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Annual Report
and Accounts 2021
SEEKING NEW
OPPORTUNITIES
OUR PURPOSE
OUR FIGHT
We exist to protect, heal and nurture in the
We have a fight on our hands. A fight to make
relentless pursuit of a cleaner and healthier world.
access to the highest quality hygiene, wellness
and nourishment a right, not a privilege.
OUR COMPASS
Our Compass guides our business. At its heart
is the goal of doing the right thing. Always.
We put consumers and people first, seek out
new opportunities, strive for excellence and
join forces to win bigger and build a culture of
shared success. Our Compass is fundamental
to rejuvenating sustainable growth.
Put consumers
and people first
Build shared
success
Do the
right thing.
Always.
Seek out new
opportunities
Strive for
excellence
OUR LEADERSHIP BEHAVIOURS
In order to deliver on our ambitions around
OWN
DELIVER
Purpose and our business strategy, our culture
enables our people to have the Freedom to
Succeed and operate at their best. Our culture
is embedded in our Leadership Behaviours.
These behaviours set out our expectations for
how every one of us at Reckitt behaves. They
are deeply embedded inside our company and
are the basis for how we evaluate our leaders
going forward in line with our desired culture.
Reckitt leaders Own, Create, Deliver and Care.
To read more about our business
visit www.reckitt.com
• Live our Purpose, Fight
• Focus on what matters
and Compass
• Know our business cold
• Make decisions
• Move boldly and at pace
• Join forces to win bigger
CREATE
CARE
• Spot opportunities
• Actively listen, learn
• Innovate, iterate and scale
• Relentlessly build better
and include
• Speak direct with respect
• Act to unleash potential
CONTENTS
Strategic Report
02 At a Glance
04 Chair’s Statement
07 Chief Executive Officer’s Statement
10 Market Context
14 Our Business Model
16
18
Sustainability Ambitions
Key Performance Indicators
20 Focus on: COP26
22 Our Strategy
24 Progress Against Our Strategy: Hygiene
26 Progress Against Our Strategy: Health
28 Progress Against Our Strategy: Nutrition
30 Progress Against Our Strategy: Strategic Imperatives
34 Focus on: Innovation
38 Focus on: Digital
42 Focus on: Supply Chain
46 Focus on: Culture & Inclusion
50 Stakeholder Engagement
66 TCFD Summary
68 S172 Statement
72 Non-Financial Information Statement
74 Group Financial Review
88 Risk Management
103 Viability Statement
Governance
104 Corporate Governance Report
108 Our Board of Directors
114 Group Executive Committee
128 Nomination Committee Report
133 Audit Committee Report
141 CRSEC Committee Report
148 Directors’ Remuneration Report
188 Report of the Directors
192 Statement of Directors’ Responsibilities
Financial Statements
193
Independent Auditor’s Report
205 Financial Statements
268 Shareholder Information
p.16
SUSTAINABILITY AMBITIONS
For a cleaner, healthier world
p.38
FOCUS ON: DIGITAL
Strategic transformation in the
digital arena
p.42
FOCUS ON: SUPPLY CHAIN
Managing global supply chains
Reckitt Annual Report and Accounts 2021
01
At a Glance
AT A GLANCE
OUR INVESTMENT STORY
GLOBAL BUSINESS UNITS
Through our core business strengths and the
actions we are taking to further drive performance,
we see an attractive investment story.
HYGIENE
Hygiene is the foundation of health and our purpose-led portfolio
works to eliminate dirt, germs, pests and odours with market-
leading products such as Lysol, Finish, Air Wick, Harpic and Mortein.
For further information on our Hygiene business
see page 24
HEALTH
Our Health portfolio brings compelling, innovative solutions that
provide pain relief, protection, hygiene and personal care to
households across the world, through brands like Dettol, Durex,
Gaviscon, Nurofen, Mucinex, Strepsils and Veet.
For further information on our Health business
see page 26
NUTRITION
The Nutrition business includes our leading infant and child
nutrition, our adult nutrition and our range of vitamins, minerals and
supplements (VMS). Brands include Enfa, Nutramigen, Airborne,
Move Free and Neuriva. The strength of this business is its focus
on science-led innovations which underpin products catering to
consumers from infants through to the elderly. In Q1 2022, VMS
moved into our Health GBU.
For further information on our Nutrition business
see page 28
1
2
3
4
5
GLOBAL PORTFOLIO OF LEADING BRANDS, SOLVING FOUR
OF THE WORLD’S LARGEST PROBLEMS
• Large and attractive total addressable market associated
with solving four of the world’s largest problems
• Powerful, purpose-led brands that make a meaningful
difference to consumers’ lives and help drive the
growth of our customers
• Two-thirds of Group net revenue generated from
brands with top three market positions globally
SUPERIOR EARNINGS MODEL WITH CAPITAL DISCIPLINE
• Superior gross margins and productivity, coupled with
strong execution, funding investment in brand equity
and innovation
• Committed to maintaining single-A credit rating, with
strong working capital and cash generation after
reinvestment in the business
• Surplus cash used for M&A or returned to shareholders
EXECUTING AGAINST OUR PLAN TO DRIVE
SUSTAINABLE GROWTH
•
Investment across six strategic imperatives
• Targeting sustainable mid-single-digit net revenue
growth and mid-20’s adjusted operating profit margins
STRONG ENVIRONMENTAL, SOCIAL AND
GOVERNANCE CREDENTIALS
• Sustainability embedded within the business;
£1bn investment over ten years
• Rated ‘AA’ by MSCI and in top 15% in the household
products industry group and DJSI gold status for 2021
EXPERIENCED AND COMMITTED MANAGEMENT TEAM,
DRIVING A CULTURE OF OWNERSHIP
• FMCG and consumer health experience, coupled with
functional expertise, from within the Group and through
external hires
• Strong culture of ownership: around 50% of employees
are shareholders
• Leadership Behaviours of Own, Deliver, Create and Care
embedded within the organisation
• Proposed management remuneration based upon LFL net
revenue growth, Relative TSR, ROCE and ESG measures
02
FINANCIAL HIGHLIGHTS
Strong financial performance building on growth from 2020, with 17.4% two-year stacked
like-for-like1 (LFL) revenue growth.
3.5%
LFL net revenue growth1
22.9%
adjusted operating margin
excl. IFCN China1
2020: 24.5%
288.5p
adjusted total EPS
(diluted)1
2020: 327.0p
174.6p
full-year dividend
2020: 174.6p
-5.4%
IFRS net revenue growth
2021: £13,234m (2020: £13,993m)
-6.1%
IFRS operating margin
2020: 15.4%
-4.5p
IFRS total EPS
(diluted)
2020: 166.3p
STRATEGIC HIGHLIGHTS
Continued strategic progress throughout 2021, with investment in strategic imperatives,
leading to improved performance.
62%
Category Market Units (CMUs)
holding or gaining market share1
c.50%
Increase in innovation
pipeline value2
20ppts
2021 improvement in % of markets where
Reckitt is rated top-tier by retailers3
SUSTAINABILITY HIGHLIGHTS
Good progress against our sustainability ambitions, which were launched in March 2021.
29.3%
revenue from more sustainable
products excluding IFCN1,4
24.9%
revenue from more
sustainable products1,4
66%
absolute reduction in carbon
emissions from operations
since 2015
£38.2m
invested in Fight for Access Fund
in 2021
1. Adjusted and other non-GAAP measures, definitions and terms are defined on
3. Based on Advantage Group 2021 survey of retailers. 20ppts increase in markets
page 81
rated top-tier, from 26% in 2020 to 46% in 2021
2. Pipeline value represents the increased revenue opportunity in 2022 compared
4. Calculated for 12 months ending 30 September 2021
to 2021
Reckitt Annual Report and Accounts 2021
03
Financial StatementsGovernanceStrategic Report Chair’s Statement
BUILDING
ON FIRM
FOUNDATIONS
Chris Sinclair
Chair
Reckitt’s performance during 2021 gives
grounds for confidence about our future
performance. Our business transformation
programme is on track. We are advancing
our strategic priorities and building
a sustainable, purpose-led culture. With
the foundations for sustainable growth
now in place, the company stands at an
inflection point.
I’m proud of the progress we made during what was a turbulent
year for the global economy. Reckitt’s resilience and flexibility
were much in evidence. We successfully navigated both
challenges and opportunities arising from pandemic-related
disruptions and supply chain bottlenecks. And we not only
delivered globally in broad performance terms but also continued
to build foundations for sustainable growth and future
outperformance.
We’re competing and innovating more effectively. Our category-
led, demand-centric approach is broadening the scope for our
brands. Our Purpose – to protect, heal and nurture in the relentless
pursuit of a cleaner and healthier world – is warmly endorsed by
the workforce.
With the foundations for strategic transformation firmly in place,
we are well positioned to focus on opportunities for future growth.
04
3.5%
LFL revenue growth
174.6p
full-year recommended dividend
£1.1bn
productivity savings to date
BUSINESS PERFORMANCE
Full-year net revenue was £13,234 million, with growth of 3.5% on
a like-for-like basis. This was underpinned by strong performance
in Hygiene and a recovery in Health as we exited the year. The
reshaped Nutrition GBU also made good progress, with solid
revenue growth from the ongoing business.
Adjusted operating profit was £2,877 million, at an adjusted
operating margin of 22.9% (excluding IFCN China), down 160bps
on 2020. This is in line with our guidance provided at the half-year
results, and reflects planned investment across many areas.
Our medium-term financial performance has been encouraging,
with 17.4% like-for-like, stacked growth1 over the past two years.
And the business has done well to deliver continuing growth in
this second year of its strategic transformation against last year’s
pandemic-influenced revenue figures.
Sharper execution, expanded capacity, better customer service and
continually improving digital capabilities have all helped to deliver
strong underlying performance across our portfolio of brands.
The business transformation is now well underway. We are realising
significant cost savings through increased productivity, with
£1.1 billion achieved to date. We have also sharpened the portfolio
with the strategic disposal of Scholl, IFCN China and E45 alongside
the addition of Biofreeze, a leading US pain relief brand, which
presents exciting new growth opportunities for our Health portfolio.
We remain focused on delivering our strategy in each of our three
business units. Our Hygiene and Health brands have continued
to deliver strong penetration-led gains with market share gains
in many categories. Strong execution and innovation delivered
consistently good growth in our continuing Nutrition business,
most notably in our Vitamins, Minerals and Supplements portfolio,
and in the US IFCN business which now accounts for half of the
GBU’s revenue.
Governance and risk management have also been important areas
of focus for the Board over the last few years. We have continued
to broaden and deepen our approach to managing safety and
compliance risk. We’re embedding our sustainability agenda, with
a new strategy and 2030 ambitions launched in March. In line with
this, we are increasing investments and initiatives that enhance the
safety and sustainability of our products, as well as their efficacy.
Consistent with the expectations we set out last year, 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. Subject to shareholder
approval at the Annual General Meeting (AGM), this will be paid
on 9 June 2022 to shareholders who were on the register on
29 April 2022.
1. Adjusted and other non-GAAP measures, definitions and terms are defined on
page 81
Reckitt Annual Report and Accounts 2021
05
Financial StatementsGovernanceStrategic Report We are investing significant energy and resources in our
sustainability agenda. Sustainability is an integral part of our
long-term growth strategy and intrinsic to our identity as a
responsible business that aims to make a positive difference in
the world. The focus on sustainability resonates with stakeholders
and is warmly embraced by our workforce.
CHANGES TO THE BOARD
The Group benefits hugely from the talented individuals on its
Board. They are committed to Reckitt and passionate about its
future. During the year we were pleased to welcome Alan Stewart
as a Non-Executive Director. As a former CFO at Tesco, Alan has
a wealth of retail and commercial experience. His expert insights
will inform our approach as we continue to strengthen our retail
partnerships. Alan will also chair the Remuneration Committee,
replacing Mary Harris in that role. I’d like to thank Mary for her
sterling efforts over the last few years in guiding our remuneration
policy changes that integrate sustainability objectives into
performance by incorporating environmental, social and
governance (ESG) metrics. Mary remains on the Remuneration
Committee but is now more able to focus on advancing our
cultural agenda in her role as Designated Non-Executive Director
for engagement with the company’s workforce.
Sara Mathew has decided to step down from the Board at this
year’s AGM. Sara’s insights and knowledge greatly enriched the
Board’s deliberations. She leaves with our sincere thanks and very
best wishes.
CONCLUSION
Healthy organisations respond to stress by adapting quickly.
We’ve learned a lot in the past year about managing costs and our
supply chain, and, importantly, about how the organisation can stay
nimble and do the right thing. Reckitt proved its mettle in 2021,
demonstrating its capacity to respond flexibly in a fast-changing
competitive landscape. This speaks to a resilient, relevant
organisation that is addressing key global challenges through
the power of its brands.
We have arrived at an inflection point. We are transitioning
out of foundation building and the focus now is on improving
performance and delivering growth by driving the business into
new areas and adjacencies. We need to build on the progress
we’ve already made in managing the business responsibly and
sustainably, but our strategy sets the right objectives. We aim to
address the needs of all stakeholders and, by doing that, deliver
strong returns for shareholders. Our task now is to ensure we
continue to compete and innovate.
Reckitt today is a dynamic, integrated business with a rich heritage,
big ambitions and a clear sense of direction. We will maintain our
focus on optimising our operations to do the right thing, always,
and put consumers and people first. I’m confident that, by doing
that, we will deliver strong, sustainable performance.
Chair’s Statement (Continued)
IMPLEMENTING OUR STRATEGY
Despite turbulent markets, we made rapid progress during 2021 in
implementing our strategy. We were able to advance our strategic
priorities and pursue business transformation while still delivering on
performance. The cultural agenda has also been progressing well.
We’ve invested in transformational capabilities and in organising
ourselves to become more focused and, as noted, continued to
expand our investments and capabilities across the whole area
of good governance, sustainability and in managing the business
responsibly. Our participation at COP26 as official hygiene partner
underlined our commitment to meaningful action and highlighted
the interconnectivity between hygiene, human health and
planetary health.
Our performance-oriented culture puts purpose at the heart of our
business. Our rebranding as Reckitt in March crystallised that. Our
new corporate identity is helping us explain what we do and why
we do it with more impact and immediacy. It’s been well received,
both externally and within the Group.
On our business agenda, managing the supply chain was a
particular priority. In the middle of a pandemic, with brands that
play a strategic role in combating infection, maintaining adequate
supply was clearly critical. We were able to scale up product
supply dramatically when needed and achieved significant
performance improvements with our major customers, getting
them product on time and at the right levels.
We’ve drawn on that experience to further strengthen our global
supply chain to better manage significant supply disruptions and
combat cost inflation. These efforts have helped to make the
organisation more integrated and resilient. At the same time,
we’re making sure we’re getting the productivity gains from our
transformation initiatives, which help to support margins as we
deal with cost inflation.
We’ve also been improving other capabilities in the organisation
– including digital and e-commerce, marketing and selling
excellence, enhanced customer service management and R&D.
And we’re building stronger customer and partner relationships
founded on our shared interest in delivering high-impact solutions
that meet societal challenges.
Importantly, we’ve also strengthened our brands by aligning them
with our Purpose and by focusing on category-led markets and
sustainable innovation. Through this, we are uncovering new
spaces in which our brands can operate. Our trusted brands
continued to advance strongly in 2021, growing market share
and increasing penetration.
TALENT AND CULTURE
Laxman’s talented top team has integrated well and is making
rapid inroads towards achieving our strategic objectives.
Further, the leadership team is progressively embedding and
operationalising our cultural agenda across the business and there
is a clear sense of direction and motivation across the company
to deliver on that. Our workforce has shown itself to be adaptable
and highly effective in very taxing conditions. Their resilience and
commitment have brought tangible improvements to execution
across the Group. We are extraordinarily fortunate to have such
a capable and dedicated team of colleagues.
06
Chief Executive Officer’s Statement
STRONG GROWTH
WITH A STRENGTHENED
PORTFOLIO
Laxman Narasimhan
Chief Executive Officer
Our journey to rejuvenate sustainable
growth is well on track.
OVERVIEW
In February 2020, we set out our strategy for rejuvenating
sustainable growth and outlined our medium-term financial
targets. Our objective is to rebuild like-for-like revenue growth
to the mid-single-digit range, and to deliver adjusted operating
margins in the mid-20s by the mid-2020s.
This strategy recognises that Reckitt plays a significant role in
solving four of the word’s largest problems: How can hygiene
be the foundation for health? How do we enable consumers
to self-care at a time when health systems are under massive
pressure? How do we support intimate wellness and eradicate
the menace of sexually transmitted diseases? How do we
provide enhanced nutrition for infants and for the increasing
number of seniors in society?
And as part of this, we capitalise on two major shifts: digital
and sustainability. Namely, how can digital enable us to win at
a time when technology is transforming consumer behaviour
and business more broadly? And how do we turn sustainability
into an advantage to realise new opportunities, while making
the world better?
Guiding us is our Purpose. We exist to protect, heal and nurture
in the relentless pursuit of a cleaner and healthier world. Our Fight
is to make access to the highest quality hygiene, wellness and
nourishment a right not a privilege. That means the highest quality
products, availability and information that drives behaviour change.
Our Compass guides us to do the right thing: put consumers and
people first, seek out new opportunities, strive for excellence
and build shared success. Our behaviours shape us and our culture:
we Own, we Create, we Deliver and we Care.
07
Financial StatementsGovernanceStrategic Report 17.4%
LFL net revenue growth1
(two-year stacked)
c.50%
employee share ownership
AA
upgraded MSCI ESG rating
Chief Executive Officer’s Statement (Continued)
STRONG TOP-LINE MOMENTUM THROUGHOUT 2021
Against this backdrop, we are seeking out new opportunities,
leveraging our Purpose, Compass, Fight and Leadership
Behaviours. And in 2021, we made good progress against
our ambitions. Group net revenue of £13.2 billion grew by 3.5% on
a LFL basis in 2021, resulting in a two-year stacked LFL net revenue
growth of 17.4%.
Our in-market competitiveness remains strong. 62% of our core
Category Market Units (CMUs), excluding IFCN China, held or
gained share.
During the year, COVID-19 continued to impact net revenue.
Around 70% of our portfolio, representing brands less sensitive
to COVID-19 dynamics, grew mid-single digits on a LFL basis.
The remaining 30% of our portfolio, which includes Lysol, Dettol
and our cold and flu brands (Mucinex, Strepsils and Lemsip), was
more volatile, reflecting fluctuations in COVID-19-related demand.
E-commerce net revenue1, excluding IFCN China, grew by 17% in
2021 and now accounts for 12% of Group net revenue. The two-year
stacked growth is over 85%.
EXECUTING WITH EXCELLENCE
We are a performance-driven company, and the significant step-up
in investment in foundational capabilities over the past two years
has further improved our execution and competitiveness.
In 2021, we were named Walmart’s Supplier of the Year for
consumables, reflecting the improvements in sales excellence
capabilities. Based on the independent Advantage Group 2021
survey of retailers, 46% of our markets, weighted by revenue,
are now considered ‘top-tier’ for customer service – an increase
of 20 percentage points compared to 2020.
Our innovation pipeline is stronger, up 50% in 2022 compared to
2021, and it is also more innovative, with patent filings up 30%.
At the same time, and in the face of significant input cost
pressures, our supply chain continued to improve, and our
commitment to quality in supply was a contributing factor in
Reckitt’s readmission to the Dow Jones Sustainability Index.
Underpinning the investment associated with these improvements,
our productivity programme continues to deliver, with cumulative
savings since the beginning of 2020 of £1.1 billion.
1. Adjusted and other non-GAAP measures, definitions and terms are defined
on page 81
08
WE ARE EVOLVING OUR ALREADY STRONG CULTURE
Alongside the investment in these foundational capabilities is
the work to evolve our culture, building on the success of our past.
In particular, setting out the Leadership Behaviours that we each
sign up to: Own, Create, Deliver and Care.
Reckitt has always had a strong culture. We are a company of
owners; around 50% of employees own shares in the company
and we see this as a differentiator.
We Create. That’s always been a strength, but we’ve refocused
in certain areas, fuelled by our investments in capabilities. Our
science platforms combined with our push to broaden our thinking
about consumer-demand spaces have resulted in a larger pipeline.
We Deliver in a way only Reckitt can and evidenced by the agility
and the tireless effort made by our teams in the last two years,
during the pandemic.
And in addition to these three behaviours we have added a fourth:
Care. Care for our consumers, customers, communities and the
environment. We will always be a highly commercial, performance-
driven company: it’s in our DNA. But we are striving to do better
than that, broadening the basis on which we are judged.
RELENTLESS PURSUIT FOR A CLEANER, HEALTHIER WORLD
A key part of Care is our care for the environment and
our communities.
In this regard, we continue to make strong progress against our
sustainability targets which were set out in April 2021. Our MSCI
Sustainability score is now AA – having been upgraded from A
in April – and our Sustainalytics score is 22.9, ranking us in the top
15% amongst our peers. We are committed to operating according
to the Paris Agreement, and we are therefore pleased that the
modelling by MSCI demonstrates our climate plans translate
into a temperature increase of 1.38 degrees – better than many
in our industry.
Around the event itself, we worked with stakeholders globally,
demonstrating the important connection between climate change
and people’s health, and the way we can help influence consumers
to adopt behaviours that help tackle climate change. We engaged
with governments around the world: in Milan, we profiled our Finish
purpose commitment at a round-table event focusing on scarce
water resources; in the US, we hosted a COP26 round-table with
the Biden administration’s Deputy Special Envoy for Climate; and
in Mexico City, the UK Embassy showcased Reckitt as a trusted
partner for health, hygiene and climate ambitions.
CREATING VALUE FOR SHAREHOLDERS
My Group Executive Committee and I are committed to maximising
value for our shareholders. Our interests are fundamentally aligned.
Reckitt has natural advantages, with the strength of our brands,
which play in attractive categories underpinned by favourable
trends. And the improvements we have made to our foundational
capabilities and to our culture, we believe, will see the business
return to sustainable mid-single-digit revenue growth with
mid-20s margins.
In addition, we will continue to be active managers of the portfolio.
During the year, we sold our footcare brand, Scholl, to Yellow Wood
Partners, and sold our IFCN business in China to Primavera Capital
Group. These two transactions have reduced our exposure to
low-growth or declining categories. The sale of IFCN China is
a good example of Reckitt’s well-known agility, as our central
functions of Digital, Finance, R&D, HR, Legal and Supply, came
together, along with our China team, to separate the business
and close the deal in just 96 days from the announcement of
the transaction.
We also announced an important strategic move into the world’s
largest pain management market of the US, with the acquisition
of Biofreeze – a leading and fast-growing analgesic brand. Here,
we see exciting potential for geographic expansion and innovation,
building on the brand’s existing strong track record for growth.
At the same time, we are better connected with our communities
through our Fight for Access Fund, to which we contributed
£38 million in 2021.
Towards the end of the year, we announced the disposal of E45.
As with Scholl, we saw less fit with our broader portfolio and
the disposal allows us to focus resources elsewhere.
An example of how we are aligning commercial interests with
doing business in the right way is our work at the COP26 summit
in Glasgow in November 2021 – which was billed as the last best
chance to implement the goals of the Paris Agreement and the
UN Framework Convention on Climate Change.
As the event’s official hygiene partner, and led by our Global
Business Solutions and R&D teams, we saw our Dettol brand
entrusted with keeping more than 30,000 delegates from over 190
countries safe from COVID-19. This was a key opportunity for us to
demonstrate our Purpose in action. We showed how we’re helping
build awareness of the connection between planetary health and
public health, how our brands can encourage pro-environmental
behaviours and how Hull – where Reckitt has its roots – is working
to become the UK’s first net-zero city.
Finally, with significant hires into the Executive team over the
past two years, I am delighted with how well the team has
been functioning, particularly given the unusual and challenging
environment. I deeply appreciate the leadership that they have
shown and the positive changes they and their teams have
brought about.
LOOKING FORWARD
We have a unique portfolio of trusted, market-leading brands in
structurally attractive categories with significant headroom for
growth. This, combined with our progress to date, gives me the
confidence in both our-near term and medium-term prospects.
Reckitt Annual Report and Accounts 2021
09
Financial StatementsGovernanceStrategic Report Market Context
ADDRESSING FOUR OF THE
WORLD’S LARGEST PROBLEMS
1 HOW CAN HYGIENE BE THE FOUNDATION FOR HEALTH?
Growing consumer awareness of the importance
of hygiene and its connection to health
2 HOW DO WE ENABLE CONSUMERS TO SELF-CARE AT A TIME
WHEN HEALTH SYSTEMS ARE UNDER MASSIVE PRESSURE?
Government healthcare cost pressures and
increased autonomy are elevating the importance
of self-care solutions
The transmission of infection will remain a pressing global concern.
With more crowded cities, greater movement of people and fewer
opportunities for physical separation, good hygiene practice is
increasingly important. In addition, too many people globally lack
clean water and sanitation.
At the same time, rising levels of income globally are allowing
more and more consumers to use products pre-emptively
to help protect their health and their homes.
Across the world, ageing populations and stretched public
finances are putting pressure on health systems. Meanwhile,
individuals are becoming better informed and are more actively
involved in looking after themselves. Citizens are also increasingly
conscious that managing their own health also has a social
dimension in the public health arena.
Self-care is putting people at the heart of decision-making
about what matters most to them: products and solutions.
Self-care solutions are supported by consumer-centred
technology on apps and elsewhere, offering increasingly
sophisticated personalised recommendations.
Our response: Reckitt’s premium, category-leading products
support hygiene both inside and outside of the home, cleaning
and sanitising and providing a frontline defence against the
spread of transmissible diseases and viruses.
With our disinfectant brands of Lysol and Dettol, we are helping
to break the chain of infection on surfaces of kitchens and
bathrooms, from hands, and other ‘at-risk’ spaces.
Harpic is ensuring the sanitisation of bathrooms, whilst Air Wick
and Finish support overall cleanliness and hygiene within the
home. Through the Reckitt Global Hygiene Institute and our
Fight for Access Fund, we are also contributing to the building
of awareness and scientific understanding of hygiene issues,
as well as to the availability of products.
Finally, our Pest brands such as Mortein and SBP are protecting
families and their homes from unwanted pests and insects.
Our response: By saving a trip to the doctor, we are
helping to reduce demand on strained public healthcare.
Our over-the-counter healthcare brands provide people with
the tools they need to treat everyday symptoms themselves,
without recourse to healthcare professionals. We partner with
clinical professionals and share science-backed information
with consumers to prevent and treat infection. Moving from
a product to a consumer focus, we are developing science
solutions that address specific consumer needs and providing
consumer benefits across protect, heal and nurture. Our
science platforms (see page 36) are enabling us to do this,
as we share insights gleaned from our gastro-intestinal work
on our VMS brand, Digestive Advantage, for example, with
our heartburn and indigestion relief brand, Gaviscon. These
dynamics, combined with digital trends, continue to provide
opportunities in areas like personalised nutrition, wellness
and digital health.
CAPITALISING ON THE BROAD AND
RISING IMPACT OF DIGITAL AND
SUSTAINABILITY
As we seek solutions to these
problems, we know that
consumer tastes, values
and behaviour are evolving.
Sustainability is not only about doing the right
thing, it is increasingly a commercial imperative.
Consumers want to buy products that are not
only safe and effective, but have also been
developed in a responsible manner, recognising
the impact its production and usage can have
on the environment or wider society.
73%
of people want to reduce their impact
on the environment and nature
(Source: Globescan; Healthy &
Sustainable Living, 2021)
10
Reckitt operates in attractive, growing market segments. We fight to address
four of the world’s largest problems. And as we do this, we are capitalising on
the broad and rising impact of digital and sustainability.
3 HOW DO WE SUPPORT INTIMATE WELLNESS
AND ERADICATE THE MENACE OF SEXUALLY
TRANSMITTED DISEASES?
Maintaining sexual health and protecting young people
in a challenging era
4 HOW DO WE PROVIDE ENHANCED NUTRITION FOR
INFANTS AND FOR THE INCREASING NUMBER OF
SENIORS IN SOCIETY?
Growing demand for specialised infant and adult
nutrition products
In many areas of the world, awareness and understanding of
sexual health and wellbeing is poor. The subject is often taboo
and seen as political rather than an essential life-or-death issue.
The exceptional measures governments and health authorities
imposed during the pandemic contributed to a global setback
in reproductive and sexual health rights. Scarce resources were
diverted from sexual health and quarantine measures kept young
people away from formal educational settings.
Our response: As the world’s leading producer of condoms
and with 90 years of brand heritage, Durex plays a crucial
role in reducing the risk of sexually transmitted infection and
encouraging safe sexual practices. We do this through better
understanding differing consumer needs, and continually
improving the performance of our products, for example, through
size and fit, to enhance pleasure and the consumer experience of
intimacy. At the same time, we’re partnering with key influencers
and celebrities such as Lil Nas X in the US, to generate product
awareness and grow usage of the category. As part of a better
understanding of consumer needs, we are addressing the
growing demands of previously-overlooked parts of the
market. Through Queen V for example, we are recognising the
importance of vaginal health, leveraging our understanding of
the microbiome to deliver products seeking to combat everyday
problems such as itchiness and dryness. Our educational
initiatives promote responsible attitudes and behaviours
with programmes that help young people make informed
and confident choices, alongside partners such as the National
AIDS Control Organization (India), Solidarite (France), Dance 4Life
(Netherlands), and UNFPA (Mexico).
Infants deserve the best possible start to life, and a key part of that
is the nutrition they receive. This is particularly the case for those
suffering from allergies, or other conditions for which more
specialised nutrition is needed. With birth rates relatively stable,
demand for such products is likely to be the key driver of infant
formula market growth over time.
At the same time, life expectancy has increased rapidly. With
people living longer, there is growing demand for health and
wellbeing products that allow them to live their lives to the full.
As such, there is continued growth in demand for high-quality
specialty food supplements, around key need states such as
immunity, digestion, and cognition and mental health.
Our response: Through the strength of our brands, consumer
insight and science understanding, we are well placed to be
a winner in the nutrition market. With our infant brands such as
the Enfa range and Nutramigen, and adult brands such as Provital,
Move Free, Airborne and Neuriva, we seek to address the most
important needs in nutrition. Our product innovation teams
leverage the capabilities within our science platforms of digestive
health and allergy and immunity to deliver natural solutions
that address the specific nutritional needs of these groups,
whether infants or adults. E-commerce is playing an increasingly
important role in how consumers seek out and purchase
nutritional products. This provides an opportunity for us to better
serve them through the lifecycle of their or their baby’s needs,
with our brand communications with an expectant mother often
beginning well before the baby is born, for example.
Digital is transforming consumer behaviour and
purchasing decisions, affecting what people buy and
how they buy it. This has implications for the way we
develop and market our products, the value we can offer
consumers, and how we manage our supply chain. The
disruption brought about by COVID-19 has accelerated
these trends, with a step-change in virtual appointments,
remote prescriptions and e-commerce transactions.
Online share of retail sales
35%
30%
25%
20%
15%
10%
5%
0%
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
UK
US
COVID-19 pushed
people online
in 2020. 2021
penetration
data proves
they stay online.
Reckitt Annual Report and Accounts 2021
11
Financial StatementsGovernanceStrategic Report Market Context (Continued)
OUR GEOGRAPHICAL
FOOTPRINT
OVERVIEW
Reckitt operates in over 60 countries around the world. Reflecting
the premium nature of our portfolio, 64% of revenue is currently
derived by developed markets – primarily North America and
Europe. However, continued growth in the middle classes in
many developing markets such as India and China will improve
affordability of premium products, and is likely to support overall
revenue growth over time.
Split of developed and developing1 markets
Group
Hygiene
Health
Nutrition
64%
79%
52%
59%
36%
21%
48%
41%
Developed markets
Developing markets
US
The US is Reckitt’s largest geographic market, with revenue in
2021 of over £3.8 billion, representing 30% of Group revenue,
excluding IFCN China.
consumer-centric innovation and improved relationships and
execution with our key customers such as Walmart and Dollar General
– both of which gave us a supplier of the year award during 2021.
Reckitt is home to some of the best loved, most recognisable
and most trusted consumer brands in the US, including Airborne,
Air Wick, Enfamil, Finish, KY, Lysol and Mucinex.
Around 5,300 employees work in the US business. We have three
R&D centres of excellence and six manufacturing locations.
US-made brands include multiple category leaders, among them
Lysol, where we lead the US surface protection category. We’re
number two in laundry additives with Finish, number two in the
cough and cold category with Mucinex, and number three in air
care with Air Wick. Our infant follow-on nutrition, Enfamil, is the
number one brand recommended by paediatricians.
Total US revenue has increased by over 20% since 2019. Led by
the increased demand for Lysol, growth has been driven by
Across each of our three GBUs, our business took market share in
2021. In Hygiene, through continued outperformance of Lysol and
Air Wick; in Health, this was through gains in Mucinex and Durex;
and in Nutrition, through our infant formula brands.
Innovation was a driver of performance in 2021, with recent
launches including Lysol Smart – a sustainability-focused product
– and the Mucinex NightShift and InstaSoothe ranges.
Reckitt also has a history of supporting local communities through
its brands. One example is Lysol’s ‘HERE for Healthy Schools
Initiative’ which provides educational materials for students and
disinfecting supplies for schools, with the mission to curb the
spread of preventable illnesses.
CHINA
China represents 5% of the total Group following the disposal of
the IFCN business. Having averaged double-digit growth in recent
years, it is now the Group’s fourth largest country market.
Reckitt has operated in the Chinese market since 1916 with
headquarters in Shanghai. The business operates across three
GBUs, with approximately 3,500 employees and five manufacturing
facilities. We have recently invested around £90 million in the
Taicang factory to support China Dettol and Durex growth.
E-commerce has been a major contributor to growth in the market,
now representing around two-thirds of the China business1. Its
success has led the way for learnings across the Group more
broadly, in areas such as digital marketing, data and automation,
and venturing.
Reckitt’s largest brands in China are Durex and Dettol which
represent more than 70% of the China business revenue. Other
brands include Finish, Lysol, Harpic and the more recently launched
Neuriva – all of which we expect to show double-digit percentage
annual growth over the coming years.
We are also active in our communities, supporting education on
the importance of hygiene, and we target reaching over 27,000
schools across the country over the next five years.
1. Excluding IFCN China
12
INDIA
India is Reckitt’s second largest market, with revenue in 2021 of
over £800 million, around 6% of Group revenue, and we have
ambitions to double this by 2030.
In a fiercely competitive space, we’re outperforming our peers.
Our net revenue growth over the past five years has averaged
8% per annum. With strong heritage in India, having entered the
market with Dettol in 1940, we play across multiple categories, with
Dettol, Harpic, Vanish and Veet each leaders in their respective
segments. Our brands are highly trusted, with Dettol for example
scoring 28% points1 higher than its closest competitor on key
attributes, and with one in two households2 purchasing the brand
in the last year.
The market backdrop is highly favourable. By 2030, India is
expected to be the most populous country in the world, with
1.5 billion people, and GDP is forecast to be $6 trillion making
it the world’s third largest economy3. Today, Indians spend a
relatively low proportion of their income on consumer staples.
With the equivalent spend some 30 times greater in the US,
there is substantial headroom for growth.
Such is the strength of our brands such as Dettol, Harpic and Durex,
we are uniquely placed to drive purpose-led messages on vital
topics, such as hygiene and sexual health and wellbeing, across
the country. Dettol’s high-profile Banega Swasth India campaign
for example has been running since 2014. Now in its eighth season,
through celebrity endorsement and in partnership with the
country’s most respected TV channel, it’s helping millions of
Indians to improve their lives with better hygiene and sanitation.
The Dettol School Curriculum is reaching 20 million primary school
children. Targeted diarrhoea prevention interventions save the lives
of around 100,000 under-5s in Uttar Pradesh.
Such is the strength of Dettol in the country, that it was the
starting place for what became a global phenomenon. The
#handwashchallenge TikTok campaign, which ultimately garnered
125 billion views, was initiated with Bollywood celebrities and
India’s top TikTok influencers uploading their own dance-based
interpretations of the handwashing rap.
The development of the India operation over the last two years
exemplifies the strategic transformation that’s underway across
Reckitt globally. We’re driving core brand performance with
innovation-led market share growth and penetration gains.
We’re growing e-commerce – up nearly 140% over the last
three years – and extending our reach. We’re supplementing our
retail network with expanding direct distribution and enhancing
digital capabilities. We’re strengthening our supply chain and
improving productivity.
Durex: making Invisible visible
Six years ago, there was limited brand awareness of Durex in India.
The brand had a very small share of what was then a low-visibility
market. Sex had long been seen as a ‘man’ thing that wasn’t
discussed in the public sphere. Condoms were mostly supplied
on request by chemists and were not on display. Product
understanding was limited and suppliers mainly served basic
needs, which favoured cheaper local brands.
Durex recognised that several category segments were underserved
and launched superior offerings to meet that untapped demand.
Its Mutual Climax condom emphasised performance, while Durex
Invisible, India’s thinnest condom, stressed intimacy.
The brand backed up these innovations with quirky, social-media-
led campaigns that championed great sex and took on centuries-
old taboos. Celebrity endorsements engaged younger audiences.
In a first for India, Durex challenged the stigma around female
sexuality and built conversations around sex that included women
and the LGBTQ+ community.
Key to performance for Durex in India, however, has been its
improved distribution. In early 2019, the brand could be found in
around 76,000 distribution points across the country. Today, it is
over 120,000. Combined with improvements in digital, this has seen
Durex gain over 210bps of market share in 2021, leading to the
brand now being the second largest condom name in the country.
Looking forward, we continue to see the Durex opportunity
as significant – with growth in the category, as well as further
opportunities for market share gains.
