I N A N C I A L S TAT E M E N T S CO N T I N U E D

22 Pension and Post-Retirement Commitments continued
Amounts Recognised in the Income Statement
The charge for the year ended 31 December is shown below:

Defined contribution plans
Defined benefit plans (net charge excluding interest)

UK
US (Medical)
Other

Total pension costs included in operating profit (Note 5)1
Income Statement charge included in finance expense

Income Statement charge included in profit before income tax

Remeasurement (gains)/losses for2:

UK
US (Medical)
Other

2019
£m

2
2
10

60
3

(52)
10
30

(12)

2018
£m

6
2
5

53
2

(63)
(18)
3

(78)

1 The Income Statement charge recognised in operating profit includes current service cost, and past service cost.
2 Remeasurement (gains)/losses excludes nil (2018: £71 million gain) 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:

2019

Discount rate
RPI increase
Life expectancy

2018

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 1.7%
Increase by 1.0%
Increase by 4.0%

Change in assumption

Change in defined benefit obligation

Increase 0.1%
Increase 0.1%
Members live 1 year longer

Decrease by 1.8%
Increase by 0.6%
Increase by 4.0%

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.

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.

19 4

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 201922 Pension and Post-Retirement Commitments continued
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 31 December 2018

At 31 December 2019

Equity
ordinary shares
number

Nominal value
£m

736,535,179

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 (2018: nil ordinary shares) were allotted and 2,244,826 ordinary shares were released from Treasury (2018:
3,697,245) 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

2019

2018

Number
of shares

Consideration
£m

Number
of shares

Consideration
£m

1,216,229
803,861

2,020,090
20,000
204,736

2,244,826

51
–

51
–
10

1,581,100
1,121,636

2,702,736
69,826
924,683

3,697,245

67
–

67
–
38

105

Market Purchases of Shares
In 2019, 2,244,826 Treasury shares were released (2018: 3,697,245), leaving a balance held at 31 December 2019 of 26,788,535 (2018:
29,033,361). Proceeds received from the reissuance of Treasury shares to exercise share options were £61 million (2018: £105 million).

195

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019N O T E S T O T H E F I N A N C I A L S TAT E M E N T S CO N T I N U E D

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 £18 million (2018: £16 million).

Executive Share Awards
Executive share awards, comprising both Executive Share Options and Restricted Share Awards, are awarded to the Senior Management Team.
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 (%)

<6%

Nil

40%

60%

80%

≥9%

100%

For awards granted in December 2013 and thereafter:

Adjusted earnings per share growth over
three years (%)

<6%

Between 6% and 10%

Proportion of awards vesting (%)

Nil

20%

Straight-line vesting between 20% and 100%

≥10%

100%

For awards granted in May 2019 and thereafter:

Adjusted EPS growth at actual FX rates (three-year CAGR)

Adjusted EPS growth at constant FX rates (three-year CAGR)

Net Revenue growth (three-year CAGR)

Return on Capital Employed (in final year)

Weighting

Threshold
(20% vesting)

Maximum

(100% vesting)

25%

10.8%

12.8%

The cost is spread over the three years of the performance period. For Executive Committee and members of the Group Leadership Team, vesting
conditions must be met over the three-year period and are not retested. For the remaining members of the Senior Management Team 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 2019 and 31 December 2018 are included in the tables following which
analyse the charge for 2019 and 2018. 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.

19 6

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 201924 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.

The 2020 Executive Share Awards are expected to be granted in May 2020.

Award Grant date

Share options
2009 08 December 2008
2010 07 December 2009
2011 01 December 2010
2012 05 December 2011
2013 03 December 2012
2014 11 December 2013
2015 01 December 2014
2016 02 December 2015
2017 01 December 2016
2018 30 November 2017
2019 10 May 2019

Restricted shares
2015 01 December 2014
2016 02 December 2015
2017 01 December 2016
2018 30 November 2017
2019 10 May 2019

Exercise price
at grant
£

Modified
exercise price
£

Performance
period

Share price on
grant date
£

Volatility
%

Dividend yield
%

Life
years

Risk-free
interest rate
%

Fair value of
one award
£

Black-Scholes model assumptions

27.29
31.65
34.64
32.09
39.14
47.83
50.57
63.25
67.68
64.99
60.83

–
–
–
–
–

26.54
30.78
33.68
31.20
38.06
46.51
50.57
63.25
67.68
64.99
60.83

–
–
–
–
–

2009–11
2010–12
2011–13
2012–14
2013–15
2014–16
2015–17
2016–18
2017–19
2018–20
2019–21

2015–17
2016–18
2017–19
2018–20
2019–21

27.80
31.80
34.08
32.19
39.66
46.69
52.40
64.15
66.28
64.86
61.45

52.40
64.15
66.28
64.86
61.40

25
26
26
25
20
19
17
18
18
18
20

17
18
18
18
19

3.1
3.5
4.3
5.4
4.3
3.7
4.0
2.9
3.0
3.4
3.7

4.0
2.9
3.0
3.4
3.7

4
4
4
4
4
4
4
4
4
4
4

4
4
4
4
4

2.78
1.69
2.16
1.00
0.61
0.76
1.03
1.07
0.46
0.68
0.83

1.03
1.07
0.46
0.68
0.83

4.69
4.70
4.49
3.18
3.29
3.85
4.34
6.75
5.54
5.58
5.89

43.93
57.13
58.85
56.71
53.02

Table 2: Share awards movements 2019

Award

Share options1
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019

Restricted shares1
2016
2017
2018
2019

Other share awards
UK SAYE
US SAYE
Overseas SAYE
SOPP

Movement in number of options

Options
outstanding
at
1 January
2019
number

99,281
119,643
480,103
934,375
1,235,516
1,694,784
2,002,591
2,091,357
2,490,055
–

Granted/
adjustments
number

–
–
–
–
–
–
–
–
–
2,491,340

Options
outstanding
at
31 December
2019
number

Lapsed
number

Exercised
number

(2,557)
(1,600)
(2,037)
(2,057)
(6,154)
(34,388)
(87,855)
(250,301)
(318,575)
(105,901)

–
(96,724)
71,509
(46,534)
367,374
(110,692)
646,593
(285,725)
(304,943)
924,419
(361,852) 1,298,544
(9,759) 1,904,977
1,841,056
–
–
2,171,480
– 2,385,439

930,898
919,587
1,269,418
–

–
–
–
1,411,339

(52,774)
(78,200)
(151,289)
(45,353)

144,288
(733,836)
(17,326)
824,061
(50,849) 1,067,280
(1,850) 1,364,136

693,313
567,300
1,680,092
118,800

316,660
176,208
639,818
24,400

(143,765)
(63,610)
(402,282)
(20,000)

746,570
(119,638)
(57,133)
622,765
(27,965) 1,889,663
103,200
(20,000)

Weighted average exercise price (share options)

£56.59

£60.83

£64.01

£42.73

£58.43

1. Grant date and exercise price for each of the awards are shown in Table 1.

197

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019N O T E S T O T H E F I N A N C I A L S TAT E M E N T S CO N T I N U E D

24 Share-Based Payments continued
Table 3: Share awards movements 2018

Award

Share options1
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018

Restricted shares1
2015
2016
2017
2018

Other share awards
UK SAYE
US SAYE
Overseas SAYE
SOPP

Options
outstanding
at
1 January
2018
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

Movement in number of options

Granted/
adjustments
number

Lapsed
number

Exercised
number

Options
outstanding
at
31 December
2018
number

–
–
–
–
–
–
–
–
–
52,760

–
1,000
–
98,880

–
–
–
–
–
–
(278,118)
(706,985)
(273,527)
(762,705)

–
(104,597)
99,281
(101,664)
119,643
(156,586)
480,103
(116,204)
934,375
(142,187)
(336,516)
1,235,516
(615,359) 1,694,784
(4,758) 2,002,591
2,091,357
2,490,055

–
–

(159,045)
(288,817)
(179,211)
(416,312)

(1,051,528)
(39,322)
(17,636)
(13,150)

–
930,898
919,587
1,269,418

749,906
294,434
2,112,455
146,800

227,268
374,170
807,428
58,000

(120,498)
(36,872)
(541,227)
(16,174)

(163,363)
(64,432)

693,313
567,300
(698,564) 1,680,092
118,800

(69,826)

Weighted average exercise price (share options)

£55.91

£64.99

£62.76

£42.64

£56.59

1. Grant date and exercise price for each of the awards are shown in Table 1.

For options outstanding at the year end the weighted average remaining contractual life is 5.64 years (2018: 5.84 years). Options outstanding at
31 December 2019 that could have been exercised at that date were 5,374,275 (2018: 4,606,460) with a weighted average exercise price of
£49.82 (2018: £43.87).

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 2019 or 2018 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 weighted average share price for the year was £61.40 (2018: £63.32).

19 8

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 201924 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 2020 and 2027 are
as follows:

Executive share option and restricted share schemes
Reckitt Benckiser 2019 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

Options and Restricted Shares Outstanding at 31 December 2019
Options and restricted shares which have vested or may vest at various dates between 2020 and 2027 are as follows:

Price to
be paid
£

Number of
shares under
option

60.83
–
–

47.44
47.44
47.44

2,491,340
1,411,339
24,400

3,927,079

316,660
176,208
639,818

1,132,686

Executive share option and restricted share schemes
Reckitt Benckiser Long-term Incentive Plan 2011 – Annual Grant – options
Reckitt Benckiser Long-term Incentive Plan 2016 – 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

Balance at 1 January 2018
Other comprehensive income/(expense)
Gains 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 income for the year

Balance at 31 December 2018

Other comprehensive income/(expense)
Losses on cash flow hedges, net of tax
Net exchange losses on foreign currency translation, net of tax
Gains on net investment hedges

Total other comprehensive expense for the year

Balance at 31 December 2019

Price to be paid £

Number of shares under option

From

2019

2018

33.68
–
–

37.20
58.86
58.95

71.80 11,611,391
3,399,765
103,200

–
–

11,147,705
3,119,903
118,800

15,114,356 14,386,408

58.95
58.95
58.95

746,570
622,765
1,889,663

693,313
567,300
1,680,092

3,258,998

2,940,705

Foreign
currency
translation
reserve
£m

Hedging
reserve
£m

Total other
reserves
£m

(1)

8
–
–

(9)
–
–

(9)

(2)

407

–
67
(44)

430

–
(578)
70

(508)

(78)

406

8
67
(44)

437

(9)
(578)
70

(517)

(80)

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.

199

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019N O T E S T O T H E F I N A N C I A L S TAT E M E N T S CO N T I N U E D

25 Other Reserves continued
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.

26 Related Party Transactions
Put and call options with non-controlling Shareholders
Within the Health Operating Segment, there are symmetrical put and call options existing over the non-controlling shareholdings in RB & Manon
Business Co. Ltd, RB & Manon Business Limited and RB (China Trading) Limited. In 2018, the parties agreed to extend these options to
31 December 2023. In the event that the options are not exercised in accordance with the agreement, they are automatically extended for
a further six years.

Within the Hygiene Home Operating Segment, there are symmetrical put and call options existing over the non-controlling shareholdings in RB
(Hygiene Home) HK Limited, RB & Manon Hygiene Home (HK) Limited and RB & Manon Hygiene Home (Shanghai) Limited. These options were
first agreed in 2019 and are currently due to expire on 31 December 2024. In the event that the options are not exercised in accordance with
the agreement, they are automatically extended for a further six years.

At 31 December 2019, the present value of these put option liabilities was £135 million (2018: £148 million).

Other
The Group has related party relationships with its directors and key management personnel (Note 5).