LFL net revenue growth in India
C A G R + 8 %
2016
2017
2018
2019
2020
2021
Leading brand positions
#1
#1
#1
#1
1. Advantage survey of retailers 2021
2. Source: Nielsen penetration data
3. Source: World Bank
Reckitt Annual Report and Accounts 2021
13
Financial StatementsGovernanceStrategic Report Our Business Model
HOW WE
CREATE VALUE
OUR PURPOSE
We exist to protect, heal and nurture in the relentless pursuit
of a cleaner and healthier world.
WHERE WE PLAY
BUSINESS STRUCTURE
Hygiene
Health
Nutrition
eRB
Global Business Solutions; Global Expansion Markets;
Greater China
Global functions & capability centres
We are the company behind some of the
world’s most recognisable and trusted
consumer brands in hygiene, health
and nutrition.
OUR ASSETS
Our people and culture
We employ outstanding people who are focused on execution.
They work in a unique culture, with a strong sense of shared
ownership, that harnesses their passion and allows them to make
a real difference.
Our brands
We have a global portfolio of leading brands, offering attractive
growth prospects and margins, and sustainable competitive
advantages.
Our knowledge and skills
We have deep consumer understanding, proven R&D capabilities
and an agile organisation, which gets the right products into the
hands of consumers quickly.
Our partnerships
We develop strong, trusted relationships with our customers,
consumers, suppliers, communities and other partners to allow
us to extend our impact.
Our infrastructure
Our business is underpinned by strong manufacturing sites,
R&D laboratories, centres of excellence and logistics centres
and well as digital infrastructure.
Our financial strength
Shareholders’ equity, debt and retained profit give us the financial
resources to implement our strategy.
14
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.
MID-TERM TARGETS
Rejuvenating Sustainable Growth. We have committed to deliver:
mid-single-digit growth and mid-20s profit margin.
HOW WE WIN
EARNINGS MODEL
Innovation
High gross margin
business
Productivity
Growth
High BEI
Out-execute
BEI = Brand Equity Investment
VALUE WE CREATE
>80
>20m
products now labelled as Climate
Pledge Friendly on Amazon
For customers
see page 52
c.50%
Reckitt products sold every day
For consumers
see page 54
c.3,200
of employees are shareholders
direct material suppliers
For our people
see page 55
>3,000
For suppliers
see page 57
>£80m
scientists, engineers, technologists
and experts work at Reckitt
For expert knowledge
see page 58
invested in over 15 startups to date
For innovators
see page 58
For collaboration and
partnerships see page 59
2bn
288.5p
total adjusted diluted EPS
For our investors
see page 60
29.3%
target engagement with 2 billion
people through our programmes,
partnerships and campaigns by 2030
For communities
see page 61
net revenue from more sustainable
products excluding IFCN
For our environment
see page 63
Reckitt Annual Report and Accounts 2021
15
Financial StatementsGovernanceStrategic Report
Sustainability Ambitions
FOR A CLEANER, HEALTHIER WORLD
OUR 2030
SUSTAINABILITY
AMBITIONS
Sustainability is central to our Purpose.
It runs through everything we do.
Our 2030 ambitions embed sustainability at the core of our
business and build on the progress we have already made. They
focus on three areas – purpose-led brands, healthier planet and
fairer society – where we can maximise our positive and enduring
impact, within and through our core business. The ambitions are
supported by specific targets and metrics to drive disciplined
execution across the business. They are backed by over £1 billion
in existing, planned and projected investment.
We aim to:
• Reach half the world with products that contribute to a cleaner,
healthier world
• Engage two billion people with purpose-led campaigns to
promote awareness for a cleaner, healthier world
• Make a lasting difference in communities through our Fight
for Access Fund and our programmes
• Work with our partners to help deliver the UN Sustainable
Development Goals
PARTNERSHIPS
We reach out to like-minded partners to drive real, sustainable
change together. Our partnerships with WWF and the Fair Rubber
Association help us create scale and impact in key areas. The
COP26 partnership adds momentum.
By engaging with consumers through partnerships and campaigns
we aim to help to build awareness and drive changes in behaviour
that can have real impact in making a cleaner, healthier world.
PURPOSE-LED BRANDS
We sell around 20 million products every single day. That’s a lot
of material and we want it to have a positive impact.
To help ensure we don’t just sell products people want to buy
but also ones that make a positive difference in the world, we’re
investing in sustainability in all our brands. Each brand now has a
purpose that’s aligned with one of the UN Sustainable Development
Goals (SDGs). Every Reckitt brand focuses on progressing SDGs.
We won’t stand still. We want to challenge ourselves to do more
every day to bring about the cleaner, healthier world we all want
to see.
We’ve set ourselves ambitious sustainability targets to lower our
use of virgin plastic and reduce our carbon, water and chemical
footprints. All our plastic packaging will be recyclable or reusable
by 2025, with at least a quarter coming from recycled materials.
By 2030, we plan to have halved our use of virgin plastic for
packaging, reduced our chemical footprint by nearly two-thirds
and cut our carbon footprint in two. We’re targeting a 50%
reduction in our overall water footprint by 2040.
By 2025
•
100% plastic packaging recyclable or reusable
• 25% recycled content in plastic packaging
By 2030
• 50% of net revenue from more sustainable products
• 50% reduction in our carbon footprint
• 65% reduction in our chemical footprint
• 50% reduction of virgin plastic in packaging
By 2040
• 50% reduction in our water footprint
baseline: 2015
16
1.8bn
people engaged through
our partnerships, programmes
and campaigns since 2013
49%
gender balance at all
management levels
A winning photo from
our competition in
partnership with
Talenthouse,
capturing moments
where people have
positively impacted
our planet to create
a cleaner,
healthier world.
Kliford Gonzales –
Philippines
A FAIRER SOCIETY
We are fighting for a world where access to the highest quality
hygiene, wellness and nourishment is everyone’s right, and not
a privilege. As part of that, we stand for a fairer society where
everyone has a stake, and all voices are heard and acknowledged.
The third pillar of our sustainability ambitions addresses this
directly. We are building an inclusive culture, where everybody
is treated fairly and equally. Our teams represent the diverse
geographies we operate in and the people we serve.
We want all our stakeholders to have sustainable livelihoods
and working conditions. One way we do this for smaller suppliers
is through partnerships with organisations on the ground.
Our team-up with the Fair Rubber Association gets a Fair Trade
premium to the farmers who produce natural rubber latex for
our Durex products.
We’re assessing and improving standards for our larger suppliers
through our strengthened audit programme. We’re establishing
leading human rights programmes and developing action
plans in all our key markets. We’re supporting resilient, local
communities by helping our suppliers measure and reduce
their environmental footprints.
• An inclusive culture, where everybody is treated fairly
and equally
• Our teams represent the diverse places where we work
and the people we serve
• Gender balance at all management levels by 2030
• Equivalent of 1% operating profit to Fight for Access Fund
A HEALTHIER PLANET
A healthier planet and healthier people are inextricably linked.
Our sustainability ambitions include targets that will ensure we play
an active role in helping to combat climate change, addressing
biodiversity and improving planetary health. We are working with
partners to create positive impact in areas that are stressed by
global warming. Our three-year partnership with WWF will protect
freshwater sources, restore wildflower habitats and help it inspire
millions of people to act for our planet.
By 2030
• Water-positive in water-stressed sites
•
100% renewable electricity
• 65% reduction in absolute carbon emissions from operations
By 2040
• Net zero across our value chain
66%
reduction in absolute carbon emissions
in our operations since 2015
100%
renewable electricity purchased for
our manufacturing operations
Reckitt Annual Report and Accounts 2021
17
Financial StatementsGovernanceStrategic Report Key Performance Indicators
FINANCIAL
LFL Net Revenue Growth1
Adjusting Operating Profit Margin1
Adjusted diluted EPS1
KPI: An indicator of strong sales execution,
innovation and customer service.
KPI: An indicator of brand strength, return on
investment in innovation and marketing.
KPI: An overall indicator of success.
2021
2020
2019
2018
2017
3.5%
11.8%2
0.8%
3.0%
0%
2021
2020
2019
2018
2017
21.7%3
23.6%
26.2%
26.7%
27.1%
2021
2020
2019
2018
2017
288.5p
327.0p
349.0p
339.9p
316.9p
Target: To rebuild consistent mid-single
digit growth in the medium term.
Target: Our plan, outlined in 2020 and
re-confirmed in 2021 for a margin in the
mid-20s by the mid-2020s.
Target: to achieve consistent earnings per
share growth as we deliver mid-single digit
revenue growth and improving margins
over time.
HEALTHIER PLANET
GHG emissions in our operations
Water use per unit of production
Sending zero waste to landfill
KPI: The percentage reduction of our Scope
1 and 2 emissions against our 2015 baseline.
KPI: The percentage reduction in total water
consumption per unit of production, against
our 2015 baseline.
KPI: The percentage of our factories
achieving zero waste to landfill, including
both hazardous and non-hazardous waste.
2021
2020
2015
66%
36%
0%
2021
2020
2015
3%
6%
0%
2021
2020
2019
2018
2017
96%
96%
96%
93%
100%
Target to 2030: 65% reduction against 2015
baseline (393,004tCO2e).
Target to 2025: 30% reduction against 2015
baseline (2.7m3 per tonne of product).
Target to 2030: 100%.
PURPOSE-LED BRANDS
Product innovation
Purpose-led brands
Social impact investment
KPI: Total net revenue from more
sustainable products.
KPI: Total number of people engaged
through our partnerships, programmes
and campaigns since 2013.
KPI: Total value of cash contributed, employee
time in working hours and in-kind product
donations valued at cost to the business.
2021
2020
2019
2018
2017
29.3%5
30.4%
24.6%
18.5%
18.2%
2021
2020
2019
2018
2017
1.8bn
1.4bn
1.0bn
0.8bn
0.6bn
2021
2020
2019
2018
2017
£38.2m
£52.8m
£12.2m
£14.4m
£10.5m
Target to 2030: 50% of net revenue.
Target to 2025: one billion people.
Target to 2025: £20 million per year.
18
1. 2017 and 2018 figures are original reported
within relevant periods and have not been
adjusted for subsequent updates made to IFRS
2.
Including IFCN China (excluding IFCN
China: 13.9%)
3.
Including IFCN China (excluding IFCN
China: 22.9%)
4. Management levels are band D and above
(excluding board employees)
5. The 2021 total net revenue from more
sustainable products including IFCN was 24.9%
6. Excluding energy used indirectly by consumers
at home
FCF Conversion1
KPI: A strong link to efficient capital
structure and well managed working capital.
2021
2020
2019
2018
2017
61%
131%
87%
84%
94%
Target: To maintain the delivery of strong
free cash flow conversion over time.
FAIR SOCIETY
Gender diversity
KPI: Gender balance at all
management levels.
2021
2020
2019
2018
Lost Work Day Accident Rate
(LWDAR)
KPI: Number of incidents resulting
in at least one lost day of work per
100,000 hours worked.
49%
49%
48%
47%
2021
2020
2019
2018
2017
0.046
0.050
0.076
0.084
0.121
Target to 2030: Gender balance at all
management levels4.
2021: 29% female senior managers in our
global workforce.
Target: Continued decrease in LWDAR rate.
Product footprint
KPI: The percentage reduction of our
product carbon footprint against our
2015 baseline6.
2021
2020
2015
+22.6%
+22.6%
0%
Target to 2030: -50% reduction against 2015
baseline (10.7 million tCO2e).
Reckitt Annual Report and Accounts 2021
19
Financial StatementsGovernanceStrategic Report Focus on: COP26
TIME TO TURN
WORDS INTO
ACTION
The COP26 summit in Glasgow was a pivotal moment in our collective fight against
climate change. Reckitt came on board as the event’s official hygiene partner.
COP26 was billed as the last, best opportunity to implement the
goals of the Paris Agreement and the UN Framework Convention
on Climate Change. Reckitt was named as hygiene partner.
Through our Dettol brand, we were entrusted with keeping
30,000+ delegates from over 190 countries safe from COVID-19.
This was a chance for us to demonstrate our Purpose in action.
We highlighted the link between planetary health and public
health, we discussed how our brands can encourage consumers
to do the right thing and we profiled the campaign in Hull – where
Reckitt has its roots – to become the UK’s first net-zero city.
SAFE AND SUSTAINABLE
Our hygiene protocols protected delegates and visitors, while
respecting the event’s sustainable objectives. Over 600 Dettol
handwashing stations were placed strategically around the site.
Every delegate got a hygiene kit.
Our approach was validated by the London School of Hygiene
& Tropical Medicine, and the data suggests it succeeded.
The frequency of COVID-19 cases at COP26 was 81% lower
than the Scottish national average.
ENGAGING WITH STAKEHOLDERS
In the run-up to the summit, we worked with stakeholders globally,
demonstrating the important connection between climate change
and health, and how we can help influence consumers to help
tackle climate change.
We engaged with governments in 41 global capitals. We hosted
and participated in top-tier and high-profile events. In Milan, we
profiled our Finish brand purpose commitment at a round-table
event focusing on scarce water resources. In the US, we hosted
a COP26 round-table with the Biden administration’s Deputy
Special Envoy for Climate. In Mexico City, the UK Embassy
showcased Reckitt as a trusted partner for health, hygiene
and climate ambitions. Dettol’s Banega Swasth Initiative ran
‘One Planet, One Health, One Future’ as a 12-hour telethon
on India’s leading channel, NDTV.
At COP26, we showcased the risk to public health of climate
change, and health strategies that take account of that.
We convened leaders from the World Health Organization,
governments, academia and civil society to build action to
protect health and combat climate change. Our major customers
have joined in the debate and are helping to develop solutions.
Sustainability leaders from Walmart, Tesco, Walgreens Boots
Alliance and Sainsbury’s all spoke at Reckitt-convened events.
YOUNG PEOPLE’S VOICES
Young people’s passion and powers of persuasion can inspire
real change, especially on climate. We ran campaigns at COP26
to give them a voice. We launched Dettol Hygiene Quest, a fun
and interactive primary school programme that aims to build
lasting hygiene habits among six to nine year-olds. A competition
for seven to 18 year-olds called for images inspiring action on
climate. The best entries won eco-friendly prizes and featured on
our Instagram account.
20
Governance
Financial Statements
26,000
hygiene kits for delegates
600+
handwashing stations
8,000
litres of Dettol
81%
lower COVID-19 cases at COP26
1,300+
sustainable pledges made
vs Scottish national average
at our exhibition stand
MATCHING PERSONAL PLEDGES
Our COP26 exhibition space highlighted five misconceptions
on hygiene and challenged visitors to do their bit for a more
sustainable world. Every promise made at our exhibition stand
was matched by a donation to WWF UK restoring ten square feet
of wildflower habitat.
The top pledge was washing hands with cold instead of warm
water. Most people didn’t know that water temperature makes
no difference to killing germs. It’s a small change with a big
impact. If everyone in the UK did that, the CO2 saving would
be the same as taking 285,000 cars off the road for a year.
THOUGHT LEADERSHIP
We convened and hosted events on a range of climate change-
related topics. ‘Planetary Health and Public Health’ discussed the
adverse public health impacts of climate change, the escalating
risks of inaction and how the private and public sectors can
collaborate to find solutions. ‘Inclusion is Key’ looked at how
gender equality improves science and innovation and spurs
climate action. The ‘Changing Consumer Behaviours’ panel session
discussed the impact on climate of a shift to more sustainable
consumption and how that can be done. ‘Achieving Net Zero:
Critical Role of Cities’ examined how the race to net zero can be
managed in cities through public and private sector collaboration
with reference to Reckitt’s own participation in Hull Living Lab.
A CLEANER, HEALTHIER WORLD
Our white paper ‘The Impact of Climate Change on Health:
Reducing Risks and Increasing Resilience in the Era of COVID-19’,
co-authored with the London School of Hygiene & Tropical
Medicine and EcoHealth Alliance, was published at the summit.
This set out the wide-ranging risks to human health of unabated
climate change and presented detailed recommendations to
address these serious and potentially existential threats. The paper
made ten recommendations for public health to build resilience
and protect people from the health impacts of climate change.
There was progress at COP26. Critically, most governments and
businesses now agree we’re in a race against time to create the
cleaner, healthier world we all want to see.
But the time for talking has passed and we cannot relax. We need
to act decisively – locally and globally – to tackle this challenge.
Everybody has a role. At Reckitt, we’re determined to play our
full part.
Reckitt Annual Report and Accounts 2021
21
Strategic Report Our Strategy
OUR GROWTH
STRATEGY
Established in February 2020,
our strategy seeks to
drive a return to sustainable,
mid-single-digit revenue
growth, with adjusted
operating profit margins
in the mid-20s.
GROWTH DRIVERS
PRODUCT
PENETRATION
Capturing new
consumers and
households
MARKET SHARE
GAINS
Serving existing
consumers faster,
better, and
more efficiently
EXPANSION INTO
NEW PLACES
Entering new
geographies and
new channels
EXPANSION INTO
NEW SPACES
Capturing new
market opportunities
GROW BRANDS AND INNOVATE
DRIVE SUPERIOR EXECUTION
INVEST IN CAPABILITIES
INCREASE PRODUCTIVITY
EMBED SUSTAINABILITY
ACTIVELY MANAGE THE PORTFOLIO
INSPIRE TALENT AND EVOLVE CULTURE
Our Compass
Our Leadership Behaviours
| Deliver
Own
| Create
| Care
For further information
see inside front cover
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GROWTH DRIVERS
Product penetration
Increasing product usage by capturing new consumers
and households.
Market share gains
Winning by serving existing consumers faster, better, and more
efficiently with superior and more relevant products.
Expansion into new places
Taking our brands and products into new geographies and
new channels.
Expansion into new spaces
Capturing new market opportunities using our brands and
consumer relationships.
STRATEGIC IMPERATIVES
INVESTMENTS SUPPORTING SUSTAINABLE GROWTH
Our strategic imperatives are those areas of focus which support
us in returning the business to sustainable growth.
Grow brands and innovate
Investing firmly behind our brands to drive equity and improve
the product offering for consumers.
Drive superior execution
Investing in capability centres for commercial excellence – sales
outperformance, marketing excellence, eRB and medical sales.
Invest in capabilities
Investments in centralised areas such as supply chain, R&D and
digital to strengthen the core of our business, supporting the
three GBUs.
CONSUMER-LED CATEGORY GROWTH
Reckitt is shifting from an innovation strategy led by brands
to a category growth strategy anchored in consumer demand.
This new demand-led growth approach uses deep consumer
insights combined with strength in science and technology
to enable category thinking that drives growth.
For progress against our growth drivers by GBU
see pages 24 to 29
Increase productivity
Embedding programmes to enhance effectiveness
and efficiency in the company and to fund investment.
Embed sustainability
Incorporating sustainability throughout our value chain
and across our business.
Actively manage the portfolio
Moving the company to higher growth and addressing
structural challenges.
INSPIRE TALENT AND EVOLVE CULTURE
Building on our strong ownership culture, adding Care to our Leadership Behaviours. See Focus on: Culture & Inclusion page 46.
For progress against our strategic imperatives
see page 30
Reckitt Annual Report and Accounts 2021
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Financial StatementsGovernanceStrategic Report Progress Against Our Strategy
HYGIENE
Volker Kuhn
President Hygiene
24
OVERVIEW
Hygiene is the foundation of health, and its relevance has never been greater. As such,
the Business plays a key role in Reckitt’s overall Purpose, to protect, heal and nurture.
At the same time, growing middle-class populations around the world drive affordability of
our premium products. The effects of COVID-19 – principally related to consumers spending
more time at home, and greater demand for disinfection – has increased overall demand,
and we expect a number of these categories to permanently retain much of this uplift.
The Hygiene GBU represents 45% of Group net revenue, with around 80% of the portfolio
from developed markets. Our six core categories account for more than 80% of total net
revenue and our largest three – surface disinfection, auto dishwashing and air care –
each deliver consumer sales of over £1 billion.
Our brands are typically leaders in their categories, with each of our largest brands
a top-three player globally. Lysol is the largest disinfectant brand in the world having
added nearly 28 million new households since 2019; Finish, the leading auto dishwashing
(ADW) detergent brand globally, is improving the standard and efficiency of dishwashing
and empowering consumers to conserve water; and air care holds number one or two
positions in over 80% of the markets in which we operate.
We have continued to invest across our capabilities throughout 2021. E-commerce and
innovation were particular areas of focus for Hygiene in 2021. In e-commerce, within air care
for example, we have designed more sustainable ecom-fit solutions empowered by our
strengthened digital-first demand creation. We are winning in the fast-growing channel
as online market leader in the US and in third position in US offline. Across digital, we have
an eRB Capability Centre (see page 38) and trained over 200 staff, resulting in an improved
media return on investment. Innovation has also been an area of progress, benefiting from
the step-up in investment in R&D. Our pipeline is more consumer-centric and stronger than
ever; for example, in auto dishwashing, we have developed thermoforming solutions which
deliver significantly better results at premium prices versus our previous ‘hard tablet’
generation of products.
Finally, we have been embedding our Leadership Behaviours of Own, Deliver, Create and
Care. Evidence of the Own and Deliver components in our culture is well reflected in the
way in which we were recognised with annual awards by Walmart and Dollar General.
Here, our commercial teams were recognised by the retailers for their transparent and
action-oriented communication, and their tenacity and agility to meet customer needs
in challenging times.
OUR REVENUE GROWTH ALGORITHM
In the medium-term, we expect our revenues to grow by 4% to 5% per annum, balanced
across our portfolio and coming from growth in penetration and market share, and through
entering new places and new spaces. Our aim is to be present in a third of all households
by 2030 as we benefit from a rising middle class globally, whilst generating a third of our
business online, and a third of our business from developing markets.
Surface
Disinfection
Auto
Dishwashing
Air
Care
Fabric
Care
Lavatory
Care
Pest
Control
c.4-6%
c.3-5%
c.3-5%
c.2-4%
c.3-6%
c.2-4%
Medium-
term net
revenue
growth
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MARKET SHARE GAINS
LYSOL US
Lysol is the largest disinfectant brand in the world. We generate
94% of our sales in markets where we are the leader or number
two. Lysol’s consistent strong performance throughout the
COVID-19 pandemic is built on its trusted brand status.
Lysol has gained more than 700bps of market share in the
US since 2019, driven primarily by growth in the core business:
wipes and disinfectant spray. Here, we have seen increased
usage amongst the most loyal consumers contributing
more than half of this growth, with a 500bps increase the
proportion of consumers buying two or more Lysol products.
Our compelling claim, ‘nothing kills more germs on more
surfaces than Lysol’ is at the heart of the brand’s offering,
and our innovation in fragrances and successful pricing
further contributed to these gains.
A particular success in 2021 was the Lysol ‘Back to School’
programme. Here Lysol has been playing a key role in helping
children and their teachers feel safe as they return to physical
lessons. Concerns were particularly elevated around this period
given the rapid spreading of the Delta variant throughout much
of the summer. Through partnerships with organisations such
as the CDC and National Geographic, marketing campaigns
across TV, digital and social, and through strong in-store display
activation, Lysol was able to take significant share from its
competition. Share of the surface category grew 630bps whilst
share in disinfectant spray grew 160bps.
In addition to the core business, we have been broadening
the shoulders of the brand. Globally, we have generated over
£250 million additional revenue contribution from new spaces
and places since the beginning of 2019, with Laundry sanitiser
alone for example contributing an additional £90 million.
NEW SPACES
AIR WICK BOTANICA AUSTRALIA
Air Wick Australia has been a leading Category Market Unit,
with Botanica driving both growth and distribution of share.
The Australian team managed to achieve one of the most
difficult, but also most important, success factors for an
innovation launch by positioning Botanica as incremental
for consumers rather than as a replacement for the existing
Air Wick core products.
This vindicated the team’s decision to allocate a sizeable
budget to launch the innovation at scale. They were also
able to secure additional distribution for the new range.
Consumers reacted positively to its purpose-led positioning.
This was highlighted by launching it in a joint campaign with
WWF Australia to help save threatened native wildflower
species from extinction.
Since the launch, Air Wick Australia as a whole has gained
significant share and has also seen a substantial
improvement in equity metrics.
PENETRATION
FINISH
Finish exists to ease the burden of dishwashing. We bring
consumers the highest standard of dishwashing while
empowering them to conserve water, a very precious
and scarce resource.
In Turkey, Finish is the brand leader, reaching more than half
of the market, 10.7 million households. Its brand penetration
in 2021 at 51.4% was 430bps ahead of 2020. There were
gains across the category, with both detergents and
enhancers doing well. Purpose-led marketing highlighted
water scarcity and outlined the water-saving benefits of
auto-dishwashing. Our #skiptherinse campaign got a lot of
traction and both Finish detergent and its additive products
made strong gains.
In the US, we teamed up with leading dishwashing machine
brands to drive penetration. There is still massive growth
potential even in this seemingly well-established market;
machine penetration currently stands at just 49% of homes.
Globally, dishwashing machine penetration is only 13%; the
typical consumer has disposable income. The rise in the
global middle class is therefore expanding our addressable
market. By 2025, this group is expected to grow by 160 million
households, a significant acceleration. And we are the clear
market leader in these high-growth developing markets.
E-commerce and innovation are important drivers of
category growth. More sustainable e-com-fit solutions are
helping us win higher online share, and our thermoformed
solutions have proved popular with consumers – delivering
better results at premium pricing versus our previous
generation of products.
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HEALTH
OVERVIEW
We created our Health GBU in 2020, with a dedicated leadership team and focused
resources. Since then, we have developed and deployed clear growth strategies for each
of our brands and categories, grounded in a deeper level of consumer insight. We have
invested significantly in our innovation pipeline and in commercial execution.
The Health GBU represents around 35% of total Group net revenue. We are present in over 130
markets across the world with a balance of revenue from developed and developing markets.
Our portfolio is well diversified across four key categories, all of which have strong
growth prospects based on a clear runway for household penetration and premiumisation.
In aggregate, over-the-counter (OTC) and germ protection account for 70% of Health net
revenue. Next in size is intimate wellness with high growth potential. Personal care is an
important scale-builder in our portfolio in many markets which we grow and invest in
selectively. All four categories have an attractive earnings model, with the highest margins
generated in OTC and Intimate Wellness.
Our Health brands are very strong. All major brands occupy leading positions in the
categories and the markets in which they play and many have strengthened throughout
COVID-19, as consumers chose the most trusted and efficacious solutions.
We have been particularly focused upon innovation and sales excellence. Innovations
include the Mucinex NightShift and the InstaSoothe sore throat ranges. Nurofen’s
breakthrough ibuprofen 12-hour product launched in Australia and a best-in-class ibuprofen
plus paracetamol, a combination launched as Nuromol in Brazil. With significant investment
since 2019, our OTC innovation pipeline in 2022 will be double that of 2021.
Another key focus area has been to drive superior customer service. A year ago we set up
our Sales Outperformance Capability Centre which helped us in resetting more strategic
partnerships with our top customers. We have received several recognition awards including
Supplier of the Year in consumables from Walmart in the US and Tesco Covid Hero in the UK.
Alongside this, we have been improving our share of distribution points. The two most
prominent examples here are Dettol’s global distribution recovery to pre-COVID-19 levels,
as well as Durex becoming the number two condom brand in India, driven by the expansion
of our network of retailers. And in the UK, we are excited to have established an initiative to
deliver our products supplied to Boots, direct to consumers via a partnership with Deliveroo.
Throughout the challenges of the pandemic, the Health business has stayed true to the
broader Reckitt Compass, and in particular the Leadership Behaviour of Care. This was
exemplified in 2021 by a cross-functional team from Reckitt India who worked to
provide support to employees and local communities affected by COVID-19.
OUR REVENUE GROWTH ALGORITHM
In the medium-term, we expect our revenues to grow by 4% to 6% per annum,
outperforming the broader market. This will continue to come from growth in
penetration and market share, and through entering new places and new spaces,
with germ protection, with its greater presence in developing markets, and intimate
wellness the fastest growing segments of the portfolio.
Germ
Protection
OTC
Intimate
Wellness
Personal
Care
Medium-term net
revenue growth
c.4-6%
c.2-4%
c.7-9%
c.2-3%
Kris Licht
President Health
26
and fully lifestyle-based approach to self-care. In the past
year, we have leveraged our R&D wealth to bring elevated
science to product solutions. All Queen V products are
Micro-v-iome friendly, going beyond pH balance to remove
harsh ingredients and ensure products respect women’s
natural microbiome ecosystem of good and bad bacteria.
This ecosystem is critical to vaginal balance and the reduced
occurrence of vaginal infections. With three product lines
– Maintain, Help, Enjoy – Queen V not only helps her in
moments of need, it equips her with the tools to proactively
maintain vaginal balance and support her moments of
ultimate enjoyment.
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GAVISCON
Gaviscon’s growing revenue in an expanding market
is built on consistent consumer-led innovation and
continued successful marketing and execution and brand
communications. As we have driven demand however,
growth in sales became constrained by our supply capacity,
risking a deterioration in customer service levels and missed
revenue opportunities.
In early 2021, we invested £20 million at our Hull factory in
the UK, adding additional lines and improving capacity by
60%. This has driven improved service levels – up by around
20ppts since 2019 – and market share gains of 60bps in 2021.
This helped accelerate Gaviscon revenue growth from 9% in
2020 to over 20% in 2021.
NEW SPACES
QUEEN V
Reckitt’s broader expanse into the intimate wellness space
has paved the way for the introduction of Queen V. Acquired
by Reckitt in 2021 and relaunching broadly in US retail in
Q2 2022, the brand has curated a loyal following within
the digital space, and takes a frank, unapologetic approach
to feminine wellness.
The female intimate wellness category presents significant
opportunity for growth for Reckitt with an addressable
market of £11 billion. It is also fuelling growth as cultural
conversations surrounding vaginal health are shifting
consumers’ attitudes and behaviours in the category.
Queen V holds a unique space within our Intimate Wellness
portfolio of brands. Created by women, for women, the
brand was founded to break down stigmas surrounding
vaginal health and offer a more effective, less intimidating,
NEW PLACES
NUROMOL AND LUFTAFEM BRAZIL
The Brazilian analgesics market is the world’s fifth biggest,
with its OTC market alone worth £1 billion. Yet there has
been no significant innovation in this category for over
a decade.
Reckitt Brazil changed all that this year with our latest
analgesic, which combines the advantages of ibuprofen
and paracetamol in a single dose. We’ve launched Nuromol
for general pain relief. We also launched Luftafem, which
leverages Luftal’s reputation for abdominal care. Aimed at
women, this provides strong-acting relief from menstrual
and other pains. Both have built scale rapidly as premium
brands in the Brazilian market.
We are now playing in a very competitive category with
two new brands, but early indications are promising.
We anticipate accelerated growth enabled by increased
awareness. We’ve embarked on a bold and extensive
media strategy to facilitate that. We’re building up consumer
awareness, engaging with the medical community, and
extending distribution and trade links. We have big ambitions
here. We’re targeting a 10% share of Brazil’s pain market
within ten years, with analgesics our biggest health category.
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NUTRITION
OVERVIEW
Our Nutrition business seeks to protect heal and nurture through providing the highest
quality nutrition to those at all stages of life – from infancy to old age. With products
spanning infant formula, allergy nutrition and vitamins minerals and supplements (VMS),
we seek to build and develop relationships with consumers with personalised solutions
delivered at scale.
The Nutrition GBU represents 20% of Group net revenue, with 60% from developed markets
– primarily North America.
Approximately 81% of revenue is from our IFCN business. The US is our largest market,
generating about half of IFCN revenue. This business has performed consistently well since
being acquired as part of Mead Johnson in 2017. Since 2018, it has averaged nearly 5%
growth as a result of continued strong execution and innovation. Our focus in IFCN is now
increasingly centred on replicating this performance in ASEAN and Latin America – the other
two major regions within IFCN. Although market structures, and our positioning within them,
are different to the US, we see significant opportunity for improved capabilities and
execution to drive performance.
In VMS, our opportunities are underpinned by the combination of our strong brands,
e-commerce and our brand incubation capabilities, coupled with strong scientific
platforms and our partnerships with customers. In Q1 2022, our VMS business moved
into our Health GBU.
Aside from the disposal of IFCN China, our particular focus throughout 2021 has been on
strengthening go-to-market execution. We have focused strongly on refining the model
that underpins the Nutrition business. Specifically, the incremental investment in science,
innovation, expert recommendation and executional excellence, coupled with our
Consumer Acquisition, Retention and Expansion (CARE) CRM model which maximises
consumer lifetime value, provides the basis for a broader Reckitt relationship with the
household, at a time in the life of a consumer when behaviours change most.
Our Leadership Behaviours of Own, Create, Deliver, Care have been further embedded
throughout the year. As an example of this, a Diversity and Inclusion initiative whereby
Nutrition leaders articulate to the business their own commitment to these issues,
with a view to inspiring the organisation to show its support, proved particularly powerful.
OUR REVENUE GROWTH ALGORITHM
In the medium term, we expect our revenues to grow by 3% to 5% per annum,
through growth in penetration and market share, and through entering new places
and new spaces. We expect relatively stable birth rates globally to be offset
by continued premiumisation in our infant nutrition business, particularly
as it relates to demand for specialty products, whilst VMS category growth
and the introduction of adult nutrition will further contribute positively.
Core Enfa
Specialty
Infant
Adult
VMS
Medium-term net
revenue growth
c.0-2%
c.7-10%
+100bps
contribution
c.4-6%
Pat Sly
President Nutrition
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NEURIVA US
MARKET SHARE
IFCN US
Our brain supplement brand, Neuriva, was launched in the
US in early 2019, capitalising on the opportunity presented
by growing consumer awareness of the importance of
brain health. Neuriva includes two natural and GMO-free
ingredients – Neurofactor and Plant-sourced Sharp
Phosphatidylserine (PS) – that are clinically proven to fuel
five indicators of brain performance, including accuracy,
concentration, focus, learning and memory.
Its performance since launch has been very strong. The
brand quickly established itself with key customers such as
Walmart, Walgreens, Amazon and Costco, and built a strong
online presence. In 2021 Neuriva launched a major campaign
partnering with a celebrity neuroscientist, helping it become
the leader in the US for household penetration in the nascent
brain supplement category, with 1.3% of households, and
the category’s #1 brand on Amazon. Revenue doubled, and
now represents around 20% of our VMS portfolio. With 68%
of sales coming from new users, the brand is supporting
penetration growth in the category.
Since acquisition of the Mead Johnson business in 2017, our
IFCN US business has performed consistently well, averaging
nearly 5% like-for-like revenue growth since 2018. 2021 was
no exception to this strong momentum, with the business
growing mid-single digits, in part driven by share gains.
We have approximately a one-third share of the IFCN
market in the US, excluding sales related to the WIC
(Women, Infants and Children) rebate programme. Within
this the majority of revenue is derived from the core, Enfa
family of products, and share here grew c.50bps in 2021 as
a result of strong innovation, with the new Enfamil NeuroPro
launched in June, accompanied by full digital and Healthcare
professional activation.
The remainder of the IFCN business is comprised of our
faster-growing speciality business, primarily Nutramigen,
which caters for infants with food allergies and other
specialist requirements. Here, share grew by nearly 70bps
in 2021. This was also driven by strong marketing execution,
positioning the brand amongst healthcare professionals as
the leader in the cow’s milk allergy (CMA) segment, whilst
engaging and educating consumers regarding CMA through
a ‘360-degree’ digital and social media campaign.
NEW PLACES
VMS
The majority of VMS revenue has historically been generated
in the US. Increasingly however, we are focused on growing
the business in China, selling via cross-border platforms
such as Tmall and JD, with Move Free the best-selling brand
in the Joint Health segment. This allows us to use products
manufactured in the US, avoiding the need to specially
formulate products. Whilst being efficient financially,
with limited need for physical presence in the country,
our marketing of Move Free in particular is supported
by very strong local communications and activations.
Now representing around a quarter of VMS revenue, China
growth has averaged 60% over the past five years, and
we continue to see significant opportunity for penetration
gains, and to develop products tailored to the local market.
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STRATEGIC
IMPERATIVES
Throughout 2021, we have
made good progress against
our six strategic imperatives:
GROW BRANDS AND INNOVATE
DRIVE SUPERIOR EXECUTION
INVEST IN CAPABILITIES
INCREASE PRODUCTIVITY
EMBED SUSTAINABILITY
ACTIVELY MANAGE THE PORTFOLIO
30
GROW BRANDS
AND INNOVATE
The ongoing success of our brands is core to our performance.
Here, we continue to invest strongly in demand generation –
through both Brand Equity Investment (BEI) and investment in
our e-commerce capabilities, which are becoming an increasingly
important driver of brand awareness.
We are developing a credible purpose for all our major brands
which is in turn informing each brand’s personality values, its
behaviour and its sustainability strategy. In doing so, and with
our deep understanding of consumer demand and our investment
in innovation, we’re driving growth as we grow brand relevance
with consumers and trade customers.
BRAND EQUITY GROWTH
Is effective at killing germs
+1000bps
Is a brand I trust
+500bps
Spontaneous consideration
+1300bps
As a result, our brand equity metrics continue to be strong; Dettol
India, for example, is seeing a 1000bps improvement in its key
brand attribute of ‘is effective at killing germs’, while Nurofen in
the UK, its largest market, saw a 500bps uplift in ‘is a brand I trust’.
Additionally, the ability to leverage the strength of these brands
to bring about behavioural change while driving commercial
performance was again recognised, with Finish, Dettol and Durex
each winning gold ‘Effie’ awards for their campaigns.
distribution points, while Dettol – where global distribution points
were adversely impacted by COVID-19 – has now returned to
pre-pandemic levels. Overall, two-thirds of our top Category
Market Units (CMUs) are growing weighted distribution.
Finally, online plays an increasingly important role in selling not only
to our trade customers but, increasingly, direct to consumers with
11 new online stores launched in 2021 helping drive further double
digit growth in this part of our e-commerce business.
This is further detailed on
Focus on: Digital page 38
INVEST IN
CAPABILITIES
We have continued to invest firmly in key foundational capabilities
to support growth across the business. In R&D, we have invested
an additional £100 million (c.30%) more than in 2019, primarily
funding increased headcount. Our capability centres (sales
outperformance, marketing excellence, eRB, medical sales) are now
fully established and leveraging best practice across the Group.
The payback periods on such investments can vary markedly.
In R&D, we typically expect investment to be returned over a
multi-year period, reflecting the time taken for consumer insights
to be turned into product development, and to go through the
necessary approval processes. Investment here has nevertheless
created a 2022 product pipeline approximately 50% bigger than
2021 levels. Our investment in capability centres by contrast is
already delivering tangible returns. We have seen improvements
in our customer service levels and Revenue Growth Management
(RGM) capabilities now rolled out to more than 60% of CMUs. KPIs
for returns on these investments, both quantitative and qualitative,
are tracked carefully.
We have continued to innovate during the year, with a strong
sustainability component. Notable new launches have included:
the Lysol Smart refill product, using 75% less plastic; our Mucinex
InstaSoothe sore throat range; Dettol Tru Clean – our first
plant-based disinfectant; and Provital, our adult nutrition product.
Our innovation is increasingly recognising the growing importance
of the online channel, with Durex and Vanish each launching
letterbox-friendly products.
DRIVE SUPERIOR
EXECUTION
We continue to make good progress in driving better execution.
Our enhanced focus on our customers – with more top-to-top
meetings, our dedicated Sales Outperformance Capability Centre
and improved product availability – has markedly improved
customer relationships. Based on the most recent Advantage
survey of retailers, the percentage of our markets rated ‘top tier’
by our customers improved by 20 percentage points, to 46%. The
improvements have also been recognised through accolades from
specific customers: During 2021 both Walmart and Dollar General in
the US named Reckitt as a supplier of the year. Such improvements,
in turn, allow us to engage more meaningfully with customers to
understand and capture long-term category opportunities.
AWARDS FROM CUSTOMERS
INVESTING IN KEY CAPABILITIES
Walmart
US
Supplier of the Year
in consumables 2021
Superdrug
UK
Supplier of the Year 2021
Woolworths
Australia
Everyday Needs Large
Supplier of the Year 2021
Dollar General
US
Strategic Partner Summit
winner 2021
At the same time, we’ve increased our product availability through
greater distribution. Durex, for example, is now the number two
condom brand in India following a more than 60% increase in
INVESTMENT
AREAS
PAYBACK
PERIOD
KPI
TRACKING
R&D
Multi-year
• Number of prototypes and IP
E-commerce
and Digital
in development
• Number of initiatives reaching
production
• Incremental revenue from
NPD pipeline
Fast
• Online market share
• Volume of traffic and customer
retention
• Investment tracking in new
ventures
• Value optimisation through
in-house platforms
Sales
Outperformance
Capability Centre
Fast
• Advantage survey performance
• Customer top-to-top feedback
• Customer service and on-shelf
availability
• Revenue Growth Management
(RGM) productivity achieved
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INCREASE
PRODUCTIVITY
Funding our investments, in 2021 we delivered approximately £750
million of savings, representing cumulative, annualised savings since
the beginning of 2020, of over £1.1 billion. Our programme has been
running ahead of initial expectations, with upgraded targets in part
necessitated by the increased input cost pressures faced across the
sector. We are now targeting £2 billion savings by the end of 2023.
Within this, the majority has been delivered within cost of goods
sold, for example, by implementing standard operating practices
across Reckitt manufacturing facilities to drive efficiency and
deliver best practice. Our design to value laboratory has now
analysed over 1,000 products to create ideas to reduce waste,
improve the environmental footprint and deliver high-quality
products to consumers at a lower cost. Approximately £150 million
has been delivered within our BEI spend as we improve marketing
data analytics, buy media more efficiently, and improve the
efficiency of our creative efforts, with the balance saved through
organisational simplification.
Our productivity capabilities are now firmly embedded within the
business, and our teams are increasingly approaching productivity
as a business-as-usual activity. Productivity increasingly goes hand
in hand with our efforts in sustainability, with projects such as
reconfiguring our sourcing of milk powder in the US or reducing
the quantity of latex waste in the production of condoms both
saving costs and reducing our environmental footprint.
PRODUCTIVITY EXAMPLES
1.Sourcing milk powder
We continue to improve our environmental impact as we
configure our supply chain, for example, with material savings
made in our US IFCN business, resulting in a 70% reduction in
our carbon dioxide emissions.
70%
reduction in carbon dioxide
emissions
Relevant sustainability targets:
65%
reduction in freight costs
• 65% reduction in absolute carbon emissions
• Carbon-neutral across our value chain
• 50% reduction in product carbon footprint
Improving efficiency through
reconfiguration of network
Michigan Plant
Chihuahua Plant
32
2. Improving Productivity and eliminating waste
in manufacturing
We have implemented our Reckitt Production System (R-PS),
which provides a set of continuous improvement standard tools
and routines to enhance manufacturing performance. Our R-PS
system has been deployed across many our Health and
Nutrition factories. In 2022, the deployment efforts will focus on
our Hygiene business unit, whilst further expanding in Health
and Nutrition.
£55m
reduction in conversion costs and
waste reduction in 2021
Relevant sustainability targets:
• 25% waste reduction
EMBED
SUSTAINABILITY
Our culture is performance-driven, with a strong sense of shared
ownership. And yet, while being shareholder-centred, we are doing
business in the right way. We have set ambitious ESG goals, with
a focus on our purpose-led brands, the planet and a fairer society.
During the year, we renewed these targets, including a 65%
reduction in absolute carbon emissions, and 50% of revenue from
more sustainable products by 2030. We have been making tangible
progress through the year and are pleased that this has been
recognised externally, with our MSCI ESG rating improving to AA,
and our Sustainalytics rating currently at 22.9 (as at January 2022);
we have also been re-entered to the Dow Jones Sustainability
Index for Europe. In addition, modelling conducted by MSCI has
confirmed that the plans we have in place are consistent with
the Paris Agreement targets on climate change.
ESG rating history
AAA
AA
A
A
A
A
A
AA
BBB
BB
B
CCC
Aug-17
Jul-18
Aug-19
Jul-20
Apr-21
ACTIVELY MANAGE
THE PORTFOLIO
We continue to actively manage the portfolio to migrate it towards
higher growth spaces and to drive shareholder returns.
In July, we completed the acquisition of Biofreeze for $1,060 million.
The business has already been growing at double-digit rates in
recent years and we see opportunity for further growth through
product innovation and geographic expansion, and through
leveraging the Reckitt sales and marketing platform.
In September, we completed the sale of IFCN China, following a
strategic review announced in February 2021. The sale was made
to Primavera Capital Group for an implied enterprise value of
$2.2 billion. The business represented approximately 6% of Group
revenues in 2020, and had, since the beginning of 2020, been
materially dilutive to Group revenue growth and margins, reflecting
increasingly difficult market conditions.
In June, we completed the sale of Scholl to Yellow Wood Partners
for an enterprise value of £275 million. Like IFCN China, Scholl had
been dilutive to revenue growth and margin, and the fit with other
parts of our portfolio was not strong. The sale therefore brings
greater focus to our personal care portfolio.
Finally, in December we announced an agreement to dispose
of E45 – our skincare brand – for £200 million. This transaction
completed on 1 April 2022.
We see further opportunity to manage the portfolio towards
higher growth over time, although we are confident in delivering
our medium-term targets with the current portfolio.
DIVESTING
Slower growth or
less scalable brands
IFCN
China
3-year CAGR1
-14%
ACQUIRING
Higher growth
or strategically
important brands
Important strategic entry
into the world’s largest
analgesics market
3-year CAGR
+10%
INSPIRE TALENT AND EVOLVE CULTURE
Underpinning our strategic imperatives is the progress we are
making to inspire talent and evolve our culture.
Throughout 2021 we have continued to make good progress,
taking the best of what exists, and building for the future.
Our Purpose, Fight and Compass have been clear for some time.
In 2021, however, we established our Leadership Behaviours
of Own, Create, Deliver and Care. These behaviours are being
reinforced throughout the organisation. Over 600 of Reckitt’s
global and regional leaders have now participated in the
leadership development programme. We continue to develop
initiatives such as our conscious inclusion programme, the Stronger
Together conversation series – our platform for sharing inspiring
and challenging stories from colleagues across the world –
and our employee resource groups.
Such focus on our culture is crucial to attracting and retaining
talent, and we are therefore pleased with our improved KPIs.
We have for example seen a 100bps increase in Net Promoter
Score from the LGBTQ+ community in 2021, and over 75%
of our people feel a positive impact from the Leadership
Behaviours launched in 2021. Being ‘proud to work at Reckitt’
remains at a level above external benchmarks2.
For more detail on the work we are doing
around culture and inclusion, see page 46
1. 2019 to 2021 CAGR. For IFCN China, Scholl and E45 2021 growth is calculated
to the end of last full month of ownership by Reckitt
2. June 2021 Reckitt all employees survey
Reckitt Annual Report and Accounts 2021
33
Financial StatementsGovernanceStrategic Report
Focus on: Innovation
INNOVATION IS A
KEY ENABLER FOR
SUSTAINABLE
GROWTH
As a business, we work to solve some
of the world’s largest problems. Through
research and development, science
and partnership, we make products that
people have trusted for generations.
Innovation at Reckitt is delivering purpose-driven, sustainable
products that protect, heal and nurture, to make a meaningful
difference to people’s lives. We earn the continuing loyalty and
trust of our consumers with differentiated products that offer
superior solutions to meet their evolving needs. We want to make
a difference to the world through our brands.
But innovation at Reckitt doesn’t begin and end with product
solutions. Innovation is a mindset, it’s rooted in our culture. There’s
a restless energy here; we always want to improve. Sometimes
that drives top-line growth with new products and better
solutions. Sometimes it spurs process improvements that extend
our manufacturing capacity or drive up productivity.
SUPPORTING INNOVATION THROUGH FOCUSED R&D
Our global R&D function has a strong commercial orientation,
prioritising high-return strategic projects. It aims to bring
differentiated products to market that are safe, effective and
compliant and to achieve that at scale and at pace.
An international team of more than 3,000 scientists, engineers,
technologists and experts operates in nine centres of excellence
at 40 regional labs across our markets. Reckitt’s global hubs drive
scale and concentrate our expertise. Our local operations keep us
close to our consumers, customers and markets and allow us
deliver targeted solutions at pace.
Since 2019 we have invested an additional £100 million in our R&D
capability. This is already delivering results through the growth we
are seeing in our product pipeline, a 50% increase from 2021 to
2022 with projects fully resourced for execution and continued
momentum through to 2024.
And, we are improving the quality. We are delivering three times
more value in the pipeline from disruptive innovation; that is,
innovations which represent breakthrough solutions to meet
consumers unmet needs. We have increased our patent filings by
30%, indicative of a more inventive and differentiated pipeline.
34
Governance
Financial Statements
Our R&D function spurs innovation in three specific ways: We
generate additional revenue streams by creating new products
and strengthening their utility; our process innovations enhance
productivity and add manufacturing capacity; and by ensuring we
deliver safe and effective solutions, R&D helps us manage risk and
protect base performance.
OUR INNOVATION CAPABILITY ENABLERS
Consumer insights
Our entire approach to innovation is founded on combining our rich
human understanding with trusted science to develop solutions
which meet consumer needs. This is not just about identifying
consumer preferences; we drill down to unearth the fundamental
science and behavioural factors driving their preferences and
concerns. Our sensory and consumer science labs use human
insight and behavioural analytics to enrich our understanding of the
problems worth solving and ensure that consumers’ overall
experience is designed into our products. For example, we are
delivering more occasions for intimate wellness by expanding into
new materials like polyurethane condoms that deliver a different
experience of size and fit, creating more choice for consumers.
We also look beyond specific brands to develop other
opportunities for serving consumer needs within a specific
category. Our category development teams research underserved
segments within their category to develop our brand offerings into
new spaces. Durex, for example, was traditionally seen as a
condom brand. The brand’s addressable market is considerably
greater when viewed as part of the intimate wellness category.
In Nutrition, we are adding a whole new area of growth, by taking
insights from our IFCN business to disrupt the adult nutrition
category. In Hygiene, we are responding to shifting consumer
expectations, such as on-the-go disinfection and cooler
temperatures in the auto-dish segment. In Health, a deeper
understanding of functional and emotional benefits for consumers
is yielding innovations for delivery systems, and new
pharmaceutical actives. We are also creating more choice and
accessibility for consumers in line with regulatory changes, from
prescription medicines to OTC.
Reckitt Annual Report and Accounts 2021
35
Strategic Report Focus on: Innovation (Continued)
MICROBIOME SCIENCE PLATFORM
Microbiome science has exploded over the last few years.
Scientists have effectively discovered an entirely new
organ. Its impact on human health, animal health and the
environment is vast. The microbiome, the microbes that
live in us, on us and around us, is enabling entirely new
growth areas.
Our microbiome science team targets six biome areas:
• Upper respiratory and ear, nose and throat (ENT) biome
• Built environmental biome
• Vaginal biome and reproductive health
• Skin biome
• Gut biome
• Baby biome
What makes the microbiome science platform so
powerful is that the science really cuts across all areas. By
building connections between them, we are creating
better insights and further utility for future innovations.
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The foundational research and development we are
generating means we can incorporate this into products
now, while innovating for the future.
Vaginal biome insights have guided our focus on female
intimate wellness. Our Queen V brand helps to restore a
balanced microbiome for women using active ingredients
and delivery systems. With supplements we are helping to
drive the vaginal microflora from the inside out.
Research in the baby biome shows that seeding a healthy
infant microbiome in the precious first thousand days of
life has lasting health benefits for allergy and immunity.
The built environmental biome studies the microbes that
are around all of us every day. Our research here has
far-reaching implications that underpin the importance of
hygiene as the foundation of health. We are applying
insights about maintaining a healthy balance between
good and bad germs to drive innovations for bio-based
disinfectants, for instance, in the laundry segment with
laundry sanitisers.
Science and knowledge
Our ability to apply our science and technical knowledge to
consumer needs ensures our innovations are built on firm
foundations. This is at the heart of how we deliver ownable
product differentiation. Our focus on science and technology
platforms spanning the breadth of our portfolio allows us to unlock
more value across the Group. We concentrate our scientific
research on nine interconnected, foundational disciplines that span
our categories. These science and technology platforms have
been selected to deepen the scientific rigour in areas that span
across our categories and brands. A globally coordinated team of
technical experts and scientists drive each platform.
This approach to our science and technology disciplines allows
us to deliver more differentiation and maximises the benefits.
Breakthroughs in polymer science, for instance, can lead to more
sustainable packaging solutions that are widely applicable.
Packaging is often the first experience the consumer has. Is it easy
to open? How safe is the product inside? Is it good for the
environment? We are now able to use novel film technology to
down gauge and light weight packaging.
We’re also introducing consumer recycled polymers for Finish and
Enfamil brands. The introduction of more sustainable packaging for
Finish is an early real-world example of a polymer-science-led
application. The iconic stand-up pouch for Finish tablets is now
made from 30% recycled (PCR) plastic and we anticipate PCR
being progressively incorporated into other brands in future. This
innovation stems directly from a two-year project in polymer
science investigating the interaction of multiple materials.
For Gaviscon and Harpic we’re using surface modification through
coating technologies to improve shelf life. And it’s also about the
product inside, for example, we’re combining smart-release
technology and advanced polymer design to help deliver
extended pain relief with Nurofen 12HR Ibuprofen 300mg modified
release tablets.
Science and technology platforms:
Nine interconnected, foundational disciplines with wide-ranging
applications and underlying benefit to our overall portfolio:
Polymer science
Microbiome
Allergy and immunity
Growth and cognition
Digestive health
Sensory enrichment
Surface chemistry
Entomology
Smart release
External partnerships
The pace of play in science and technology has never been faster;
and consumers understand the benefit of science more than ever.
We believe there are great new ideas happening in many areas
around the world, impactful innovation concepts can come from
anywhere. Through our external partnering ecosystem we are able
to access leading-edge science and technologies. Digitalisation
and collaborative networks can amplify and magnify them into
36
successful globally disruptive innovations. We reach out and forge
partnerships with academics, startups, suppliers and many others
to share our strengths and augment our capabilities. We set out to
be a committed commercial partner that co-develops, co-creates,
and ultimately launches new solutions.
Building scale at pace, launching in multiple markets and creating
superior product experiences are key differentiators for Reckitt.
Our ecosystem is diverse. We draw on the latest developments,
scientific inventions and capabilities. Our strategic supplier
programme gives us access to innovative new ingredients which
can impact how our products are used.
Changing regulatory conditions can influence our portfolio of
brands. We see regulatory intelligence as a source of competitive
advantage. We are using our regulatory and medical advantage
to open new markets and create new differentiated claims.
Across the portfolio, we keep abreast of developments by
maintaining close relationships with regulatory, professional
and trade associations. We work with technology providers
and forge links with key opinion leaders, healthcare professionals
and their networks.
We collaborate with thought leaders to shape and advance
scientific understanding around consumer needs. At the University
of Naples for example, where one of the top thought leaders on
food and milk allergy is aiding the science of our Nutramigen
products and helping to create new medical insight and evidence.
We are highly focused on enhancing our science and technology
driven innovation by attracting high quality ideas and developing
more partnerships. This will be further cemented with the launch
of our external partnering platform in 2022.
Diverse ecosystem of partnerships
KOLs, HCPs, influencers
and networks
Regulatory,
professional and
trade organisations
Technology
providers
Key suppliers
and distributors
Universities
and research
institutes
Startups and accelerators
Sustainable innovation
Sustainability is at the heart of our innovation process. We want
every innovation to be more sustainable than its predecessor,
whether it’s a small incremental change or a major new launch,
everything counts.
This isn’t always straightforward. Sustainability impacts are
multi-dimensional and every innovation has trade-offs.
To help us to understand and evaluate these choices, we’ve
developed a purpose-built Sustainable Innovation Calculator (SIC).
The calculator evaluates the sustainability impact of every new
product versus existing products and established benchmarks.
Each potential innovation is rated on things like reformulation,
packaging, ingredient quality, device optimisation and
consumer use.
There are always benefits and drawbacks to innovations and we
weigh the impact of our decisions carefully. For example, a natural
ingredient may score highly on one aspect of sustainability, but it
could also have a higher water impact than a synthetic ingredient;
or, plastic packaging may actually have a lower carbon footprint
than a composite equivalent. This is what makes the SIC so
powerful – it looks at all of these elements. We then use that
data to inform our overall decisions, fully understanding the
impact of a product innovation and its implications for our
sustainability ambitions.
We want consumers to trust our brands and to feel confident that
our products are safe and cause no harm to the ecosystems or
the people that they touched during their lifecycle. By actively
encouraging an innovation culture which embeds sustainability
as a fundamental criterion, ensuring it is always considered and
improvements both big and small are made at every opportunity,
we believe we will be able to deliver against our ambitions.
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NUROFEN 12HR
In 2021 we launched Nurofen 12HR in
partnership with an external company using a
modified release technology fuelled by
patented technologies which enable us to
unlock enhanced consumer benefits in OTC.
Working closely with our external partner, we
were able to create a tablet that provides
both fast and extended pain relief over 12hrs
in one dose. Specially-formulated ibuprofen
is rapidly released through disintegration
from the outer surface of the pill to provide
fast pain relief but also slowly diffuses
through the polymer-based tablet allowing
for elongated dissolution over a 12hr period.
This type of scientific application
demonstrates how we can translate novel
physical and chemical performance into
consumer benefit and illustrates the power
of our external partnering programme as we
can combine our capabilities with those of
our partners to create new innovations which
directly address the needs of people around
the world. In creating this scientific
technology, we will be able to scale and
increase the positive impact across our
portfolio of medicines to drive superior and
differentiated innovations in other formats.
Reckitt Annual Report and Accounts 2021
37
Financial StatementsGovernanceStrategic Report
Focus on: Digital
STRATEGIC
TRANSFORMATION
IN THE DIGITAL
ARENA
The pandemic has driven a step-change in consumer behaviour, altering what people
buy and how they buy it. Our employees’ ways of working are changing, and supply
chains are less predictable. This, combined with ongoing developments in technology
and marketing techniques, drives the need for enhanced end-to-end digital capabilities,
and means the digital transformation of Reckitt is one of our most important opportunities.
DIGITAL TRANSFORMATION
There are four components to our Digital transformation opportunity:
DRIVING BEST-IN CLASS
DEMAND GENERATION
1
EXECUTING WITH
E-COMMERCE
2
3
STRENGTHENING
OUR DIGITAL
INFRASTRUCTURE
4
DIGITAL SKILL-
BUILDING ACROSS
THE ORGANISATION
38
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AMAZON CENTRE OF GLOBAL EXCELLENCE
Amazon is our largest global e-commerce customer and
now the second biggest customer to Reckitt globally.
Our 30 years’ experience with the company has forged
a powerful and highly functioning partnership.
We collaborate in many key areas. We work together
on customer experience, channel optimisation, brand
protection, advertising and supply chain issues. We
co-plan growth strategies. And we continue to progress
our Climate Pledge work.
Embedding sustainability
Our sustainability, innovation, brand and packaging
solutions teams all meet regularly with Amazon to discuss
challenges and unlock new market opportunities.
We were an early signatory to Amazon’s Climate Pledge,
the first consumer packaged goods company to do so.
We are now engaging on the complexities and nuances
of implementing that in our categories. Our expertise,
along with Amazon’s scale and ambition, has a significant
multiplier effect.
On the back of these workstreams, Reckitt brand teams
are actively working to create sustainable innovations
that emphasise re-usability, compaction and reduced
air, water and packaging impacts in line with Amazon’s
Climate Pledge Friendly (CPF) shopping initiative. They
also support Amazon’s proprietary compact by design
programme. So far, 86 Reckitt products are CPF-badged.
Retailer advertising and media
As part of our global relationship, we collaborate with
Amazon advertising to test, identify and scale up best
practices that expand the reach for Reckitt’s brands.
We’re working together in multiple areas, including
collaborative lists; the global roll-out of full-funnel
advertising; bespoke intelligence and dashboard
capabilities; programmatic and demand-side platform
testing; and early-stage Adtech and Martech integrations.
To maximise our consumer reach and minimise lost
opportunities, we have enabled AI-led media buying
for more than 97% of our search spend on Amazon.
New countries and emerging channels
We launched in two new countries, Sweden and Poland,
during 2021. For the third year in succession, we had
complementary 1P (direct) and 3P (marketplace) offerings
in every country. Although relatively small launches, these
are strategically important opportunities.
Amazon Business, or B2B, is seen as a key growth channel
by the company over the next decade. Working with the
B2B teams based in the US, we are increasing our focus
on serving business customers via their integrated
website and testing ways to better connect with them.
We must deliver a seamless consumer experience and
plan to introduce a professional product range to meet
their specific needs.
Brand protection
Brand protection is critical to every company. Our global
and regional e-commerce legal teams partner with the
Amazon brand protection team to address the thousands
of unauthorised sellers of our products and better protect
our consumers and our brands. We manage these sellers
directly to further strengthen the consumer experience,
and we are employing elements of AI and ML to broaden
our scope.
OUR DIGITAL BACKBONE
Our digital infrastructure journey continued in 2021 and
our transition to the cloud is well advanced. In December,
we decommissioned the first of our three data centres and
the remaining two will follow in 2022.
As we move to a modular, API first architecture for our technology
stack, we have invested in a modern integration layer. Its strong
and agile execution capabilities earned us the Best API Strategy
award from our strategic partner, MuleSoft.
We are adopting an automation-first culture across all functional
areas, including our shared services transformation. We have
introduced process mining at scale to find opportunities for
simplification and rationalisation. Automating our own technology
operation has unlocked significant savings and improved
user experience. We were named Best Automation Centre of
Excellence at the UiPath Automation Excellence Awards and best
IT Opportunity-to-Deployment at The Hackett Group Awards.
We are charting a promising journey that will bring our data and
analytics strategy to life, unlock potential and help us outperform
in the marketplace.
In 2021, we built a machine learning model using more than 200
internal and external real-time data signals to predict consumer
demand in the US for our key categories. We’ve used this to
inform strategic, commercial and supply planning. This marks
a step-change in capability. We’re far more able to navigate
volatile demand. We can offer better service to our customers
and, ultimately, our consumers. We’re scaling up this approach
in 2022 to all our key brand/market combinations.
Reckitt Annual Report and Accounts 2021
39
Financial StatementsGovernanceStrategic Report
Focus on: Digital (Continued)
A DEEP DIVE ON E-COMMERCE
Our global e-commerce strategy today draws heavily on the
lessons we learnt over the past decade in China. As the most
advanced e-commerce market in the world, where online sales
outstripped physical retail in 2021, we believe China offers a
window into the future of global online market. For example, mega
trends such as social commerce, are already over ten times larger in
China than in the US. Taking this view globally, and using China as a
blueprint, has helped us stay agile, while gaining accelerated scale.
Our digital growth1
All our territories have experienced strong double-digit growth
in e-commerce over the last 12 months. E-commerce has more
than doubled its contribution to Group net revenue since 2018
achieving c.£2.5 billion in consumer sales in 2021. That equates
to 12% of total revenue. Our aim is to generate 25% of company
revenue digitally within five years through a combination of
organic and inorganic growth.
6%
£0.9bn
7%
£1.1bn
10%
£2.0bn
12%
£2.5bn
2018
2019
2020
2021
Total consumer sales (sell-out estimated retail sales value)
E-commerce as a percentage of Group net revenue)
25%
Five-year
ambition
Our focus is on ensuring that we build e-commerce as a global
capability. Even in countries where Reckitt is relatively small,
we are committed to building our e-commerce capability
to stay ahead of the curve.
Our strategic approach
Three areas form the core of our e-commerce strategy.
First, availability and preference. E-commerce has hundreds of
channels and platforms, big and small, and we want to maintain
first-mover advantage in them all. To do that, our brands need
to be present everywhere and be the most preferred brand
in their category.
Second, we are building efficiency and focusing operations through
the active use of data and automation. Our online consumer sales
bring in millions of data points every day: We use this to drive
efficiency in our advertising spend and reduce our fixed costs.
Our investment strategy is the third component. The focus here is
on capabilities we either cannot or do not want to build ourselves.
Through Access VC, our venturing division and other entities,
we invest in early-stage startups that either bring new capabilities
to Reckitt or to take us to new spaces and places. So far, we have
deployed over £80 million in capital across several startup brands.
Read more in our Access VC case study.
End-to-end digital capabilities
Over the last two years we have created an end-to-end digital
capability that employs marketing data, automation and venturing.
We have made a significant investment to fully integrate our CARE
model (Consumer Acquisition, Retention and Expansion model).
We analyse the data to drive six main capabilities:
1. Adjusted and other non-GAAP measures, definitions and terms are defined
on page 81
40
• Global media buying across our business units
• A global consumer insights hub informing innovation
and advertising
• Our digital factory applies consumer insights to produce
in-house targeted creative content
• Data-driven marketing focuses on improving efficiencies
• First party and second party data acquisition powers our global
data strategy
• Direct to consumer platforms (we have around 40 D2C brand
storefronts globally)
Our global marketing team of some 2,000 brand stewards
in 50 countries across all three business units supports our
digital capabilities, along with our Global Digital and Data Hub
in Warsaw (Poland) where 200 technology and data professionals
are operating and advancing our backbone digital platforms.
They are all plugged into Marketing Excellence, our global virtual
community dedicated to sharing expertise across the Group
and growing our global marketing capabilities.
Driving best-in-class demand creation
As part of our investment programme over the past
two years, and reflecting the growing importance of
the online channel, we have begun to scale across the
business a digital demand creation excellence programme.
This has involved the development of existing core digital
capabilities such as measurement and audience targeting,
and requires cross-functional up-skilling in our marketing,
media and analytics teams.
The programme has so far been rolled out to over
20 markets across each GBU, incorporating over
90 ‘test-and-learn’ campaigns.
Whilst we are still early in this journey, early signs of the
potential for performance uplift are encouraging. These
‘test-and-learn’ campaigns delivered significant sales uplifts
compared to pilot tests, and are also allowing us to generate
wide playbooks, enabling the sharing best practice across
the Group. External benchmarking has also demonstrated
that, where applied, our programme has accelerated our
‘digital maturity’ in this respect ahead of industry averages.
The key drivers of growth
E-commerce penetration is growing across consumer-packaged
goods. We anticipate that the market will be two to three times
larger over the next three years and our addressable market is
expected to grow as much as tenfold over the next five years.
Increasing convenience for consumers and, from that, gaining lifetime
value is a key objective. Daily-use, big-name brands like Dettol and
Finish are ideal for automated purchase. A significant number of UK
consumers have signed up to Amazon Subscribe & Save. These kinds
of schemes are helping us transition to more predictable, repeatable
and more easily serviceable revenue streams.
As we build out from a brand-based approach and begin to think
more in terms of categories, new opportunities are emerging.
The intimate wellness category, of which the Durex brand
forms part, is well suited to e-commerce. By growing our digital
capabilities in this category we can build a data powerhouse
for insight and innovation. Our recent acquisition of Queen V
strengthens our positioning in this category and provides more
brand-building opportunities with digitally native consumers.
Growing market share through superior execution
Our e-commerce portfolio is highly focused on our top ten brands.
They account for over 80% of total e-commerce growth over the
last year and over 70% of total e -commerce sales.
Our omnichannel strategy ensures that Reckitt brands are available
wherever the consumer requires them. Over 90% of our brands are
at Amazon Fresh click-and-collect stores. At Boots and Superdrug,
our brands average 80%+ omnichannel satisfaction ratings.
We have developed a robust ratings and review process and pay
close attention to consumer feedback. Machine learning helps
us identify adverse events early and respond to consumer issues.
Our online reputation has flourished, with all our core brands
achieving consistently high consumer ratings on multiple
platforms internationally.
Be Fast – No one can predict the successes of the future so
we maintain a strong digital presence everywhere to maximise
first-mover advantage. When new channels and platforms emerge
we move quickly to extend our presence. This rapid expansion
is helping us build scale fast through D2C, B2B, live-streaming and
on social commerce.
Excellent execution is a top priority for the e-commerce team.
Amazon UK, for instance, tags over 80% of our brands as either
‘Amazon Choice’ or ‘Best Seller’. As such, they recommend our
products via Alexa and their category searches. That drives
additional traffic and strengthens our market positions.
Our unique operating model
Our operating model is based on what we’ve learnt from our
e-commerce activities in China. ‘Be Big, Be Fast, Be Bold and Open’
emphasises the attributes we need to fuel rapid growth and
energise outperformance.
Be Big – Scale provides tremendous advantages in the digital
arena. Three-quarters of our e-commerce teams focus on scaled
operations. They run big brands in big channels and collaborate
with pure players, such as Amazon and Alibaba, to grow them into
profitable end-to-end businesses. The focus here is on sustainable
growth and ensuring we pursue the right earnings model.
Amazon 1P
Tesco.com
Boots.com
DTC
Durex.co.uk
Getir
Amazon 2P
Waitrose.com
Chemists
Direct
Deliveroo
Dija
Amazon 3P
Asda.com
Ocado
Ebay
Zapp
Weezy
Morrisons
.com
Sainsburys
.com
Uber
Superdrug
Channel Launch Year
2011-2013
2013-2015
2015-2017
2017-2019
2019-H1 2021
Be Bold and Open – Our experimentation engine is the home of
our moon-shot ideas. Here we partner with our colleagues in R&D
and in our GBUs to launch new brands into the Reckitt portfolio.
We also work with external partners and innovators to test
different approaches.
ACCESS VC: INVESTING IN PURPOSE-DRIVEN, DIGITALLY-LED BRANDS
Access VC is the purpose-driven
venture arm of Reckitt. Through it, we help
startups and founders from all walks of life
accelerate their growth and make a bigger
impact on the world. We invest in founders
Oxwash: Decarbonising laundry
Oxwash joined our accelerator programme
to scale their revolutionary sustainable
laundry service. Their laundry system
recycles and disinfects water from
who share our purpose and want to fight for access
to better health, hygiene and nutrition.
previous wash cycles, saving up to 60% of the water
consumed in a typical commercial washing machine.
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Access VC is aptly named. It provides much more
than funding. Our partners get access to our experts,
capabilities and global network, including research
and development, consumer insights and ‘go-to-market’.
We offer mentoring and capital resources to help them
refine and scale their business models. Early-stage
startups can also participate in our six-month accelerator
programme, run by Founders Factory, the world’s leading
startup accelerator.
Our trusted, global brands can help our partners unlock
new markets and reach more consumers. This can result
in brand partnership opportunities, as well as leveraging
our close relationships with some of the biggest retailers
on the planet.
Fast forward to today, and the team has expanded the
sustainable laundry startup from one hub in Oxford with
two more, in Cambridge and London. They are now
extending their services across the UK.
Kinsa: Making thermometers smart
Kinsa is a leader in smart thermometers
and real-time monitoring of infectious
disease, appearing in Fast Company’s
listing of ‘The 10 most innovative
companies in data science’. Their solution acts as an
early-warning system for preventable illnesses, helping
communities, schools and enterprises to act fast to stop
the spread.
They are partnering with a number of Reckitt’s brands,
including Lysol and Mucinex, to support the growth and
application of their technology at a bigger scale.
Reckitt Annual Report and Accounts 2021
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Financial StatementsGovernanceStrategic Report
Focus on: Supply Chain
MANAGING
GLOBAL SUPPLY
COMPLEXITY AND SCALE
Reckitt is a global manufacturer. We sell 20 million products daily
in more than 200 markets. Well over half of our employees, over
20,000 people, are involved in supplying them.
We manage our supply globally in a highly integrated way. Each
of our business units has adopted a single operating model that
connects every stage of its supply chain with consumer priorities.
These are underpinned by core capabilities which leverage the
strength and scale of our global network.
The volatility created by the global supply chain crisis is best met
by a holistic approach to planning, with visibility across the full
product lifecycle to mitigate risk and maximise opportunities.
This approach is helping us build a resilient, agile and efficient
manufacturing capability.
We maximise transparency with high-quality data and connected
technologies. The supply function engages directly with all parts
of the business. That allows us to adapt swiftly to shifting market
dynamics and adjust our productive capacity proactively.
In our highly connected society, change
can be rapid, radical and unpredictable.
The global pandemic exposed the
vulnerability of supply chains built
on just-in-time, diversified and
globalised models.
We found out that, not just factories, but entire regions could halt
production at a moment’s notice, with profound consequences
for businesses on the other side of the world.
And on the demand side, the bar is being set higher. Today’s
smartphone-equipped, social-media-savvy consumers expect
products to be available when and where they need them.
And they want the brands they buy to be sourced responsibly
and supplied sustainably.
We are meeting these challenges by managing our global supply
on a holistic basis, by acting as one Reckitt and by staying true
to our Purpose.
42
Global supply pursues five strategic priorities:
1
2
3
EMBRACING OUR
PURPOSE, FIGHT
AND COMPASS IN
EVERYTHING WE DO
PROTECTING
OUR PEOPLE,
OUR CONSUMERS
AND OUR BRANDS
FUELLING GROWTH
THROUGH
PRODUCTIVITY AND
UNLOCKING VALUE
4
BUILDING A
SUSTAINABLE
AND RESILIENT
END-TO-END
SUPPLY CHAIN
5
ENABLING THE
ORGANISATION WITH
SPEED AND AGILITY
We will meet our strategic priorities through five workstreams that began in 2020 focused on building internal capabilities and driving
excellence. Our world-class productivity programme has provided us with the resources to reinvest into the Business and underpin these
capabilities with new technologies.
By strengthening our operations, improving our ways of working and increasing efficiency, we have created a more resilient supply
organisation, creating value for our people, our customers and our consumers.
Reckitt Annual Report and Accounts 2021
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Financial StatementsGovernanceStrategic Report Focus on: Supply Chain (Continued)
QUALITY PERFORMANCE
Our continued investment into ensuring we make products people
love has delivered a step-change in our quality performance over
the last two years around three key metrics:
27%
overall improvement in Quality,
as measured by a reduction in deviations1,2
12%
reduction in Cost of Non-Quality1
11%
reduction in Time to Release1
We’re getting better products to market faster, and improving
our efficiency.
1. Quality metrics vs 2019
2. Based upon Quality Deviations metric
BUILDING THE FACTORY OF THE FUTURE
Industry 4.0 offers huge benefits for manufacturing, but
achieving digital transformation depends on seamless
interconnectivity. Like many manufacturers, Reckitt has
progressively automated our processes over the years.
We rely on technologies that are mostly factory-led and
designed to perform specific tasks. That results in siloed
data, which limits our ability to understand and analyse our
activities in an integrated way.
To quickly overcome these obstacles and move toward
full-scale digitalisation of our factories, we decided to invest
in a factory of the future. This had to do more than provide
proof of concept, we wanted it to add immediate
value, provide incremental benefits over time and be
re-deployable at other locations.
Each of our factories has specific requirements and differing
technologies, but there is a shared need for connectivity.
We teamed up with IBM to build a scalable cloud foundation
and data backbone for running our Nottingham factory.
We installed IoT sensors that share equipment data.
Operators no longer need to inspect machinery. They are
notified automatically when maintenance is due. With more
connectivity and improved data visibility right across the
factory, it’s far easier to understand our processes and
analyse how they can be improved. And this is just the
beginning, machine learning and predictive AI algorithms
will boost manufacturing excellence and automate planning.
44
On World Quality Day, we introduced a new Quality Commitment
to ensure quality supports our strategy to rejuvenate sustainable
growth. The Quality Commitment recognises that we can only
deliver the highest-quality products by embracing our Purpose,
Fight, Compass and Leadership Behaviours in all that we do.
This replaces our more narrowly defined Quality Vision. The Quality
Commitment is about who we are as well as what we do. Everyone
is required to sign up to it because each of us has a personal
responsibility to ensure that every interaction with our brands
is a positive experience.