27 Dividends

Cash dividends on equity ordinary shares:
2018 Final paid: 100.2p (2017: Final 97.7p) per share
2019 Interim paid: 73p (2018: Interim 70.5p) per share

Total dividends for the year

2019
£m

2018
£m

709
518

1,227

688
499

1,187

The Directors are proposing a final dividend in respect of the financial year ended 31 December 2019 of 101.6p per share which will absorb an
estimated £721 million of Shareholders’ funds. If approved by Shareholders it will be paid on 28 May 2020 to Shareholders who are on the
register on 17 April 2020, with an ex-dividend date of 16 April 2020.

28 Acquisitions
On 22 February 2019 the Group completed the acquisition of 100% of the issued share capital of UpSpring, Ltd, an innovative pre and post-natal
healthcare company based in Texas, USA.

29 Cash Generated From Operations

For the year ended 31 December

Operating (loss)/profit from continuing operations
Depreciation, amortisation and impairment2
(Losses)/gain on sale of property, plant and equipment
(Increase) in inventories
(Increase) in receivables
Increase in payables and provisions
Share-based payments

Cash generated from continuing operations

2019
£m

(1,954)
5,554
(4)
(87)
(150)
31
18

3,408

2018
(Restated)1
£m

3,058
409
9
(68)
(103)
81
14

3,400

1 Restated for the adoption of IFRS16 (Note 31).
2 Includes adjusting items of £81 million (2018: £78 million) amortisation on acquisition-related intangibles and £5,116 million of impairment on goodwill and intangible assets (note 9).

20 0

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 201930 Discontinued Operations
On 11 July 2019, the Group announced it had reached agreements with the U.S. Department of Justice (“DoJ”) and the Federal Trade
Commission (“FTC”) to resolve the long-running investigation into the sales and marketing of Suboxone Film by its former prescription
pharmaceuticals business Indivior, a business that was wholly demerged from the Group in 2014.

Under the terms of the agreements, the Group agreed to pay a total of up to $1.4 billion (£1.1 billion) to fully resolve all federal investigations
into the Group in connection with the subject matter of the Indivior indictment and claims relating to state Medicaid programs for those states
choosing to participate in the settlement. The resolution will also protect the Group’s participation in all U.S. government programmes.
As of 31 December 2019, $1.4 billion has been paid.

While the Group has acted lawfully at all times and expressly denies all allegations that it engaged in any wrongful conduct, after careful
consideration, the Board of the Group determined that the agreement is in the best interests of the company and its Shareholders. It avoids the
costs, uncertainty and distraction associated with continued investigations, litigation and the potential for an indictment at a time of significant
transformation under RB 2.0 and during CEO transition. This is a non-criminal resolution and is on the basis that there is no admission of any
violation of law or any wrongdoing by the Group or any of the Group’s employees.

31 Effect from implementation of IFRS 16 ‘Leases’
The effect of the implementation of IFRS 16 on the Group Income Statement, Group Balance Sheet and Group Cash Flow for the financial year
ending 31 December 2018 are set out below.

Group Income Statement

Net operating expenses

Operating profit

Adjusted operating profit

Operating profit

Finance expense

Net finance expense

Profit before income tax

Net income for the period from continuing operations

Attributable to owners of the parent company

Net income

Basic earnings per ordinary share:
From continuing operations (pence)

From total operations

Diluted earnings per ordinary share:
From continuing operations (pence)

From total operations

31 December
2018
Reported
£m

Effects of
IFRS 16
£m

31 December
2018
Restated
£m

(4,588)

3,047

3,358

3,047

(403)

(325)

2,722

2,186

2,161

2,181

306.8

306.1

305.5

304.8

(13)

(2)

(0.2)

(0.3)

(4,577)

3,058

3,369

3,058

(416)

(338)

2,720

2,184

2,159

2,179

306.6

305.9

305.2

304.5

201

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019N O T E S T O T H E F I N A N C I A L S TAT E M E N T S CO N T I N U E D

31 Effect from implementation of IFRS 16 ‘Leases’ continued
Group Balance Sheet

ASSETS
Property, plant and equipment

Total non-current assets

Total assets

LIABILITIES
Current liabilities
Short-term borrowings
Provisions for liabilities and charges

Non-current liabilities
Long-term borrowings
Provisions for liabilities and charges

Total liabilities

Net assets

EQUITY
Capital and reserves
Retained earnings

Attributable to owners of the parent company

Total equity

31 December
2018
Reported
£m

Effects of
IFRS 16
£m

31 December
2018
Restated
£m

1,858

32,698

37,650

(2,209)
(542)

(7,614)

(9,670)
(87)

(15,247)

(22,861)

14,789

28,215

14,742

14,789

304

(60)
5

(55)

(280)
13

(267)

(322)

2,162

33,002

37,954

(2,269)
(537)

(7,669)

(9,950)
(74)

(15,514)

(23,183)

(18)

14,771

(18)

28,197

14,724

14,771

202

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 201931 Effect from implementation of IFRS 16 ‘Leases’ continued

ASSETS
Property, plant and equipment

Total non-current assets

Total assets

LIABILITIES
Current liabilities
Short-term borrowings

Non-current liabilities
Long-term borrowings

Total liabilities

Net assets

EQUITY
Capital and reserves
Retained earnings

Attributable to owners of the parent company

Total equity

Group Cash Flow Statement

CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from continuing operations

Net cash generated from operating activities

CASH FLOWS FROM INVESTING ACTIVITIES
Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of borrowings

Net cash used in financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents at end of the year

Cash and cash equivalents comprise:
Cash and cash equivalents
Overdrafts

1 Includes £60m depreciation, amortisation and impairment.

31 December
2017
Reported
£m

Effects of
IFRS 16
£m

31 December
2017
Restated
£m

1,754

31,589

37,013

(1,346)

(6,576)

(11,515)

(16,864)

(23,440)

13,573

27,039

13,533

13,573

314

(48)

(282)

2,068

31,903

37,327

(1,394)

(6,624)

(11,797)

(17,146)

(330)

(23,770)

(16)

13,557

(16)

27,023

13,517

13,557

31 December
2018
Reported
£m

Effects of
IFRS 16
£m

31 December
2018
Restated
£m

3,330

2,454

701

3,400

2,524

(422)

–

(422)

(2,244)

(2,618)

(586)

1,477

1,483
(6)

1,477

(70)

–

–
–

–

(2,314)

(2,688)

(586)

1,477

1,483
(6)

1,477

32 Post Balance Sheet Events
The impact of COVID-19 is considered to represent a non-adjusting post balance sheet event as at 31 December 2019. For further information on
the potential future impact of COVID-19, refer to the Chief Executive’s statement within the Strategic Report.

In March 2020, the Group drew down around £750 million from its committed borrowing facilities due to illiquidity in the short-term market for
commercial paper. Committed facilities total £5,500 million (2018: £4,500 million), of which £4,750 million remains undrawn, and available to
draw. The Group remains compliant with its banking covenants. Our committed facilities are not subject to renewal until from 2022 onwards.

203

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019
F I V E Y E A R S U M M A R Y

The five year summary below is presented on a statutory basis. The year ending 31 December 2016, 31 December 2017, 31 December 2018 and
31 December 2019 show the results for continuing operations and exclude the impact of RB Food. The years ending 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 (loss)/profit

Adjusted Operating Profit
Adjusting items

Operating (loss)/profit
Net finance expense
(Loss)/Profit before income tax
Income tax (expense)/benefit
Attributable to non-controlling interests
Net income attributable to owners of the parent company from
continuing operations

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 profit4,5 (times covered)
Diluted earnings per share, continuing
Dividend cover1

2019
£m

12,846
(1,954)

3,367
(5,321)

(1,954)
(153)
(2,107)
(665)
(13)

Restated4
2018
£m

12,597
3,058

3,369
(311)

3,058
(338)
2,720
(536)
(20)

Restated3
2017
£m

11,449
2,737

3,122
(385)

2,737
(238)
2,499
894
(17)

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)

(2,785)

2,164

3,376

1,729

1,743

9,407
(1,427)

14,771
(1,438)

13,557
(1,424)

8,426
(1,102)

6,906
(936)

(15.2%)
-12.8x
(31.5%)
(393.0)
(2.3x)
174.6p

26.2%
17.9x
349.0p
2.0x

24.3%
9.0x
19.7%
305.2p
1.8x
170.7p

26.7%
10.9x
339.6p
2.0x

23.9%
11.5x
-35.8%
474.7p
2.9x
164.3p

27.3%
18.0x
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

1. Dividend cover is calculated by dividing diluted 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 adoption of IFRS 15 in 2017. The 2015 and 2016 balances have not been restated.
4. Restated for adoption of IFRS 16 (Note 31). The 2015, 2016 and 2017 balances have not been restated.
5. Adjusted operating profit cover over adjusted net finance expense.

20 4

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019PA R E N T C O M PA N Y B A L A N C E S H E E T

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
Share capital
Share premium
Retained earnings

Total equity

Notes

2019
£m

2018
£m

14,963

14,949

3,6
4
6

42
2
4

44
3
1

5,6

(8,425)

(6,347)

(8,377)

(6,299)

6,586

(99)

6,487

74
245
6,168

6,487

8,650

(369)

8,281

74
245
7,962

8,281

The Financial Statements on pages 205 to 222 were approved by the Board of Directors on 26 March 2020 and signed on its behalf by:

Christopher Sinclair
Director

Laxman Narasimhan
Director

Company Number: 06270876

205

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019

PA R E N T C O M PA N Y S TAT E M E N T O F C H A N G E S I N E Q U I T Y

Balance at 1 January 2018
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 2018

Comprehensive income
Loss for the financial year

Total comprehensive loss

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 2019

Share
capital
£m

Share
premium
£m

Retained
earnings
£m

Total
equity
£m

243

7,604

7,921

–

–
–
–
–

–

2
–
–
–

1,428

103
(10)
24
(1,187)

1,428

105
(10)
24
(1,187)

(1,070)

(1,068)

245

7,962

8,281

–

–
–
–
–

–

–
–
–
–

–

(646)

61
4
14
(1,227)

(646)

61
4
14
(1,227)

(1,148)

245

6,168

6,487

Reckitt Benckiser Group plc has £5,543 million (2018: £7,355 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.

20 6

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019N O T E S T O T H E PA R E N T C O M PA N Y F I N A N C I A L S TAT E M E N T S

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 a public limited company. The address of the registered
office is given on page 224. The nature of the Group’s operations
and its principal activities are set out in the Strategic Report on
pages 1 to 77.

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 s408 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;
from disclosing the Company key management personnel
compensation, as required by FRS 102 paragraph 33.7.

(ii)

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 or at www.rb.com.

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.

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.

207

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019N O T E S T O T H E PA R E N T C O M PA N Y F I N A N C I A L S TAT E M E N T S CO N T I N U E D

1 Parent Company Accounting Policies continued
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.

Repurchase and Reissuance of Ordinary Shares
When shares recognised as equity are repurchased, the amount of the
consideration paid, including directly attributable costs, is recognised
as a charge to equity. Repurchased shares are classified as Treasury
shares and are presented in retained earnings. When Treasury shares
are sold or reissued subsequently, the amount received is recognised
as an increase in equity and the resulting surplus or deficit is presented
within share premium.

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 preparing these financial statements, management has made
judgements and estimates that affect the application of the
Company’s accounting policies and the reported amounts of assets,
liabilities, income and expenses. Actual amounts and results may differ
from these estimates.

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
Basic financial liabilities, including loans from fellow group companies,
are initially recognised at transaction price, unless the arrangement
constitutes a financing transaction, where the debt instrument is
measured at the present value of future payments. Debt instruments
are subsequently carried at amortised cost.

Financial liabilities are derecognised when the liability is extinguished,
that is when the contractual obligation is discharged, cancelled
or expires.

Provisions
Provisions are recognised when the Company 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. Where it is
possible that a settlement may be reached or it is not possible to make
a reliable estimate of the estimated financial impact, appropriate
disclosure is made but no provision recognised.

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.

Key sources of estimation uncertainty
Each year, management is required to make a number of assumptions
regarding the future. The related year-end accounting estimates will,
by definition, seldom equal the final actual results. The estimates and
assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within
the next financial year are addressed below.

The Company recognises legal provisions in line with the Company’s
provisions policy. The level of provisioning in relation to civil and/or
criminal investigations is an area where management and legal
judgement is important, with individual provisions being based on best
estimates of the potential loss, considering all available information,
external advice and historical experience. As at 31 December 2019, the
Company recognised exceptional legal provisions of £99m (2018:
£369m) in relation to a number of historical regulatory matters. Refer
to Note 7 of the Company Financial Statements for further information.

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.

20 8

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 20192 Investments

Cost
At 1 January 2018
Additions during the year
At 31 December 2018
Additions during the year
At 31 December 2019

Provision for impairment
At 1 January 2018
Provided for during the year
At 31 December 2018
Provided for during the year
At 31 December 2019

Net book amounts
At 31 December 2018

At 31 December 2019

Shares in
subsidiary
undertakings
£m

14,925
24
14,949
14
14,963

–
–

14,949

14,963

The Directors believe that the carrying value of the investments is supported by their underlying net assets.

The subsidiary undertakings as at 31 December 2019, all of which are included in the Group Financial Statements, are shown in Note 11 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; Reigate Square Holdings Sàrl which has a year ending 31 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, and in 2018, 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
Other Receivables

Amounts owed by Group undertakings are unsecured, interest free and are repayable on demand (2018: same).

4 Debtors Due After More Than One Year

Deferred tax assets

Deferred tax assets consist of short-term timing differences.

2019
£m

40
2

2019
£m

2018
£m

44
-

2018
£m

20 9

5 Creditors Due Within One Year

Amounts owed to Group undertakings
Taxation and social security
Other payables

2019
£m

8,412
4
9

8,425

2018
£m

6,342
5
–

6,347

Included in the amounts owed to Group undertakings is an amount of £8,368 million (2018: £6,333 million) which is unsecured, carries interest
at 3M LIBOR and is repayable on demand (2018: same). All other amounts owed to Group undertakings are unsecured, non-interest bearing and
are repayable on demand (2018: same).

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 2018

Charged to the Statement of Comprehensive Income
Utilised during the year
Released to the Statement of Comprehensive Income

At 31 December 2018

Charged to the Statement of Comprehensive Income
Utilised during the year
Released to the Statement of Comprehensive Income

At 31 December 2019

Provisions have been analysed between current and non-current as follows:

Current
Non-current

2019
£m

42
4

2018
£m

44
1

8,421

6,342

Legal
provisions
£m

Total
provisions
£m

356

17
(2)
(2)

369

79
(331)
(18)

2019
£m

99
–

17
(2)
(2)

369

79
(331)
(18)

2018
£m

369
–

369

Provisions relate to exceptional legal provisions in relation to a number of historic matters. Refer to note 17 of the Group Financial Statements.

210

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 20198 Share Capital

Issued and fully paid

At 1 January 2019
Allotments

At 31 December 2019

Equity
ordinary shares

Nominal value
£m

736,535,179
–

736,535,179

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.

9 Related Party Transactions
There were no transactions with related parties other than wholly owned companies within the Group.

10 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.

The Company has also issued a guarantee on behalf of Reckitt Benckiser Treasury Services plc in relation to the issuance of a US$8,250 million
bond (two tranches of US$2,500 million, one tranche of US$2,000 million, one tranche of US$750 million and one tranche 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 Reckitt Benckiser Treasury Services plc in relation to committed borrowing facilities
totalling £5,500 million (2018: £4,500 million). Details of the facilities are included in Notes 14 and 32 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$2,300
million (2018:US$3,000 million) issued by Mead Johnson Nutrition Company prior to acquisition. The senior notes consist of two tranches of
US$750 million, one tranche of US$500 million and one tranche of US$300 million. One tranche of US$700m was settled during the year.

Other contingent liabilities are disclosed in Note 19 of the Group Financial Statements.

211

11 Subsidiary Undertakings
In accordance with Section 409 of the Companies Act 2006 and Schedule 4 of The Large and Medium-sized Companies and Groups (Accounts
and Reports) Regulations 2008, a full list of related undertakings as at 31 December 2019, including their registered office address, country of
incorporation and the percentage of share ownership, is disclosed below. All undertakings are indirectly owned by Reckitt Benckiser Group plc,
unless otherwise stated.

From time to time, management reviews the Group structure and seeks to remove redundant, dormant or non-trading entities. The Group is
currently undergoing such a review. In 2019, 19 legal entities were placed into liquidation, and our expectation is that further entities will be
eliminated in 2020. The removal of legal entities ultimately allows management to focus on the core business, reduces compliance obligations
and cost, and improves transparency of the Group to external parties.

All subsidiary undertakings of Reckitt Benckiser Group plc are included in the consolidated Financial Statements of the Group.

Name

103-105 Bath Road
Limited

2309 Realty Corporation

Philippines

Airwick Industrie SAS

France

Anhui Guilong
Pharmaceutical Trading
Company Ltd

China

Apenas Boa Nutrição
Indústria de Alimentos
Ltda.

Beleggingsmaatschappij
Lemore BV

Benckiser

Blisa, LLC

Brevet Hospital Products
(UK) Limited*

British Surgical Industries
Limited*

Canterbury Square
Holdings S.à.r.l

Central Square Holding
BV

Crookes Healthcare
Limited

Cupal,Limited

Dakin Brothers Limited

USA

Dorincourt Holdings
(Ireland) Limited

Ireland

Durex Limited

Earex Products Limited*

ERH Propack Limited

Country of
Incorporation

Registered
Office

Share Class

Proportion
of shares
held

Name

Country of
Incorporation

Registered
Office

Share Class

Proportion
of shares
held

149

ORD

100.00%

Gainbridge Investments
(Cyprus) Limited

Cyprus

116

A/B

ORD

88.32%

Glasgow Square Limited

100.00%

Green, Young & Company
Limited

ORD

100.00%

149

ORD

100.00%

Brazil

ORD

100.00%

Netherlands

102

ORD

100.00%

150

ORD

100.00%

122 MEMBERSHIP

100.00%

149

ORD

100.00%

Grosvenor Square
Holding B.V.

Guilong Pharmaceutical
(Anhui) Co. Ltd

Guilong Pharmaceutical
(Anhui) Co. Ltd†

Hamol Limited

Helpcentral Limited

Howard Lloyd &
Company,Limited

Netherlands

102

ORD

100.00%

China

149

ORD

100.00%

–

100.00%

ORD

100.00%

Kukident GmbH

Germany

COMMON

100.00%

149

ORD/PREF

100.00%

Lancaster Square
Holdings SL

Spain

134

ORD

100.00%

Luxembourg

ORD

100.00%

LI Pensions Trust Limited

Netherlands

102

ORD

100.00%

Ireland

ORD

100.00%

149

ORD

100.00%

149

ORD/PREF

100.00%

ORD

100.00%

Linden Germany A
Limited

Linden Germany B
Limited

Lloyds Pharmaceuticals

London International
Group Limited

London International
Trading Asia Limited

149

ORD

100.00%

149

ORD

100.00%

149

ORD

100.00%

Hong Kong

ORD

100.00%

LRC Investments Limited* UK

LRC North America Inc

USA

LRC Products Limited

LRC Secretarial Services
Limited

149

122

149

ORD/PREF

100.00%

COM/PREF

100.00%

ORD

100.00%

Exponential Health LLC

USA

122 MEMBERSHIP

100.00%

Maddison Square Holding
B.V.

Netherlands

102

ORD

100.00%

Fenla Industria, Comercio
e Administracao Ltda

Brazil

FF Homecare & Hygiene
Limited

COMMON

100.00%

Manufactura MJN, S. de
R.L. de C.V.

Mexico

ORD

100.00%

151

PREFERRED

37.50%

Mead Johnson &
Company LLC

USA

122 MEMBERSHIP

100.00%

Mead Johnson B.V.

Netherlands

103

ORD

100.00%

212

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 201911 Subsidiary Undertakings continued

Name

Mead Johnson do Brasil
Comercio E Importacao
De Productos de Nutricao
Ltda.

Mead Johnson
Nutricionales de México,
S. de R.L. de C.V.

Mead Johnson Nutrition
(Asia Pacific) Pte. Ltd.

Country of
Incorporation

Registered
Office

Share Class

Proportion
of shares
held

Name

Brazil

ORD

100.00%

Mexico

ORD

100.00%

Singapore

127

ORD

100.00%

Mead Johnson Nutrition
(Vietnam) Company
Limited

Mead Johnson Nutrition
Argentina S.A.

Mead Johnson Nutrition
(Australia) Pty Ltd

Australia

Mead Johnson Nutrition
(Belgium) BVBA

Belgium

Mead Johnson Nutrition
(Canada) Co.

Canada

ORD

100.00%

ORD

100.00%

COMMON

100.00%

Mead Johnson Nutrition
(Colombia) Ltda.

Colombia

ORD

100.00%

Country of
Incorporation

Registered
Office

Share Class

Proportion
of shares
held

Vietnam

159

ORD

100.00%

Argentina

A/B

90.00%

Mead Johnson Nutrition
Company

USA

122

COMMON

100.00%

Mead Johnson Nutrition
Holdings (Singapore) Pte.
Ltd.

Mead Johnson Nutrition
International Holdings Pte
Ltd

Singapore

127

ORD

100.00%

Singapore

127

ORD

100.00%

Mead Johnson Nutrition
Nominees LLC

USA

Mead Johnson Nutrition
Trading Poland Sp. z o.o

Poland

122 MEMBERSHIP

100.00%

118

ORD

100.00%

Mead Johnson Nutrition
(Dominicana), S.A.

USA

122

COMMON

100.00%

Mead Johnson Nutrition
Venezuela S.C.A.

Venezuela

157 ORD/COMMON 100.00%

–

100.00%

Mead Johnson
Nutritionals (China) Ltd.

China

ORD

88.89%

ORD

100.00%

Mead Johnson One C.V.

Netherlands

104

Mead Johnson Nutrition
(Dominicana), S.A.†

Dominican
Republic

Mead Johnson Nutrition
(France) SAS

France

Mead Johnson Nutrition
(Hong Kong) Limited

Hong Kong

Mead Johnson Nutrition
(Hong Kong) Limited†

Hong Kong

India

Italy

Mead Johnson Nutrition
(India) Private Limited

Mead Johnson Nutrition
(Italia) S.r.l.

Mead Johnson Nutrition
(Malaysia) Sdn Bhd

Mead Johnson Nutrition
(Panama), S. de R.L.

Mead Johnson Nutrition
(Philippines), Inc.

Mead Johnson Nutrition
(Poland) Sp. z o.o

Poland

Mead Johnson Nutrition
(Puerto Rico) Inc.

USA

ORD

100.00%

–

100.00%

ORD

100.00%

Mead Johnson Pediatric
Nutrition Institiute (China)
Ltd.

China

Mead Johnson Pediatric
Nutrition Technology
(Guangzhou) Ltd

China

QUOTA

100.00%

Mead Johnson Two C.V.

Netherlands

Malaysia

ORD

100.00%

Medcom Marketing And
Prodazha Ukraine LLC*

Ukraine

Panama

113

100.00%

PARTNERSHIP/
MEMBERSHIP
INTERESTS

Philippines

116

COMMON

99.96%

MJN Asia Pacific Holdings
LLC

USA

118

ORD

100.00%

MJN Global Holdings B.V. Netherlands

122

COMMON

100.00%

MJN Holdings
(Netherlands) B.V.