To help achieve that, we’ve introduced a single Quality Manual
for all our business units and functions. Group-wide adoption
of the same set of processes streamlines and connects the
entire business. This is all underpinned by a new digital platform
to support our teams in meeting these high standards.
Our commitment to quality was a contributing factor in Reckitt’s
readmission to the Dow Jones Sustainability Index in 2021.
Our pledge to ‘do the right thing, always’ showed its value recently
after a spate of product recalls by the Singaporean government.
Seventeen brands of hand sanitiser had to be removed from sale
after the detection of unacceptably high levels of acetaldehyde
and/or methanol. Thanks to our robust processes, even at a time
when sanitiser was under intense demand and our teams were
working virtually, Reckitt brands were not affected.
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Nottingham went operational as Reckitt’s first factory of
the future in May 2021. Within a month, we were projecting
a 10% reduction in plant maintenance costs and a 3%
decrease in electric power consumption. The platform-
based approach there uses consistent data and connectivity
protocols, which are easily replicable at other factory sites.
THE FOURTH INDUSTRIAL REVOLUTION
We are using technology to help fuel growth and unlock additional
value. Better data and connectivity are helping us get more
efficient and productive. Starting with our Nottingham plant, we’ve
created a fully connected environment that automates the capture,
use, analysis and sharing of data across the Group and can be
easily replicated in any factory around the world.
This combines the Internet of Things (IoT), cloud technology,
networking and AI to improve safety, quality, productivity and
efficiency in our manufacturing process. Individually, these
technologies are now mature enough for us to connect them
cost-effectively. These richly connected data pools will deepen
our understanding of how our processes interact and how they
can be improved.
CUSTOMER EXCELLENCE
In a time of unprecedented supply chain disruption, collaborating
with customers has been essential to ensure access to our
products. We have reconfigured our customer operating model to
improve availability through improved engagement, communication
and strategic supply chain solutions. By working with our customers
across the supply chain, from manufacturing to customer service
to sales, we are building aligned and tangible success measures
for mutually beneficial performance and growth, focused on
consumer needs.
This change in our approach has generated tangible
improvements, which have not gone unnoticed by key partners
such as Walmart and Dollar General, and has been reflected in
industry benchmarks such as the Advantage Group 2021 survey
of retailers.
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WALMART SUPPLIER
OF THE YEAR
In March 2021, Walmart named Reckitt its
2020 Supplier of the Year for consumables
for a number of reasons. First and foremost,
we had delivered the products Walmart
shoppers most needed in 2020. We’d
invested in improving availability while
providing products to help keep shoppers
safe during the pandemic. Our transparent
communications kept us agile and able to
provide the stores and shoppers with what
they needed when they needed it. We were
quick to adapt our product mix in 2020 to
maximise in-store availability and tested new
replenishment models in several markets to
meet unconstrained demand.
We also worked hard to deliver meaningful
insights on new shopper habits that helped
Walmart plan for new category dynamics
in 2021. Taken together, all of these efforts
led to increased penetration for Walmart
in multiple categories, including surfaces,
immunity, air care, auto dishwashing, carpet
and septic.
Reckitt Annual Report and Accounts 2021
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Financial StatementsGovernanceStrategic Report
Focus on: Culture & Inclusion
MOVING
FORWARD
Our cultural transformation in support of
Reckitt’s strategic goals is progressing
well. Our focus on and investments in
inclusion, wellbeing and our people are
inspiring and equipping them to fight for
a cleaner, healthier world.
EVOLVING OUR CULTURE
In support of our strategy and to reflect our stance as a purpose-
driven, consumer-centric business we are evolving our culture.
At the same time, we are continually assessing how best to enable
and deliver exceptional business performance, while adapting to
the changing social priorities in a COVID-19-affected environment.
The cultural change underway at Reckitt builds on our best
qualities. We’ve always been known for our dynamic culture,
united by a shared sense of ownership and focused on action
and achievement. Reckitt has long been recognised as a place
where people take responsibility for making things happen.
That drive for delivery and innovation is now even more strongly
combined with a sense of purpose. We’re responsible for our
impact in the world and we want to make a real, positive difference.
There’s a groundswell of support for our Purpose, Fight and
Compass. We are more focused than ever on fulfilling Reckitt’s
potential. We take care of each other and recognise we all have
a part to play in making access to the highest-quality hygiene,
wellness and nutrition a right, not a privilege. An inclusive,
dynamic and collaborative culture is at the heart of our
strategic transformation.
LEADERSHIP AT RECKITT
We aim, through our cultural transformation, to drive performance
through our Purpose and unleash the true potential of our people.
Leadership is key to realising our cultural ambitions and achieving
sustainable outperformance.
Using our Compass as the starting point, we’ve defined Leadership
Behaviours that capture Reckitt’s uniqueness, capitalise on our
strengths and stretch us where we still need to shift the dial.
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Governance
Financial Statements
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DRIVING CONSCIOUS
INCLUSION
In 2021, we initiated an ambitious programme
to promote the benefits of conscious
inclusion. Starting with our senior
management team, this stressed the
importance of leading inclusively and the
significant role leaders can and must play in
creating a more inclusive culture. The learning
was practical, conversational and peer-
based, providing tips and tools to ensure our
leaders embody our Leadership Behaviours
in an inclusive way. Almost 90% of our senior
leaders have attended these sessions so far.
We are now extending this programme
across the Group to encourage all our people
to recognise the critical role they too play in
creating an ‘everyone’ culture. The learning
includes e-workouts, market-wide round-
tables and smaller team discussions.
In 2022, we will continue the learning by
embedding this philosophy into our ongoing
leadership curriculum.
behaviours first so they can act as role models for their peers and
colleagues. By the end of 2021, over 600 of Reckitt’s global and
regional leaders had participated in the programme.
To help Reckitt leaders understand how their leadership measures
up to these expectations, evaluation of their performance against
the behaviours and feedback from their teams is part of their
annual performance reviews.
At Reckitt, we Own, Create, Deliver and Care. Our leaders
must embody these behaviours. We grow leaders who know
their business and Own their decisions while living our Purpose
and Compass every day. Create reminds us to relentlessly build
better and seek out new opportunities that put people and
consumers first.
Deliver encapsulates our commitment to superior execution.
Getting things done and joining forces to win bigger are more
important than personal kudos. We act boldly and at pace,
focusing on what matters to make things happen.
Care is about making sure we have due concern for the people
we work with as well as the world around us. We speak directly
with respect, actively involving, including and listening to other
voices, and are ready to learn from others.
We are systematically reinforcing these behaviours through
our people, policies and practices, including in our leadership
development curriculum, all-employee survey and personal
development tools.
Our leadership development ethos is that leaders grow leaders.
We made sure senior leaders understood and adopted the
Reckitt Annual Report and Accounts 2021
47
Strategic Report
STRONGER TOGETHER
Since launching with a five-year commitment in June 2020, our
global Stronger Together conversation series has continued to
create opportunities for sharing inspiring and challenging stories
from our colleagues across the world. Sometimes tough to hear,
these allow us to understand each other better and build shared
awareness to create a more inclusive environment.
We ran seven live global events in 2021, reaching almost 30,000
people, with more watching later on demand. Invited guests and
colleagues shared their experiences. Many colleagues have shared
deeply personal stories in this global setting, with many more
sharing their stories in local Stronger Together conversations.
The raw vulnerability and courage shown by colleagues in telling
their real stories have prompted increased awareness and
understanding.
These global conversations have been integral to building
an increased level of trust across all areas of the organisation.
They underpin and are a key part of our strategy to build a more
inclusive culture through the power of storytelling, education
and allyship.
Stronger Together conversations are now held at regular intervals
within markets to deepen the level of understanding, empathy
and trust amongst colleagues.
In 2021, to complement and build on the Stronger Together
series, we launched leader-led conscious inclusion conversations
within every team across the organisation. These peer-to-peer
discussions encourage individuals to raise awareness of their
own behaviours and be consciously inclusive through discussion
of concepts such as reducing bias and micromessaging.
EMPLOYEE RESOURCE GROUPS (ERGS)
ERGs are employee networks that aim to raise the profile of
under-represented people. They provide a space for colleagues
to connect and support each other. They are represented
on the Global Inclusion Board and provide input on consumer
perspectives which inform our innovation process.
ERGs are open to all and welcome anyone who wants to advance
their interests, either as a member of their community or as an
ally. There are currently three global ERGs; they focus on gender
balance, the LGBTQ+ community, and race and ethnicity. We also
have a global disability working group which is moving to a global
ERG in 2022. We anticipate additional global ERGs may be formed
in the future as needed. Colleagues are also encouraged to set
up local ERGs to represent the needs of local communities
in their market.
Focus on: Culture & Inclusion (Continued)
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GENDER PAY REPORTING
In the United Kingdom, gender pay reporting
is a legal requirement. This reporting
highlights any difference between the
average hourly wages of the company’s
male and female employees in the UK.
We see this as a welcome move towards
equality and transparency.
In 2020, Reckitt was one of the first UK
companies to start reporting on a global
basis. We now share data on our nine largest
markets, covering over 70% of our working
population. For further information see our
2021 Gender Pay Report at www.reckitt.com/
sustainability/fairer-society/gender-pay.
A DIVERSE, INCLUSIVE CULTURE
Our ambitions for a cleaner, healthier world are advanced in a
fairer society. By embracing our diversity we help build a more
inclusive world.
We are nearly 40,000 people of 120 different nationalities.
We operate in 60 countries that span six continents. Inclusion
is fundamental to our success, both internally and externally.
We are actively creating an environment where all colleagues feel
able to participate fully, bring their best self to work, and realise
their potential. And Reckitt is better placed to have a positive
impact in the world when we represent and reflect the diversity
of the consumers and communities we serve, globally and locally.
Our Global Inclusion Board, chaired by our CEO, is made up of
senior leaders and sponsors of our Employee Resource Groups
(ERGs). Together, they set and drive our inclusion agenda. The
Board is accountable for strategic delivery, governance, monitoring,
reporting and communication.
Our inclusion strategy rests on six pillars. The work we’re doing
on the leadership, people and policy pillars helps ensure we are
building an inclusive culture internally. Externally, our inclusive
approach to procurement, brands and partnerships aligns what
we do with who we are.
48
SUPPORTING AND ENHANCING OUR COLLEAGUES’ WELLBEING
In 2021, we intensified our focus on colleagues’ personal and
professional wellbeing with two clear aims. Firstly, we want to
equip all employees with the mental and physical resources to
thrive by building awareness and resilience through self-care and
education. We also focused on increasing resilience in our leaders
to help them sustain performance, individually and collectively.
To realise these ambitions, we have teamed up with leading global
performance partners and an organisation that focuses on mental
health. Together, we delivered bespoke wellbeing resources
including 1:1 and group performance coaching, training, social
learning events and access to resources via digital apps. We also
hosted global wellbeing sessions on balance, mental health and
the importance of managing mental energy. Almost 10,000
colleagues attended and the feedback was very positive.
US achieves top ranking in Corporate Equality Index
At Reckitt, we’ve made it our priority to foster a more diverse,
equitable and inclusive culture that provides every individual
with a genuine sense of belonging. The efforts we’ve made,
particularly in 2021, earned us a score of 95 out of 100 on the
Human Rights Campaign Foundation’s 2022 Corporate Equality
Index (CEI).
An important benchmarking survey and report in the US, the
CEI measures corporate policies and practices related to
LGBTQ+ workplace equality. This marks the third year Reckitt
has participated.
FUTURE OF WORK GUIDANCE
In March 2020, we implemented a rapid switch to remote
working where practical and possible. This abrupt change
enabled many to experience the benefits, and challenges,
of working remotely. We quickly set up the Reckitt Future
of Work programme to explore and ensure we are ready
for how the workplace might evolve.
Our aim is to create a seamless, inclusive workplace
experience that empowers colleagues with choice about
how and where they work. We encourage our people
to consider how the four Cs of Connect, Create, Coach
and Collaborate shape their working lives at Reckitt.
We encourage colleagues to find a working pattern
that works for them and is aligned with their team,
our business and consumers’ needs.
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Our approach is flexible, focusing on what is delivered,
not when or where. We ask colleagues to consider,
on a case-by-case basis, which activities and projects
are better achieved by being physically present and which
merit screen-based interaction.
In the physical workplace, we’re moving away from
a 1-to-1 desk-to-colleague ratio to a contemporary,
open-plan layout with bookable desks in designated
areas. More space is given over to collaboration, enabling
the four Cs to flourish and helping us truly be one Reckitt.
Our working environment needs to reflect and embed
our Purpose, Compass and culture, focusing on wellbeing
and inclusion while also meeting the diverse needs of
colleagues across our many geographical cultures. We’re
building virtual and physical spaces with a diverse set of
tools, both digital and physical, that meet these needs.
Reckitt Annual Report and Accounts 2021
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Financial StatementsGovernanceStrategic Report
Stakeholder Engagement
MAPPING WHAT
MATTERS
As a purpose-led business we aim to
maximise returns for all our stakeholders.
That creates impact for the business and
through the business.
We engage with stakeholders across our business to get the
broadest picture of what they want from us and how we can
respond. Stakeholders tell us what matters most to them. Those
insights help us better meet their needs, and improve our approach.
OUR 2021 MATERIALITY ASSESSMENT
In August 2021, we asked Corporate Citizenship to conduct
a materiality assessment to identify, prioritise and contextualise
the key risks and opportunities for the business and inform
strategic decision-making. The assessment was built on an earlier
assessment conducted by the company on our behalf. We wanted
to quantify the changes and developments in stakeholders’
perceptions of risk and their expectations of Reckitt as
an organisation.
Corporate Citizenship last conducted an assessment on our behalf
in 2018. Since then, we’ve been on a journey of transformation. Not
only that, the world has changed enormously: the global pandemic,
rapid technological advances and changing social attitudes have
all had a huge impact on global culture in recent years.
We wanted this materiality exercise to include double materiality
analysis, as recommended by the Global Reporting Initiative’s
latest best practice guidelines. This considers both the impact
of environmental, social and governance (ESG) issues on us
(our financial materiality) and our own ability to impact key ESG
issues (our impact materiality). This perspective was built into
each stage of the materiality process.
Nineteen material ESG topics were prioritised, chosen for their
topicality and relevance. Precise wording was agreed internally.
Interviews and surveys were then conducted on these subjects
with both internal and external stakeholders.
Internally, Corporate Citizenship conducted ten interviews with
Reckitt leaders and did a detailed survey of 76 employees, who
are broadly representative of the workforce as a whole. Externally,
they consulted with customers, suppliers, investors, peers, opinion
leaders, NGOs and industry associations. There were detailed
interviews with ten external stakeholders; 20 more responded
to surveys.
RECKITT’S 2021 MATERIALITY MATRIX
Materiality matrix showing the priority of issues in terms of the view of the business and the view of stakeholders:
11
14
13
18
19
3
7
8
9
12
10
16
2
5
6
4
17
High
1
1. Climate change
2. Product quality & safety
3. Packaging & waste
4. Advancing global health & hygiene
5. Ethical business conduct
6. Sustainable product innovation
7. Public health challenges
8. Labour & human rights
9. Supply chain management
10. Employee health, safety & wellbeing
11. Water
12. Diversity, equity & inclusion
13. Responsible governance
14. Ingredients
15. Biodiversity & ecosystems impacts
16. Talent management & employee development
17. Data privacy & cybersecurity
18. Contributing to local communities
19. Sales & marketing practices
Impact on the business (low high)
Reckitt’s impact: Low Medium High
15
)
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Low
50
They analysed these responses to rank the key issues of concern
and develop a materiality matrix reflecting internal and external
perspectives on sustainability topics and their relative significance
to Reckitt and our stakeholders. Points are ranked by colour to
indicate the perceived significance of our impact on each issue.
Climate change has become more important and we have been
working with climate risk specialists, Risilience and Cambridge
Centre for Risk Studies (CCRS) within the Judge Business School
at the University of Cambridge, to assess our climate change risks
and opportunities. For further information please see page 66 and
our Climate Change Insight.
KEY FINDINGS
Reckitt’s most material issues are closely aligned with our 2030
strategy, which suggests that our stakeholders think we are
prioritising the right things. They didn’t see any major gaps in
strategy and recognised that we’ve made significant strides over
the past two years.
There was a shift in our most material issues, however with Climate
change overtaking Product quality & safety.
Our stakeholders view action on climate change as a must-have.
Three of the top four issues where we were thought to have the
biggest (positive or negative) impact – Packaging & waste, Climate
change and Sustainable product innovation – were environmental.
We are now closely identified with our Purpose. Not only was
Advancing global health and hygiene commonly viewed as one
of our biggest societal impacts, it was also seen as fundamental
to the successful delivery of our mission, and therefore intrinsically
linked to our financial value.
Non-negotiable ESG issues like Product quality & safety and Ethical
business conduct continue to be among our most material issues.
Stakeholders referenced previous product recalls, and the volatile
nature of public perception of consumer goods companies. Some
also believed that our repositioning as a health company means
that we will face more intense scrutiny.
Employee issues are higher up the agenda. Employee health, safety
& wellbeing and Diversity, equity & inclusion were both seen as
more material this year.
Supply chain issues have also become more material to the
business. There was a notable shift of Labour & human rights
and Supply chain management to the right of the matrix.
Biodiversity is not yet perceived as a business priority, but
many external stakeholders did say they see this as the next
big emerging issue, with increasing public awareness and
nature-based financial disclosures anticipated in coming years.
SUSTAINABLE DEVELOPMENT GOALS
In 2015, UN Member States adopted the 17 Sustainable
Development Goals (SDGs) as part of the 2030 Agenda for
Sustainable Development. At Reckitt, we recognise the impact we
can have for society on many of these goals. There are five SDGs
where our impact can be greatest. These embody the work of our
brands and our business as a whole, through our value chains and
in our partnerships.
We are also progressing the SDGs through our brands. We have
reorientated each of our brands to give it a distinct purpose that is
aligned with an SDG. See page 54 for more on purpose-led brands.
Progress on the five SDGs where we have greatest impact is
detailed below:
SDG2: Zero hunger
In infant nutrition we focus on the first 1,000
days of life. Our products keep mothers healthy
and nourish their babies. In line with World
Health Organization (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.
SDG3: 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. The pandemic has ensured
this has been a focus throughout 2021.
SDG5: Gender equality
Promoting gender equality is enshrined 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 proportional targets at senior
management level. We report internationally on gender pay.
We have set up social impact projects to encourage girls to stay
in school in South Africa and equip women in rural communities.
SDG6: 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 and WaterAid, our
Mission Paani and Banega Swasth campaigns
improve access to water and sanitation, building community
awareness of health and hygiene. Publicity campaigns emphasise
conserving water and ensuring sustainable sources for future
generations by building water-harvesting systems in villages.
SDG13: Climate action
We are accelerating delivery of our contribution
to the Paris Climate Change Agreement to
keep global warming to below 1.5°C. This is
a major milestone in our ambition for carbon
neutrality by 2040, a decade ahead of the
world’s goal of 2050. We will reduce carbon emissions from our
sites by 65% and power our operations with 100% renewable
electricity by 2030, while also reducing our products’ footprint.
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BUILDING PARTNERSHIPS
WITH STAKEHOLDERS
Incorporating stakeholder voices into our decision-making improves our ability to develop
as a purpose-led business. We don’t have all the answers – we reach out to stakeholders
to find out what they think and to learn from and deliver with them, as well as to
strengthen long-term relationships.
ALIGNING PURPOSE
AND STRATEGY WITH
OUR CUSTOMERS
HOW WE ENGAGE WITH CUSTOMERS
We aim to build mutually beneficial partnerships with retailers,
founded on common purpose and strong structural relationships.
We coordinate these relationships globally, regionally or nationally,
depending on the customer profile. We hold top-to-top meetings
to articulate shared objectives and define common purpose.
We support this work with joint workshops to agree strategy
and action plans.
Operationally, we provide ongoing multi-disciplinary support. Our
customers can call on category, shopper, sustainability, operational,
channel and format, and regional specialists. Our sales teams and
specialists act as advocates, advancing customers’ interests within
the company.
CUSTOMER PARTNERSHIPS
Globally, our major physical trading channels include hypermarkets
and supermarkets, pharmacies, drug stores, traditional trade and
emerging trade (including discounters, convenience stores, mother
and baby stores, and travel and speciality retail). Online, we have
well over 1,000 e-commerce retailers. Our brands are on all the
main portals, and we also trade via marketplace platforms, through
physical retailers’ digital channels and via e-pharmacy outlets.
Online presence is increasingly important. Most large retailers have
pivoted towards omnichannel strategies. We are matching this
change with an omnichannel approach to category and customer
engagement and by developing e-commerce-specific supply chains.
In e-commerce, we have a more reciprocal relationship. Digital
customers promote and sell our brands through online channels.
When we sell more through their channels we often spend more
on media space.
52
Whether online or offline, our aim is the same. We seek to identify
strategic synergies, promote purpose-led innovation and invest in
partnerships and networks.
Refreshing our approach to responsible marketing
We feel an imperative to guide our employees, stakeholders
and partners on responsible marketing. Central to this approach
is our commitment to comply with relevant local, national
or international marketing standards, laws and regulations,
including being guided by industry self-regulatory best
practices. When our existing Ethical Marketing Principles
were initially created in 2015, we had not yet embedded brand
Purpose and Sustainability into Reckitt, as we have today. Nor
had we fully foreseen the growing importance of Digital, and
its multiple channels for marketers to speak with consumers.
Brands now have far greater amounts of consumer Information,
with the responsibility to source and sort this data responsibly
to ensure consumer trust. That is why we have recently adopted
a new ‘Responsible Marketing Principles and a ‘Responsible
Marketing Policy’. These apply to all brands, all audiences and
all communications or activities irrespective of nature or media
type (such as sponsorships, promotions, packaging, in store,
on or offline, TV, radio, print, outdoor, cinema, websites, blogs,
influencer marketing, social media or sponsored content,
AI, connected packaging, banners, educational material).
We are rolling out of the new Principles and Policy to ensure
effective adoption. This is why we’re investing in a robust
training and change management module, so that the
employees impacted by this Policy understand what is required
of them. Completion of the Responsible Marketing training
will be mandatory to all marketeers and available to all Reckitt
employees. We’ll systematically measure compliance of the
Policy through established key performance indicators. We
continue to process and monitor on an ongoing basis consumer,
customer and employee feedback on our marketing, for
example through our consumer care lines or our Speak Up Line.
3. Climate action and responsible sourcing.
On climate, Reckitt was an early signatory to Amazon’s Climate
Pledge, committing us to net-zero emissions by 2040. We now
sell over 80 products that are labelled as Climate Pledge Friendly
on Amazon.
Walmart’s Project Gigaton sustainability initiative seeks to reduce
emissions in the global value chain by a billion metric tonnes by
2030. We’ve been designated a Giga-Guru for the work we’ve
done to reduce and report on our greenhouse gas emissions.
With retailers, we are also focusing increasingly on biodiversity,
responsible sourcing across shared supply chains, co-designing
for lower water and/or carbon product footprint, and climate
action. We shared platforms at COP26 with a number of our
retail customers to draw attention to climate change and health,
the ways we can influence behaviour to combat climate change,
and how businesses can support biodiversity.
4. Purpose-led brands
We are partnering with retailers to build shopper awareness and
engagement with sustainability through our purpose-led brands.
We work together to encourage purpose-led behaviour change
and raise the profile of purpose-led products.
With Walmart, for example, we developed omnichannel
promotions to raise consumer awareness of water-reduction
strategies alongside the Finish Skip the Rinse campaign. There
were in-store displays with video walls, we created a ‘.com’ hub
for Walmart and Reckitt traffic, and we complemented this with
push notifications on mobile phones.
PARTNERING ON SUSTAINABILITY WITH PURPOSE-LED BRANDS
The global sustainability team works closely with global and local
sales teams. We are developing joint business plans with priority
customers that recognise the value of collective action on
sustainability. Our sustainability partnerships with key retailers
have four main pillars:
1. Packaging innovation
We are designing more sustainable packaging for both physical
outlets and e-commerce platforms. We are working with Amazon
to develop compact by design-certified products with lighter,
more sustainable packaging.
• Airborne has reduced the size of chewable Vitamin C tablets
and removed secondary cardboard packaging, reducing weight
for e-commerce sales. These and other packaging changes
deliver sustainability aims for us and our customers.
• Air Wick has introduced new packaging in the Liquid Electricals
range, saving over 500 tonnes of plastic.
• Durex has redesigned its 100ml Durex Play lube bottles to use
less plastic and replaced non-recyclable pumps with flip caps.
They now use fully recyclable bottles made from 100%
post-consumer recycled (PCR) plastic.
• Harpic Essentials packaging now includes 35% PCR.
We have set up co-branded recycling stations at some retail
stores. In the UK, we’re recycling PVC blisterpacks from
pharmaceutical tablets together with Superdrug.
We are exploring different refill and reuse models. One example
is Loop, TerraCycle’s reuse and refill platform. Reckitt has signed
up to Tesco’s Loop programme. Tesco now sells Finish tablets in
reusable, stainless steel containers. Each container is cleaned and
returned to shelves for re-sale. The system is available in-store in
the UK
Finish has replaced its hard-to-recycle multi-material (PET and PE)
pouches with a fully recyclable pouch. The PE-based design won
a UK packaging award. We have also increased the amount of
recycled plastic (PCR) in our Finish recyclable pouches.
Lysol SMART kits are reducing plastic pollution by delivering
the product in a bottle system that works with refill cartridges.
The bottle is designed to be reused at least 25 times, resulting in
a 75% plastic saving compared to standard delivery mechanisms.
2. Better ingredients
Our focus here is on reducing chemical footprints, creating
products with lower quantities of chemical components
and innovating to introduce safe, effective products using
natural ingredients.
We share Walmart’s commitment to reducing its chemical
footprint. We are collaborating to reduce chemicals of
high concern.
Where possible, we’re replacing synthetic with natural ingredients.
Botanical Origin’s nature clean formula uses botanically based
active ingredients. Its plastic packaging is fully recyclable
and made from 50% recycled materials. Finish 0% is free from
preservatives, fragrances and phosphates, and has a much
lower chemical footprint. Gaviscon’s naturally sourced GaviNatura
heartburn and indigestion relief range is providing natural solutions
to gastric symptoms.
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PUTTING CONSUMERS FIRST
HOW WE ENGAGE WITH CONSUMERS
Today’s consumers want quality and value, but they also want
to know that the products they buy and the businesses they buy
them from reflect their values. Many expect manufacturers to play
a leading role in reducing global warming.
Sustainability is increasingly relevant for shoppers. Many are
actively prioritising it and favouring purposeful brands. Parents
are passing that message on to the next generation.
86%
of parents care about sustainability
and try to convey this to their children
(Source: Kantar, What does
sustainability mean to parents
as shoppers?, 2020)
As a purpose-led company, we want to make things better.
We exist to protect, heal and nurture in the relentless pursuit
of a cleaner, healthier world. We are fighting to make access
to the highest-quality hygiene, wellness and nourishment a right,
not a privilege.
Our Compass guides us and the behaviours we adopt.
Putting consumers and people first is a guiding principle.
We want people everywhere to trust our brands. By reaching
more people in more places we grow our business and increase
our impact. We do that by gaining and retaining people’s trust.
That trust is hard-earned and easily lost.
PURPOSE-LED BRANDS
Our purpose-led brands are at the front line of that fight. We sell
20 million products a day worldwide. They are helping us improve
the lives of the people we serve, our consumers, their families and
their communities through better hygiene, health and nutrition.
We work to forge emotional connections with consumers through
brands that reflect their values. Rooting our brands in purpose
supports our sustainability ambitions. Even small changes in
consumer behaviour can have a big impact.
Consumers want products that are safe and effective. They also
want to know they’re sustainable and responsibly sourced. We’re
reducing and improving our packaging and the chemicals in our
products. We’re strengthening our commitments on climate
change, biodiversity, human rights and the circular economy.
Every brand has a purpose which connects it to a United Nations
Sustainable Development Goal (SDG) where it can have most
impact. The Vanish brand purpose for example, ‘helping clothes
live many lives’, is centred on SDG12, responsible consumption and
production. Lysol’s purpose, ‘keeping your loved ones illness-free’,
progresses SDG3, good health and well-being. For Air Wick,
‘connecting people to nature’ prioritises SDG15, life on land.
A brand’s purpose drives every aspect of its strategy. It informs
personality, values, behaviour, sustainability strategy and diversity
and inclusion commitments. Anchoring strategy in purpose helps
drive innovation, triggering new products, services and business
models. It also makes our brands more relevant for new target
audiences and new partners.
VANISH – HELPING CLOTHES LIVE MANY LIVES
As the British Fashion Council’s Garment Care Partner
Vanish was active in 2021 in helping to promote
sustainable fashion in line with the brand’s purpose
of helping clothes live many lives.
More circularity in the fashion industry is urgently needed.
After oil and gas, it’s one of the world’s most polluting
industries. It’s responsible for 4% of all global carbon
emissions. Much of that comes from consumers. We
dispose of clothing far too quickly. Shockingly, a rubbish
truck-sized load gets incinerated or goes to landfill every
single second.
Vanish’s three-part documentary co-produced with
the British Fashion Council champions the designers,
entrepreneurs and everyday people at the forefront
of the sustainable fashion revolution.
‘Generation Rewear’ is working to stop fashion waste.
They are buying pre-loved garments, wearing clothes
longer and repurposing the clothes in their wardrobes.
Vanish is also encouraging people to think more
sustainably about how they wash their clothes. Vanish
products provide better performance at low temperatures
than detergents alone. Cold wash cycles can double the
useful life of clothing, avoiding premature garment
disposal while saving money and energy.
Finally, the brand has become the founding partner of the
Circular Fashion Ecosystem (CFE) project with the Institute
of Positive Fashion to share knowledge with our fashion
partners. The CFE aims provide an action-oriented
blueprint for the future of fashion and accelerate
the transition towards a circular fashion economy.
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INSPIRING TALENT AND
EVOLVING OUR CULTURE
HOW WE ENGAGE WITH OUR PEOPLE
There are nearly 40,000 of us at Reckitt; colleagues of all ages,
backgrounds, identities and beliefs. We come from all over the
world; more than 120 nations are represented. This diversity is a
tremendous source of strength. It enriches our thinking and helps
us connect with our consumers across the globe.
We want to tap into this strength by promoting an inclusive culture
where everyone is heard and every voice matters. For more on this
see Focus on: Culture & Inclusion on pages 46 to 49.
Speaking direct with respect is a cornerstone of our culture here
at Reckitt. Fostering transparent conversations with and among
colleagues is critical. Globally and locally, we use a range of
mechanisms to learn what our colleagues are really thinking, from
in-depth conversations on specific topics to Group-wide surveys.
Colleagues are encouraged to submit ideas and vote on proposals
through our Freedom to Succeed forum. Their thinking informs
strategy and triggers action. For instance, in June we followed up
the launch of our 2030 sustainability ambitions with a call for ideas.
We received nearly 300 suggestions back, many of them excellent.
These were passed on to relevant teams for assessment and
further action.
Initiative-specific champions and ambassadors provide expert
input and guidance on current issues. We regularly canvas opinion
to take the temperature of the organisation and to bring to the
surface any issues or concerns. Our all-employee online survey
is a key tool for that.
Annual performance appraisals give employees the opportunity
to offer more detailed feedback on team leaders. Our internal
grievance process and confidential whistle-blower service provide
alternative mechanisms to raise concerns through formal channels.
Senior leaders encourage colleague conversations to communicate
and ensure understanding of our strategy, involve employees
and understand their concerns. Our CEO sets the tone. His online
presentation in March to introduce our new brand internally
included a lengthy Q&A live-streamed by over 9,000 employees
and viewed later by many more. He posts regular email updates
and hosts multi-level focus groups, virtual sofa chit-chats and the
Stronger Together conversation series. Members of the group
executive leadership team take the lead on specific topics and
participate in virtual and on-site townhall meetings with colleagues
across the globe.
Our new brand has been well received internally. It reflects our
status as a purpose-led organisation with a long and rich heritage
and is helping us to inspire our people and evolve our culture.
We maintain online connectivity through Rubi, our intranet.
We also publish a fortnightly newsletter internally. We have an
active presence on social media and use those channels to share
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rich content, spark topical discussions and present business
updates. With over 970,000 followers of Reckitt, LinkedIn is a key
platform for sharing news and topics of interest, and an important
recruitment channel. We’re also active on Facebook, where we
have 97,000 followers, and we also have 20,000 on Twitter and
11,500 on Instagram. These numbers continue to grow.
WHAT THEY TELL US
We conducted an all-employee survey in June 2021 using the
LinkedIn survey tool, Glint. Reckitt originally adopted Glint for
employee feedback and insights in 2020. We included all 31
questions asked in 2020 in this year’s survey, so we could do
year-on-year comparisons.
There was an extra question this year on barriers to execution and
17 more questions examining how our leaders are living up to our
desired Leadership Behaviours (see Focus on: Culture & Inclusion
on pages 46 to 49 for more on these). We also requested optional
demographic information in seven key markets to inform our
inclusion strategy.
There was strong engagement in the survey globally. Over 74%
of our global workforce responded and there were some 25,000
comments. Analysing these highlighted relative strengths and
areas where we can improve.
As inspired by our Purpose, Fight and Compass: 85% of
respondents are personally committed to making access to the
highest-quality hygiene, wellness and nourishment a right, not a
privilege. They are proud to work for the company and identify
strongly with our culture of achievement. There is also strong
appreciation for the company’s investments in wellbeing and
sustainable high performance.
Overall, our leaders are thought to be performing well. Colleagues
scored leadership highly in all categories. The highest leadership
scores registered were for decisiveness, Purpose and speaking
direct with respect.
The survey also highlighted some areas for improvement.
Colleagues are very supportive of the company’s journey to a
more inclusive culture, but want more equal opportunities for
development and better recognition of their efforts. There is also
a view that barriers to execution are sometimes high; we need
to have more simplified processes and automation that will help
a more efficient response.
“Understanding where
colleagues are coming from
helps us get where we want
to be.”
Mary Harris
Designated Non-Executive Director
for engagement with the
company’s workforce
In my role as the designated NED for employees, I facilitate the Board’s access to employee
views to enrich boardroom discussions by ensuring colleagues’ priorities and concerns are
shared with and understood by the Board.
Direct conversations can help the Board gauge the strength and depth of feeling on a range
of issues. At the same time, we aim not to duplicate the company’s own extensive internal
engagement efforts, which are regularly and openly shared with the Board.
I and the full Board elicit employees’ perspectives through a combination of formal and
informal channels that exist in the Business. For example, the Board reviewed the 2021
all-employee survey, along with other talent and culture metrics.
Additionally, in September the Board conducted formal listening sessions with employees.
Groups of colleagues from a wide range of backgrounds met up, in person and virtually, with
Board members to discuss topics such as inclusion, consumer focus, innovation and R&D,
business transformation and sustainability.
Along with other Board members, I visited the Nottingham, UK factory to gain direct
experience of the manufacturing facility and talk to colleagues on site. In addition,
I attended the seven Stronger Together conversations held in 2021 to hear first-hand
the experience of Reckitt colleagues across the world. Diversity and inclusion were
increasingly prevalent themes this year and sustainability continues to be seen as both
urgent and important.
The Board factors the effect on employees into our deliberations and decisions. We
regularly consider specific, employee-related issues, including engagement, turnover and
attrition rates, talent, inclusion, broader reward frameworks and gender pay gap reporting.
The inclusion of environmental, social and governance (ESG) as a reward metric in our
proposed Directors’ Remuneration Policy is in direct response to employee as well as
shareholder feedback. This year, among other issues, we also discussed Reckitt’s role in
our planned COP26 partnership, which was extremely important to the business and our
colleagues, and the impact on them of the IFCN China divestment.
Our colleagues are invaluable in helping us identify both current and upcoming issues; not
least because the people that work here are consumers and citizens too. Listening to what
they say and acting on what they tell us is helping Reckitt fulfil its Purpose and stay relevant
in a changing world.
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BUILDING A RESPONSIBLE AND
RESILIENT SUPPLY CHAIN
HOW WE ENGAGE WITH SUPPLIERS
Maintaining healthy long-term relationships with our suppliers not
only helps us protect business continuity, but also lays important
foundations for achieving our sustainability ambitions.
We are embedding ESG objectives in core business activity by
ensuring our supplier relationships are founded on purpose. This
is not just about protecting ourselves reputationally, it also gives
us the opportunity to improve standards globally, whether that’s
making farming practices more sustainable or ensuring fair
treatment for workers. We are centralising more supplier
relationships and procurement activity to strengthen controls
and improve efficiency.
We support more sustainable livelihoods and working conditions
for our suppliers. Our new partnership with the Fair Rubber
Association ensures that the farmers who produce natural rubber
latex used for our Durex products receive a Fair Trade premium.
Smaller suppliers don’t always have the capabilities or resources
to spot issues, understand their root causes or implement the
changes it will take to stop them. We audit all suppliers. Where
needed, we work with them through our capability building
programme to help improve their processes and raise standards.
We require all our suppliers to adhere to six responsible sourcing
principles that prioritise sustainability. They must ensure labour
and human rights are respected, provide a safe and healthy work
environment, source natural raw material responsibly, protect the
environment and reduce environmental impact, use ever safer and
more sustainable ingredients, and conduct business with honesty
and integrity (see ‘Managing global supply’ on page 42).
We are developing human rights programmes across our value
chain and will have detailed action plans in our ten key markets
by 2030. We’re building on our work with the Danish Institute for
Human Rights (DIHR) in Thailand with a comprehensive review of
human rights in markets, prioritised by scale and the level of risk.
At the same time, we are working with supplier collaboration
platform Manufacture 2030 to encourage and support suppliers in
recording and reducing their carbon and water impacts.