Netherlands

PARTNERSHIP
INTERESTS

100.00%

–

100.00%

PARTNERSHIP
INTERESTS

100.00%

–

100.00%

104

152

122 MEMBERSHIP

100.00%

ORD

105

100.00%

MJ UK Holdings Limited

149

ORD

100.00%

MJ USA Holdings LLC

USA

122 MEMBERSHIP

100.00%

Mead Johnson Nutrition
(Puerto Rico) Inc.†

Mead Johnson Nutrition
(Singapore) Pte. Ltd.

Puerto Rico

122

–

100.00%

Singapore

127

ORD

100.00%

Mead Johnson Nutrition
(Taiwan) Ltd.

Taiwan

141

ORD

100.00%

Mead Johnson Nutrition
(Thailand) Ltd.

Thailand

143

COMMON

100.00%

Mead Johnson Nutrition
(UK) Ltd.

Mead Johnson Nutrition
(Venezuela) LLC

USA

149

ORD

100.00%

122 MEMBERSHIP

100.00%

MJN Innovation Services
B.V.

MJN International
Holdings (UK), Ltd.

Netherlands

103

ORD

100.00%

149

ORD

100.00%

MJN U.S. Holdings LLC

USA

122 MEMBERSHIP

100.00%

New Bridge Holdings B.V. Netherlands

New Bridge Street
Invoicing Limited*

Norwich Square Holding
SL

Spain

ORD

102

149

100.00%

134

ORD

100.00%

Nurofen Limited

149

ORD

100.00%

213

11 Subsidiary Undertakings continued

Country of
Incorporation

Registered
Office

Share Class

Proportion
of shares
held

Name

Country of
Incorporation

Registered
Office

Share Class

Proportion
of shares
held

149

ORD

100.00%

RB (Hygiene Home) HK
Limited

Hong Kong

Name

Open Championship
Limited*

Optrex Limited

Oriental Medicine
Company Limited

Hong Kong

Oxy Reckitt Benckiser LLC South Korea

Pharmalab Limited

Prebbles Limited*

Propack Produkte für
Haushalt und
Körperpflege GmbH

PT Mead Johnson
Indonesia

Germany

Indonesia

PT Reckitt Benckiser
Hygiene Home Indonesia

Indonesia

PT Reckitt Benckiser
Hygiene Home Trading
Indonesia

PT Reckitt Benckiser
Indonesia

PT Reckitt Benckiser
Trading Indonesia

Qingdao London Durex
Co., Ltd

Qingdao New Bridge
Corporate Management
Consulting Company
Limited

R&C Nominees Limited

R&C Nominees One
Limited

R&C Nominees Two
Limited

Indonesia

China

RB & Manon Business Co.
Ltd

China

RB & Manon Business
Limited

Hong Kong

RB & Manon Hygiene
Home (Shanghai) Limited

China

RB & Manon Hygiene
Home Limited

Hong Kong

RB (China Trading)
Limited

RB (China) Holding Co.
Ltd

China

RB (Health) Colombia
S.A.S

Colombia

RB (Health) Malaysia Sdn
Bhd

Malaysia

RB (Hygiene Home)
Australia Pty Ltd

Australia

RB (Hygiene Home) Czech
Republic, spol s.r.o

Czech Republic

214

ORD

100.00%

RB East Trading Limited *† Dubai

149

133

149

ORD

100.00%

ORD/DEF

100.00%

ORD

100.00%

ORD

90.10%

ORD

100.00%

ORD

100.00%

ORD

100.00%

ORD

100.00%

ORD

100.00%

149

ORD

100.00%

149

ORD

100.00%

ORD

75.05%

ORD

80.00%

149

ORD

80.00%

ORD

100.00%

ORD

100.00%

ORD

100.00%

ORD

100.00%

ORD

100.00%

RB (Hygiene Home)
Hungary Kft

Hungary

RB (Hygiene Home) Ltd

Israel

RB (Hygiene Home) New
Zealand Limited

New Zealand

107

ORD

80.00%

ORD

100.00%

ORD

100.00%

RB (Hygiene Home)
Poland Sp. z o.o

RB (Hygiene Home)
Romania S.R.L.

RB (Hygiene Home)
Slovakia, spol. s r.o.

Poland

119

ORD

100.00%

Romania

123

ORD

100.00%

Slovakia

130

ORD

100.00%

RB Health (US) LLC

USA

154 MEMBERSHIP

100.00%

RB (Suzhou) Co. Ltd

China

RB Asia Holding Limited

RB Finance Luxembourg
(2018) S.à.r.l

Luxembourg

RB Health (Canada) Inc.

Canada

RB Health (Ecuador) Cia.
Ltda.

Ecuador

RB Health Chile SpA

RB Health Manufacturing
(US) LLC

Chile

USA

RB Health Mexico, S.A de
C.V.

Mexico

RB Health Nordic A/S
sivuliike Suomessa†

RB Health Nordic A/S,
filial†

Finland

Sweden

RB Health Nordic, NUF†

Norway

149

–

100.00%

ORD

100.00%

–

80.00%

ORD

100.00%

COMMON/
PREFERRED

100.00%

ORD

100.00%

ORD

100.00%

154 MEMBERSHIP

100.00%

138

110

114

128

ORD

100.00%

–

ORD

100.00%

RB Holdings
(Luxembourg) S.à.r.l

Luxembourg

ORD

100.00%

RB Holdings (Nottingham)
Limited

149

ORD

100.00%

RB Holdings Luxembourg
(2018) S.à.r.l

RB Hygiene Home
(Thailand) Limited

Luxembourg

ORD

100.00%

Thailand

144

ORD

100.00%

RB Hygiene Home Arabia
FZE

Dubai

ORD

100.00%

ORD

75.00%

RB Health Peru S.R.L.

Peru

ORD

100.00%

RB Health Services
Mexico, S.A de C.V.

Mexico

RB Healthcare Pte Ltd*

Singapore

RB Holding Europe Du
Sud SAS

France

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 201987

ORD/PREF

100.00%

149

ORD

100.00%

149

ORD

100.00%

149

ORD

100.00%

149

ORD/PREF

100.00%

ORD

100.00%

ORD

100.00%

149

ORD

100.00%

11 Subsidiary Undertakings continued

Name

Country of
Incorporation

Registered
Office

Share Class

Proportion
of shares
held

Name

Country of
Incorporation

Registered
Office

Share Class

Proportion
of shares
held

RB Hygiene Home Austria
GmbH

Austria

RB Hygiene Home
Belgium SA/NV

RB Hygiene Home
Deutschland GmbH

Belgium

Germany

RB Hygiene Home France
SAS

France

RB Hygiene Home India
Private Limited

RB Hygiene Home
Investments Limited

India

RB Hygiene Home Japan
Ltd

Japan

ORD

100.00%

RB UK Hygiene Home
Commercial Limited

ORD

100.00%

RB USA (2019) Ltd

ORD

100.00%

ORD

100.00%

ORD

100.00%

RB USA Holdings LLC

RB Winchester (Ireland)
Unlimited Company

RBHCR Health Reckitt
Costa Rica Sociedad
Anonima

USA

149

ORD

100.00%

149

ORD

100.00%

122 MEMBERSHIP

100.00%

Ireland

ORD

100.00%

Costa Rica

COMMON

100.00%

149

ORD

100.00%

Reckitt & Colman (Jersey)
Limited

Jersey

ORD

100.00%

RB Hygiene Home
Netherlands B.V.

RB Hygiene Home Nordic
A/S

Netherlands

102

ORD

100.00%

Denmark

ORD

100.00%

RB Hygiene Home Nordic
A/S, filial†

Sweden

RB Hygiene Home Nordic
A/S, sivuliike Suomessa†

Finland

RB Hygiene Home Nordic
NUF†

Norway

138

110

–

100.00%

RB Hygiene Home
Switzerland AG

Switzerland

140

ORD

100.00%

RB Ireland Hygiene Home
Commercial Limited

Ireland

RB LATAM Holding B.V.

Netherlands

RB Luxembourg (2016)
Limited

ORD

100.00%

102

149

ORD

100.00%

Reckitt & Colman
(Overseas) Health Limited

Reckitt & Colman
(Overseas) Hygiene Home
Limited

Reckitt & Colman
(Overseas) Limited

Reckitt & Colman (UK)
Limited

Reckitt & Colman Capital
Finance Limited

Jersey

China

Reckitt & Colman
Guangzhou Limited

Reckitt & Colman
Holdings Limited

Reckitt & Colman
Management Services
(Ireland) Limited

Ireland

ORD

100.00%

Reckitt & Colman Pension
Trustee Limited

149

ORD

100.00%

RB Luxembourg (TFFC)
S.à.r.l

Luxembourg

ORD

100.00%

RB Luxembourg Holdings
(TFFC) Limited

149

ORD

100.00%

Reckitt & Colman
Sagrotan
Verwaltungsgesellschaft
GmbH

Germany

COMMON

100.00%

RB Luxembourg Holdings
(TFFC) Limited†

Luxembourg

–

100.00%

RB Manufacturing LLC

USA

122 MEMBERSHIP

100.00%

RB Mexico Investments
Limited

RB NL Brands B.V.

Netherlands

RB Reigate (2019) Ltd

RB Reigate (Ireland)
Unlimited Company

Ireland

RB Reigate (UK) Limited

RB Salute Mexico S.A de
C.V.

Mexico

RB Square Holdings
Spain, S.L.

RB UK Commercial
Limited

Spain

149

ORD

100.00%

102

149

ORD

100.00%

134

A/B

100.00%

149

ORD

100.00%

Reckitt & Colman Trustee
Services Limited

Reckitt & Sons Limited

Reckitt Benckiser (2012)
BV

Netherlands

Reckitt Benckiser
(Australia) Pty Limited

Australia

Bangladesh

Reckitt Benckiser
(Bangladesh) Limited

Reckitt Benckiser
(Belgium) SA/NV

149

ORD

100.00%

149

102

ORD

100.00%

ORD/PREF

100.00%

ORD

82.96%

Belgium

ORD

100.00%

Reckitt Benckiser (Brands)
Limited

149

ORD

100.00%

Reckitt Benckiser (Brasil)
Comercial de Produtos de
Hygiene, Limpeza e
Cosméticos Ltda.

Brazil

ORD

100.00%

215

11 Subsidiary Undertakings continued

Name

Country of
Incorporation

Registered
Office

Share Class

Proportion
of shares
held

Name

Reckitt Benckiser (Brasil)
Ltda

Brazil

Reckitt Benckiser (BVI)
No. 1 Limited

British Virgin
Islands

ORD

100.00%

Reckitt Benckiser (New
Zealand) Limited

ORD

100.00%

Reckitt Benckiser (Pars)
PJSC

Iran

Reckitt Benckiser (BVI)
No. 1 Limited†

149

–

100.00%

Reckitt Benckiser (Poland)
SA

Poland

Country of
Incorporation

Registered
Office

Share Class

Proportion
of shares
held

New Zealand

108

ORD

100.00%

ORD

100.00%

119

ORD

100.00%

Reckitt Benckiser (BVI)
No. 2 Limited

British Virgin
Islands

ORD

100.00%

Reckitt Benckiser (BVI)
No. 2 Limited†

149

–

100.00%

Reckitt Benckiser (BVI)
No. 3 Limited

British Virgin
Islands

ORD

100.00%

149

–

100.00%

ORD

100.00%

Reckitt Benckiser
(Portugal) S.A.