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FAIR RUBBER AND THE
BUSINESS/COMMUNITY
BENEFITS
We continue to deliver on our action plan
in Thailand, with initiatives such as our work
to certify rubber farms and plantations
under Fair Rubber Association standards.
It strengthens their communities and our
supply network.
This approach extends to other key
commodities. Our work with palm oil
suppliers is developing individual roadmaps
to ensure we’re only using certified
sustainable palm oil for infant formula and
soap within the next two years. Similar
programmes exist with our paper and
board suppliers for the origin of timber.
These programmes also connect to our
work on biodiversity with the University of
Oxford’s Nature-Based Insetting team (see
‘Ecosystems, biodiversity and nature-based
solutions’ on page 65).
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Stakeholder Engagement (Continued)
EXPERT KNOWLEDGE
HOW WE ENGAGE WITH EXPERTS
Insights from academics and scientists help us understand
long-term trends. We use that knowledge to build action
programmes, guide innovation and develop the expertise
and capabilities to meet future challenges.
In 2021, we commissioned an ecosystem impact assessment
from Nature-Based Insetting at the University of Oxford, which
published its initial findings in November. This looked at the effect
on ecosystems of value chains that source commodities, such as
palm oil, latex and fragrances, in areas of high biodiversity. We are
developing progressive programmes in response to this data to
protect and regenerate these ecosystems by 2030.
We’ve established a strategic partnership with Risilience and
Cambridge Centre for Risk Studies (CCRS), within the Judge
Business School at the University of Cambridge, to support our
ongoing commitment to deliver on the Paris Agreement and
ambition to achieve carbon neutrality by 2040 while delivering
growth and long-term shareholder value. Risilience will supply
analytics to assess climate science impacts and potential ways
of evolving the business to achieve our sustainability goals.
A co-authored white paper with EcoHealth Alliance and the
London School of Hygiene & Tropical Medicine was published at
COP26. ‘The Impact of Climate Change on Health: Reducing Risks
and Increasing Resilience in the Era of COVID-19’ set out the risks
to human health of unabated climate change and presented
recommendations to address these potentially existential threats.
We sponsored a report by the Economist Intelligence Unit (EIU)
on the global state of health literacy. ‘Health literacy around the
world: policy approaches to wellbeing through knowledge and
empowerment’ reviewed the state of health literacy in seven
countries, its link with health outcomes and how it could be
boosted in national policy and the education, healthcare and
digital sectors.
One of the ways we are advancing understanding of the links
between hygiene and health through the Reckitt Global Hygiene
Institute. The institute is a not-for-profit organisation launched
in 2020 with funding from Reckitt. It seeks to create a central
repository of hygiene research to fill the gaps in science-based
evidence around hygiene. It commissions specific, directed
research through grant funding and funds a post-doctoral
fellowship programme in hygiene. Its research efforts are guided
by an internationally renowned, independent expert panel.
We engage with healthcare professionals internationally to
exchange information, share best clinical practice and sponsor
research. We manage numerous educational partnerships,
including with Harvard School of Public Health, the Royal Children’s
Hospital in Melbourne and SickKids in Canada. We also share our
expertise in professional journals and at presentations for
international symposiums and congresses.
PARTNERING WITH
INNOVATORS
COLLABORATIVE PROJECTS AND VENTURES
The best ideas can come from anywhere, and high-impact
solutions are often better delivered by networks than individual
organisations – two great reasons for encouraging collaborative
projects with like-minded innovators.
We collaborate with independent, purpose-driven entrepreneurs
whose objectives chime with our own. That’s why we’ve set up
Access VC. This well-capitalised venture provides funding for
startups. It’s designed to be agile, flexible and a great partner for
purpose-driven initiatives. Access VC also manages our existing
Reckitt minority stake assets, including the Healthily and Founders’
Factory investments.
We work with Founders’ Factory to accelerate early-stage
startups. For companies at a later stage in their journey, we provide
funds, resources and knowledge.
A winning photo from
our competition in
partnership with
Talenthouse,
capturing moments
where people have
positively impacted
our planet to create
a cleaner,
healthier world.
Marcos Antonio
Esteves – Brazil
58
Voted popular
choice, a photo from
our competition in
partnership with
Talenthouse,
capturing moments
where people have
positively impacted
our planet to create
a cleaner,
healthier world.
Muhammad Amdad
Hossain –
Bangladesh
Access VC offers more than just venture capital: it’s a cooperative
enterprise. Purpose-driven entrepreneurs get access not just to
funds but to Reckitt’s experts, brands, resources, scale and global
reach. Recent collaborators include little yawn collective, which
champions proven sleep solutions for kids, and Oxwash, which is
making laundry simple and sustainable together with Vanish Zero.
For more on Access VC, see Focus on: Digital on page 38.
We reach out to external partners in numerous ways to promote
innovation, and benefit hugely from the range and diversity of
the people and organisations with whom we collaborate. We tap
external knowledge to apply inventions and import capabilities.
Through our strategic supplier programme, we co-develop new
ingredients and processes. For more on external partnerships,
see Focus on: Innovation on page 34.
COLLABORATION AND
PARTNERSHIPS
WORKING WITH GOVERNMENTS, INDUSTRY PARTNERS AND NGOS
As a partner to governments, we’re encouraging behaviour change
for societal issues. In 2021, as one of 11 principal partners at the UN
Climate Change Conference in Glasgow (COP26) and the official
hygiene partner, we worked to advance action on climate change
and promote awareness of the link between planetary and public
health (see pages 64 and 65).
Where impact at scale through collective action is needed to
make a lasting or transformational difference we’re working with
our peers to introduce new, more sustainable business models.
We’re advancing best practice and encouraging the transition
towards more sustainable activity by leveraging our participation
in trade associations.
We’re active in the Consumer Goods Forum, which drives positive
change on climate change and key issues through collaborative
action with customers and peers. We are members of its Forest
Positive Action group, Plastic Waste Coalition of Action and its
Human Rights working group.
Through the Global Self-Care Federation, we work with our peers
in the self-care industry to raise international standards and ensure
key policy- and decision-makers embrace self-care, recognise its
value and use its broad range of benefits as building blocks to
deliver better and more sustainable health outcomes for all.
Illicit trade has grown well beyond the capabilities of individual
governments and individual companies. It requires a sustained,
coordinated response. Reckitt joined the Transnational Alliance
to Combat Illicit Trade (TRACIT) in 2020. TRACIT is a private sector
initiative to mitigate the economic and social damages of illicit
trade and counterfeit goods.
We are also members of AISE, Europe’s International Association for
Soaps, Detergents and Maintenance Products, where we actively
support its agenda for sustainable cleaning. These help inform our
own approach on aligning product development with policy and
regulatory development.
In June 2021, we joined the World Business Council for Sustainable
Development (WBCSD). The WBCSD comprises nearly 200
companies who are committed to innovating to make real, tangible
progress to tackle the triple threat of climate change, nature
in crisis and mounting inequalities, for a more sustainable world.
We are specifically involved in work on protecting and promoting
health, which connected to our activity at COP26.
We work with NGOs and government bodies that coalesce around
areas of common interest. As members of the Ellen MacArthur
Foundation, we’re pursuing joint initiatives to reduce the use of
plastics and developing infrastructure, systems and standards
that promote the circular economy.
Since 2020 Reckitt has been committed to the UN Global
Compact corporate responsibility initiative and its principles in the
areas of human rights, labour, the environment, and anti-corruption.
The social and environmental impacts we create through our
purpose-led brands and our work to support a healthier planet
and fairer society help to advance the broader development goals
of the United Nations, particularly the 17 Sustainable Development
Goals. We have communicated our progress to deliver the
Ten Principles, details are within our Sustainability policies
and reports at www.reckitt.com.
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ENGAGING WITH INVESTORS
OUR INVESTMENT COMMUNITY
Our investment community includes current and potential
shareholders, mainly institutional and retail investors, as well as
‘sell-side’ research analysts, banks and ratings agencies. We also
have a significant employee-shareholder community, with over
50% of Reckitt employees owning a stake in the company.
Our investors provide the financial capital – equity or debt – that
underpins our business and allows us successfully to execute our
strategy. In return, they expect good financial returns as dividends,
capital appreciation or interest.
The cost of equity or debt is influenced by financial markets’ risk/
reward perception. Maintaining an open, constructive dialogue
around the opportunities and challenges we face helps investors
make appropriate investment decisions.
All market participants are entitled to equal and timely access to
market-sensitive information. We are committed to keeping all
investors updated, with regular briefings on our strategic progress
as a purpose-led business focused on sustainable growth. We
ensure retail investors get access to the same information at the
same time as our institutional investors, often through our
corporate website.
COVID-19 restrictions meant the 2021 AGM was held as a closed
meeting. Shareholders were able to submit questions in advance
or during the meeting, allowing the Board to engage and interact
directly with them.
Our proactive investor relations programme this year included
one-to-one meetings with major shareholders, group meetings,
webinars, roadshows, conferences, round tables and fireside chats.
We are now supplementing our regular financial reporting with
‘bite-size’ seminars profiling different facets of the company to
give further insight into our transformation journey. The first of
these was held in September, ‘Delivering sustainable growth’,
included updates on how business units are putting strategy into
practice and in-depth presentations on R&D and e-commerce.
INVESTOR PRIORITIES
In 2021, our investors primarily wanted to discover more about
the company’s performance in its transformational journey as
we progress our strategy of rejuvenating sustainable growth.
They were keen to understand where investments have been
made and their associated returns.
In common with many of our peers, cost-inflation and its effect
on our margin outlook, was a recurring topic. Investors are also
tracking carefully how COVID-19 is changing consumer behaviour,
particularly now the virus appears to be receding in parts of
the world.
Portfolio management activities that had a material effect on
company structure, in particular the disposal of IFCN China and
the acquisition of Biofreeze were particular items of interest.
ESG is an increasingly material topic for investors, with ESG ratings
incorporated into investment decision-making. Our ratings are
also used as part of a loan facility which was established during
the year.
Investors welcomed Reckitt’s return to the Dow Jones Sustainability
Index (DJSI) in 2021. They wanted to hear how our renewed ESG
targets would be achieved and the effect on performance of
embedding sustainability into our core business model.
Our Sustainalytics ESG score is currently rated as medium risk at
22.9 – slightly higher than previously following the revision of some
of their criteria. Our AA MSCI ESG rating places us as an industry
leader on managing ESG risks.
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INVESTING IN COMMUNITIES
HOW WE ENGAGE WITH COMMUNITIES
As we manage the effects of the COVID-19 pandemic and
build back towards a sustainable way of living, the right to the
highest-quality hygiene, wellness and nourishment has never
been more important.
We fight for that through our brands and by working with partners
on the ground. We’re empowering people to make small changes in
their lives that contribute to the wellbeing of the wider community
and help bring about a cleaner, healthier world.
We maximise our impact through our purpose-led brands, the way
we do business across our value chain, and the partnerships and social
investments we make, especially through our Fight for Access Fund.
In 2021, as the world began to look beyond the pandemic,
we renewed our focus on our long-term goals of sustainability
and growth, while protecting those communities most at risk.
SEED, SCALE & SUSTAIN
Our ambition is to reach half the world with our purpose-led
products, engage two billion people through our programmes,
partnerships and campaigns, and have a measurable, positive
impact on ten million people by 2030.
Through our brands and social impact programmes, we have
continued to support people and ideas to create systemic change
and contribute to tackling some of the world’s greatest challenges.
Underpinning our approach is our social impact model – Seed,
Scale & Sustain – which offers investment and mentorship, and
convenes global experts to connect social enterprises with the
resources they need to grow and ultimately become independent.
We support individuals, ideas and infrastructure. We provide
funding and advice to develop projects. We connect innovative
businesses and programmes with our global network to help them
to build scale across communities and borders. And we equip
them with the resources and know-how to help their projects
become self-sustaining and deliver lasting social impact.
For the biggest challenges, collaboration is key. We develop strong
partnerships and invest where we can make the most difference.
Examples include working with Water.org to get people clean
water and sanitation services, delivering emergency relief with
the International Red Cross, and restoring water and wildflower
habitats alongside the WWF.
ACTIVE WHERE WE MAKE THE BIGGEST IMPACT
We aim to progress all the SDGs, but focus more resources where
our impact is greatest. We’ve identified SDG2, SDG3, SDG5, SDG8
and SDG13 as our high-priority goals. (For more on SDGs see page 51)
We have long experience building health and hygiene literacy.
Our partners help us get these messages across with impact.
Recent examples include our work with Raleigh to teach good
handwashing practices in Tanzania and our work with Project
HOPE to change hygiene behaviours in Pakistan.
We support the poorest communities – where hunger, disease and
poor sanitation are most prevalent, and where the worst effects
of climate change are felt first. We emphasise women and girls.
We set a target that a minimum of 50% of our beneficiaries are
women and expect to be above this.
Our programmes focus on three main areas: clean water,
hygiene and sanitation; sexual health and rights; and maternal
and child health.
• Clean water, hygiene and sanitation: we fight for universal
access to clean water and a safe, hygienic environment
• Sexual rights and equality: programmes that empower women
and girls around their sexual rights through access, knowledge
and disease prevention.
• Maternal and child health: nutritional and wellness programmes
for new mothers and children to give them the best start in life.
CLEAN WATER, HYGIENE AND SANITATION
In August 2021, we extended our two-year partnership with
Water.org to continue to strengthen access to safe water
and sanitation.
In 2020, Eko Group H2O+ won the Lead2030 grant under SDG6
at One Young World. They gained funding and mentoring from
Reckitt. Their winning project uses reused and recycled materials
to harvest and filter the abundant local rainwater in Colombia.
Reckitt’s mentorship has helped to scale the operation. By the
end of 2021, Eko had tripled sales, installing 65 rainwater harvesting
systems in seven communities. They had also developed a new
handwashing basin product to improve hygiene in schools.
Simultaneously, with Dettol, we are improving hygiene and
wellbeing through the Hygiene Quest. This interactive educational
programme is promoting good hygiene behaviours in schools. Its
comprehensive curriculum uses gamification, nudge psychology
and motivational reward systems to support long-lasting
behavioural change. It was piloted in Scotland and Nigeria to
test responses in different cultural and economic environments.
Teachers reported better handwashing by students and lower
rates of illness and absenteeism. We presented the Scottish results
at COP26 and have scaled the programme up in both countries.
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ACCESS TO CLEAN WATER
THROUGH AFFORDABLE
MICROFINANCE
Reckitt and Water.org’s joint microfinance
programme has been rolled out in India,
Indonesia and Kenya. We worked together
to develop an easy-to-use microfinance
platform with local banks, offering loans for
domestic hygiene and sanitation services,
such as toilets, sinks, wells and water tanks.
The loans are designed to be affordable to
the poorest communities.
More than £36 million in loans have supported
over 700,000 people in the past two years.
The next step is to scale up the microfinance
platform to make it self-sustaining.
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SEXUAL RIGHTS AND EQUALITY
In 2020 Reckitt, UNAIDS and Gilead partnered with the Wits
Business School at the University of Witwatersrand to launch a new
programme, ‘Aspire Higher’, which challenged students to pitch
innovative ways of improving the sexual health of African youth.
Four pilot projects gained funding. They’ve been working
throughout 2021 to implement and test their new ideas.
Sometimes, the best opportunities to create positive social impact
are right on our own doorstep. Reckitt sources raw materials for
Durex in Thailand. HIV prevalence there is among the highest in
Asia, with 9% of the region’s total population living with HIV. We
are investing in the health of workers living in rural communities.
The Rurality Thaitex programme is improving access to safe sex
and family planning. Sexual education is delivered at places of
work and workers also have access to sexual health services at
mobile centres and drop-in clinics.
MATERNAL AND CHILD HEALTH
We’ve worked with the US non-profit March of Dimes since
2020 to improve access to antenatal and postpartum care
for the estimated 7 million women and 500,000 babies born
each year in the US living in so-called ‘maternity deserts’.
We’ve invested in two pilot programmes to test the impact
of new approaches to improving care within maternity deserts
in Ohio and Washington, D.C.
Project Oscar began shortly after Reckitt delegates from One
Young World 2017 met disability activist Oscar Anderson. Oscar
lives with cerebral palsy as a complication of untreated neonatal
jaundice (NNJ).
NNJ affects six out of ten newborn globally. It is easily treatable
with the right care. We developed a plan for sustained change
in the provision of care in Vietnam, where Oscar was born.
We partnered with the Ministry of Health to train 261 healthcare
professionals and provide 96 regional hospitals with high
quality phototherapy units. Since the launch of the programme,
over 60,000 newborns have been effectively treated by
trained healthcare professionals. A recent assessment of
the programme’s impact identified reductions in fatalities,
disability and hospitalisation.
In South Africa, diarrhoea is one of the deadliest diseases for
children under the age of five. In 2021, we worked with the local
Ministry of Health to encourage the regular handwashing that can
prevent the illness. Dettol New Mums Clinic provided hygiene
products, educational resources and support for healthcare
workers, reaching hundreds of thousands of mothers.
In Bangladesh, maternal mortality is the third most common
cause of death among women aged 15-49, with approximately
7,600 preventable deaths each year. In 2021, the local Dettol
team supported BRAC’s (formerly known as the Bangladesh
Rehabilitation Assistance Committee) Health, Nutrition and
Population programme, providing hygiene products and education
to help improve antenatal and postpartum care. Our small
contribution has helped ensure mothers are able to put into
practice the advice given to them by BRAC staff.
EMERGENCY RELIEF
Reckitt provides emergency relief in response to global events
and need.
In February 2021, we began a new strategic partnership with
the Red Cross to support its campaign to strengthen vulnerable
communities. We joined the charity’s Disaster Relief Alliance with
an initial £250,000 grant and product donations, as well as time
through employee volunteering.
The COVID-19 pandemic has affected communities across the
world, but refugees are particularly at risk. In 2021, we helped fund
the International Rescue Committee (IRC), enabling it to directly
engage 11,206 people, two-thirds of them women. In Syria, hygiene
kits were distributed to vulnerable groups, including the elderly
and people with disabilities or chronic disease.
IMPROVING ACCESS TO NUTRITIOUS, AFFORDABLE FOOD
Malnutrition is rife in Africa. In Congo, 22% of the
population, including 3.4 million children, are malnourished.
Tailored Food won the Lead2030 SDG2 grant at One
Young World in 2020 and funding from Reckitt for a
business model that addresses one of the key causes –
the lack of affordable and nutritious food products. It
works with local entrepreneurs, farmers and market
workers to help them to develop their own nutritious food
products, using local produce and processes.
With significant growth and impact over the past year,
Tailored Food’s sales of nutritious, tasty, low-cost meals
have more than trebled, from 210,000 to 676,000. An
estimated 33,800 people suffering from malnutrition in
Liberia and Congo have benefited, as too has the local
economy. There are 265 more well-paying jobs for women
in rural communities thanks to sales the business has
generated. It has the backing of the UN World Food
Programme, whose’ commitment to buy 70,000 cassava
and peanut-based snack bars in Congo every month
supports 160 women entrepreneurs in rural communities.
A recent research study into Tailored Food’s business
model by the Bill & Melinda Gates Foundation found that
100% of consumers living in extreme poverty view its
products as both affordable and accessible. Reckitt has
extended its support for Tailored Food into 2022 to help
reach even more local food producers and strengthen
access to quality nutrition.
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OUR SHARED PLANET
ENABLING CIRCULARITY
Shifting to a more circular economic system – one built around
reducing, reusing, recycling, renewal and redesign – is a massive
global transformation. Everybody will need to adopt different
ways of doing things. It calls for new and novel infrastructures
and a radical shift in our collective behaviour.
We’re doing what we can do to increase circularity, but this is
a collaborative effort. Multiple actors – our peers, our suppliers,
our customers, consumers, recyclers, re-processors and regulators
– need to coordinate their activities.
Getting there will take progress in three main areas: eliminating
waste and pollution, circulating products and materials, and
regenerating nature. We are addressing all three of these as well
as finding ways to facilitate more circular systems and processes.
DEVELOPING CIRCULAR ECONOMY MODELS
We have been working with a range of partners to implement
circular infrastructure.
TerraCycle’s closed-loop recycling programme allows UK
consumers to recycle non-recyclable flexible packaging through
public drop-off locations and by initiating home collections. The
Reckitt Recycling Programme is operational in 1,300+ UK locations.
Meanwhile, Finish has partnered with Loop in a new trial with
UK retailer Tesco. The Loop sustainable packaging concept sees
empty packaging collected, cleaned and redistributed. Ten Tesco
stores are selling Finish tabs alongside other Loop brand partners
in stainless-steel jars, with in-store return points for when the
product is finished.
PLASTICS AND PACKAGING
We are reducing our plastic footprint and are committed to make
all our packaging recyclable by 2025.
We have increased the recyclability of our range, but the
proportion of post-consumer resin (PCR) we include in our
packaging is still far lower than we would like. Disappointingly,
our PCR percentage only increased marginally from 3% in 2019 to
3.5% in 2020. This is in part because our focus during COVID-19 has
been on selling higher volumes of hygiene products to combat the
pandemic. Although we used 50% more PCR in our packaging, this
was overshadowed by much higher volumes of hygiene products
sold. It’s also the case that some of our regulated products take
longer to change. We’re committed to accelerating this
programme, increasing PCR and using less plastic overall.
We have redesigned the Durex 200ml Play Massage 2in1 bottle to
be fully recyclable. It is now made from 100% PCR. In India, Reckitt
was one of the first buyers of Banyan Nation’s ‘better plastic’ PCR
solution. Banyan Nation uses an innovative plastic intelligence
platform to connect to small-scale waste collectors and sorters.
The collected plastic is recycled as PCR in Reckitt packaging.
REDUCING WASTE IN MANUFACTURING
We are identifying cost reductions and efficiency improvements
at our manufacturing sites by thinking more sustainably.
The Durex factory in Bangpakong, Thailand was paying over
£60,000 a year to dispose of unused natural rubber latex and
Naked condom waste products. In 2021, however it found a sandal
manufacturer who wanted to use this waste rubber to make
slippers. This not only saved money by reducing waste but also
earned revenue from sales. The initiative improved the factory’s
financial position by over £32,000.
The Makati factory in the Philippines teamed up with J&J Farms
to convert waste milk powder to animal feeds and biogas. J&J’s
biogas facility creates enough methane to run generators which
provide electricity for deep-well pumps, air-conditioned housing
for breeding boars and tunnel-ventilated farrowing houses.
Up to 80% of the farm’s electricity comes from its biogas facility.
The increase in biogas production from adding milk powder has
reduced electrical consumption by over 20%.
CHEMICALS AND INGREDIENTS
We are moving towards better chemistry in our products and
lowering our chemical footprint by progressively using more
ingredients from natural origins as part of a more circular model.
VEO’s probiotic surface cleaner uses a 99% biodegradable formula
with active probiotic bacteria – free from chlorine bleach,
formaldehyde, phosphates and disinfectant chemicals. The
biodegradable formula preserves water and enables a longer-
lasting impact with less negative environmental impact than
traditional chemicals.
The Veet Minima hair removal range has low chemical credentials,
including cold wax strips that are hypoallergenic and fragrance –
and dye-free. Hot wax strips are fragrance and dye-free with 100%
natural ingredients, while creams do not use urea.
Lysol’s Simply kills 99.9% of bacteria using a plant-based active
ingredient and is free from bleach, dyes and phosphates. Lysol is
powered with hydrogen peroxide, which kills 99.9% of viruses and
bacteria without the harshness of bleach.
Dettol Tru Clean has plant-based active ingredients. It’s free from
bleach, dye and phosphates and can be produced with far less
water. The product has been launched in China and its wider
roll-out is under consideration.
Consumers are concerned about harsh chemicals and artificial
fragrances in their homes. Air Wick has been reducing the
chemical footprint in its products and increasing naturally
derived ingredients to over 50%. These changes resulted
in the launch of Summer Delights, White Flowers & Melon
with an 87.5% reduction in chemical footprint.
Across Reckitt, our brands are developing ‘free from’
ranges removing ingredients of potential concern
(e.g. dyes, fragrances, preservatives).
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PROTECTING PLANETARY
HEALTH
The COVID-19 pandemic has driven home the link between
people’s health and planetary health. Infectious diseases, new
vectors of transmission, increased respiratory illness and water-
borne disease are all connected to climate change. Safeguarding
the planet, protecting biodiversity and acting to limit climate
change serve all our interests.
OUR ACTION ON CLIMATE CHANGE
Our ambition is to reach net zero emissions across our value chain
by 2040, a decade earlier than the world’s goal to keep the rise in
temperature to less than 1.5°C globally. We also recognise the
importance of making rapid progress before then. Our science-
based targets for 2030 do just that, with a 65% reduction in Scope
1 and 2 operations emissions and a 50% reduction in Scope 3
product emissions.
Our absolute carbon emissions (Scope 1, 2 and 3) stayed level
with 2020 (-0.04%) despite business growth. Against our 2015
baseline however, volumes over the past two years have increased
our overall footprint. This increase is in our scope 3 emissions,
particularly relating to ingredients and packaging. At the same time,
our scope 1,2 emissions have reduced by 66% against the baseline.
To address these scope 3 emissions, we continue to develop more
recyclable packaging and greater use of recycled materials, in line
with our plastics pledge; our work with suppliers to monitor and
reduce their footprint; and our emerging prioritisation of high
carbon ingredients. This is driving activity to reduce emissions from
ingredient manufacture and to consider alternative, lower-carbon
ingredients while maintaining product efficacy, safety and quality.
More detail is in our Climate Change Insight.
We are reducing Scope 1 and 2 emissions by switching to
renewable electricity sources for all our manufacturing sites.
We’ve already achieved 66% carbon reduction in our operations
and will press on from here.
We are also finding ways to reduce energy usage in manufacturing.
We’re initially targeting high-energy processes such as compressors,
air handling and boilers. Over time, we will progressively replace
equipment with more energy-efficient alternatives.
We will also introduce alternatives to the gas used in combined
heat and power plants and, in time, in spray dryers, where we
use gas for thermal energy. In Evansville (US), we’re already using
landfill gas for spray drying. We intend to replicate that approach
where possible at other locations. We are monitoring alternative
fuels such as hydrogen as a longer-term gas replacement.
Scope 3 emission reductions are more difficult to achieve as they
often rely on supplier activity and changes in how people use our
products. Nevertheless, we’re making progress to deliver our 2030
50% goal.
We’re engaging with suppliers with the help of Manufacture 2030
to help them measure and reduce their carbon emissions. We’re
targeting high-energy ingredients to ensure they’re manufactured
using renewable energy. Where this isn’t possible we’ll consider
alternative ingredients.
Internally, we’re using our Sustainable Innovation Calculator (SIC)
to design lower-carbon ingredients and materials into our
products. The SIC also helps us design products that require less
energy and water in use, and we’re increasing the use of recycled
and recyclable packaging to reduce the end-of-life carbon
footprint for our products.
We’re also engaging with our consumers to reduce their energy
and water use by, for instance, advocating lowering washing
machine temperatures, skipping the rinse for dishwashing, using
cold water to wash their hands and recycling packaging.
Looking at our logistics network, we’re undertaking a low-carbon
trial in the UK to reduce our carbon footprint. This uses recycled
vegetable oil as fuel. We’ll develop more low-carbon logistics
solutions and scale these globally.
Water stress, a consequence of climate change, is another
focus for us. With around 19 of our sites in water-stressed areas,
it’s important we reduce water impact in these communities.
We’ve reduced water use per production unit by 3% since 2015,
and will go further. But we want to go beyond our own factories.
That’s why we work in local communities to safeguard water
suppliers, improve sanitation and enable health literacy.
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We also aim to up the efficiency of our water use, targeting a
further 30% improvement by 2025. By 2040, we aim to halve the
water footprint of our products. We’re designing products to
reduce their water and carbon impact across their whole lifecycle.
This can mean, for example, using less water in manufacturing,
concentrating ingredients so they are lighter to transport, or
formulating them so they can be used in people’s homes with
less water.
Our ambition is to become water positive in water-stressed areas
by 2030. We’re developing water catchment area programmes
at key sites. Our Hosur, India site now has sufficient externally
validated projects to cover half its annual water use and the
remainder will be confirmed in 2022. It has created water
harvesting projects and helped reinstate local water courses. Our
Sitarganj factory in India, one of our bigger water users, is saving
nearly 15,000 tonnes of water annually by reducing wastewater.
It’s important that we work with and learn from others. We’ve
joined the Water Resilience Coalition and its parent organisation,
the CEO Water Mandate. This group of some 200 companies seeks
to address global water challenges through corporate water
stewardship, in partnership with the UN, governments and civil
society organisations.
Finish worked with National Geographic, Love Water UK and US
non-profit The Nature Conservancy to reach more than 350 million
people around the world with the Save Water Clean Clever
campaign. In the US alone, pledges made add up to over seven
million gallons of water saved every year.
A large part of our water footprint arises when people use our
products in their homes. If we can reduce that, we create a big
impact. But tackling that requires subtle changes in how people
use products, for example skipping the rinse when using Finish.
Our brands connect with people every day, and campaigns like this
one help people understand how doing things a little differently
can save water or energy at home. This can save waste, and even
save people money, while our products can still perform just as
well. Similar to carbon, the overall water footprint increased by
14.6% compared to our 2015 baseline, influenced by high volumes
of disinfectant and hygiene products such as soap over the
past two years. Our SIC targets our water footprint within our
innovation process. It focuses us on using ingredients with a
lower water footprint alongside our continuing work to reduce
water when consumers use our products at home. For example,
developing Finish to avoid the need for pre-rinsing. With more than
90% of our total water footprint arising when products are used,
this emphasis is naturally important for water overall.
ECOSYSTEMS, BIODIVERSITY AND NATURE-BASED SOLUTIONS
At Reckitt, we’re committed to protecting and regenerating the
ecosystems we rely on. We know that strong ecosystems will
become increasingly resilient over time and better able to support
natural resources and local people.
It makes sense to build up biodiversity. Translating that principle
into effective action is more challenging, however,and we’re
currently developing our approach. We will need comprehensive,
evidence-based metrics to measure our impacts on nature before
we can take effective action.
In 2021, we linked up with the Nature-Based Insetting team at the
University of Oxford to develop nature-based solutions. Together,
we are developing a roadmap for the protection, restoration and
sustainable management of ecosystems within key supply chains.
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WWF PARTNERSHIP
WWF and Reckitt launched a partnership in
March 2021 to tackle causes where we can
make the most impact.
Together, we will help restore and protect
2,100km of freshwater within two of the
world’s most important ecosystems in the
Amazon and the Ganges. The programmes
aim to improve the quality of freshwater
resources to allow people and nature
to thrive.
We’re also inspiring millions to fight for nature
through our brand partnerships with Air Wick
and Finish. Together we will restore over 1.2
billion square feet of wildflower habitats
globally and replenish 500 million litres of
freshwater in the UK. Through our partnership
we are also raising awareness with people on
the biodiversity and water crises, and
encouraging proactive actions from all
to effectively address.
WWF is also supporting Reckitt’s sustainable
business transformation through joint
research and collaboration focusing on water,
climate change and biodiversity.
We’ve started to make great progress:
• WWF is participating in the Indian
government’s first national river dolphin
population census to help protect this
iconic endangered species, with 925km
of the Ganges already surveyed
• A major study has begun to explore
hydropower alternatives in the Tapajós
basin in Brazil to keep the rivers free
of dams
• Through the Air Wick partnership; WWF is
already restoring 77 million square feet of
forest and wildflower habitats globally
This roadmap will help mitigate our ecosystem impacts in a socially
sustainable way, by insetting measurable nature-based solutions
into our global value chains that will help tackle climate change.
We’re focusing first on our most vulnerable, significant value
chains, beginning with five commodities: palm oil, latex, and three
fragrance oils used in Reckitt’s Air Wick Botanica range. All
originate in areas of high biodiversity. Our programme evaluates
environmental impacts and subsequently develops measurable
and impactful interventions against evidence-based targets.
Our aim is to implement these in key value chains by 2030.
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TCFD Summary
OUR TCFD
SUMMARY
CLIMATE CHANGE AND OUR BUSINESS
At Reckitt we recognise the importance of climate change in
our relentless pursuit of a cleaner and healthier world. From the
perspective of our business and our consumers all over the world,
we also recognise the increasingly clear and adverse impact that
climate change is having and will have on people’s health and
hygiene. Whether through new vectors of disease, increased risk,
poorer hygiene through water stress or increased bacterial loads,
increased ambient temperatures or different acute weather
patterns, to name but a few, these impacts will pose both risks
and opportunities within our value chain.
To that end, in our approach to meet the recommendations of
the Task Force on Climate-related Financial Disclosures (TCFD),
we assess risks and opportunities within our day-to-day
business operations, structure and governance activities. Our
comprehensive TCFD disclosure is published in our Climate Change
Insight together with further details of climate change activity and
emissions data to provide a holistic report of activity for all
interested stakeholders.
We are building compliance with TCFD expectations and
recommendations. This embeds our climate change response
within routine business activity, helping to build an effective
response that assesses materiality, mitigates risk and builds
opportunity within our brands and value chain. For example, we
have adopted our Sustainable Innovation Calculator (SIC) for all
new product development, measuring the climate and water
impact of innovations. We also strongly support climate disclosure
and transparency in our annual reporting and associated
sustainability insights.
We have conducted climate-related risk and opportunities
scenario analysis to consider the longer-term impacts of climate
change. With Risilience and Cambridge Centre for Risk Studies
(CCRS) within the Judge Business School at the University of
Cambridge, we developed a digital-twin model of our business.
This builds scenarios for low-carbon transition and physical risks
across our value chain, with a 5 to 20 year horizon and consistent
with the emissions pathways and scenarios specified by the
Intergovernmental Panel on Climate Change (IPCC).
OUR APPROACH
In 2021, we worked with Risilience to assess our climate change
risks and opportunities. The Risilience platform applies the climate
change research frameworks and approaches pioneered by
Risilience and provides quantitative analytics that inform our risk
management approach, and allows us to prioritise areas for action.
Our programme involves key functional stakeholders throughout
Reckitt including procurement, brands, operations, sustainability
and finance teams.
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Compliance Statement
We are pleased to confirm that we have included
in this TCFD Statement for Reckitt the material climate-
related financial disclosures consistent with the four
recommendations and the eleven recommended disclosures
set. However, as we try and align our approach to the
updated TCFD additional guidance (Implementing the
Recommendations of the Task Force on Climate-related
Financial Disclosures (2021 TCFD Annex) which was released
in October 2021, there are some recommendations in the
2021 TCFD Annex: All Sector Guide that we are continuing to
work on and will require more time for us to fully consider. In
line with the current Listing Rules requirements (as referred
to in Listing Rule 9.8.6R(8)), these areas are detailed below
with reference to the TCFD recommendations:
• Development of more detailed disclosures by geography
or sector, in addition to the current considerations for the
overall business. Our current analysis often considers
specific geographies for supply chain risks and sectors
for market-level risks and opportunities, and we will
develop these for future reporting (TCFD Strategy (a)).
• Assessment of climate related issues in terms of
acquisitions or divestments, where we are developing
processes to strengthen our existing compliance agenda.
We will report on these in the future (TCFD Strategy (b)).
• Assessment of climate related issues in terms of the
response of consumers, to products in different ways,
both in terms of risk and opportunity, and in different
geographies. We have begun to assess these, considering
both internal and external data and will report more on
these in the next two years. Our sustainable product
innovation programme does, however, already take such
issues into account alongside transitions risks, within our
product innovation activity (TCFD Strategy (b)).
• Assessment of climate related issues in terms of access
to capital where there is apparently limited initial impact
(TCFD Strategy (b)).
• Further development of our decarbonisation roadmap
alongside the initial interim milestones noted for our 2025,
2030 and 2040 targets and ambitions (TCFD Strategy (b)).
• The development, during 2022, of our internal carbon
pricing approach and modelling which will inform future
programmes (TCFD Strategy (b)).
• With ongoing activity, we continue to build resilience
against the impacts of climate change (TCFD Strategy (c)).
We are working to implement the 2021 TCFD Annex
recommendations in full over the course of 2022 and will
report further on these in our next TCFD report.
We assess risks and opportunities in the short term (up to three
years), medium term (three to six years) and long term (six to 12 years
and beyond). From a range of potential future global climate
pathways, we initially assessed five different scenarios: a >4°C
(global temperature rise by 2100); a 3°C scenario based on
international policies in 2020-21; a 2.5°C scenario; a Paris-Agreement-
aligned mitigation (2°C) and a 1.5°C mitigation (global net zero by
2050 as referred to by IPCC) scenario. With the help of Risilience,
our near-to-medium-term analysis included piloting a cumulative
five-year view which supports our financial and operational planning.
GOVERNANCE
Our approach to climate change risk is within the governance
framework of our core business. Our Board, supported by the Board’s
Corporate Responsibility, Sustainability, Ethics and Compliance
(CRSEC) Committee and Risk Committee, has responsibility
for oversight of our climate change strategy. The strategy is
delivered through our Executive Committee and management
team. For more details on our Governance Framework and CRSEC
committee, see pages 141 to 147 in our Annual Report and our
Sustainability Governance, Reporting and Assurance Insight.
LEARNINGS TO DATE
Our climate risk analysis, through the digital-twin model, has
provided initial insights that we will refine and develop further
in 2022 and beyond. This includes understanding the potential
risks and opportunities to our upstream supply chain and the
supply of materials. This will build resilience through our suppliers
with the involvement of our procurement and sustainability
functions. A second area of focus is on risks at our operating sites.