Reckitt Benckiser
(Romania) Srl

Reckitt Benckiser
(RUMEA) Limited

Reckitt Benckiser
(RUMEA) Limited†

Portugal

120

ORD

100.00%

Romania

123

ORD

100.00%

Dubai

149

ORD

100.00%

–

100.00%

Reckitt Benckiser (BVI)
No. 3 Limited†

Reckitt Benckiser (BVI)
No. 4 Limited

British Virgin
Islands

Reckitt Benckiser
(Canada) Inc.

Canada

Reckitt Benckiser
(Cayman Islands) Limited

Cayman
Islands

Reckitt Benckiser
(Centroamerica) SA

Costa Rica

Reckitt Benckiser
(Channel Islands) Limited

Guernsey

Reckitt Benckiser (Czech
Republic), spol. s r.o.

Czech Republic

Reckitt Benckiser (Egypt)
Limited

Egypt

NEW
COMMON

100.00%

Reckitt Benckiser
(Singapore) Pte Limited

Singapore

129

ORD

100.00%

ORD

100.00%

ORD

100.00%

ORD

100.00%

ORD

100.00%

ORD

100.00%

Reckitt Benckiser (Slovak
Republic), spol. s r.o.

Reckitt Benckiser (South
America) Holding BV

Reckitt Benckiser (Spain)
BV

Reckitt Benckiser
(Switzerland) AG

Reckitt Benckiser
(Thailand) Limited

Slovakia

130

ORD

100.00%

Netherlands

102

ORD

100.00%

Netherlands

102

ORD

100.00%

Switzerland

140

ORD

100.00%

Thailand

143

ORD

100.00%

Reckitt Benckiser (ENA)
BV

Reckitt Benckiser España
SL

Reckitt Benckiser
(Granollers) SL

Reckitt Benckiser
(Grosvenor) Holdings
Limited

Reckitt Benckiser (Health)
Holdings Limited

Reckitt Benckiser
(Hygiene Home) Holdings
Limited

Spain

Netherlands

106

ORD

100.00%

134

ORD

100.00%

Reckitt Benckiser (UK)
Limited

Reckitt Benckiser (USA)
Limited

134

ORD

100.00%

Reckitt Benckiser AG

Switzerland

149

ORD

100.00%

Reckitt Benckiser Arabia
FZE

Dubai

149

ORD

100.00%

149

ORD

100.00%

140

ORD

100.00%

149

ORD

100.00%

149

ORD

100.00%

Reckitt Benckiser
Argentina SA

Reckitt Benckiser Asia
Pacific Limited

Reckitt Benckiser Asia
Pacific Limited†

Argentina

ORD

100.00%

Japan

149

ORD

100.00%

ORD

100.00%

Reckitt Benckiser (India)
Private Limited

India

ORD

100.00%

Reckitt Benckiser (Lanka)
Limited

Sri Lanka

137

ORD

99.99%

Reckitt Benckiser Austria
GmbH

Austria

Reckitt Benckiser Bahrain
W.L.L

Bahrain

ORD

100.00%

ORD

100.00%

Reckitt Benckiser (Latvia)
SIA

Latvia

Reckitt Benckiser
(Malaysia) Sdn Bhd

Malaysia

Reckitt Benckiser (Near
East) Limited

Israel

ORD

100.00%

Reckitt Benckiser Brands
Investments BV

Netherlands

102

ORD

100.00%

ORD

100.00%

Reckitt Benckiser Bulgaria
Eood*

Bulgaria

ORD

100.00%

Reckitt Benckiser BY LLC

Belarus

Reckitt Benckiser Calgon
BV

Netherlands

ORD

100.00%

102

–

100.00%

ORD

100.00%

216

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 201911 Subsidiary Undertakings continued

Name

Country of
Incorporation

Registered
Office

Share Class

Proportion
of shares
held

Name

Country of
Incorporation

Registered
Office

Share Class

Proportion
of shares
held

Germany

COMMON

100.00%

149

140

ORD

100.00%

Reckitt Benckiser Health
Comercial Ltda

Brazil

ORD

100.00%

Reckitt Benckiser Health
Kenya Limited

Kenya

QUOTA

100.00%

149

ORD

100.00%

–

100.00%

ORD

100.00%

Reckitt Benckiser Health
Limited

Reckitt Benckiser
Healthcare (Central &
Eastern Europe) Limited

Reckitt Benckiser
Healthcare (CIS) Limited

ORD

100.00%

ORD

100.00%

149

ORD

100.00%

149

ORD

100.00%

149

ORD

100.00%

Reckitt Benckiser
Healthcare (Ireland)
Limited

Reckitt Benckiser
Healthcare (Italia) S.p.A

Reckitt Benckiser
Healthcare (MEMA)
Limited

Reckitt Benckiser
Healthcare (Philippines),
Inc.

Ireland

ORD

100.00%

Italy

ORD

100.00%

149

ORD

100.00%

Philippines

117

COMMON/
PREF

100.00%

Reckitt Benckiser
Healthcare (Russia) LLC

Russia

124

–

100.00%

Reckitt Benckiser
Healthcare (UK) Limited

149

ORD

100.00%

ORD

99.00%

ORD

100.00%

PARTNERSHIP
SHARES

100.00%

–

Reckitt Benckiser Chartres
SAS

France

Reckitt Benckiser Chile SA Chile

Reckitt Benckiser
Colombia SA

Colombia

Reckitt Benckiser
Commercial (Italia) S.r.l.

Reckitt Benckiser
Corporate Services
Limited

Italy

Reckitt Benckiser d.o.o

Croatia

Germany

Reckitt Benckiser
Detergents GmbH

Reckitt Benckiser
Deutschland GmbH

Reckitt Benckiser East
Africa Limited

Kenya

Reckitt Benckiser Ecuador
SA

Ecuador

Reckitt Benckiser Europe
General Partnership

Switzerland

Reckitt Benckiser Europe
General Partnership,
Slough (UK), Wallisellen
Branch†

Reckitt Benckiser Ev ve
Hjyen Ürünleri A.S¸.

Reckitt Benckiser
Expatriate Services
Limited

Reckitt Benckiser Fabric
Treatment BV

Turkey

147

100.00%

149

ORD

100.00%

Netherlands

102

ORD

100.00%

Reckitt Benckiser Finance
(2005) Limited

Reckitt Benckiser Finance
(2007)

Reckitt Benckiser Finance
(2010) Limited

149

ORD

100.00%

149

ORD

100.00%

149

ORD

100.00%

Reckitt Benckiser Finance
(Ireland) Unlimited
Company

Ireland

ORD

100.00%

Reckitt Benckiser Finance
Company Limited

149

ORD

100.00%

Reckitt Benckiser Finish
BV

Netherlands

102

ORD

100.00%

Reckitt Benckiser France
SAS

France

ORD

100.00%

Reckitt Benckiser FSIA BV Netherlands

102

ORD

100.00%

Reckitt Benckiser Global
R&D GmbH

Reckitt Benckiser Health
Argentina SA

Germany

COMMON

100.00%

Argentina

ORD

100.00%

Reckitt Benckiser
Healthcare Australia Pty
Limited

Reckitt Benckiser
Healthcare BV

Reckitt Benckiser
Healthcare France SAS

Reckitt Benckiser
Healthcare India Private
Limited

Australia

ORD

100.00%

Netherlands

102

ORD

100.00%

France

India

ORD

100.00%

ORD

100.00%

Reckitt Benckiser
Healthcare International
Limited

149

ORD

100.00%

Reckitt Benckiser
Healthcare Manufacturing
(Thailand) Limited

Reckitt Benckiser
Healthcare Portugal Ltda

Reckitt Benckiser
Healthcare SA

Thailand

145

ORD/PREF

100.00%

Portugal

120

ORD

100.00%

Spain

134

ORD

100.00%

Reckitt Benckiser Hellas
Healthcare S.A.

Reckitt Benckiser Hellas
Hygiene Home A.E.

Greece

ORD

100.00%

COMMON

100.00%

Reckitt Benckiser Holding
(Thailand) Limited

Reckitt Benckiser Holding
GmbH & Co KG

Thailand

143

COMM/PREF

45.00%

Germany

–

100.00%

217

11 Subsidiary Undertakings continued

Country of
Incorporation

Registered
Office

Share Class

Proportion
of shares
held

Name

Guernsey

ORD

100.00%

Name

Reckitt Benckiser
Holdings (Channel Islands)
Limited

Reckitt Benckiser
Holdings (Channel Islands)
Limited†

149

–

100.00%

Italy

QUOTAS

100.00%

Reckitt Benckiser
Holdings (Italia) S.r.l.

Reckitt Benckiser
Holdings (Luxembourg)
Limited

Reckitt Benckiser
Holdings (Overseas)
Limited

Reckitt Benckiser
Holdings (TFFC) Limited

Reckitt Benckiser
Holdings (USA) Limited

Reckitt Benckiser Home
Chemical Products
Trading (Shanghai) Co.
Limited

Reckitt Benckiser Hong
Kong Limited

China

Reckitt Benckiser
Holdings (USA) Limited†

Luxembourg

149

ORD/PREF

100.00%

149

ORD

100.00%

149

ORD

100.00%

149

ORD

100.00%

–

100.00%

ORD

100.00%

Hong Kong

ORD

100.00%

Reckitt Benckiser Hong
Kong Limited†

Taiwan

Reckitt Benckiser
Household and
Healthcare Ukraine LLC

Ukraine

142

153

–

100.00%

Reckitt Benckiser
Household Products
(China) Company Limited

Reckitt Benckiser Hygiene
Home Brands B.V.

China

ORD

100.00%

Netherlands

102

ORD

100.00%

Reckitt Benckiser Hygiene
Home Egypt Limited

Egypt

Reckitt Benckiser Hygiene
Home Ukraine LLC

Ukraine

ORD

100.00%

153

–

100.00%

Reckitt Benckiser
Investments (2012) LLC

USA

122 MEMBERSHIP

100.00%

Country of
Incorporation

Registered
Office

Share Class

Proportion
of shares
held

Luxembourg

ORD

100.00%

149

ORD

100.00%

Reckitt Benckiser
Investments (No. 8) S.à.r.l

Reckitt Benckiser
Investments Limited

Reckitt Benckiser IP LLC

Russia

Reckitt Benckiser Ireland
Limited

Ireland

Reckitt Benckiser Italia
S.p.A

Reckitt Benckiser Japan
Limited

Reckitt Benckiser Jersey
(No.1) Limited

Italy

Japan

Jersey

Reckitt Benckiser Jersey
(No.1) Limited†

Reckitt Benckiser Jersey
(No.2) Limited

Jersey

Reckitt Benckiser Jersey
(No.2) Limited†

Reckitt Benckiser Jersey
(No.3) Limited

Jersey

Reckitt Benckiser Jersey
(No.3) Limited†

Reckitt Benckiser Jersey
(No.5) Limited

Jersey

Reckitt Benckiser Jersey
(No.5) Limited†

Reckitt Benckiser Jersey
(No.7) Limited

Jersey

125

–

100.00%

ORD

100.00%

ORD

100.00%

ORD

100.00%

ORD

100.00%

149

–

100.00%

ORD

100.00%

149

–

100.00%

ORD

100.00%

149

–

100.00%

ORD

100.00%

149

–

100.00%

ORD/A/C/D

100.00%

Reckitt Benckiser
Kazakhstan LLC

Reckitt Benckiser
Kereskedelmi Kft

Reckitt Benckiser Laundry
Detergents (No. 1) BV

Reckitt Benckiser Laundry
Detergents (No. 2) BV

Reckitt Benckiser
Lime-A-Way BV

Kazakhstan

Hungary

–

100.00%

ORD

100.00%

Netherlands

102

ORD

100.00%

Netherlands

102

ORD

100.00%

Netherlands

102

ORD

100.00%

Reckitt Benckiser LLC

USA

122 MEMBERSHIP

100.00%

Reckitt Benckiser
Investments (No. 1) S.à.r.l

Luxembourg

Reckitt Benckiser
Investments (No. 2) S.à.r.l

Luxembourg

Reckitt Benckiser
Investments (No. 4) S.à.r.l

Luxembourg

Reckitt Benckiser
Investments (No. 5) S.à.r.l

Luxembourg

Reckitt Benckiser
Investments (No. 6) S.à.r.l

Luxembourg

Reckitt Benckiser
Investments (No. 7) S.à.r.l

Luxembourg

ORD

100.00%

ORD

100.00%

ORD

100.00%

ORD

100.00%

ORD

100.00%

ORD

100.00%

Reckitt Benckiser LLC

Russia

Reckitt Benckiser
Luxembourg (2010)
Limited

Reckitt Benckiser
Luxembourg (No. 1)
Limited

Reckitt Benckiser
Luxembourg (No. 2)
Limited

126

149

–

100.00%

ORD

100.00%

149

ORD

100.00%

149

ORD

100.00%

218

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 201911 Subsidiary Undertakings continued

Country of
Incorporation

Registered
Office

Share Class

Proportion
of shares
held

149

ORD

100.00%

149

ORD

100.00%

Name

Reckitt Benckiser
Tatabanya Kft

Reckitt Benckiser Temizlik
Malzemesi San. ve Tic.
A.S.

Country of
Incorporation

Registered
Office

Share Class

Proportion
of shares
held

Hungary

ORD

100.00%

Turkey

148

–

99.96%

Ireland

81 A/B/C/D/E/F/G/

100.00%

Reckitt Benckiser Tiret BV Netherlands

Name

Reckitt Benckiser
Luxembourg (No. 3)
Limited

Reckitt Benckiser
Luxembourg (No. 4)
Limited

Reckitt Benckiser
Management Services
Unlimited Company

H/I/K

ORD

100.00%

Reckitt Benckiser Marc BV Netherlands

Reckitt Benckiser Mexico,
S.A. de C.V.

Mexico

102

100

Reckitt Benckiser
Morocco Sarl AU

Morocco

101

ORD

100.00%

Reckitt Benckiser Nigeria
Limited

Nigeria

109

ORD

99.53%

Reckitt Benckiser Nordic
A/S

Denmark

ORD

100.00%

Reckitt Benckiser NV

Netherlands

Reckitt Benckiser NV†

Luxembourg

Reckitt Benckiser Oven
Cleaners BV

Netherlands

Reckitt Benckiser Pakistan
Limited

Pakistan

Reckitt Benckiser Peru SA Peru

Reckitt Benckiser
Pharmaceuticals
(Proprietary) Limited

South Africa

Reckitt Benckiser plc˚

Reckitt Benckiser Porto
Alto Lda

Portugal

102

ORD

100.00%

–

100.00%

ORD

100.00%

112

ORD

98.67%

115

131

149

121

ORD

100.00%

Reckitt Benckiser Power
Cleaners BV

Reckitt Benckiser
Production (Poland) Sp.
z.o.o.

Netherlands

102

ORD

100.00%

Poland

119

ORD

100.00%

Reckitt Benckiser S.à.r.l

Luxembourg

Reckitt Benckiser Scholl
India Private Limited

India

Reckitt Benckiser Service
Bureau Limited

Reckitt Benckiser Services
(Kenya) Limited

Kenya

Reckitt Benckiser Services
S.A. de C.V.

Mexico

149

ORD

100.00%

ORD

100.00%

100

ORD

100.00%

Reckitt Benckiser South
Africa Health Holdings
(Pty) Limited

Reckitt Benckiser South
Africa Proprietary Limited

South Africa

132

ORD

100.00%

South Africa

132

ORD

100.00%

USA

Reckitt Benckiser Treasury
(2007) Limited

Reckitt Benckiser Treasury
Services plc

Reckitt Benckiser USA
(2010) LLC

Reckitt Benckiser USA
(2010) LLC†

Reckitt Benckiser USA
(2012) LLC

Reckitt Benckiser USA
(2013) LLC

Reckitt Benckiser USA
(2013) LLC†

Reckitt Benckiser USA
Finance (No.1) Limited

Reckitt Benckiser USA
Finance (No.2) Limited

Reckitt Benckiser USA
Finance (No.3) Limited

Reckitt Benckiser Vanish
BV

Reckitt Benckiser
Venezuela SA

Reckitt Colman Chiswick
(OTC) Limited

Reckitt Piramal Private
Limited

India

Reigate Square Holdings
S.à.r.l

Luxembourg

Scholl (Investments)
Limited*

Scholl (UK) Limited

Scholl Consumer Products
Limited

Scholl Latin America
Limited*

Scholl Limited

Servicios Nutricionales
Mead Johnson, S. de R.L.
de C.V.

100.00%

Relcamp Aie*

Spain

ORD

100.00%

Rivalmuster*

102

149

ORD

100.00%

ORD/PREF

100.00%

149

ORD

100.00%

122 MEMBERSHIP

100.00%

149

–

100.00%

122 MEMBERSHIP

100.00%

122 MEMBERSHIP

100.00%

149

–

100.00%

149

ORD

100.00%

149

ORD

100.00%

149

ORD

100.00%

149

ORD

100.00%

135

149

ORD

100.00%

ORD

100.00%

ORD

100.00%

Netherlands

102

ORD

100.00%

Venezuela

158

NOMINATIVE

100.00%

Bahamas

ORD

100.00%

Mexico

149

ORD/PREF

100.00%

ORD

100.00%

Reckitt Benckiser Taiwan
Limited

Taiwan

142

ORD

100.00%

Seton Healthcare Group
No.2 Trustee Limited

149

ORD

100.00%

219

11 Subsidiary Undertakings continued

Country of
Incorporation

Registered
Office

Share Class

Proportion
of shares
held

Name

Country of
Incorporation

Registered
Office

Share Class

Proportion
of shares
held

149

ORD

100.00%

Tai He Tai Lai Culture
Communication Co Ltd

China

ORD

100.00%

Vietnam

143

ORD

100.00%

149

ORD

100.00%

The Representative Office
of Reckitt Benckiser
(Thailand) Ltd in Ho Chi
Minh City†

149

ORD

100.00%

Tubifoam Limited

Name

Seton Healthcare No.1
Trustee Limited

Sonet Group Limited*

Sonet Healthcare
Limited*

Sonet Investments
Limited

Sonet Prebbles Limited

Sonet Products Limited

Sonet Scholl Healthcare
International Limited*

Sonet Scholl Healthcare
Limited*

Sonet Scholl Overseas
Investments Limited

Sonet Scholl UK Limited

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 UK

SSL (SD) International
Limited*

SSL Australia Pty Ltd

Australia

SSL Capital Ltd

SSL Healthcare (Shanghai)
Ltd

Jersey

China

SSL Healthcare Ireland
Limited

Ireland

149

ORD

100.00%

149

ORD

100.00%

149

ORD

100.00%

149

116

ORD

100.00%

COMMON/
PREF

38.00%

149

ORD

100.00%

149

ORD/PREF

100.00%

149

ORD

100.00%

149

ORD

100.00%

149

ORD

100.00%

ORD

100.00%

ORD/PREF

100.00%

ORD

100.00%

ORD

100.00%

SSL Healthcare
Manufacturing SA

Spain

136

ORD

100.00%

SSL Healthcare Norge AS* Norway

SSL Healthcare Sverige AB Sweden

SSL Holdings (USA) Inc

USA

SSL International plc

SSL Manufacturing
(Thailand) Limited

Thailand

SSL New Zealand Limited

New Zealand

SSL Products Limited

Suffolk Finance Company
Limited

111

139

122

149

146

108

149

ORD

100.00%

COMMON

100.00%

ORD

100.00%

ORD/DEF

100.00%

Suffolk Insurance Limited

Bermuda

COMMON

100.00%

220

149

155

149

ORD

100.00%

ORD

100.00%

Ultra Chemical Limited*

Ultra Laboratories
Limited*

UpSpring LLC

USA

W.Woodward,Limited

Winchester Square
Holdings S.à.r.l

Luxembourg

Xinzhou ZhongHeng
Pharmaceutical Co., Ltd

China

* This entity is in liquidation
˚ Interest held directly by Reckitt Benckiser Group plc
† This is a registered branch

Registered Office

Teniente General Richieri 15, Ciudad de Sunchales. Santa Fe, Argentina

Bucarelli 2608 PB A, CABA, Buenos Aires, Argentina

King & Wood Mallesons Governor Phillip Tower Level 61 1, Farrer Place
Sydney NSW 2000, Australia

Level 47, 680 George Street, Sydney, NSW, 2000, Australia

Guglgasse 15, A-1110 Wien (Vienna), Austria

c/o 103-105 Bath Road, Slough, SL1 3UH, United Kingdom

Building 330, Road 1506, Block 115. Bahrain International Investment
Park, Hidd. Kingdom of Bahrain

58/59 Nasirabad Industrial Area, Chittagong- 4209, Bangladesh

220108, Minsk, Kazintsa, 121A, app.403, Belarus

20 Allée de la Recherche, 1070 Anderlecht, Belgium

Clarendon House, 2 Church Street, Hamilton, HM DX, Bermuda

Estrada Fukutaro Yida, n. 930, Bairro Cooperativa, in the city of Sao
Bernardo Do Campo, Estate of Sao Paulo, 09852-060, Brazil

Rodovia Raposo Tavares, 8015, km 18, Jardim Arpoador, CEP 05577-900,
São Paulo, Brazil

Presidente Juscelino Kubitschek Avenue, n. 1909, 24th floor, Part B,
North Tower, Condomínio São Paulo Corporate Centers, 04543-907, São
Paulo, Brazil

Av. Presidente Juscelino Kubitshek,1909, cj 241 and 251, Ed. São Paulo
Corporate Center/North Tower, São Paulo – Brasil. 04543-903

Av. Presidente Juscelino Kubitschek, nº 1.909, Conjunto 241, Parte C,
localizado no 24º andar da Torre Norte do Condomínio São Paulo
Corporate Centers, Bairro Vila Nova Conceição, São Paulo , CEP
04543-907, Brazil

Palm Grove House, PO Box 438, Road Town, Tortola, VG1110, British
Virgin Islands

Sofia City – 1407, Lozenets region, 22, Zlaten rog Str., 3rd floor, Office 4,
Bulgaria

1959 Upper Water Street, Suite 900, Halifax, Nova Scotia, B3J 3N2,
Canada

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 201911 Subsidiary Undertakings continued

Suite 2300, Bentall 5, 550 Burrard Street, Vancouver, BC, V6C 2B5,
Canada

1680 Tech Avenue Unit 2, Mississauga, Ontario L4W 5S9, Canada

PO Box 309, Ugland House, South Church Street, George Town, Grand
Cayman, KY1-1104, Cayman Islands

Presidente Kennedy n° 5454 depto 1602. Comuna: Vitacura. Ciudad:
Santiago de Chile, Chile

Av. Pdte. Kennedy Lateral 5454 of 1602, Vitacura, Región Metropolitana,
Santiago de Chile, Chile

Dangtu Economic Development Zone, Maanshan City, Anhui Province,
China

Unit 02, 11/F, Tower A, Hedonic Center, 6 , Songyue Road, Siming
District, Xiamen, China

Room 01, Floor 2, No.2, Xiayuan Road, Dongji Industry Zone of Economic
and Technology District, Guangzhou, Guangdong, China

No. 1-13 Shangma Part Aodong Road, High-tech Industrial Development
Zone, Qingdao, China