For example, increases in the frequency and severity of extreme
weather events (physical risks) could affect the supply chain. There
may also be an increasing impact of chronic risks such as water
stress. We have already begun to build resilience through business
continuity planning and, in the design and location of new sites, by
taking account of issues including future water stress. We assessed
a range of other risks associated with transition to a low-carbon
economy and policy environment, including potential policy and
regulation, and technology, market, reputation and liability risks. This
leads to a third area of focus: the potential impact of climate change
on the way people select and use our products. With data from
our own consumer research team alongside external data from
Risilience and others, we will consider potential trends and also how,
using our SIC this influences the design of new products. This also
creates an opportunity for innovation that meets the emerging
demands of consumers and the impacts of fiscal policy and a
changing environment. We will report further on this in the future.
Considering the carbon and water footprints of our products,
the growing interest people have in more sustainable products
and how low-carbon, low-water products may save people energy
and water in use in the future will help our innovation process,
strengthening the resilience and appeal of our brands.
Changes relating to the low-carbon transition, as well as the
associated impacts, vary with the different climate pathways.
Impacts are influenced by emerging and potential policy
frameworks over the coming years including, for example, the
extent of carbon taxation measures. Should such measures be
applied to all Scope 1, 2 and 3 emissions by 2025, and considering
transition factors beyond policy such as consumer preference
and technological change, the impact would be significant.
A more likely, phased policy approach and changes in preference,
alongside our ongoing mitigation activity in supply networks and
products, would not be material.
Physical risks are expected to be minor in the short to medium
term. Over the longer term, 20 years or so, physical risk impacts
will become more pronounced, both in terms of more frequent
extreme weather events and chronic impact. Again, our
progressive work on topics such as water catchment area
management, product innovation and supply chain resilience are
intended to mitigate these risks. For further details please see our
Climate Change Insight.
Our analysis will continue in 2022 and beyond, initially assessing key
risks in greater detail. This will include the relative impacts across
key raw materials and, as noted, potential changes in consumer
use. We will also assess the impact of our sustainability and
climate strategy which will provide insights into the efficacy and
contribution of various climate mitigation initiatives. This helps us
to focus activity where we can create greatest impact and to
capitalise on potential opportunities associated with a low-carbon
transition that support our business resilience and growth in a
future low-carbon economy. We focus activity through routine
business planning within brands and our supply chain, including
within financial planning for those business functions in annual and
three-year cycles in order to manage risks and deliver against our
Sustainability Ambitions. For example, capital allocation for
environmental improvements on carbon are built into current
five-year planning and are within existing external disclosures.
Progress is reviewed routinely to enable further assessment of
resource need and allocation.
For our full TCFD statement and our work with Risilience,
emissions data, activity to build resilience, see our Climate
Change Insight. In line with our commitment to climate
disclosure and transparency, more details of our climate strategy,
governance and related risk and opportunity analysis can be
found in our public submission to the external benchmark
Carbon Disclosure Project (CDP) investor questionnaire at
www.reckitt.com/sustainability/policies-and-reports.
A winning photo from
our competition in
partnership with
Talenthouse,
capturing moments
where people have
positively impacted
our planet to create
a cleaner,
healthier world.
Cabure Films – Spain
Reckitt Annual Report and Accounts 2021
67
Financial StatementsGovernanceStrategic Report S172 Statement
OUR SECTION
172 STATEMENT
This statement shows how our Directors
have acted in a way that they consider,
in good faith, would be most likely to
promote the success of the company for
the benefit of its members as a whole,
having regard to stakeholders, including
matters under section 172(1)(a)-(f) of
the Companies Act 2006, during 2021.
The statement has been prepared in
response to the obligations set out in
the Companies (Miscellaneous Reporting)
Regulations 2018, and the UK Corporate
Governance Code 2018.
Section 172
Overview
Understanding the needs and expectations of our stakeholders
is fundamental to our Purpose: to protect, heal and nurture in the
relentless pursuit of a cleaner and healthier world. We recognise
that our business can only grow and prosper by acting in the
long-term interests of our key stakeholders, namely our people,
our consumers and customers, our investors and our partners,
and the communities and environment we operate in. The Board
considers our key stakeholders and the matters set out under
section 172 of the Companies Act 2006 in its discussions and
decision-making. The following table sets out key examples of
how the Board has considered matters under section 172 during
the year in performing its duties.
(a) the likely
consequences
of any decision
in the long-term
The Board always strives to act in the long-term interests of its key stakeholders. Our
Rejuvenating Sustainable Growth strategy is founded on creating long-term shareholder value,
which is achieved by meeting the needs of all stakeholders, through our relentless pursuit of
a cleaner and healthier world. When launching our strategy, we set out that we would manage
and strengthen our portfolio, whilst seeking out new opportunities.
In doing so, during the year, the Board approved the sale of the Scholl brand, and our Infant
Formula and Child Nutrition (IFCN) business in China, and the acquisition of the Biofreeze brand.
The Board took into consideration the long-term consequences of these decisions, ongoing
feedback and consultation with investors, and the potential to create stakeholder value. These
decisions represent a major step forward in implementing our strategy and a key milestone in
our journey to rejuvenate sustainable growth.
(b) the interests of
our people
Our employees are fundamental to our success as a business. Understanding the interests of our
employees is important for the Board and forms part of our decision-making process. During the
year, the Board has kept up to date with methods of employee engagement, including the results
of all employee surveys on culture, Stronger Together conversations and employee well-being.
Our approach to ways of working in light of COVID-19 and adopting a hybrid working model
takes into consideration direct feedback received from our employees through surveys.
In September, the Board held round-table discussions with employees which focused on
inclusion, consumers, innovation and science, sustainability and business transformation. The
discussions provided employees with the opportunity to engage directly with Board members
and express their views and concerns regarding the organisation, its culture and operations. The
Board reviewed feedback from the round-table discussions at its November meeting, including
actions required to address employee concerns. The Board is committed to continuing to
engage with employees to understand their interests.
68
Relevant disclosures
Chief Executive Officer’s
Statement page 9
Nutrition pages 28 to 29
Progress against our
strategy page 33
Stakeholder Engagement
page 60
Decision making in
practice and taking
stakeholder views into
account pages 70 to 71
Focus on: culture &
inclusion pages 46 to 49
Building Partnerships
with Stakeholders
pages 55 to 56
Chair’s introduction to
governance pages 105
to 106
Corporate Governance
Report pages 121 to 122
Section 172
Overview
(c) the need to
foster business
relationships
with our key
stakeholders
The Board understands the importance of fostering business relationships with key stakeholders.
During the year, the Board took part in listening sessions on the topics of nutrition, ecosystems,
biodiversity and nature-based solutions. At these sessions the Board heard perspectives from
external panellists including investors, suppliers, academics and NGOs. Board members were
invited to ask questions during the session and discuss next steps.
(d) the impact of
Reckitt’s
operations on
the community
and the
environment
In our efforts to provide access to the highest quality health and hygiene products, we
were proud to be named a Principal Partner, and the official hygiene partner at COP26. Key
management personnel attended the conference including our CEO, where a broad range of
events were held with government ministers, leading academics and civil society leaders. This
enabled us to better understand the interests and aims of those stakeholders and also develop
our own activities in support whilst also creating opportunities for our business. The significant
impact of climate change on health was a key theme of our engagement at COP26, alongside
our ability to connect with customers and consumers to develop joint activities to combat
climate change. As the official hygiene partner for the conference, we demonstrated Reckitt’s
ability to protect the health of tens of thousands of people at such events through effective
hygiene interventions and protective self-care. This supported the organising parties of the
United Nations and the UK Government in running a safe and valuable conference.
Sustainability is central to our Purpose and runs through everything we do. We understand
as a business the effects our operations have on the environment and the need to embed
sustainability to create positive impacts for both communities and the wider society in which
they operate, as well as for our business. During 2021, we built on our commitment to combat
climate change through science-based targets for carbon reduction by 2030 and as a key
milestone, our ambition is to be carbon neutral across our value chain by 2040. In March 2021,
our sustainability ambitions to 2030 were approved by the Board. We are focused on our impact
through our purpose-led brands and innovative products; sustaining a healthier planet through:
our work on climate change, natural resources and biodiversity; and enabling a fairer society
through our activity in our own business and across our value chain to support inclusion,
strengthen human rights and support for sustainable livelihoods. Our goals of reaching half the
world with purpose-led brands to enable more people to lead cleaner, healthier lives, and of
engaging two billion people through our programmes and campaigns, are designed to create
lasting impact in communities and with our stakeholders. They also strengthen impact within
our business. At COP26, we demonstrated how we can engage consumers to help tackle
climate change, using our innovative products to reduce energy usage in their daily lives and
create impact at scale alongside our own work to do the same in our value chain.
Our Board is responsible for overseeing, considering and reviewing the Group’s environmental,
social and governance (ESG) strategy, as outlined in its Schedule of Matters Reserved for the
Board. The Board delegates regular oversight of sustainability to the Corporate Responsibility,
Sustainability, Ethics and Compliance (CRSEC) Committee. The CRSEC Committee reviews
our sustainability objectives and progress against our targets, and reports on these to the
Board regularly.
Relevant disclosures
Sustainability Ambitions
pages 16 to 17
Focus on: COP26
pages 20 to 21
Stakeholder
Engagement pages 52
to 65
CRSEC Committee
Report pages 141 to 147
Chief Executive Officer’s
Statement page 9
Sustainability Ambitions
pages 16 to 17
Key Performance
Indicators page 18 to 19
Focus on: COP26
pages 20 to 21
Stakeholder Engagement
pages 53 and 64
Our TCFD Summary
pages 66 to 67
Decision-making in
practice and taking
shareholder views into
account pages 70 to 71
Non-Financial Information
Statement page 73
CRSEC Committee
Report pages 143 to 144
(e) the desirability
of maintaining a
reputation for
high standards
of business
conduct
The Board is responsible for monitoring our culture and values, and the delivery of our strategy
can only be achieved with the highest standards of business conduct. All Directors must act with
integrity, lead by example, and promote the company’s culture and values. We aim to create the
space and opportunities to help our employees make a difference and do the right thing, always.
Our Freedom to Succeed employee value proposition aims to instil, promote, reinforce, and
reward the positive behaviours and attributes that make that real. Our focus is on maintaining
an open, positive and inclusive culture by promoting continuing dialogue across Reckitt.
Connections are forged across Reckitt in many ways, including Board site visits, virtual townhalls,
regular CEO emails to employees and all-employee surveys. Our Compass and Leadership
Behaviours monitor a consistent standard of cultural expectations across the Company.
Focus on: Culture &
Inclusion pages 46 to 49
Chair’s introduction to
governance page 104
Corporate Governance
Report pages 121 to 122
Report of Directors’
page 190
The CRSEC Committee reports to the Board after each of its meetings, providing an update
on Reckitt’s ethics and compliance priorities, including the Group’s Speak Up programme.
(f) the need to act
fairly as
between
Reckitt’s
shareholders
The 2021 Annual General Meeting (AGM) provided an opportunity for the Board to engage
directly with shareholders. Due to the ongoing COVID-19 pandemic, the AGM was held as a
closed meeting. Despite being unable to meet shareholders in person, we invited shareholders
to submit questions in advance of the meeting or during the meeting in real time.
Stakeholder Engagement
page 60
Chair’s introduction to
governance page 107
In addition, during the year, we were pleased to launch our investor seminar series. The series
seeks to provide ‘bite-size’ look-ins on the progress we have made in our transformation to
deliver sustainable growth. The first event provided investors with an opportunity to hear from
the broader senior management team, including overviews on the business units and specific
areas of the business such as R&D and innovation.
Reckitt Annual Report and Accounts 2021
69
Financial StatementsGovernanceStrategic Report S172 Statement (Continued)
DECISION-MAKING IN PRACTICE AND TAKING
STAKEHOLDER VIEWS INTO ACCOUNT
SALE OF IFCN CHINA
During the year we took decisive action to strengthen our
portfolio, following a strategic review of the IFCN business
in China. The Board carefully considered the proposal to sell
Reckitt’s IFCN business in China. Board discussions identified
that trading conditions had been difficult for the IFCN business
in China including, as a result of the ongoing restrictions on
cross-border trade between Hong Kong S.A.R. and mainland
China, the impact of increased local competition, and a
slowing down of birth rates. Additionally, operating margins
had been impacted by product write-offs due to lack of trade
between Hong Kong S.A.R. and mainland China. The COVID-19
pandemic and the resultant recession had further impacted
IFCN performance in China.
As part of the Board’s decision-making, stakeholder views
were considered including feedback from investors and the
need to create long-term value for shareholders. The Board
assessed in detail the strategic options for the IFCN business
in line with the Group strategy, assessing the advantages
and disadvantages for stakeholders of selling the IFCN
business in China. In addition, the Board reviewed how IFCN
China could be separated efficiently, including separation of
the corporate structure while also considering the impact
on corporate functions, including employees. The Board
also ensured protection for the employees through
provisions in the sale and purchase agreement.
After a thorough review, the Board announced the sale of
IFCN China to investment company, Primavera. The Board
considered the long-term interests of stakeholders and
concluded that the sale of IFCN China would create
stakeholder value and be in the best interests of the
company, aligning to our strategy and growth expectations.
Our Nutrition business is now stronger and more
concentrated in markets such as North America,
Latin America, and ASEAN.
RB REBRANDING AS RECKITT
The Board considered management’s proposal to rebrand
as Reckitt, to reflect the company’s renewed Purpose, Fight,
Compass, and Leadership Behaviours. The Board reviewed the
proposal for the rebranding as Reckitt, considering the benefits
for stakeholders in the long term. Stakeholder perspectives played
a key role in the Board’s decision to approve and subsequently
launch the new Reckitt brand. During the decision-making process,
the Board reflected on the 200-year history of the company, the
transformation journey of the business and our current corporate
Purpose. The new Reckitt name draws upon the legacy of the
founders of the business as well as our connection to Hull, UK.
Reckitt reflects the existing widespread usage of Reckitt by key
stakeholders and is clearer, simpler and more memorable, whilst
retaining positive associations with the company’s heritage.
The importance of branding formed part of Board discussion,
noting that branding acts as a trust mark for our stakeholders,
most notably employees, customers, and investors – but also
governments, regulators, civil society (NGOs) and increasingly
our consumers. The Board acknowledged that global digitisation,
including the internet and social media, has made corporate
brands more visible and increasingly valuable. Creating a consistent
and visible brand online allows our consumers, customers and
partners to get a deeper and clearer view of our behaviour and
70
performance, influencing opinions and decision-making about
our products, as well as whether to invest in, partner with, or work
for Reckitt. In addition, the Board considered that stakeholders
expect heightened levels of transparency and that in attracting
talent and potential employees, they look for companies with a
good corporate reputation which are aligned to their values. The
redevelopment of the corporate identity from RB to Reckitt is a
key milestone for the company’s ongoing journey of transformation
towards sustainable growth and reflects our renewed Purpose and
strategy. The new brand is built on how stakeholders recognise
the brand; it is more powerful, consistent, and impactful.
NEW SUSTAINABILITY AMBITIONS TO 2030
The approval of our new sustainability ambitions to 2030 was a key
decision for the Board during the year. The proposed sustainability
ambitions were reviewed by the Board at its February meeting and
our new ambitions for a cleaner, healthier world were launched in
March, backed by an investment of more than £1 billion over the
next ten years to ensure we meet our goals.
By 2030, our bold ambitions are to reach half the world with
products that contribute to a cleaner, healthier world; engage
two billion people through our programmes, partnerships, and
campaigns; create a lasting impact in communities; and, together
with our partners, contribute to delivering the UN Sustainable
Development Goals (SDGs). Our sustainability ambitions are broken
down into three focus areas, reflective of our Purpose, and include:
purpose-led brands; healthier planet; and fairer society, addressing
our commitment to ESG factors. The Board considered the
interests and expectations of our stakeholders in the sustainability
and ESG fields, including: market and benchmarking assessments
of competitor, customer and consumer positions; consideration of
investor focus and ESG metrics; external stakeholder implications,
BIOFREEZE ACQUISITION
In July 2021, it was announced that Reckitt had completed the
acquisition of Biofreeze. The Board considered carefully the
position of the brand in the market, the growth possibilities of
topical analgesics in the US pain market and advantages for our
stakeholders. The Board decided that Biofreeze was a strong
strategic fit with Reckitt’s pain portfolio and represented a
unique opportunity for Reckitt in the US pain market. The Board
acknowledged that the acquisition represented a unique and
exciting opportunity to unlock value for Reckitt’s shareholders and
investors through Reckitt’s expertise, global operating footprint,
and infrastructure. Biofreeze is a perfect fit with Reckitt’s Health
platform and deepens Reckitt’s presence within the broader
pain category.
The Biofreeze brand serves our consumers through tapping into
the growing consumer global trend for wellness and self-care,
and aligns with our strategy to build a US Health footprint in new
spaces and places. The acquisition presents benefits for Reckitt’s
stakeholders, who are highly interested in safe and effective
alternatives, consistent with Biofreeze’s positioning. Biofreeze has
including SDGs; internal evaluation including business strategy
development and leadership perspectives; and input from
investors. The Board discussed the need for clear targets,
outcomes for the business, the importance of measurability to
enable reporting and what it meant to be carbon neutral by 2040.
a history of being used by athletes and professionals, and has a
strong clinical foundation, placing the brand in a trusted position to
serve our consumers. In addition, the Board’s review of Biofreeze
identified that the brand has strong existing partnerships in place
and a number one position on Amazon. These factors, and the
value the brand will provide for Reckitt’s stakeholders, contributed
to the Board’s decision to approve the acquisition.
Reckitt Annual Report and Accounts 2021
71
Financial StatementsGovernanceStrategic Report Non-Financial Information Statement
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
Environmental matters
• Environmental policy
• Sourcing for sustainable growth
policy
• Plastics Pledge
Additional information and risk management
Group Environmental Management System1
Our 2030 Sustainability Ambitions
Our Sustainability Performance
Environment
Task Force on Climate-related Financial Disclosures (TCFD)2
Employees
• Code of Conduct
• Our Values
• Occupational Health & Safety
• Speak Up policy
• Sourcing for sustainable growth
policy
Our 2030 Sustainability Ambitions
Our Sustainability Performance
People
CRSEC Committee Report
Gender Pay Gap Report
Group Occupational Health & Safety Management System1
Human rights
• Policy on Human Rights and
Responsible Business
• Modern Slavery Act Statement
• Commitments to international
standards
Social and community
matters
• Breast-Milk Substitute (BMS)
Marketing Policy
• Product Safety Policy
• Responsible Marketing Policy
Our 2030 Sustainability Ambitions
Our Sustainability Performance
Building partnerships with stakeholders
Environment
Our commitment to auditing and transparency on BMS
Our 2030 Sustainability Ambitions
Our Sustainability Performance
Customers
Communities
Social Impact Investment Report
Anti-bribery and
anti-corruption
• Code of Conduct
• Speak Up policy
People
CRSEC Committee Report
Policy embedding, due
diligence and outcomes
Principal risks and impact
of business activity
Description of business
model
Non-financial key
performance indicators
Risk Management and Principal Risks
CRSEC Committee Report
Principal Risks
Our Business Model
Pages 16-17
Pages 18-19
Pages 63-65
Pages 66-67
Pages 16-17
Pages 18-19
Pages 46-49
Pages 141-147
Pages 16-17
Pages 18-19
Pages 52-65
Pages 63-65
Pages 16-17
Pages 18-19
Pages 52-53
Pages 61-62
Pages 46-49
Pages 141-147
Pages 88-103
Pages 141-147
Pages 92-100
Pages 14-15
Pages 18-19
1.
Information not in the public domain
2. Detailed TCFD disclosure can be found in our Climate Change Insight
Most of our reporting on these topics and KPIs are contained in our Strategic Report under the sections entitled Our 2030 Sustainability Ambitions, Our Sustainability
Performance and Building partnerships with stakeholders and Risk Management (or are incorporated into the Strategic Report by reference for these purposes from the pages
noted). Reckitt 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.reckitt.com/sustainability/policies-and-reports/.
GENDER DIVERSITY1
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
7 (2020: 7) male
5 (2020: 5) female
All managers
Other employees2
7,913 (2020: 8,596) male
20,491 (2020: 21,611) male
7,715 (2020: 8,286) female
16,172 (2020: 17,300) female
1. Diversity data is taken as of 31 December 2021 for active Reckitt employees (excluding contractors)
2. 31 persons with undisclosed gender
72
GREENHOUSE GAS (GHG) EMISSIONS AND ENERGY CONSUMPTION
Metric
Total Scope 1 GHG emissions
Total Scope 2 GHG emissions
Total Scope 1 and Scope 2 GHG emissions
Emissions intensity1
Unit
tCO2e
tCO2e
tCO2e
tCO2e per unit of production
Energy consumption resulting in above GHG emissions
Proportion of GHG emissions arising from UK operations
Proportion of energy consumption arising from UK operations
kWh
%
%
2021
120,346
13,289
133,635
0.0390
20203
131,496
117,297
248,793
0.07014
1,287,371,165
1,373,207,532
14
11
10
12
We reported the above emissions 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 2021 were 254,801 tonnes of CO2e (2020: 266,0723)
and our total Scope 1 and 2 tonnes of CO2e were 375,147 (2020: 397,5683).
Our GHG and energy data includes emissions and energy consumption from operations covered by the Group Financial Statements for which
we have operational control. Where we acquire new businesses, we include their emissions and energy consumption from the first full
calendar year of our ownership onwards.2 CO2e, or carbon dioxide equivalent, is the effective amount of CO2 generated by all gas emissions
which add to the greenhouse effect and global warming.
1. The scope of our GHG emissions per unit of production KPI is for manufacturing and warehousing. Including R&D and offices the GHG emissions intensity per unit of
production in 2021 and 2020 would be 0.042 tCO2e and 0.072 tCO2e respectively
2. For further information on the methodologies used to calculate our emissions and energy metrics please see our Reporting Criteria Basis of Preparation
3. 2020 figures updated due to improved methodology for calculating GHG associated with commercial offices, plus data reporting system updates
4. Emissions Intensity per unit of production is restated for 2020 to reflect the change from KCU (1000 consumer units) to tonnes for unit of production. This changes provides
a more unified measure across our three business units
Our policies
Anti-bribery and corruption
Our policy is that all Reckitt 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
Reckitt’s Code of Conduct governs standards of conduct in relation to our employees, as well as our stakeholders. In addition, Reckitt 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.
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.
Product safety policy
The purpose of this policy is to assure our stakeholders of the safety of our products by describing our approach to Safety Assurance for
products of Reckitt. We have a responsibility to develop products that are as safe and nourishing as they can be; to monitor their in-use safety
and listen to feedback from users, and if things change, to react quickly and effectively to mitigate harm.
Responsible Marketing Policy
This sets out Reckitt’s approach to responsible marketing. It outlines clear requirements to anyone involved in preparing Reckitt marketing
communications and activities. This applies to everyone at Reckitt, particularly the Marketing function, as well as with external partners.
To ensure adoption, Reckitt is investing a robust training module on the policy, so that everybody understands what is required of them.
Compliance will be systematically measured, and we will monitor ongoing feedback through our consumer care lines or Speak Up Line.
Sourcing for sustainable growth policy
The policy sets out Reckitt’s human rights, health & safety, environment and sourcing requirements we expect our business partners to
meet. It encompasses principles of 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. The policy details the Framework which sets out
standards to drive us to conduct business with honesty and integrity, respect human rights, provide a safe and healthy working environment,
use safe and sustainable ingredients, source raw materials responsibly and protect the environment.
Reckitt Annual Report and Accounts 2021
73
Financial StatementsGovernanceStrategic Report
Group Financial Review
CONTINUED
STRONG FINANCIAL
PERFORMANCE
Jeff Carr
Chief Financial Officer
74
We delivered another strong performance
in 2021.
Group net revenue of £13,234 million grew by 3.5% on a LFL
basis in 2021, reflecting volume growth of 0.6% and price/mix
improvements of 2.9%. Performance was driven by strong
growth in Hygiene, particularly in North America. Lysol saw good
growth off the back of an outstanding 2020, as core consumption
remained strong, and we gained further penetration in the laundry
sanitiser segment. Total net revenue at actual exchange rates
was down 5.4%, reflecting net M&A impact of -3.8% and foreign
exchange headwinds of 5.1%.
The two-year stacked LFL net revenue growth for 2021 vs 2019
(the summation of the year-on-year growth rates for 2021 and
2020) for the group was 17.4%. This was driven by two-year
stacked LFL net revenue growth of 27% in Hygiene, and 12%
and 6% in Health and Nutrition, respectively.
Our in-market competitiveness remains strong. 62% of our Core
Category Market Units (CMUs), excluding IFCN China, held or gained
share. In Hygiene it was 57% and in Health and Nutrition it was 61%
and 72%, respectively (weighted by net revenue).
During the year, COVID continued to impact net revenue. Around
70% of our portfolio, representing brands less sensitive to COVID
dynamics, grew mid-single-digits. The remaining 30% of our
portfolio which includes Lysol, Dettol and our cold and flu brands
(Mucinex, Strepsils and Lemsip) have been more volatile reflecting
fluctuations in COVID related demand.
E-commerce net revenue¹, excluding IFCN China, grew by
17% in 2021 and now accounts for 12% of group net revenue.
The two-year stacked growth is over 85%.
Our Global Business Solutions (GBS) has further developed its
channel and geographic footprint through partnerships with
operators such as Diversey. We have taken market share within the
sectors in which we participate, although overall performance in
2021 was impacted by a slower return to travel and workplaces
than originally anticipated.1
Adjusted gross margin (excluding IFCN China) was 58.5%, (2020:
60.5%) a reduction of 200bps. The reduction in gross margin was
principally driven by c.11% cost inflation, partially mitigated by
productivity initiatives (+250bps) and pricing and mix (+80bps).
Adjusted operating profit (excluding IFCN China) was £2,944 million
(2020: £3,216 million) at an adjusted operating margin of 22.9%
(2020: 24.5%) in line with our guidance of 22.7-23.2%. The
reduction of -160bps was principally driven by gross margin
(-200bps) partially offset by productivity efficiencies in BEI
spend (60bps).
Adjusted operating margin (including IFCN China) was 21.7%
(2020: 23.6%). As previously communicated, IFCN China
experienced challenging trading throughout the nine months
of ownership in 2021, as well as c.£40 million of exit costs incurred
just prior to the transfer of the business which diluted adjusted
operating margin in 2021.
The IFRS operating loss was £804 million (2020: £2,160 million
profit). The IFRS operating loss in 2021 included a pre-tax loss of
£3,353 million in relation to the strategic review and disposal of
IFCN China and pre-tax losses of £234 million from the sale of
Scholl and EnfaBebé brand in Argentina.
Total adjusted diluted EPS was 288.5p in 2021 (IFRS: -4.5p loss per
share), 11.8% lower than 2020 due to the lower adjusted operating
profit and the adverse impact of foreign exchange.
The 2021 proposed dividend of 174.6p remains in line with 2020
consistent with our approach of sustaining 2019 levels to rebuild
dividend cover to two times. Thereafter, we will grow the dividend
progressively in line with adjusted net income.
Free cash flow was £1,258 million in 2021 (2020: £3,052 million).
As expected, this was lower than the prior year due to the partial
unwind of significant working capital favourability experienced
in 2020. Capital investment to support our growth and margin
ambitions was £441 million, 3.3% of Group net revenue.
Net debt ended the year 2.6x adjusted EBITDA (2020: 2.4x
adjusted EBITDA).
1. Adjusted and other non-GAAP measures, definitions and terms are defined on
page 81
3.5%
LFL net revenue growth1
22.9%
adjusted operating margin
excl. IFCN China1
2020: 24.5%
-5.4%
IFRS net revenue growth
2021: £13,234m (2020: £13,993m)
-6.1%
IFRS operating margin
2020: 15.4%
Reckitt Annual Report and Accounts 2021
75
Financial StatementsGovernanceStrategic Report £m
Volume
Price/Mix
5,911
5.1%
2.4%
LFL
7.5%
£m
1,401
23.7%
FX
GAAP
-5.9%
1.6%
Constant
FX (CER)
-1.3%
GAAP
-6.9%
-220bps
Vanish net revenue grew double-digits driven by reduced
confinements of consumers versus the prior year and the success
of our purpose led marketing campaign. Harpic grew mid-single-
digits as a result of continued penetration activities in key markets.
Our Pest business delivered low-single-digits growth.
Adjusted operating profit for Hygiene at £1,401 million was down
1.3% on a constant foreign exchange basis and 6.9% on an actual
basis. Our industry leading adjusted operating margin was 23.7%.
Higher raw material and transportation costs were partially
mitigated by record productivity savings, pricing and volume
leverage leading to a -220bps decline in adjusted operating
margin versus the prior year.
Group Financial Review (Continued)
HYGIENE
Net Revenue 2021
FY 2021
Operating Profit
Adjusted Operating Profit
Adjusted Operating Profit Margin %
2021 PERFORMANCE
Hygiene net revenue grew 7.5% on a LFL basis to £5,911 million for
the full-year. Volume grew by 5.1% and price/mix improved by 2.4%.
Price increases taken in the latter half of 2021 were offset by a
return to more normalised promotion levels, especially in North
America. On a two-year stacked LFL basis, net revenue is up 27%.
Growth was broad-based across our core categories and regions,
with over 57% of Core Hygiene CMUs (weighted by net revenue)
growing or holding share. E-commerce net revenue grew by 28%
and we continue to have better market share positions online,
driven by our improved capabilities in go-to-market and digital
demand creation.
Lysol continued the positive momentum, with net revenues up
high-single-digits on a LFL basis in 2021 following well over 70%
growth in 2020. Growth was driven by increased consumption
due to the pandemic as well as strong growth in new spaces
(e.g. Laundry Sanitisers) and new places. Lysol has continued
to gain market share and significantly contributed to category
growth, especially in Laundry Sanitisers, where we see significant
further penetration growth potential. Overall, Lysol revenue was
c.90% higher than 2019.
Finish continued its growth momentum with net revenue growing
by mid-single-digits in 2021. Revenue growth was particularly
strong in Europe and Developing Markets driven by our focus on
category building, and penetration growth with superior solutions
in our premium Finish Quantum product. E-commerce significantly
contributed to the brand’s success.
Air Wick net revenue grew double-digits. This was led by the
US driven by strong market growth and market share gains.
Air Wick’s scented oils natural range together with the launch
of purpose inspired marketing campaigns in partnership with
the World Wildlife Fund significantly accelerated Air Wick’s
growth momentum.
76
HEALTH
Net Revenue 2021
FY 2021
£m
Volume
Price/Mix
LFL
Net M&A
FX
4,646
-2.1%
2.0%
-0.1%
-0.4%
-4.5%
GAAP
-5.0%
GAAP
-11.0%
-180bps
Constant
FX (CER)
-5.5%
£m
1,187
25.5%
from a brand focus to a category centric portfolio of global
lifestyle brands.
OTC net revenue grew by low-single-digits in 2021 but declined by
low-single-digits on a two-year stack basis, driven predominantly
by very low incidences of cold & flu in 2020 and the spring of
2021. Within OTC our less seasonally impacted brand of Gaviscon
delivered strong growth in both 2020 and 2021 driven by market
share gains, and increased distribution into new places such as
India and parts of Latin America. Our cold and flu relief brands,
including Mucinex, Strepsils and Lemsip, were adversely impacted
by extremely low incidences of cold and flu, and resultant high
levels of retailer stock in the first half of the year, offset by strong
start to the season in the second half. Importantly we have made
good progress in our growth drivers during 2021; we entered into
an adjacent category (new space) with the successful launch of
Mucinex InstaSoothe, sore throat relief, in the second half of the
year. We also launched into new places with the rollout of Nuromol
– a unique and exclusive formulation of Ibuprofen and Paracetamol
– into Brazil – a top 5 market globally for analgesics. And we made
a strategically important entry into the world’s large analgesic
market with the acquisition of Biofreeze in the US. Biofreeze a fast
growing, efficacious, topical analgesic brand, will benefit from
Reckitt’s strong distribution platform in the US, and its global
category expertise and innovation capability. Since the acquisition
Biofreeze has delivered double-digit LFL growth.
Our personal care portfolio, following the sale of Scholl in H1 2021,
has grown mid-single-digits led by our Veet brand. Growth was
driven by our focus on new channels with high-single-digit growth
in our e-commerce platforms, the expansion of Veet for Men, and
our entry into new spaces such as Veet Minima/Pure.
Adjusted operating profit for Health at £1,187 million was down
5.5% on a constant foreign exchange basis. Adjusted operating
margin was 25.5%, a reduction of 180bps year-on-year. The decline
is due to the impact of a weak cold and flu season, further
investment behind capabilities and a deteriorating input cost
environment. This was partially mitigated by our productivity
programme and some pricing taken in the second half of 2021.
Operating Profit
Adjusted Operating Profit
Adjusted Operating Profit Margin %
2021 PERFORMANCE
Health net revenue of £4,646 million was broadly flat in 2021 versus
2020 on a LFL basis. Volume declined 2.1%, reflecting primarily
the reduction in Dettol volumes. Price/mix improved by 2.0%.
On a two-year stacked LFL basis, net revenue is up 12%,
reflecting the higher consumption rates for some of our brands,
the broadening of our brands to new places and spaces, and
the actions we have taken on portfolio management to create
a faster growth business.
The disposal of Scholl and acquisition of Biofreeze, combined,
contributed 40bps decline to reported Health net revenue growth
for the full-year.
In 2021 Health delivered strong market share gains, with 61%
of Core Health CMUs (weighted by net revenue) growing or
holding share.
Dettol net revenue declined low double-digits in the year
following exceptional growth in 2020. The brand has continued
to stabilise with net revenue up over 40% compared to 2019, for
both the year as a whole and in the fourth quarter. We delivered
a number of successful product launches during the year, including
‘Dettol Tru Clean’ – our first plant-based disinfectant, quickly
establishing itself as one of the larger eco brands in the UK.
We have a strong pipeline of innovations launching in 2022
and are targeting Dettol to continue its strong, sustainable
growth trajectory.
Intimate Wellness delivered strong mid-teens growth in both 2021
and on a two-year stack, led by our flagship brands of Durex and
KY. Growth is underpinned by a renewed focus on execution
fundamentals, innovation, investment behind omnichannel
growth across e-commerce and new ‘impulse access models’.
In particular, we have seen strong growth in China from our recent
and successful polyurethane Durex condom launch. KY has driven
renewed momentum from its digital-first, culturally connected
advertising and media strategy, which has sparked new points
of trial and captured incremental households in the US during the
year. Growth in a number of our developing markets has also been
strong, with increased distribution and improved display execution,
to win in impulse points. As a result, Durex has now become
the number 2 condom brand in India. We see significant growth
opportunities within our Intimate Wellness business as we pivot
Reckitt Annual Report and Accounts 2021
77
Financial StatementsGovernanceStrategic Report £m
Volume
Price/Mix
LFL
Net M&A
2,677
2,294
-4.9%
-4.9%
5.5%
5.5%
0.6%
0.6%
-14.4%
0.2%
FX
-4.8%
-6.2%
GAAP
-18.6%
-5.4%
Constant
FX (CER)
-31.2%
GAAP
-37.4%
-330bps
2.4%
-5.6%
Unchanged
£m
289
10.8%
356
15.5%
the significant decline in IFCN China net revenue. Excluding IFCN
China, adjusted operating profit for Nutrition was £356 million
(15.5% margin).
IFCN China
The disposal of IFCN China completed on 9 September 2021.
The business contributed net revenue of £383 million and an
adjusted operating loss of £67 million in 2021 to the date of sale,
with a challenging and competitive trading environment
throughout the year, and c.£40 million of exit costs incurred
immediately prior to the transfer of the business.
Group Financial Review (Continued)
NUTRITION
Net Revenue 2021
FY 2021
FY 2021 (ex IFCN China)
Operating Profit
Adjusted Operating Profit
Adjusted Operating Profit Margin %
Adjusted Operating Profit (ex IFCN China)
Adjusted Operating Profit Margin % (ex IFCN China)
2021 PERFORMANCE
Nutrition net revenue grew by 0.6% on a LFL basis in the full-year at
£2,677 million, and grew 6% on a two-year stack. Within this, our
IFCN business grew consistently over the past two years at
low-single digit growth, with our VMS business delivering very
strong growth in 2020, offset by a weaker 2021 as it lapped the
very strong comparatives. For 2021 volume declined 4.9% and we
delivered price/mix improvements of 5.5% as pricing was taken in
a number of markets. Actual net revenue declined 18.6% primarily
as a result of the performance and disposal of IFCN China which
completed in September.
Market share performance was strong, with 72% of our Core
Nutrition CMUs (weighted by net revenue) holding or gaining
market share for the year, excluding IFCN China.
IFCN net revenue grew 3% on a LFL basis. The US business, which
represents around half of IFCN net revenue, grew mid-single-
digits. Growth in our speciality brands was strong, we gained
share in the important non-WIC portion of the market, and further
expanded our adult nutrition offering with the launch of Provital
in ASEAN and Sustagen in the developing markets. Latin America
grew low single-digits, whilst ASEAN was down slightly, with
better momentum in the second half of the year in part driven
by improvements in competitiveness in key ASEAN markets.
Net revenue in our Vitamins, Minerals and Supplements business
declined high-single-digits. This was primarily the result of a
reduction in demand for Airborne following exceptional growth
in 2020, plus increased competitive challenges. Despite these
challenges, net revenue in 2021 significantly exceeded 2019 levels.
Move Free grew strongly in both the US and China, and Neuriva, has
become the leader in the US for household penetration in the brain
category, with net revenue doubling in 2021.
Adjusted operating profit for Nutrition at £289 million was 31.2%
lower on a constant foreign exchange basis and 37.4% lower on an
actual basis. Adjusted operating margin was 10.8%, down 330bps
year-on-year reflecting principally the negative leverage related to
78
ADDITIONAL FINANCIAL
COMMENTARY
The following section should be read in conjunction with the
FY 2021 Review from page 74 and the Adjusted Performance
Measures section from page 81.