16/F, Xu Jia Hui International Plaza, No.1033 Zhao Jia Bang Road,
Shanghai, China

Unit B01, Room 401, Tower 2, Parkview Green Fang Cao Di, No.9
Dongdaqiao Road, Chaoyang District, Beijing, China

Room 1101, No. 1033, Zhao Jia Bang Road, Shanghai, China

No. 3, Canglian 1 road, ETDZ, Guangzhou, China

C6-8 area, 6 floor, No 333, Futexiyi Road, Free trade zone, Waigaoqiao,
Shanghai, China

No.34 Beijing East Road, Jingzhou City, Hubei Province, China

Room 1605, No.660 Shangcheng Road, Pudong District, Shanghai City,
China

Unit B06, Room 401, Tower 2, Parkview Green Fang Cao Di, No.9
Dongdaqiao Road, Chaoyang District, Beijing, China

Fenyuan Road, Xinzhou Economic and Technology Development Zone,
Shanxi, China

2# Xia Yuan Road, Dongji Industrial District, Guangzhou Economic &
Technological Development Zone, Guangzhou, 510730, China

Room 02, Floor 2, No.2, Xiayuan Road, Dongji Industry Zone of Economic
and Technology District, Guangzhou, Guangdong, China

5th Floor, Building 1, Taicang Biological Port, No. 52 Yingang Road,
Taicang Port Economic and Technological Development Zone, China

Calle 76 No. 11-17 Piso 3, Edificio Torre Los Nogales, Bogota, Colombia

Calle 76 No.11 – 17 Oficina 301 Bogotá, Colombia

Calle 46 # 5 – 76. Cali, Colombia

San José, Escazú Corporate Center, 7 Piso, Costado Sur de Multiplaza
Escazú, San José, Costa Rica

Ulica Grada Vukovara 269d, 10 000 Zagreb, Hrvatska, Croatia

1 Lampousas Street, P.C. 1095, Nicosia, Cyprus

Vinohradská 2828/151, 130 00 Praha 3-Žižkov, Czech Republic

Vandtarnsvej 83A 2860 Soborg, Denmark

Av. Winston Churchill No.1099, Tower Acropolis, Floor 12, City of Santo
Domingo, Dominican Republic

Behind GAC Complex, Jebel Ali Free Zone, PO Box 61344 Dubai, UAE

Office No. 1801 – 1803 – 1804 EMAAR Properrties – Burj Khalifa, P.O.
Box: 119481, UAE

PO Box 119841, Jebel Ali Freezone, Dubai, UAE

P.O. Box 16834 Jebel Ali Free Zone Dubai, UAE

Av. Coruña N27 – 88 y Orellana. Quito – Ecuador

Av. 12 de Octubre N26-48 y Orellana. Edificio Mirage, Piso 4, Oficina 4C.
(Quito-Ecuador) Código postal 170525, Ecuador

Polyium Building 22, Off-road 90, District 1, 5th Settlement, New Cairo,
Egypt

Building A1, Second Floor, Plot #A14b01, Cairo Festival City, First District,
Fifth Settlement, New Cairo, Egypt

Itsehallintokuja 6 02600 Espoo, Finland

Självstyrelsevägen 6 02600 Esbo, Finland

38 RUE Victor Basch, 91300 Massy, France

102 RUE de Sours 28000 Chartres, France

Heinestrasse 9, 69469 Weinheim, Germany

Robert-Koch-Str. 1, 69115 Heidelberg, Germany

Darwinstrasse 2-4, 69115 Heidelberg, Germany

Dr. Albert-Reimann-Strasse 3, 68526 Ladenburg, Germany

7 Taki Kavalieratou Street, 145 64 Kifissia, Greece

1st and 2nd Floors, Elizabeth House, Les Ruettes Brayes, St Peter Port,
GY1 1EW, Guernsey

2206-11, Windsor House, 311 Gloucester Road, Causeway Bay,
Hong Kong

25/F Chubb Tower, Windsor House, 311 Gloucester Road, Causeway Bay,
Hong Kong

Alamdea Dr. Carlos D'assumpcao No.258,6 Andar, F6, Edif.Kin Heng
Long Plaza, Macau, MO, Macau

9/F Three Exchange Square 8, Connaught Place Central, Hong Kong

Unit 2001, 20/F, Greenfield Tower, Concordia Plaza, No. 1 Science
Museum Road, Kowloon, Hong Kong

134-146 ut Bocksai, 1113 Budapest, Hungary

Unit No. 54, 5th Floor, Kalpataru Square, Andheri-Kurla Road, Andheri
(East), Mumbai – 400059, Maharashtra, India

Plot. No. 48, Sector 32, Institutional Area, Gurgaon-122001, Tamilnadu,
India

Plot no. F73 & 74, Sipcot Industrial Park, Irungattukottai, Sriperumbudur
Taluk, Kancheepuram District-602117, Tamilnadu, India

Treasury Tower – District 8 Level 59, Scbd Lot 28, Jl. Jend Sudirman Kav
52-53, Kel. Senayan, Kec., Kebayoran Baru, Kota Adm. Jakarta Selatan,
Prop. Dki Jakarta, Indonesia

District 8 Level 58th floor. SCBD Lot 28, Jl. Jend. Sudirman kav 52-54,
Jakarta 12190, Indonesia

Jalan Raya Narogong Km. 15, Desa Limusnunggal Pangkalan VII, Kec
Cileungsi , Bogor, Indonesia

No. 67, West Taban Avenue, Africa Boulevard, Tehran, Iran

3rd Floor Kilmore House, Park Lane, Spencer Dock, Dublin 1, Ireland

6th Floor, 2 Grand Canal Square, Dublin 2, Ireland

6 Hanagar, Hod Hasharon, Israel

Via Birmania, 81-00144, Roma, Italy

Via Spadolini, 7, 20141 Milano, Italy

3-20-14 Higashi Gotanda, Shinagawa-ku, 141-0022, Tokyo

ICF 5, St. Helier, JE1 1ST, Jersey

44 Esplanade, St Helier, JE4 9WG, Jersey

Office 302, Building 15a, Koktem-1, Micro District, Almaty city,
Kazakhstan

Plot Lr No 209/2462, Likoni Road, Nairobi, Kenya

14 Riverside, L.R Number 209/19436, Riverside Drive, Nairobi, Kenya

LR.NO.1870/1/569, 2nd Floor, Apollo Centre, Ring Road, Westlands,
Kenya

221

11 Subsidiary Undertakings continued

Rı¯ga, Stre¯lnieku iela 1A – 2, LV-1010, Latvia

133 24th Floor Two IFC, 10 Gukjegeumyung-ro, Youngdeungpo-gu, Seoul,

1 Rue de la Poudrerie, L – 3364 Leudelange, Luxembourg

Suite 1005, 10th Floor, Wisma Hamzag Kwong Hing, No. 1 Leboh
Ampang, 50100 Kuala Lumpur, W.P. Kuala Lumpur, Malaysia

Unit No. 50-8-1, 8th Floor, Wisma Uoa Damansara, 50 Jalan Dungun,
Damansara Heights, 50490 Kuala Lumpur, Malaysia

Level 7, Menara Milenium, Jalan Damanlela, Pusat Bandar Damansara,
Damansara Heights, 50490 Kuala Lumpur, Malaysia

Av. Ejército Nacional No. 769, Corporativo Miyana Torre B, Piso 6,
Alcaldía Miguel Hidalgo, Colonia Granada, CP 11520, Mexico

Calzada de Tlalpan No. 2996, Col. Ex Hacienda Coapa, Del. Coyoacán,
Cd. de México, C.P. 04980, Mexico

150-945, South Korea

134 Carrer de Mataró, 28, 08403 Granollers, Barcelona, Spain

135 Carrer de Fray Pau Carbó, 24, 08403, Granollers, Barcelona, Spain

136 Av. Can Fatjó, 151, 08191 Rubí, Barcelona, Spain

137 41 and 41/1, Lauries Raoad, Colombo 4, Sri Lanka

138 Vretenvägen 2, 4th Floor, 171 54 Solna, Sweden

139 Box 190, 101 23 Stockholm, Sweden

140 Richtistrasse 5, 8304 Wallisellen, Switzerland

141

5F., No.156, Jiankang Rd., Songshan Dist. Taipei, 105, Taiwan

142 6F., No. 136, Sec. 3, Ren’ai Rd., Da’an Dist., Taipei City 10657, Taiwan,

100 Circuito Dr Gustavo Baz,7 No 7, Fracc Industrial El Pedregal, Atizapan de

R.O.C.

Zaragoza, Edomex, Mexico

143 388 Exchange Tower, 14th Fl.,Sukhumvit Rd., Klongtoey, Bangkok,

101 322 Boulevard, Zerktouni, Residence Boissy Ler Etage – Bourgogne,

10110, Thailand

Casablanca, Morocco

102

Siriusdreef 14, 2132 WT Hoofddorp, The Netherlands

103 Middenkampweg 2, 6545 CJ Nijmegen, The Netherlands

104 225 North Canal Street, Floor 25, Chicago, IL 60606, USA

105

Zuidplein 142, Tower H, 17th Floor, 1077 XV Amsterdam, The
Netherlands

106

Schiphol Boulevard 267, 1118 BH Schiphol, The Netherlands

107

Level 1, 2 Fred Thomas Drive Takapuna, Auckland, 0622, New Zealand

108 2 Fred Thomas Drive, Takapuna, Auckland 0622, New Zealand

109 12 Montgomery Road, Yaba, Lagos, Nigeria

110 Henrik Ibsens Gate 60A,0255 Oslo, Norway

111 Vollsveien 9, 1366 Lysaker, Norway

112

113

3rd Floor, Tenancy 04 and 05, Corporate Office Block, Dolman City,
HC-3, Block 4, Scheme 5, Clifton, Karachi, Pakistan

Regus, Torres de la Américas, Torres de las Américas, Torre A, Piso 15.
Oficina 1539., Punta Pacifica, Ciudad de Panamá, PA , Panama

114 Calle Dean Valdivia 148 Piso 5, San Isidro Lima 27, Peru

115 Avenida República de Panamá No. 2557 Int. 202, La Victoria. Lima, Peru

116

2309 Don Chino Roces Avenue Extension, Makati City, Philippines

117

3rd Floor Mead Johnson Nutrition Inc, 2309 Don Chino Roces Extension,
Makati City, Philippines

118 Ul. Wołoska 22, 02-675 Warsaw, Poland

144 No. 388, Room No. 1903, 19th Floor, Exchange Tower, Sukhumvit Road,
Sub-District Klongtoey, District Klongtoey Bangkok 10110, Thailand

145 65 Moo 12 Lardkrabang-Bangplee Road, Bangplee Samutprakarn,

Bangkok 10540, Thailand

146 100 Moo 5 Bangsamak, Bangpakong, Chachoengsao, Thailand

147 Orta Mahallesi Demokrasi Caddesi Benckiser Sitesi No:92 Tuzla/Istanbul,

Turkey

148 Dikilitas¸ Mah. Hakkı Yeten Cad. Selenium Plaza 10 C Fulya, Istanbul,

Turkey

149 103-105 Bath Road, Slough, SL1 3UH, United Kingdom

150 4th Floor, 115, George Street, Edinburgh, EH2 4JN, Scotland

151 Northcliffe House, Young Street, London, W8 5EH, United Kingdom

152

Prospect 40-Richchia Zhovtnia., 120, 1 Block, Kiev, 03127, Ukraine

153 28A Moskovskiy Prospect, Bld.G, Office 80. 04073, Kiev, Ukraine

154 399 Interpace Parkway, Parsippany, NJ 07054, USA

155 4209 S. Industrial Drive, Suite 200, Austin, Texas, 78744, USA

156

Illinois Corporation Service Company, 801 Adlai Stevenson Drive,
Springfield IL 62703, Sangamon County, USA