GROUP OPERATING PROFIT
Adjusted operating profit was £2,877 million (2020: £3,301 million)
at an adjusted operating margin of 21.7%, 190bps lower than the
prior year (2020: 23.6%). Adjusted operating margin excluding
IFCN China was 22.9% (2020: 24.5%), 160bps lower than prior year.
Adjusted operating profit in 2021 included the favourable effect of
adjustments to trade spend and operational expenditure accruals,
certain of which were subject to significant estimation uncertainty
as a result of the COVID-19 pandemic when originally recorded
in 2020.
IFRS operating loss was £804 million (2020: £2,160 million profit)
at an IFRS operating margin of minus 6.1% (2020: 15.4%). The
IFRS operating loss in 2021 was principally driven by the loss of
£3,353 million in relation to the IFCN China strategic review. The
IFRS operating profit in 2020 included impairment charges of
£985 million in relation to IFCN goodwill.
NET FINANCE EXPENSE
Adjusted net finance expense was £220 million (2020: £260 million).
The decrease in 2021 is due to lower average net debt, a credit on
revaluation of a put option liability and a favourable comparison
with prior year adjusted net finance expense which included the
interest element of a sales tax provision.
IFRS net finance income of £547 million (2020: £286 million net
finance expense) was principally driven by a £766 million net
foreign exchange gain resulting from the liquidation of a number of
subsidiaries to simplify the Group’s legal entity structure.
TAX
The adjusted effective tax rate was 22.0% (2020: 22.7%). The rate
in 2021 benefited from favourable updates to estimates in relation
to certain historical matters.
The IFRS tax rate was -80.0% (2020: 38.4%). The IFRS tax rate
in 2021 was impacted by the effect of non-taxable net foreign
exchange gains on the liquidation of subsidiaries, the deferred tax
effect of disposals in the period and the impact of the UK tax rate
change on deferred tax on intangible assets.
DISCONTINUED OPERATIONS
Income from discontinued operations of £31 million (2020: £50
million) relates to the Group’s RB Pharmaceuticals (now Indivior)
business demerged in 2014. The amount in 2021 principally relates
to income from an agreement with Indivior plc to settle indemnity
claims relating to the Group’s settlement with the DoJ in 2019,
and related matters.
EARNINGS PER SHARE (EPS)
Total adjusted diluted EPS was 288.5p (2020: 327.0p). The decrease
in 2021 was principally due to lower adjusted operating profit and
the adverse impact of foreign exchange.
IFRS total diluted EPS was a loss per share of 4.5p (2020: earnings
per share of 166.3p), principally due to the net loss in relation to the
strategic review of IFCN China.
BALANCE SHEET
At 31 December 2021, the Group had total equity of £7,453 million
(31 December 2020: £9,159 million).
Current assets of £4,862 million (31 December 2020: £5,314 million)
decreased by £452 million, principally as the result of lower cash
and cash equivalents and lower inventories.
Current liabilities of £8,088 million (31 December 2020: £6,938
million) increased by £1,150 million. The increase is principally due
to the re-classification from non-current to current liabilities of
$3.2 billion (£2,401 million) of bonds which mature in June 2022,
offset by lower trade and other payables and the repayment of
commercial paper in 2021.
Non-current assets of £21,941 million (31 December 2020: £25,978
million) are primarily comprised of goodwill and other intangible
assets of £18,868 million (31 December 2020: £22,979 million) and
property, plant and equipment. The decrease of £4,037 million is
predominantly due to the disposal of goodwill and other intangible
assets relating to IFCN China and Scholl, partially offset by the
recognition of goodwill and other intangible assets on the
acquisition of Biofreeze.
Non-current liabilities of £11,405 million (31 December 2020: £15,195
million) decreased by £3,790 million. This decrease is principally
due to the re-classification from non-current to current liabilities of
$3.2 billion (£2,401 million) of bonds which mature in June 2022, the
early repayment of term loans and the reduction in deferred tax
liabilities as a result of the disposal of IFCN China.
NET WORKING CAPITAL
Negative net working capital was reduced by £347 million to
negative £1,882 million (2020: negative £2,229 million), or a
reduction of £194 million excluding IFCN China which was disposed
in 2021. Negative NWC as a percentage of net revenue was 14%
(2020: 16%).
The reduction in negative NWC excluding IFCN China was the
result of higher inventory and receivables, and as expected lower
payables following the partial reversal of the favourable impact
on NWC in 2020.
Reckitt Annual Report and Accounts 2021
79
Financial StatementsGovernanceStrategic Report Group Financial Review (Continued)
CASH FLOW
Free cash flow
£m
Adjusted Operating Profit
Depreciation and share-based payments
Capital expenditure
Movement in working capital and
provisions
Exceptional cash flow
Interest paid
Tax paid
Free cash flow
Free cash flow conversion
31 Dec
2021
2,877
401
(441)
(356)
(86)
(222)
(915)
1,258
61%
31 Dec
2020
3,301
407
(476)
895
(46)
(267)
(762)
3,052
131%
Free cash flow (FCF) is the amount of cash generated from
continuing operating activities after net capital expenditure on
property, plant and equipment and intangible software assets.
Free cash flow reflects cash flows that could be used for payment
of dividends, repayment of debt or to fund acquisitions or other
strategic objectives.
Free cash flow as a percentage of continuing adjusted net income
was 61% (2020: 131%). The lower free cash conversion in 2021
was expected, principally resulting from the partial unwind of
significant working capital favourability experienced in the prior
year. Free cash flow in 2021 includes £203 million of transaction
costs and cash tax relating to the disposal of IFCN China. Excluding
cash outflows relating to the disposal of IFCN China, free cash flow
conversion was 71% in 2021.
Net cash from operating activities was £1,697 million (2020: £3,518
million), down £1,821 million.
Net debt
£m
Opening net debt
Free cash flow
Shares reissued
Acquisitions, disposals and purchase of
investments
Dividends paid
New lease liabilities in the year
Exchange and other movements
Cash flow attributable to discontinued
operations
31 Dec
2021
31 Dec
2020
(8,954)
(10,749)
1,258
80
3,052
131
694
(36)
(1,263)
(1,257)
(109)
(82)
(2)
(86)
1
(10)
Closing net debt
(8,378)
(8,954)
Net debt at 31 December 2021 was £8,378 million (31 December
2020: £8,954 million), a decrease of £576 million, as free cash flow
and net proceeds from M&A more than offset the dividend
payments in 2021.
The Group regularly reviews its banking arrangements and
currently has adequate facilities available to it. The Group has
committed facilities totalling £4,500 million (31 December 2020:
£5,500 million), which expire after more than two years, which are
undrawn and available to draw. The Group remains compliant
with its banking covenants. The committed borrowing facilities,
together with cash and cash equivalents, are considered sufficient
to meet the Group’s projected cash requirements.
DIVIDENDS
The Board of Directors recommends a final 2021 dividend of 101.6
pence (2020: 101.6 pence), consistent with its policy and guidance
from February 2020. The ex-dividend date will be 28 April 2022
and the dividend will be paid on 9 June 2022 to shareholders on
the register at the record date of 29 April 2022. The last date for
election for the share alternative to the dividend is 17 May 2022. The
final 2021 dividend will be accrued once approved by shareholders.
RETURN ON CAPITAL EMPLOYED (ROCE)
ROCE in 2021 was 10.1%, in line with the prior year (2020: 10.1%),
as lower adjusted operating profit was offset by lower average
capital employed. The lower capital employed principally resulted
from the disposal of IFCN China, which has been removed from
capital employed from the date of disposal in September 2021.
CAPITAL RETURNS POLICY
Reckitt has consistently communicated its intention to use its strong
cash flow for the benefit of shareholders. Our priority remains to
reinvest our financial resources back into the business, including
through value-adding acquisitions, in order to deliver sustainable
growth in net revenue and improving earnings per share over time.
In managing the balance sheet, we intend to maintain key financial
ratios in line with those expected of an A-grade credit-rated
business. This will broadly define acceptable levels of leverage
over time.
Repatriating cash to shareholders through a growing dividend remains
a long-term goal of the business. As a result of the investments being
made during 2021, which will benefit long-term sustainable growth,
our pay-out for 2021 is in excess of our policy of paying an ordinary
dividend equivalent to c.50% of total adjusted net income.
As set out in February 2020, we will maintain the dividend pay-out
per share at 2019 levels until we rebuild dividend cover to target
levels, at which time we will be able to resume growth in
dividends in line with the growth in adjusted net income.
We will return surplus cash to shareholders as appropriate.
80
ALTERNATIVE PERFORMANCE
MEASURES
The financial information included in this preliminary announcement
is prepared in accordance with International Financial Reporting
Standards (IFRS) as well as information presented on an adjusted
(non-IFRS) basis.
• The 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 expense on an adjusted basis.
• Other individually material items of expense or income.
Some of these items are resolved over a period of time such
that the impact may affect more than one reporting period.
In the prior year, for presentational purposes adjusting items
were split into exceptional items, other adjusting items and the
reclassification of finance expenses on tax balances. The change
to presentation of these items in the current year is to provide a
clearer view of the nature of the Group’s adjusting items. There has
been no change in individual items classified as adjusting items.
ADJUSTED MEASURES
• Adjusted Operating Profit and Adjusted Operating Profit
margin: Adjusted operating profit reflects the IFRS operating
(loss)/profit excluding items in line with the Group’s adjusted
items policy. See page 84 for details on the adjusting items
and a reconciliation between IFRS operating (loss)/profit and
adjusted operating profit. The adjusted operating profit margin
is the adjusted operating profit expressed as a percentage of
net revenue.
• Adjusted tax rate: The adjusted tax rate is defined as the
Adjusted continuing income tax expense as a percentage of
Adjusted profit before tax.
• Adjusted diluted EPS: Adjusted diluted EPS is the IFRS
diluted EPS excluding items in line with the Group’s adjusting
policy. See page 84 for details on the adjusting items and a
reconciliation between IFRS net (loss)/income and adjusted net
income. The weighted average number of shares for the period
is the same for both IFRS EPS and adjusted EPS.
• Adjusted EBITDA (earnings before interest depreciation and
amortisation): Adjusted operating profit less depreciation and
amortisation (excluding adjusting items).
Financial information presented on an adjusted basis excludes
certain cash and non-cash items. These items have a pattern
of recognition that is largely uncorrelated with the trading
performance of the business. Management reviews the business
on this basis for the purpose of making operating decisions and
showing these adjusted measures in addition to the IFRS measures
provides useful additional information on trading performance to
the users of the financial statements. These adjusted measures
should not be considered in isolation from, substitutes for,
or superior to the financial measures prepared in accordance
with IFRS.
The following items (adjusting items) are excluded from IFRS
earnings in calculating adjusted earnings.
•
Impact of business combinations where IFRS accounting
results in the recognition of certain costs that are not
comparable with those for internally generated assets,
(although the net revenues and other costs of these business
combinations are not adjusted for):
• Amortisation of (a) acquired brands, trademarks and similar
assets and (b) certain other intangible assets recorded
as the result of a business combination; Inventory fair
value adjustments;
• Professional and advisor costs recorded as the result of
a business combination; and
• Changes to deferred tax liabilities relating to (a) acquired
brands, trademarks and similar assets and (b) certain other
intangible assets recorded as the result of a business
combination as the amortisation or profit on disposal
of these brands would be treated as an adjusting item.
• Profits or losses relating to the sale of brands and related
intangible assets as the continued active management of our
portfolio results in the recognition of profits or losses relating
to disposals of brands and related intangible assets which
are largely uncorrelated with the trading performance of
the business.
• Re-cycled foreign exchange translation reserves upon the
sale, liquidation, repayment of share capital or abandonment of
a subsidiary previously controlled by the Group, as the gain or
loss relates to mainly exchange movements in previous periods
rather than the current period.
Reckitt Annual Report and Accounts 2021
81
Financial StatementsGovernanceStrategic Report Group Financial Review (Continued)
OTHER NON-GAAP MEASURES
• Like-for-like (LFL): Net revenue growth or decline at
OTHER DEFINITIONS AND TERMS
• Stacked Net Revenue Growth: The summation of the
constant exchange rates (see below) excluding the impact of
acquisitions, disposals and discontinued operations. Completed
disposals are excluded from LFL revenue growth for the
entirety of the current and prior years. Acquisitions are included
in LFL revenue growth twelve months after the completion of
the relevant acquisition. LFL growth also excludes countries
with annual inflation greater than 100% (Venezuela).
• Constant exchange rate (CER): Net revenue and profit growth
or decline adjusting the actual consolidated results such that
the foreign currency conversion uses the same exchange rates
as were applied in the prior period.
• Brand Equity Investment (BEI): BEI is the marketing
support designed to capture the voice, mind and heart
of our consumers.
• Net working capital (NWC): NWC is the total of inventory,
trade and other receivables and trade and other payables.
NWC is calculated as a % of last twelve months net revenue
to compare changes in NWC to the growth of the business.
• Net Debt: The Group’s principal measure of net borrowings
being a total of cash and cash equivalents, short-term and
long-term borrowings, lease liabilities and derivative financial
instruments on debt.
• Free Cash Flow and Free Cash Flow Conversion: The Group’s
principal measure of cash flow defined as net cash generated
from continuing operating activities less net capital
expenditure. A reconciliation of cash generated from
operations to Free Cash Flow is shown on page 83. The Group
tracks Free Cash Flow as a % of adjusted net income to
understand the conversion of adjusted profit into cash.
like-for-like net revenue growth for the relevant period in 2021
and 2020 (excluding IFCN China), to provide visibility of growth
versus periods prior to the start of the COVID-19 pandemic.
• Category Market Unit (CMU): Reckitt analyses its market share
by CMUs, which represent country and either brand or category,
e.g. US Lysol. This allows us to analyse the components of
market share growth taking into account both geography and
brand/category. Management has identified those Core CMUs
that are the most strategically important. The list of Core CMUs
is kept under continual review and will change over time based
on strategic decisions. Currently, Core CMUs cover c.70% of
Group net revenue and between c.65% to c.80% of each GBU’s
net revenue. As a measure of competitiveness, management
tracks the percentage of Core CMUs holding or gaining market
share, weighted by net revenue.
• E-commerce: E-commerce channel net revenue is direct
sales from Reckitt to online platforms or directly to consumers.
Estimates of total e-commerce sales as a percentage of
Group net revenues are calculated by adding e-commerce
channel net revenue to an estimate of e-commerce sales
achieved by our brands through omnichannel distributors
and retailer websites.
• Discontinued operations: Includes credits or charges related
to the previously demerged RB Pharmaceuticals business
that became Indivior plc. Net income 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. Total assets has been adjusted to
add back impairments of Goodwill except where the impaired
asset has been disposed or partially disposed. Current liabilities
exclude legal provisions recorded as a result of exceptional
items and current tax.
• Net revenue attributable to ‘more sustainable’ products:
A product is defined as ‘more sustainable’ when it scores
‘better’ on one of the five parameters (carbon, water, plastics,
packaging and ingredients) at time of launch using our
Sustainable Innovation Calculator (a streamlined Lifecycle
Assessment tool that models the environmental impacts of
products). The net revenue from ‘more sustainable’ products is
expressed as a percentage of total net revenue. The calculation
is done on the basis of a 12 month period ending September
(to allow assembling the related data). This percentage does
not apply to infant formula.
82
RECONCILIATION OF IFRS TO LIKE-FOR-LIKE NET REVENUE BY GBU
RECONCILIATION OF OPERATING CASH FLOW TO FREE CASH FLOW
Net Revenue
31 December 2021
Hygiene
£m
Health
£m
Nutrition
£m
Group
£m
2020 IFRS
Disposals
5,816
4,890
3,287
13,993
–
(176)
(885)
(1,061)
2020 Like-for-like
5,816
4,714
2,402
12,932
2021 IFRS
M&A
Exchange
5,911
4,646
2,677
13,234
–
340
(142)
207
(403)
(545)
143
690
2021 Like-for-like
6,251
4,711
2,417
13,379
Like-for-like growth
7.5%
(0.1)%
2020 Like-for-like1
19.5%
12.1%
Impact of IFCN China
–
–
0.6%
0.0%
5.4%
3.5%
11.8%
2.1%
2020 Like-for-like excl.
IFCN China1
19.5%
12.1%
5.4%
13.9%
2021 2 year stack
27.0%
12.0%
6.0%
17.4%
1
See page 87 for reconciliation to IFRS
RECONCILIATION OF ADJUSTED EBITDA TO NET DEBT
31 Dec
2021
£m
(804)
3,681
2,877
362
3,239
31 Dec
2021
£m
31 Dec
2020
£m
2,160
1,141
3,301
392
3,693
31 Dec
2020
£m
Adjusted EBITDA/Net debt
Operating (loss)/profit
Less: Adjusting items
Adjusted Operating Profit
Less: Adjusted Depreciation and
Amortisation
Adjusted EBITDA
Net Debt
Cash and cash equivalents including
overdrafts
Financing liabilities
Net Debt
Adjusted EBITDA/Net Debt
DIVIDEND COVER
Interim dividend paid in year
Final dividend proposed
Total dividends
Adjusted Net Income
Dividend cover
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
Free Cash Flow
Free Cash Flow Conversion
ROCE CALCULATION
Adjusted Operating Profit
Less: Taxation on adjusted operating
profit
Adjusted Net Operating Profit after
Tax
IFRS total assets
IFRS total current liabilities
31 Dec
2021
£m
31 Dec
2020
£m
2,836
4,557
(222)
(915)
(373)
(77)
9
1,258
61%
(267)
(762)
(394)
(92)
10
3,052
131%
31 Dec
2021
£m
2,877
31 Dec
2020
£m
3,301
(633)
(750)
2,244
26,946
2,551
31,292
(8,088)
(6,938)
IFRS total assets less current liabilities
18,858
24,354
Less IFRS items not included in capital
employed:
Short-term borrowings
Current tax liabilities
Legal provisions
2,485
93
86
763
72
127
Cash and cash equivalents
(1,261)
(1,646)
1,259
1,644
(9,637)
(10,598)
(8,378)
(8,954)
2.6x
2.4x
Current tax recoverable
Retirement benefit surplus
IFRS balances included in capital
employed
Add impact back unrealised impairments
Less Goodwill due to deferred tax on
intangibles
Impact of average in year vs closing
balance
Average capital employed
Return on Capital Employed
31 Dec
2021
£m
521
726
1,247
2,059
1.7
31 Dec
2020
£m
520
725
1,245
2,334
1.9
(155)
(355)
(125)
(226)
19,751
3,143
23,319
5,116
(4,133)
(5,301)
3,442
22,203
10.1%
2,023
25,157
10.1%
Reckitt Annual Report and Accounts 2021
83
Financial StatementsGovernanceStrategic Report Group Financial Review (Continued)
The table below reconciles the Group’s reported IFRS measures to its adjusted measures for the year ended 31 December 2021.
Net Revenue
Cost of sales
Gross profit
Net operating expenses
Operating (Loss)/profit
Net finance income/(expense)
Share of loss of associate
(Loss)/profit before income tax
Income tax credit/(charge)
Net (loss)/income from continuing
operations
Less: Attributable to non-controlling interest
Net (loss)/income for the year attributable
to owners of the parent
Net income from discontinued operations
Total net (loss)/income for the year
attributable to owners of the parent
Earnings per share (EPS) from continuing
operations
Basic
Diluted
Earnings per share (EPS) from
discontinued operations
Basic
Diluted
Earnings per share (EPS) from total
operations
Basic
Diluted
IFRS
£m
13,234
(5,558)
7,676
(8,480)
(804)
547
(3)
(260)
208
(52)
(11)
(63)
31
(32)
(8.8)
(8.8)
4.3
4.3
(4.5)
(4.5)
Adjusting Items
Reclassified
foreign
exchange
translation on
liquidation of
subsidiaries
£m
Other
individually
material
items of
income and
expense
£m
Finance
expense
reclass
£m
Impact of
business
combinations
£m
Losses on
disposal of
brands
£m
–
14
14
77
91
–
–
91
170
261
–
261
–
261
36.6
36.6
–
–
36.6
36.6
–
–
–
234
234
–
–
234
(117)
117
–
117
–
117
16.4
16.4
–
–
16.4
16.4
–
–
–
–
–
(766)
–
(766)
–
(766)
–
(766)
–
(766)
(107.3)
(107.3)
–
–
(107.3)
(107.3)
–
–
–
–
–
(1)
–
(1)
1
–
–
–
–
–
–
–
–
–
–
–
Adjusted
£m
13,234
(5,544)
7,690
(4,813)
2,877
(220)
(3)
–
–
–
3,356
3,356
–
–
3,356
2,654
(846)
(584)
2,510
2,070
–
(11)
2,510
2,059
(31)
–
2,479
2,059
351.6
351.6
288.5
288.5
(4.3)
(4.3)
–
–
347.3
347.3
288.5
288.5
Earnings per share (EPS) is calculated using 713.8 million shares (basic) and 713.8 million shares (diluted).
84
Impact of business combinations is composed of:
• Amortisation of acquired intangibles of £61 million relates to
the amortisation of certain intangible assets recognised as
a result of historical business combinations. Included within
income tax expense is a £14 million tax credit in respect of
this amortisation.
• Acquisition advisor costs relate to acquisition related costs of
£19 million as a result of acquisitions in 2021, £3 million of which
has been charged to Cost of Sales. Included within income tax
expense is a £4 million tax credit in relation to these costs.
•
Inventory fair value adjustment of £11 million relates to the
amount charged to cost of sales for the fair value step-up
of acquired inventories as these inventories are sold. Included
within income tax expense is a £1 million tax credit in relation to
these charges.
• Changes to deferred tax liabilities of £189 million relate
principally to the revaluation of deferred tax liabilities for
acquired intangible assets due the change in the UK corporate
tax rate, which was substantively enacted during the year.
Losses related to disposals of brands and related intangible
assets: the pre-tax loss of £234 million relates to the disposal of
Scholl (£165 million) and the disposal of EnfaBebé (£69 million).
Included within income tax expense are associated tax credits of
£94 million in relation to these disposals, and a deferred tax credit
of £23 million on classification of the E45 brand as held for sale at
31 December 2021.
Reclassified foreign exchange translation on liquidation of
subsidiaries of £766 million is the net gain following the liquidation
of legal entities as part of simplification of the Group’s legal
entity structure.
Reclassification of finance expenses of £1 million relates to the
net interest charge on tax liabilities that is shown within the
adjusted tax charge.
Other individually material items of income and expense
principally relate to charges in relation to the strategic review
of IFCN China, which resulted in the disposal of the IFCN China
business, the closure of factories in Australia dedicated to IFCN
China and the subsequent re-organisation of the remaining Reckitt
Nutrition business.
Amounts charged to IFRS operating loss in relation to the IFCN
China strategic review include:
• Loss on disposal of IFCN China of £3,284 million;
•
Impairment of the Australian factory assets, £48 million along
with associated termination fee £3 million; and
• Costs of £18 million relating to the subsequent restructuring of
the Reckitt Nutrition business.
Included within income tax expenses is a £846 million net tax
credit in relation to the IFCN strategic review.
Also included within IFRS operating loss is a charge of £3 million
in relation to the Korea HS issue. Income from discontinued
operations of £31 million relates to amounts agreed with Indivior
plc to settle indemnity claims relating to the DoJ settlement
in 2019.
Reckitt Annual Report and Accounts 2021
85
Financial StatementsGovernanceStrategic Report Group Financial Review (Continued)
The table below reconciles the Group’s reported IFRS measures to its adjusted measures for the year ended 31 December 2020.
Net Revenue
Cost of sales
Gross profit
Net operating expenses
Operating profit
Net finance expense
Share of loss of associate
Profit before income tax
Income tax expense
Net income from continuing operations
Less: Attributable to non-controlling interest
Net (loss)/income for the year attributable
to owners of the parent
Net (loss)/income from discontinued
operations
Total net income for the year attributable
to owners of the parent
Earnings per share (EPS) from continuing
operations
Basic
Diluted
Earnings per share (EPS) from
discontinued operations
Basic
Diluted
Earnings per share (EPS) from total
operations
Basic
Diluted
IFRS
£m
13,993
(5,558)
8,435
(6,275)
2,160
(286)
(1)
1,873
(720)
1,153
(16)
1,137
50
1,187
160.0
159.3
7.0
7.0
167.0
166.3
Adjusting Items
Reclassified
foreign
exchange
translation on
liquidation of
subsidiaries
£m
Other
individually
material
items of
income and
expense
£m
Finance
expense
reclass
£m
Impact of
business
combinations
£m
Losses on
disposal of
brands
£m
–
–
–
80
80
–
–
80
59
139
–
139
–
139
19.6
19.5
–
–
19.6
19.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
26
–
26
(26)
–
–
–
–
–
–
–
–
–
–
–
Adjusted
£m
13,993
(5,558)
8,435
(5,134)
3,301
(260)
(1)
–
–
–
1,061
1,061
–
–
1,061
3,040
(3)
(690)
1,058
2,350
–
(16)
1,058
2,334
(50)
–
1,008
2,334
148.7
148.2
328.3
327.0
(7.0)
(7.0)
–
–
141.7
141.2
328.3
327.0
Earnings per share (EPS) is calculated using 710.9 million shares (basic) and 713.7 million shares (diluted).
Acquisition related items are composed of:
• Amortisation of acquired intangibles of £80 million relates to
the amortisation of certain intangible assets recognised as
a result of historical business combinations. Included within
income tax expense is a £19 million tax credit in respect of
this amortisation
• Changes to deferred tax liabilities of £78 million relate to
principally to the change in the UK corporate tax rate which was
substantively enacted during the year (which is netted against
the £19 million tax credit)
Reclassification of finance expenses of £26 million relates to the
net interest charge on tax liabilities that is shown within the
adjusted tax charge.
Other individually material items of income and
expense include:
• £985 million impairment in relation to IFCN goodwill;
• £69 million charge relating to the Korea HS issue; and
• £7 million relating to previously announced restructuring
projects (principally RB 2.0 costs).
Income tax expense is a £3 million tax credit for these items.
86
ADJUSTED MEASURES EXCLUDING IFCN CHINA
The table below reconciles the Group’s reported IFRS measures to its adjusted measures excluding IFCN China for the years ended
31 December 2021 and 31 December 2020.
Year ended 31 December 2021
Net Revenue
Cost of sales
Gross profit
Net operating expenses
Operating (loss)/profit
Operating margin
Operating margin vs PY
Year ended 31 December 2020
Net Revenue
Cost of sales
Gross profit
Net operating expenses
Operating profit
Operating margin
RECONCILIATION OF PRIOR YEAR IFRS TO LIKE-FOR-LIKE NET REVENUE
Net Revenue
31 December 2020
2019 IFRS & like-for-like
IFCN China disposal
2019 Like-for-like (excl. IFCN China)
2020 reported
Exchange
2020 Like-for-like
2020 IFCN China disposal
2020 Like-for-like (excl. IFCN China)
Like-for-like growth
Like-for-like growth (excl. IFCN China)
Adjusting
Items
£m
Adjusted
£m
–
14
14
3,667
3,681
13,234
(5,544)
7,690
(4,813)
2,877
IFRS
£m
13,234
(5,558)
7,676
(8,480)
(804)
–6.1%
(2,150 bps)
Adjusting
Items
£m
Adjusted
£m
–
–
–
1,141
1,141
13,993
(5,558)
8,435
(5,134)
3,301
IFRS
£m
13,993
(5,558)
8,435
(6,275)
2,160
15.4%
Adjusted
excl. IFCN
China
£m
IFCN
China
£m
(383)
214
(169)
236
67
IFCN
China
£m
(861)
375
(486)
401
(85)
12,851
(5,330)
7,521
(4,577)
2,944
22.9%
(160 bps)
Adjusted
excl. IFCN
China
£m
13,132
(5,183)
7,949
(4,733)
3,216
24.5%
Hygiene
£m
Health
£m
Nutrition
£m
Group
£m
5,031
4,462
3,353
12,846
–
5,031
5,816
194
–
(991)
(991)
4,462
4,890
114
2,362
3,287
11,855
13,993
65
373
6,010
5,004
3,352
14,366
–
6,010
19.5%
19.5%
–
(863)
(863)
5,004
12.1%
12.1%
2,489
13,503
0.0%
5.4%
11.8%
13.9%
Reckitt Annual Report and Accounts 2021
87
Financial StatementsGovernanceStrategic Report Risk Management
OUR APPROACH TO INTEGRATED
RISK MANAGEMENT AT RECKITT
Risk management occurs at different levels in Reckitt, with identification and assessment
performed at the functional, Global Business Unit, corporate and Group levels to provide
both a ‘top-down’ and ‘bottom-up’ three-dimensional view of risk. The framework is
implemented as follows:
Functional
risk assessments
Global Business Unit/
corporate risk assessments
Group principal and
emerging risk assessment
Board
oversight
Annual
Report
Consolidation and critical
challenge by Risk Management
Reviewed by Global Business Unit/
corporate function leadership teams
Principal and emerging risks identified
through the Group Risk Assessment are
disclosed in Reckitt’s Annual Report and
Accounts
T
A
H
W
• Identifies and monitors risks
impacting the operation of
each function or functional area
• Controls are mapped to the
• Identifies and monitors risks
with the potential to impact
each Global Business Unit and
the corporate centre
• Identifies the most significant
principal and emerging risks
with potential to impact
the Group
• Oversight across each
principal risk provided
by a nominated
Board Committee
three lines of defence
• 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
• Principal and emerging risks are
disclosed in the Annual Report
• Completed bi-annually, with
updates shared at the Global
Business Unit Risk Committees
N
E
H
W
• Functional risks are reviewed in
detail annually to identify any
changes to the risk profile,
including new risks and
changes in assessment
• Formal sign-off by functional
W
O
H
• Periodic reporting and
risk deep dives occur
with input from the
risk owner
• Completed annually in advance
• Completed bi-annually in
of the Global Business Unit
strategic planning process
advance of the half-year results
announcement and Group
strategic planning process.
Updates are shared with the
Risk, Sustainability &
Compliance Committee (RSCC)
and Board
• Global Business Unit risk
• One-to-one meetings are held
assessments are reviewed and
updated annually through a
series of one-to-one meetings
with Global Business Unit
leadership
with all Global Executive
Committee (GEC) members,
Group functional and assurance
heads, external advisors and
Non-Executive Directors (NEDs)
heads. Updates on top risks and
associated mitigations are
reported to the RSCC on a
quarterly basis
• For corporate functions, the
functional risk assessments are
reviewed and challenged
• Synthesised output formally
reviewed and signed off by
the GEC and thereafter by
the Board
• Risk assessment owned by
functional leadership team
• Functional risk owners assigned
to specific risks, controls and
action plans
O
H
W
• Led by Global Business Unit/
• Group Risk Management
• GEC owner
corporate management teams
• GEC owners are assigned to
each risk, with the principal and
emerging risk set then
circulated to the Board for final
review and sign-off
88
Our approach to the 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 Global Business Unit and corporate strategic planning process as follows:
Identification of risks
Control strategy
Assessment of net risk and
prioritisation
Management
action
What could impact Reckitt
and the achievement of its
objectives?
• Identifies the most significant
principal and emerging risks
with potential to impact
the Group
• One-to-one meetings are held
with all GEC members, Group
functional and assurance heads,
external advisors and NEDs
• Functional, Global 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 Global 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 reviewed to
establish if it is appropriate and
operating as intended
• Considering the controls
we have in place to manage
each risk:
• Where we identify control gaps,
what more do we need to do?
• What is the probability that
the risk will materialise?
• If it did, what would the likely
• Having identified areas of
highest risk that require
attention, action plans are
developed by management to:
• Address any control
gaps identified
impact be?
• Improve the effectiveness
• How comfortable are
we with how the risk
is being managed?
• Is the risk within an
acceptable level of appetite?
• 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
of existing controls, thereby
reducing the probability and
impact to an acceptable level
• GEC owners and their principal
and emerging risks are
circulated to the Board for
final review, sign-off and
ongoing monitoring
• Principal and emerging risks are
disclosed in the Annual Report
Reckitt Annual Report and Accounts 2021
89
Financial StatementsGovernanceStrategic Report Risk Management (Continued)
OUR PRINCIPAL & EMERGING RISKS,
AS AT 31 DECEMBER 2021
Key to principal risks
Category ID
Risk title
Risk statement
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
COVID-191
COVID-19 continues to cause disruption in key markets and creates significant volatility and uncertainty across
the portfolio, impacting our ability to accurately predict consumer demand, and execute growth plans.
Product Safety Robust process, systems, data and culture for the development and assessment of product safety are not in
place or operating effectively, leading to safety risk to consumers.
Supply
Disruption1
Disruption to the continuity of supply as a result of: ongoing disruptions to material supply, freight and labour
availability; ongoing market volatility and unpredictability; remaining capacity gaps; and reliance on single
factories for key products and/or source for key materials without qualified contingencies in place.
Cyber Security As a complex global organisation, there is a risk that Reckitt falls victim to increasingly sophisticated
cyber-attacks aimed at causing disruption to our information assets by destruction, or by circumventing
confidentiality, integrity or availability controls.
Employee
Health & Safety
Work accidents leading to death, injury or illness of Reckitt employees wherever they are working; and other
workers on Reckitt premises or premises under Reckitt supervision, in case of outsourced operations.
Sustainability1
Failure to address existing and emerging environmental and social risks and opportunities (including climate
change), and changing societal expectations of businesses in addressing these, creates underlying risk to
business resilience, growth and share price performance.
Adherence to
Product Quality
Standards1
Innovation1
Disruption1
China1
People1
Non-compliance with applicable quality regulations, guidelines and internal/external standards across the
product lifecycle governing how we produce and supply product.
The current innovation pipeline does not meet the changing needs of our consumers and new go-to-market
channels, or is not sufficient to achieve organic growth ambitions and drive gross margin accretion.
Inability to respond to, adapt and evolve both our products and processes to disruptive market forces
including e-commerce, digital, new formats, applying AI and machine learning, and increasing data
challenges, impacting our ability to effectively service our customers and consumers with the
required agility.
Risk in China of economic uncertainty, changing regulations and changes in current or new partners
impacting growth and business performance.
We do not achieve our strategic objectives due to our reduced ability to attract, develop at accelerated
pace and retain talent in a highly competitive market, further enhanced by a changing workplace
environment. We lose momentum to drive the organisation’s transformation if we do not attract and retain a
diverse and capable workforce.
Tax Disputes
Increasing global tax rates, alongside tax authority challenges in key markets, impact our global operating
model and tax footprint.
Product
Regulations
Non-compliance with product classification regulations, guidelines, internal standards and/or registrations
across the supply chain and throughout the product lifecycle.
Legal &
Compliance1
We are not fully compliant with relevant laws and regulations, including anti-corruption laws, data privacy
laws and global competition laws.
South Korea
Humidifier
Sanitiser (HS)
Financial and reputational risk as a result of the health issues caused by consumers inhaling a humidifier
sanitiser previously sold by Oxy, which Reckitt acquired in 2001. The product was withdrawn in 2011.
BS
Black Swan
Event
We define a Black Swan event as an unforeseen reputational incident impacting multiple brands. The Board
considers the possibility of a Black Swan event throughout the course of the year.
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1. See Viability Statement on page 103
90
Mitigation activity
Colour indicates extent of activity outstanding to
mitigate in line with risk appetite.
All significant mitigating actions are in place
and operating effectively
Some significant actions remain in progress
Significant and urgent actions remain
under way
Risk movement
Arrows indicate movement from prior
year position.
Direction and distance of movement.
Principal risks
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Remote
Possible
Likely
Highly Likely
Probability
Interconnectivity of risks
15
14
1
BS
13
12
11
Action planning to mitigate principal risks
is complicated by the interconnectivity
between them, requiring robust oversight
by leadership teams to prioritise time and
resources as appropriate.
Operational
Strategic
People
Financial
Compliance
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Reckitt Annual Report and Accounts 2021
91
Financial StatementsGovernanceStrategic Report Risk Management (Continued)
MAPPING PRINCIPAL & EMERGING
RISKS TO STRATEGIC IMPERATIVES
Consideration of principal and emerging risks, and how we are managing them, is an
important part of building our strategy and demonstrating our longer-term viability. The
chart below shows the linkage between our current principal and emerging risks and our
strategy, specifically our six strategic imperatives. Further information on each of the
strategic imperatives can be found on page 22.
Risk
Grow brands
and innovate
Drive superior
execution
Invest in
capabilities
Increase
productivity
Embed
sustainability
Actively
manage the
portfolio
1. COVID-19
2. Product Safety
3. Supply Disruption
4. Cyber Security
5. Employee Health & Safety
6. Sustainability
7. Adherence to Product
Quality Standards
8. Innovation
9. Disruption
10. China
11. People
s
k
s
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p
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n
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P
12. Tax Disputes
13. Product Regulations
14. Legal & Compliance
15. South Korea Humidifier
Sanitiser (HS)
1. Geopolitical
2. Economic Volatility in
post-COVID World
3. Sector Consolidation
4. Emergence of
Environmental Tax
Instruments
s
k
s
i
r
g
n
g
r
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m
E
i
5. Science and Technology
‘Disruptors’
92
Grow brands and innovate
Drive superior execution
Invest in capabilities
Increase productivity
Embed sustainability
Actively manage the portfolio
1. COVID-19
2. PRODUCT SAFETY
Risk movement:
No change
Oversight accountability
Executive ownership resides directly with the
Group Executive Committee, with each Global
Business Unit responsible for its respective
deliverables. Board oversight is provided by
the main Board.
Risk movement:
No change
Oversight accountability
Executive ownership resides with the Chief
R&D Officer, who drives activity through
each of the Global Business Unit executive
leadership teams. Board oversight is provided
by the CRSEC Committee.
The risk: COVID-19 continues to cause disruption in key markets and
creates significant volatility and uncertainty across the portfolio,
impacting our ability to accurately predict consumer demand, and
execute growth plans.