157 Urb. Las Mercedes, Av. Orinoco cruce con Mucuchies Torre Nordic, Piso

1, Oficina 1 y 2, Municipio Baruta Caracas, Venezuela

158 Av Intersección Avenidas Orinoco Con Mucuchies Edif Torre Nordic Piso 1
of 1 y 2 Urb Las Mercedes, Caracas, Miranda Zona, 1061, Venezuela

159 Unit 401, 4th Floor, Metropolitan Building, No. 235 Dong Khoi Street,

119

05-100 Nowy Dwór Mazowiecki, Ul. Okunin 1, Poland

Ben Nghe Ward, District 1, Ho Chi Minh City, Vietnam

120 R. Dom Cristóvão da Gama 1 – 1º Andar C/D, Edifício Restelo, 1400-113

Lisboa, Portugal

121

Estrada Malhada dos Carrascos nr12, 2135-061, Samora Correia, Portugal

122 Corporation Service Company, 251 Little Falls Drive, Wilmington, DE

19808, New Castle County, USA

123 89-97 Grigore Alexandrescu Street, Building A, 5th floor, Finish room,

Sector 1, Bucharest, Romania

124 4, Shluzovaya emb., 3rd Floor, Moscow, 115114 Russia

125 Kozhevnicheskaya street, 14, Moscow, 115114, Russia

126 Moscow, Kosmodamianskaya Nab d.52/1, Russia

127 80 Robinson Road, #02-00, 068898, Singapore

128 1 Fifth Avenue, #04-06 Guthrie House, 268802, Singapore

129 12 Marina Boulevard, #19-01 Marina Bay Financial Centre, 018982,

Singapore

130 Drienˇ ová 3, 821 08 Bratislava, Slovakia

131 8 Jet Park Road, Elandsfontein, Gauteng, 1406, South Africa

132 8 Jet Park Road, Elandsfontein, Gauteng, 1601, South Africa

222

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019S H A R E H O L D E R I N F O R M AT I O N

Annual General Meeting
Our AGM will he held on Tuesday 12 May 2020 at 3.00pm at
103-105 Bath Road, Slough, Berkshire, SL1 3UH.

The Notice convening the meeting, together with the business to
be considered at the meeting is contained in a separate document for
Shareholders and is available on our website at www.rb.com.

2020 Financial Calendar and Key Dates

Announcement of Quarter 1 interim
management statement

Annual General Meeting

Record date for 2019 final dividend

Payment of 2019 final ordinary dividend

Announcement of 2020 interim results

30 April 2020

12 May 2020

17 April 2020

28 May 2020

28 July 20201

Record date for 2020 interim dividend

21 August 20201

Payment of 2020 interim ordinary dividend

29 September 20201

Announcement of Quarter 3 interim
management statement

20 October 20201

1 Provisional dates.

Dividend
The Directors have recommended a final dividend of 101.6 pence per
share, for the year ended 31 December 2019. Subject to Shareholder
approval at the 2020 AGM, payment of the final dividend will be made
on 28 May 2020 to all Shareholders on the register as at 17 April 2020.
The latest date for receipt of new applications to participate in the
Dividend Reinvestment Plan (DRIP) in respect of the 2019 final dividend
is 5 May 2020. Details on how to join the DRIP are found on page 223
of this report.

Mandatory Direct Credit
In September 2018 we changed the way we pay dividends to
Shareholders and no longer pay dividends by cheque. This is known as
‘mandatory direct credit’. The reasons and benefits for introducing this
change are:

•

Shareholders receive dividend funds quicker;

• we reduce our environmental impact;

• we reduce the risk of cheque fraud; and

• we reduce the administration costs if issuing or banking cheques.

To have your dividends paid directly into your bank account, please
logon to the Computershare Investor Centre at www.investorcentre.
co.uk, or by telephone on +44 (0)370 703 0118. We will hold your
dividends for you until you provide valid bank details and charges may
be applied to reissue any dividend payments.

If you are based overseas, you may choose to have your dividends

paid to your account in your local currency by using Computershare’s
Global Payment Service (GPS). To view the terms and register to
the GPS, please visit www.computershare.com/uk/investor/GPS.
If you wish to reinvest your dividend to buy more shares, please
join our DRIP.

Dividend Reinvestment Plan (DRIP)
Shareholders participating in the DRIP receive additional shares
purchased in the market instead of receiving a cash dividend. 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.

Electronic Shareholder 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 quicker and more effective communications with
Shareholders; and

•

support RB’s corporate responsibility profile.

Shareholders can register their email address at www.investorcentre.
co.uk/etreeuk/reckittbenckiser. For each new Shareholder that does
so, we will donate £1 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 hard copy 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
Computershare. Shareholders can revoke their consent at any time
by contacting Computershare.

The Company’s 2019 Annual Report and Notice of the 2020 AGM

are available to view at www.rb.com. The Investor section of the
website also contains up-to-date information for Shareholders to view
throughout the year, including:

•

detailed share price information;

financial results;

regulatory announcements;

dividend payment dates and amounts;

access to Shareholder documents including the Annual Report
and Notice of AGM; and

•

share capital information.

Share Dealing Facility
The Company’s shares can be traded through most banks, building
societies, stockbrokers or ‘share shops’. In addition, UK-based
Shareholders can buy or sell RB shares using a share dealing facility
operated by the Registrar, these include internet and telephone
share dealing.

223

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019S H A R E H O L D E R I N F O R M AT I O N CO N T I N U E D

Internet Share Dealing
This service offers Shareholders a straightforward way to buy or sell
RB’s shares on the London Stock Exchange. The commission is 1%,
subject to a minimum charge of £30. In addition, stamp duty, currently
0.5%, is payable on purchases. There is no need to open an account in
order to deal. Real-time dealing is available during UK market hours
08:00 to 16:30. In addition, there is a facility to place your order
outside of market hours. Up to 90-day limit orders are available
for sales.

To access the service, log on to www.computershare.trade/.

Shareholders must have their Shareholder Reference Number (SRN)
available. The SRN appears on share certificates. Internet share dealing
is currently limited to certain jurisdictions: a full list of countries can be
found on the Computershare website at www.computershare.trade/
cert_faqs.html scroll down to the section ‘Using the service’ and then
‘Am I eligible to register for the service?’.

Telephone Share Dealing
Telephone share dealing is available to Shareholders residing in the UK
and Ireland. The service is available Monday to Friday, excluding bank
holidays, from 08.00 to 16.30 by contacting Computershare on
+44 (0)370 703 0084. The commission is 1%, subject to a £50 cap.
In addition, 0.5% stamp duty is payable on purchases; a full list of
fees can be found online at www.computershare.trade/costs.html.
To access the service, Shareholders must have their SRN to refer to
during the call. Shareholders should also have a debit card to make
purchases over the telephone.

Telephone share dealing is offered on an execution-only basis and

no recommendation can be made with respect to buying, selling or
holding shares in RB. Shareholders who are unsure of what action to
take should obtain independent financial advice. It is also important to
note that share values may go down as well as up, which may result in
a Shareholder receiving less/more than he/she originally invested.

Detailed terms and conditions for both internet and telephone
dealing are available upon request by calling +44 (0)370 702 0000.

American Depositary Receipts
American Depositary Receipts (ADRs) are dollar-denominated
securities that represent the ownership of ordinary shares in a non-US
company, quoted and traded in US dollars in the US securities market.
An ADRs allow the purchase, holding and sale of non-US shares by US
investors. Dividends are paid to investors in US dollars.

Reckitt Benckiser Group plc ADRs are traded on the

over-the-counter market (OTC) under the symbol RBGLY. Five ADRs
represent one ordinary RB share. J.P. Morgan Chase Bank N.A. is the
Depositary. The table below provides details of the identification of RB
securities on the US market place and the London Stock Exchange.

Symbol

Security

Listing/Trading

CUSIP/ISIN

RBGLY U.S. security (ADR) OTC Pink

756255204

RB.

Ordinary share

London Stock
Exchange

GB00B24CGK77

ADR Depositary Bank
J.P. Morgan Chase sponsors and administers the RB ADR facility.
J.P. Morgan ADR shareholder services can be contacted as follows:

J.P. Morgan Chase Bank N.A.
PO Box 64504, St. Paul, MN 55164-0504, US
Online via: www.shareowneronline.com
Telephone number for general queries: Tel: (800) 990 1135
Telephone number from outside the US: Tel: +1 651 453 2128

Company Secretary
Rupert Bondy

Registered Office
103-105 Bath Road, Slough
Berkshire SL1 3UH
Telephone: +44 (0) 1753 217800
Registered and domiciled in England and Wales No. 6270876

Analysis of Shareholders as at 31 December 2019

Distribution of shares by type of Shareholder

No. of holdings

Company Status
Public Limited Company

Nominees and institutional investors
Individuals

Total

5,504 726,213,040
10,322,139
11,552

17,056 736,535,179

Auditor
KPMG LLP

Size of shareholding

No. of holdings

Solicitors
Slaughter and May/Linklaters LLP

1,943,278
10,350
1,847,794
2,540
5,222,237
2,531
2,503,082
357
14,577,022
611
190
13,270,263
372 118,740,194
105 578,431,309

17,056 736,535,179

Registrar and Transfer Office
The Company’s Registrar, Computershare, is responsible for
maintaining and updating the Shareholder register and making
dividend payments to Shareholders. 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 6ZZ
Reckitt Benckiser Shareholder helpline:
Tel. +44 (0)370 703 0118
Website: www.computershare.com/uk

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

224

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019Cautionary 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 Annual Report and Financial Statements. 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 2019 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.

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 RB shares which are uneconomic to continue
holding, 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 Shareholders 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 29 LON20771, London W1E 0ZT or register
online at www.mpsonline.org.uk.

Share Fraud And ‘Boiler Room’ Scams
Share fraud is a deceptive practice that induces investors to make sales
and purchases based on inaccurate information and in violation of
security laws. In Boiler Room scams, fraudsters will entice investors
into scams through increased persuasion and high-pressure tactics
through cold calling or random contact.

RB is aware of these deceptions and urges Shareholders who are

offered unsolicited investment advice, discounted shares, a premium
price for shares, or free company or research reports to investigate
thoroughly before making any decision.

If you receive any form of unsolicited investment advice, please

take the following steps:

•

confirm the name of the person and/or organisation;

check the Financial Conduct Authority’s (FCA) Financial Services
Register at https://register.fca.org.uk/ to ensure they are
authorised;

use the details on the Financial Services Register to contact
the firm;

call the FCA Consumer Helpline on +44 (0)800 111 6768
(freephone) or 0300 500 8082 (from the UK), if there are no
contact details on the Register or if they are out of date;

search the FCA’s list of unauthorised firms and individuals at
www.fca.org.uk/consumers/unauthorised-firms-individuals to
avoid doing business with reported offenders;

if you are approached by fraudsters please contact the FCA using
their helpline, or share fraud reporting form; and

•

consider getting independent financial advice.

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) should the investment be
unsuccessful. Remember: if it sounds too good to be true, it probably
is. If you think you have been a victim of these scams, the matter
should be reported to the Police and to Action Fraud. For more
information, please visit the Serious Fraud Office website at
www.sfo.gov.uk/contact-us/reporting-serious-fraud-bribery-
corruption/.

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226

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STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSReckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019N O T E S

228

Reckitt Benckiser Group plc (RB) Annual Report and Financial Statements 2019R

Reckitt Benckiser Group plc
Registered office
103-105 Bath Road,
Slough, Berkshire, SL1 3UH
Registered in England & Wales
No 6270876

rb.com