Potential impact
In 2020, the impact of the COVID-19 principal risk was focused on supply
chain disruption and the health and wellbeing of our people. As we
emerge from the pandemic, we are now facing significant demand
volatility across the portfolio and higher levels of uncertainty over the
medium- to long-term impact on consumer behaviours. Such volatility
may impact our ability to accurately forecast and affect the planning and
strategic investments required to execute growth plans.
Mitigation progress in 2021
Return-to-work policies, additional site-specific protocols and safety
measures have now been rolled out across our sites. These protocols
outline the measures we are taking to keep our people safe and are
overseen by the Global Advisory Group, who continue to monitor and
respond to changing work practices.
Across the Supply organisation, additional supply continuity responses
were activated which included engagement of new suppliers for critical
materials, daily reviews of manufacturing capacity across our network of
factories and manufacturing partners, and partnership with logistics
providers and regulatory authorities to ensure we could move products
across closed borders. Across the R&D organisation, additional lab
procedures, including enhanced safety protocols, were also activated to
ensure we could continue to support the safety and efficacy of current
products in market and in the development pipeline.
Current control strategy
Strategic capacity plans for sourcing, manufacturing and logistics are
being reviewed to respond to the COVID-19-related surge in demand for
specific products. Our sales and operations planning and execution
processes are being strengthened, allowing us to better respond to the
amplified demand volatility we are seeing.
As the pandemic continues into 2022, return-to-work protocols have
been established to ensure both compliance with local government
requirements and respect for each individual’s personal situation.
Manufacturing and R&D activities are ongoing, and the safety of our
people across our sites remains our first priority. Additionally, we continue
to support our people through regular updates and a programme of
global and local wellbeing initiatives.
We have launched our ‘Future of Work’ approach, providing greater
flexibility and creating a seamless, inclusive and consistent experience in a
hybrid world. Our approach is underpinned by the four Cs – Connect,
Create, Coach and Collaborate – which will help to guide choices around
where we work.
Activity impact for 2022
The Group monitors the impact of COVID-19 across all areas, continually
reviewing our guidance to ensure it remains appropriate and reflects any
further developments. It is anticipated that while some disruption will
continue into 2022, this will reduce as our ‘Future of Work’ approach
becomes further embedded. Target rating from current Red to Amber by
the end of 2022, provided that there is no escalation in pandemic-related
circumstances and/or geopolitical events.
The risk: Robust process, systems, data and culture for the
development and assessment of product safety are not in place
or operating effectively, leading to safety risk to consumers.
Potential impact
Product safety issues lead to reputational damage with consumers,
customers or regulators. Significant financial losses could arise from
supply disruption, product recalls, delayed launches, penalties and
a loss of consumer trust, as well as possible criminal liability for
senior management.
Any gaps in the completion of our safety assessments or a lack
of anticipation of new safety concerns could exacerbate any
potential impact.
Mitigation progress in 2021
Several product-safety-related programmes have been completed or
remain on plan for completion. Our Product Integrity Review (PIR)
programme is now complete and PLM (Product Lifecycle Management)
implementation is ongoing. Continued focus on data governance and
systems is required to modernise data flow and compliance. A strategic
review of our data governance is underway and further learnings made
will be applied to the programme moving forward.
Our Global Safety Assurance (GSA) transformation project, led by our
Chief Safety Officer, is underway with forecast completion in Q1 2023.
The programme will elevate Reckitt’s global safety approach into the
leading group of peer organisations and includes safety culture,
processes, systems and data.
Product safety training has been rolled out to all employees, as well as
specific training for relevant employees to understand their role in
ensuring safety, quality and regulatory compliance for all Reckitt products.
We have made investments in Consumer Relations to improve consumer
data insights and awareness of social media to identify emerging trends,
themes and safety concerns.
Current control strategy
The GSA team operates as part of the Global R&D function, further
embedding product safety into each of the Global Business Units through
proximity to markets whilst providing centralised oversight and assurance
services. GSA is accountable to the Risk, Sustainability & Compliance
Committee (RSCC) and thereafter to the Corporate Responsibility,
Sustainability, Ethics & Compliance (CRSEC) Committee.
A robust quality management system is underpinned by clear policies and
supporting systems, which are subjected to comprehensive and
independent regular audit review. Consumer safety and vigilance teams
within the GSA function conduct pre- and post-market safety reviews
and monitor and report on adverse events.
Activity impact for 2022
2022 will see the continued rollout of key safety programmes including
Product Lifecycle Management (PLM), QualityOne and the Global Safety
Assurance transformation. Innovation and business processes are
continuously adapted to ensure safety diligence requirements are fully
implemented. We will continue to proactively engage with regulators to
ensure we are staying abreast of emerging safety concerns. Target rating
to remain Amber at the end of 2022. This is a multi-year deliverable to
replace current systems.
Reckitt Annual Report and Accounts 2021
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Financial StatementsGovernanceStrategic Report Risk Management (Continued)
3. SUPPLY DISRUPTION
4. CYBER SECURITY
Risk movement:
Increasing
Oversight accountability
Executive ownership resides directly with
the Chief Supply Officer. Board oversight
is provided by the main Board.
Risk movement:
Increasing
Oversight accountability
Executive ownership resides directly with the
Chief Information & Digitisation Officer. Board
oversight is provided by the main Board.
The risk: Disruption to the continuity of supply as a result of: ongoing
disruptions to material supply, freight and labour availability; ongoing
market volatility and unpredictability; remaining capacity gaps; and
reliance on single factories for key products and/or source for key
materials without qualified contingencies in place.
Potential impact
Disruption to the continuity of supply may result in supply shortages
and importation barrier issues, leading to loss of sales and market share.
Increased levels of cost pressure across commodities, freight and labour
may impact our ability to serve customers and erode our cost competitive
advantage. Network and capacity constraints, combined with higher
levels of market volatility, may also impact the availability of product
in market.
Mitigation progress in 2021
Progress has been made across a number of areas to address the varying
causes of supply disruption. We continue to de-risk our supply of critical
materials by reducing the total value of monosourced spend across
each Global Business Unit. Strategic capacity plans have been developed
and are being executed for the sourcing of high-risk materials, critical
manufacturing sites and logistics centres.
The Reckitt Production System, developed to drive sustainable
manufacturing performance, is being rolled out across all manufacturing
sites. An equivalent Logistics System is currently in pilot phase.
In 2021 we established a dedicated e-commerce Supply team that will
focus on planning, e-commerce ready packaging and logistics execution.
Current control strategy
Set-up and qualification of multiple manufacturing locations for critical
products is ongoing with a target completion date of 2025. Portfolio
harmonisation and increased regionalisation of manufacturing will allow
us to improve our agility, proximity and responsiveness to any unforeseen
disruptions. A reset of our sales and operations planning and execution
processes is underway and will be deployed across the business in 2022.
We are mitigating increasing cost pressures through our Group-wide
productivity programme which includes procurement excellence,
manufacturing and logistics pillars. The development and rollout of our
end-to-end supply digitisation programme will also help increase cost
and operational efficiencies across the supply chain.
We continue to improve our level of asset protection, and factories
considered key or strategic have received investment to attain Highly
Protected Risk (HPR) status by our insurers.
A Group-wide business continuity programme is underway to
strengthen business continuity processes across products and sites.
Robust Employee Health & Safety (EH&S), quality, sustainability and human
rights programmes have been developed and are being rolled out across
all of our facilities and suppliers.
Activity impact for 2022
2022 will see the continued rollout of the end-to-end Supply Chain
Planning programme. This will help to strengthen the resilience of
our supply chain through investments in: upstream supply resilience;
alternative sites of manufacture; adequate manufacturing capacity;
robust products; improved manufacturing processes; and holistic
packaging design. Target rating to remain Amber at the end of 2022.
The risk: As a complex global organisation, there is a risk that Reckitt
falls victim to increasingly sophisticated cyber-attacks aimed at
causing disruption to our information assets by destruction, or by
circumventing confidentiality, integrity or availability controls.
Potential impact
Significant business disruption, data destruction or theft, regulatory
non-compliance, reputational damage, financial loss and constraints
in delivering global business strategy.
This risk is heightened by the increasing volume and types of sensitive
personal data held, a strengthened regulatory environment including
significant financial penalties for non-compliance, and the growing
number and complexity of connected digital systems. These include
third parties, as well as cloud and digital service providers.
Mitigation progress in 2021
Phase 1 of the Cyber Transformation Programme was successfully
completed in early 2020 and included: removal of legacy platforms;
increased IT security team headcount; new cyber response playbooks
and processes; advanced threat protection; and continued improvements
to system recovery speed and capability. It also covered areas such
as improving baseline identity and access management for some
financial systems as well as multi-factor authentication to protect
Reckitt system identities.
We have launched the next phase of our multi-year cyber security
strategy which will further reduce cyber risk through investment in our
cyber security baseline, agility and innovation, allowing us to stay as close
as possible to emerging cyber threats.
Current control strategy
Our strategy places continued focus on reducing cyber risk whilst
improving the maturity of our security posture, upgrading our capabilities
and supporting business agility, innovation and the strategic growth
agenda. We apply industry standards and methodologies to establish the
control framework, including ISO and National Institute of Standards and
Technology (NIST) guidelines.
Through increasing engagement with the business and partners,
advancement of our cyber capabilities and renewed focus on risk
ownership and accountability, the Group Cyber Transformation
Programme will continue to evolve the cyber security strategy and
framework and implement the required controls to mitigate cyber risk.
Activity impact for 2022
Phase 2 of the Cyber Transformation Programme commenced in 2021
and will continue over the next three to four years, investing in and
embedding cyber security processes across the Group.
These include: enhancements to operational technology in critical
factories; identity and access management for critical business
applications; digital security; building stronger cyber defence detection
and response capabilities to cover our multi-cloud strategy; and uplifting
Reckitt colleague cyber awareness and education. This risk is dynamic
and constantly evolving, and as such target rating to remain Amber at the
end of 2022.
94
Grow brands and innovate
Drive superior execution
Invest in capabilities
Increase productivity
Embed sustainability
Actively manage the portfolio
5. EMPLOYEE HEALTH
& SAFETY
Risk movement:
No change
Oversight accountability
Executive ownership resides directly with
the CEO, Global Business Unit Presidents
and Chief Supply Officer. Board oversight
is provided by the CRSEC Committee.
The risk: Work accidents leading to death, injury or illness of Reckitt
employees wherever they are working; and other workers on
Reckitt premises or premises under Reckitt supervision, in case
of outsourced operations.
Potential impact
Impacts are wide-ranging and variable in materiality; they may include
loss of life, debilitating injury, ongoing damage to brand/employer
reputation, reduced operational efficiency from factory closure or
significant supply disruption, impaired financial performance from
lost sales, fines or remediation costs, and possible criminal liability for
senior management.
Mitigation progress in 2021
COVID-19 health and safety policies, standards and return-to-work
protocols have been published and adopted across our sites, with
key messages cascaded through the Global Business Unit and Supply
leadership teams. Local audits were completed where required by
regulators to comply with COVID-19 regulations.
We have launched an extensive programme to embed a heightened
Employee Health & Safety (EH&S) culture across the enlarged Group
through rigorous auditing, culture days, surveys and training initiatives.
A Driver Safety Standard programme has been deployed. Engineering
standards are in place and a Global Engineering Compliance team for
structural auditing has been established. Group ISO 45001 or OHSAS 18001
certification is complete across all Reckitt in-scope sites and our Group
EH&S standards continue to be enhanced to meet scope.
Current control strategy
Policy and enhanced EH&S standards are in place and reinforced through
an audit compliance programme (including self-assessment, site visits,
assurance of improvement actions, KPI tracking and culture surveys) by
a second line of defence compliance team within Supply; and ongoing
EH&S training is also provided across all sites including commercial offices.
Key risk indicators are monitored and action taken where measures
are out of tolerance. During COVID-19-related travel restrictions, we
implemented technology-aided inspections and site coaching calls.
Oversight is provided by the Supply leadership team as well as the Group
Risk, Sustainability & Compliance Committee (RSCC).
Activity impact for 2022
We will continue to roll out the programme of culture surveys and safety
days to increase awareness; and continue with the rigour of auditing,
including supporting the business through supply, commercial and R&D
site visits. Target rating to remain Amber at the end of 2022.
6. SUSTAINABILITY
Risk movement:
Increasing
Oversight accountability
Executive ownership resides directly with
the CEO and the Head of Corporate Affairs
& Chief Sustainability Officer. Each Global
Business Unit is responsible for its respective
deliverables. Board oversight is provided by
the CRSEC Committee.
The risk: Failure to address existing and emerging environmental
and social risks and opportunities (including climate change), and
changing societal expectations of businesses in addressing these,
creates underlying risk to business resilience, growth and share
price performance.
Potential impact
Failure to increase the sustainability of our environmental and social
footprint may lead to increased scrutiny from consumers, customers,
NGOs and ESG-focussed investors. The impacts of this are broad in range
and include: reputational damage; adverse public perception; resource
inefficiency; loss of market share as consumers shift towards ‘greener’
products; omission from established sustainability indices impacting future
investment; and potential regulatory penalties. Climate change also has the
potential to significantly disrupt Reckitt’s operations through an increased
number of extreme weather events, water crises and ecosystem loss.
Mitigation progress in 2021
In 2021 we launched our Sustainability Ambitions, which will be
underpinned with £1 billion investment over the next ten years. We
continue to focus on strengthening our processes, programmes and
controls alongside our external stakeholder relationships, through
partnerships with NGOs, academia, and critical opinion-formers.
We have partnered with Risilience and Cambridge Centre for Risk Studies
(CCRS) within the Judge Business School at the University of Cambridge to
model the impact of climate risk (both physical and transition) on our global
operations, with the output from this analysis supporting our financial and
operational planning, and our Task Force on Climate-related Financial
Disclosures (TCFD) reporting. We also launched a partnership with the
Nature-Based Insetting team at the University of Oxford to better
understand the impact of our footprint on biodiversity and support our
contribution to the Task Force on Nature-related Financial Disclosures (TNFD).
More information about these partnerships can be found on page 66.
A holistic packaging strategy is in development, supporting both
e-commerce and traditional retail channels with levels of packaging use.
The expansion of our human rights programme beyond our supply chain,
using the societal impact framework to assess and address human rights
impacts along the full value chain, is on track. Our sustainability and
governance capability has been enhanced through the establishment
of the Group Risk, Sustainability & Compliance Committee (RSCC).
Current control strategy
We continue to embed the plans and resources required to deliver an
environmental strategy in the supply chain in support of climate change
and water efficiency, with capital expenditure plans, environmental
project identification, local and global capabilities, and capacity to
support environmental performance improvement.
At a Global Business Unit and brand level, we are driving sustainability
through customer-facing programmes, and through delivery of more
sustainable ingredients, packaging and sourcing programmes. We continue
to embed sustainability into the product development process by evaluating
all new innovation against a set of sustainability criteria and introducing
sustainability targets into our science-based and technology solutions.
Activity impact for 2022
Internal and external initiatives, along with greater transparency on
non-financial sustainability indicators, will help to drive increased
awareness of our sustainability agenda across our global network. Target
rating to remain Amber at the end of 2022. This is a multi-year deliverable
to build and embed the significant actions required.
Reckitt Annual Report and Accounts 2021
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7. ADHERENCE TO PRODUCT
QUALITY STANDARDS
Risk movement:
No change
Oversight accountability
Executive ownership resides directly with
the CEO, Global Business Unit Presidents
and Chief Supply Officer, who drive activity
through each of the Global Business Unit
executive leadership teams. Board oversight
is provided by the CRSEC Committee.
The risk: Non-compliance with applicable quality regulations,
guidelines and internal/external standards across the product
lifecycle governing how we produce and supply product.
Potential impact
Impacts are wide-ranging and may include a consumer safety incident,
regulatory failures, loss of sales (including product recall) and adverse
reputational impact, a supply disruption or factory closure, or potential
civil/criminal actions against individuals. The risk is heightened by
the increasing scrutiny, complexity, frequency and stringent audit
requirements enforced on our factories by regulators.
Mitigation progress in 2021
As part of the evolution of our product quality processes, the Quality
team has been integrated into the Supply function. This restructure will
help to further embed product quality into each of the Global Business
Units by driving proximity to markets whilst also providing centralised
oversight and assurance services.
We have made significant investment in ensuring the highest quality
of our products and compliance with all applicable regulations and
standards. These measures include assurance programmes covering
predictive quality, culture of quality, technology-enabled fail-safe controls,
quality audit programmes across manufacturing sites and supplier
facilities, and transformation of our Consumer Relations function.
The Product Integrity Review (PIR), an end-to-end quality review of the
product portfolio, is now complete.
Current control strategy
Reckitt’s Quality standards have been defined, communicated and
embedded within our standard operating procedures. A quality audit
programme to assess compliance with Reckitt’s Quality standards across
manufacturing sites has been established and is being delivered against.
Continued investment in key Quality transformation programmes
including QualityOne and LabEx, and implementation of a systematised
product safety and compliance programme through Product Lifecycle
Management (PLM), is providing a live database of product data.
COVID-19 impact assessments have been performed to identify risks
to programme delivery and agreed timescales.
Quality KPIs and metrics are presented and discussed at each Global
Business Unit, Risk, Sustainability & Compliance Committee (RSCC) and
Corporate Responsibility, Sustainability, Ethics & Compliance (CRSEC)
Committee meeting.
Activity impact for 2022
We continue to look for opportunities to optimise our quality assurance
processes and the use of Quality data to drive continuous improvement
across the product lifecycle. Target rating to remain Amber at the end
of 2022.
8. INNOVATION
Risk movement:
Decreasing
Oversight accountability
Executive ownership resides directly with the
CEO, Global Business Unit Presidents and the
Chief R&D Officer. Board oversight is provided
by the main Board.
The risk: The current innovation pipeline does not meet the changing
needs of our consumers and new go-to-market channels, or is not
sufficient to achieve organic growth ambitions and drive gross
margin accretion.
Potential impact
Failure to understand and effectively respond to changing consumer
wants, needs and behaviours (including in the context of COVID-19)
may lead to loss of market share to small entrepreneurial companies
leveraging new channels and digital media.
Inability to execute innovation may result in failure to achieve the
necessary innovation rate hurdles in terms of growth contribution and
gross margin accretion, impacting organic top-line growth.
Mitigation progress in 2021
In 2021 we implemented enhanced innovation pipeline reporting to
provide greater visibility over our three-year innovation pipeline, and the
resourcing required to achieve our targets.
We launched the Innovation Council to harmonise innovation across each
Global Business Unit, market and function, including Marketing, R&D and
Supply. The Innovation Council will report to the GEC on a quarterly basis.
The Global R&D function now includes the Regulatory, Global Safety
Assurance (GSA) and Operational Excellence functions, driving greater
partnerships and operational efficiencies. Dedicated teams are focused
on delivering innovation for global brands and operational teams are
focused on local brands. Frontline resources have been deployed
in-market to drive proximity to consumers.
Current control strategy
We continue to invest in new tools and resources to enhance our
innovation, brand purpose, packaging and design capability. Dedicated
resourcing has been deployed to deliver on ‘e-commerce first’-focused
innovations.
IGNITE, our new external partnering platform to be launched in 2022, will
enhance our partnership capability and drive co-creation of innovation
through greater external orientation and new partnership opportunities
across discovery, development and launch.
Our consumer data and insights capability has been strengthened with a
dedicated team focused on insight generation and idea validation through
new digital tools for faster and more accurate innovation modelling.
Activity impact for 2022
Continued strengthening of our technical capabilities, alongside the
pursuit of new partnerships, improved harmonisation and enhanced
reporting will help to drive improved innovation across the full product
lifecycle, allowing us to better scale, leverage and accelerate our pipeline.
Innovation models will continue to evolve during 2022 and will broaden
as additional drivers of innovation growth are identified. Target rating to
remain Amber at the end of 2022. This is a multi-year deliverable to build
and embed the significant actions required.
96
Grow brands and innovate
Drive superior execution
Invest in capabilities
Increase productivity
Embed sustainability
Actively manage the portfolio
9. DISRUPTION
10. CHINA
Risk movement:
No change
Oversight accountability
Executive ownership resides with the Global
Business Unit Presidents and the Chief Human
Resources Officer. Board oversight is provided
by the main Board.
Risk movement:
No change
Oversight accountability
Executive ownership resides directly with
the CEO and Global Business Unit Presidents.
Board oversight is provided by the main Board.
The risk: Inability to respond to, adapt and evolve both our products
and processes to disruptive market forces including e-commerce,
digital, new formats, applying AI and machine learning and increasing
data challenges, impacting our ability to effectively service our
customers and consumers with the required agility.
Potential impact
We continue to see dramatic changes to the ecosystem and competitive
landscape in which we operate, with many of these changes arising from
COVID-19 and its impact around the globe. Some of the changes may
not yet be fully known or understood and may either present significant
future opportunity or disrupt our current operating model.
Failure to respond to these disruptions may result in share loss to insurgent
brands that are more consumer-centric, and may reduce our ability to
identify and exploit rapidly growing channels, impacting top-line growth.
Mitigation progress in 2021
Our eRB organisation is now operating to scale bigger, faster, bolder
e-commerce and digital solutions, supporting each Global Business Unit
with digital business development and strengthening capability through
technology and infrastructure.
Our capability centres (Marketing Excellence, Sales Outperformance,
Medical Sales and eRB) are now operating to share excellence, develop
functional capabilities, drive economies of scale and scope, and provide
tools and technology enabling best practice sharing.
Chief Customer and Chief Information & Digitisation Officers are now in
role to strengthen customer relationships and drive new business models
for our increasingly digital consumers.
Global Business Solutions launched in 2020 to support businesses with the
expertise, knowledge and products they need to make their workplaces
and outlets hygienically safe for both consumers and employees.
Current control strategy
Continued investment in capability and technology, enabling us to harness
the power of all channels, all platforms, all brands, in all markets. Pursuit of
external partnership opportunities to identify, incubate and launch new
brands and ventures, driving future growth. Entering new growth spaces
will also allow us to reach and acquire more consumers.
Activity impact for 2022
Internal and external initiatives will continue to increase capability and
drive incremental growth across priority channels and segments. This
includes the continued rollout of The Digital Factory, our venture to build
e-commerce expertise across all markets. Target rating to remain Amber
at the end of 2022. This is a multi-year deliverable to build and embed the
significant actions required.
The risk: Risk in China of economic uncertainty, 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 and
regulatory uncertainty. The behaviours of Chinese consumers are also
changing which, alongside other economic factors, has the potential to
impact our operations and performance in this market.
Mitigation progress in 2021
In 2021 we finalised the sale of our China Infant Formula & Child Nutrition
business to Primavera. Our operations in China are now supported
through our focused China businesses, allowing us to better leverage our
scale across the Greater China area while maintaining agility, boosting
partnerships to support our growth ambitions, and driving China-centric
innovation through bespoke design and innovation hubs.
Current control strategy
Our current China businesses will continue to be managed as
independent units, with shared government affairs and regulatory
capabilities supported by a quarterly governance model.
We maintain a strong network in China to 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.
China-based regulatory intelligence teams provide insight on any changes
in regulation that may impact us, and we partner closely with local
industry to ensure we are working within government-set parameters.
Activity impact for 2022
We will continue to focus on execution of our Greater China operating
model, alongside continued delivery of China-centric innovation,
consumer-centricity and close monitoring of global and regional
economic developments. Target rating from current Red to realistically
reduce to Amber by the end of 2022, though further disruptions can
be anticipated which could extend this level of higher exposure.
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Financial StatementsGovernanceStrategic Report Risk Management (Continued)
11. PEOPLE
12. TAX DISPUTES
Risk movement:
No change
Oversight accountability
Executive ownership resides directly with the
Chief Human Resources Officer, who drives
activity through each of the Global Business
Unit executive leadership teams. Board
oversight is provided by the main Board.
Risk movement:
Increasing
Oversight accountability
Executive ownership resides directly with
the Chief Financial Officer. Board oversight
is provided by the Audit Committee.
The risk: Increasing global tax rates, alongside tax authority
challenges in key markets, impact our global operating model and
tax footprint.
Potential impact
Increasing global tax rates may result in an overall increase in our tax
liability. Additionally, if our filing positions around transfer pricing are not
considered in any country to be compliant or our operating model is not
sufficiently communicated, implemented and embedded, both internally
and externally, tax authorities may successfully challenge our tax return
filings with a potentially significant financial impact on the Group.
Mitigation progress in 2021
Ongoing timely and robust responses to progress outstanding disputes
and continual monitoring of progression in relation to Advanced Pricing
Agreements (APAs) and subsequent operating model tax audits. Detailed
and thorough advice and technical support from advisors is received.
Provisions are made at CHQ for anticipated exposures. The business will
continue to review the provisioning strategy over the next five years to
take account of any expected changes.
Current control strategy
Ongoing review by the Reckitt Tax function, country Finance Directors
and external advisors with central provisioning for anticipated exposures.
Regular tax reviews are undertaken with each Global Business Unit
alongside continuous monitoring of information on EC State Aid
investigations and possible application to Reckitt. We also monitor the
impact of the Base Erosion and Profit Shifting (BEPS) initiative and other
law changes to identify possible adverse impacts and put in place
remedial strategies.
Activity impact for 2022
Timely and robust responses to progress outstanding disputes, continual
monitoring of progression in relation to APAs and subsequent operating
model tax audits, and increased prioritisation of projects and senior
management overview are expected to maintain this risk as Green for
2022. Target rating to remain Green at the end of 2022.
The risk: We do not achieve our strategic objectives due to our
reduced ability to attract, develop at accelerated pace and retain
talent in a highly competitive market, further enhanced by a
changing workplace environment. We lose momentum to drive the
organisation transformation if we do not attract and retain a diverse
and capable workforce.
Potential impact
Disruption to business performance attributed to churn across senior
management positions and the risk of fatigue arising from a period of
sustained business change.
Mitigation progress in 2021
Following the launch of the Rejuvenating Sustainable Growth strategy,
a new leadership team is now in place and churn across senior
management has stabilised.
A Senior Vice-President for Talent & Leadership Development is now in
role and we have launched a Leadership Development and Talent Centre
of Excellence to deliver greater value to the business by identifying,
developing and scaling best practice HR processes that directly
contribute to the attraction, retention and development of our people.
Current control strategy
Talent identification, mapping and calibration have been undertaken for
critical senior management positions, helping to optimise both talent
management and succession planning processes.
Retention measures and succession plans for key management positions
are in place, and regular retention risk analysis is undertaken, including a
review of turnover rates and active review of workforce planning to meet
strategic objectives. The Group’s total compensation programmes and
employee value proposition (EVP) are also subject to annual review.
A number of initiatives are under way to promote Reckitt as an employer
of choice. These include social impact and diversity and inclusion (D&I)
programmes, and a global wellbeing programme has been launched
focusing on equipping all employees with tools, techniques and strategies
to sustain peak performance. A new Global Head of Wellbeing will lead
this activity.
We offer a suite of tools to help our people get the most out
of their careers at Reckitt, from learning and development, the
annual performance review process and leadership development
programmes that focus on how managers can inspire, empower
and engage their teams.
Activity impact for 2022
We will continue to focus on unleashing the potential of our people,
performance and Purpose by attracting the best talent, developing
our people and enabling culture change, to shape and drive our future
workplace to deliver sustainable outperformance. Target rating to remain
Amber by the end of 2022.
98
Grow brands and innovate
Drive superior execution
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Actively manage the portfolio
13. PRODUCT REGULATIONS
14. LEGAL & COMPLIANCE
Risk movement:
No change
Oversight accountability
Executive ownership resides directly with the
Chief R&D Officer, who drives activity through
the Global Business Unit executive leadership
teams. Board oversight is provided by the
CRSEC Committee.
Risk movement:
Increasing
Oversight accountability
Executive ownership resides with the
General Counsel & Company Secretary
together with the Chief Ethics & Compliance
Officer, with each Global Business Unit
responsible for its respective deliverables.
Board oversight is provided by a combination
of the CRSEC and Audit Committees to
ensure full and appropriate coverage of
the Compliance programme.
The risk: Non-compliance with product classification regulations,
guidelines, internal standards and/or registrations across the supply
chain and throughout the product lifecycle.
The risk: We are not fully compliant with relevant laws and
regulations, including anti-corruption laws, data privacy laws and
global competition laws.
Potential impact
Non-compliance with a product-related regulation may result in
supply disruption, increased regulatory scrutiny, financial impact
including product recall, damage to company reputation and potential
civil/criminal liability.
Regulations impacting our products across the portfolio are continually
evolving. If we do not anticipate these changes and are not ready to
use them to drive innovation and competitive advantage, we may see
an increase in costs and a loss of market share to competitors.
This risk is enhanced by the extensive range of product regulatory
classifications across the portfolio, emerging regulations in key markets
and fragmented IT systems lacking end-to-end integration.
Mitigation progress in 2021
As part of the evolution of our product safety and regulatory processes,
the Regulatory team has been integrated into the Global R&D function.
This restructure will help to further embed regulatory compliance into
each of the Global Business Units by driving proximity to markets whilst
also providing centralised oversight and assurance services.
We have increased our investment in medical and regulatory processes
to ensure our product claims are more data-focused and substantiation
is stronger. Enhanced metric-based reporting now allows us to focus
on in-market issues and identification of any process improvements.
Current control strategy
Multiple control programmes are in place to manage regulatory
compliance risks including resiliency mapping, our REACh compliance
programme and updates to our company core datasheets.
Regulatory intelligence processes and systems have been strengthened
and we have evolved how our regulatory KPIs are established, monitored
and reported.
The Risk, Sustainability & Compliance Committee (RSCC) structure
ensures appropriate regulatory KPIs are reported to all levels in the
organisation. There is an appropriately resourced single system for
consumer complaints in place and specialist audit teams providing
independent assurance.
Activity impact for 2022
The Product Lifecycle Management (PLM) programme will systematise
our product safety and compliance processes, aligning with the standards
set within the Product Integrity Review (PIR) and Product Safety
Evaluation Report (PSER) projects. PLM is due for completion in 2022.
Review of the end-to-end artwork and label approval process is ongoing
and continues to be a focus area for the business.
Our Regulatory teams partner with external regulators to credibly engage
in regulation development and to assess the impact and opportunities
of future regulations to drive readiness, innovation and competitive
advantage. Target rating from current Amber to Green at the end of 2022.
This is a multi-year deliverable to replace current systems.
Potential impact
Non-compliance with relevant laws and regulations may damage Reckitt’s
reputation, leading to significant potential fines and possible criminal
liability for Reckitt companies and/or senior management.
Stricter data privacy regulations in key markets, together with adoption of
new technology and our growing e-commerce business, have impacted
data handling practices across the Group. The COVID-19 pandemic has
seen an increase in competition law and anti-trust compliance risk as we
respond to a significant increase in demand for COVID-19 essential
products.
Mitigation progress in 2021
The global Ethics & Compliance programme has been strengthened
through the implementation of extensive controls across key compliance
risk areas. For data privacy, this includes the establishment of a robust
privacy framework under the oversight of the Group Data Protection
Officer, a dedicated e-commerce privacy function, fully dedicated
privacy resources in key countries, completion of Privacy Impact
Assessments and adoption of stringent data protection safeguards across
direct-to-consumer channels.
Competition law risk and control assessments were completed in key
markets, with supporting mitigation plans agreed and implemented. Our
third-party bribery, interaction with HCEs and HCPs, and grants, donations
and charitable contributions processes have evolved through the
introduction of an enhanced operating model supported by more robust
systems and procedures.
Our third-party due diligence programme has been fortified and aligned
across Global Business Units for consistency.
Our claims substantiation processes have also been strengthened in
response to the settlement of a number of legacy cases.
Current control strategy
A Senior Vice-President Legal was appointed to each Global Business
Unit in 2020, with dedicated ethics and compliance resources working
alongside the Global Business Units to roll out the Compliance programme
across all key markets. The programme of global compliance risk
assessments will continue in 2022, alongside implementation of new
policies and procedures, allowing us to effectively respond to any
changes in the risk profile.
All employees are required to complete online Global compliance training
modules every year. Core modules include Code of Conduct, anti-bribery,
antitrust, data privacy, human rights, and (separately) product safety and
cyber security.
The Group-wide Speak Up hotline is operational, widely communicated
and reinforced through a robust, independent investigation process and
follow-up procedure.
Activity impact for 2022
Continued advancement of the Ethics & Compliance programme through
targeted risk assessments, enhanced analytics and expansion of the
training programme will help to drive greater awareness of relevant laws,
regulations and company policies. Expansion of the third-party risk
management strategy will strengthen supply chain governance. Target
rating to remain Amber at the end of 2022. This is an ongoing and
dynamic programme.
Reckitt Annual Report and Accounts 2021
99
Financial StatementsGovernanceStrategic Report Risk Management (Continued)
15. SOUTH KOREA HUMIDIFIER
SANITISER (HS)
Risk movement:
No change
Oversight accountability
Executive ownership of the risk at a Group
level resides directly with the General Counsel
& Company Secretary. Board oversight is
provided by the main Board.
The South Korea Humidifier Sanitiser (HS) issue was a tragic event. The
Group continues to make both public and personal apologies to victims.
The risk: Financial and reputational risk as a result of the health issues
caused by consumers inhaling a humidifier sanitiser previously sold
by Oxy, which Reckitt acquired in 2001. The product was withdrawn
in 2011.
Potential impact
While a provision was made in 2016 to cover the initial government
classification rounds and certain other costs, the risk of additional
exposure remains. An amendment made to the HS Special Law in 2020
has led to an increased volume of civil claims against Reckitt Benckiser
Korea (RBK). The South Korean Government has now decided to include
asthma, toxic hepatitis and children’s interstitial lung disease as HS injuries
and there is potential further expansion of liability as the new amendment
to the law reduces the burden of proof to establish that injury or illness is
caused by HS exposure. Further, under the law amendment, the Korean
Government can impose additional contributions to the Industry Relief
Fund (IRF) up to the amount of the previously collected for the Special
Relief Fund (SRF).
Mitigation progress in 2021
RBK has continued to work with the Government, victims and other
businesses to progress settlement with existing category 1 and 2
claimants via its Compensation Plan, and address legal claims, as well
as to restore trust among consumers in South Korea. RBK also made
comments on the issues with the HS law amendment during the
legislative process.
Current control strategy
Full public apology formally and repeatedly made by RBK to affected
parties. Regular review meetings continue with the Group, to monitor
issues as they arise. The Group has encouraged RBK to seek a broader
resolution involving all responsible parties on a basis that provides fair
compensation to legitimate victims, with each responsible party
contributing its fair share. An HS mediation committee has been
established and has been meeting with claimant groups and industry
companies to discuss various issues related to designing a comprehensive
mediation plan to cover all HS victims.
Activity impact for 2022
The Group will continue to encourage RBK to seek a broader resolution
and will continue to evaluate options to do the right thing while limiting
liability to fund compensation payments which are not anchored in proper
standards of legal and scientific proof. Target rating likely to remain Amber.
EMERGING RISKS
The implementation of an effective
risk management framework within an
organisation remains a cornerstone of
the corporate governance expectations
contained within the 2018 revisions to
the UK Corporate Governance Code.
We have defined an emerging risk as an event that has the
potential to significantly impact Reckitt’s financial position,
competitiveness and reputation, specifically:
• when the nature and value of the impact is not yet fully known
or understood, giving the emerging nature of the risk; and/or
• with an increasing impact and probability over a longer time
horizon (i.e. five or more years).
Emergence of
Environmental Tax
Instruments
Sector
Consolidation
t
c
a
p
m
i
f
o
d
e
e
p
S
Economic
Volatility in
post-COVID World
Geopolitical
Science and
Technology
‘Disruptors’
Probability
Low financial
impact
Moderate
financial impact
Significant
financial impact
100
Grow brands and innovate
Drive superior execution
Invest in capabilities
Increase productivity
Embed sustainability
Actively manage the portfolio
Category
ID Risk title
Risk statement
1
Geopolitical
Increasing geopolitical volatility with the potential to destabilise key markets and in some cases disrupt
our operations. This includes domestic political developments and regional tensions, the longer-term
impact of Brexit, fluctuations in oil prices, and changes to local regulations impacting imports and exports
e.g. subsidies, duties etc.
2
Economic Volatility in
post-COVID World
Emerging from COVID-19, we are now faced with a highly volatile global economy. Some economies that
have ‘bounced back’ are seeing increasing inflationary pressure and uncertainty whether such inflation is a
structural or transitory issue, while other countries are moving further into recession. We are also seeing a
surge in barriers to global trade, including COVID-19 restrictions and global freight shortages. This volatility
impacts our commercial strategies, including pricing, and may expose the Group to high levels of instability.
Further, the impact of COVID-19 on consumer behaviours is increasingly uncertain, impacting our ability to
accurately plan and forecast.
3
Sector Consolidation
Across the consumer products sector, we are seeing increasing levels of consolidation combined with the
rise of private equity firms. Consolidation in the number of players together with higher levels of
competition for potential acquisition targets may impact our ability to drive inorganic growth.
i
c
g
e
t
a
r
t
S
4
5
Emergence of
Environmental Tax
Instruments
We see a potential increase in the use of taxes or other fiscal instruments in areas such as materials
(e.g. plastics), packaging (e.g. single-use or non-recyclable), landfill disposal, as well as emerging water or
carbon taxes as governments seek to encourage producer responsibility, promote behaviour change and
fully cost externalities. This is particularly the case as governments seek to redress the financial impacts of
COVID-19 and ‘build back better’.
Science and Technology
‘Disruptors’
COVID-19 saw the development of the world’s first mRNA vaccines, created using new technology that
has significant potential to be applied in the fight against other diseases, including seasonal cold and flu.
The use of mRNA technology and other emerging science to create new vaccines or novel therapies to
fight seasonal cold and flu could significantly disrupt the traditional cold and flu category in the long term.
1. GEOPOLITICAL
The risk: Increasing geopolitical volatility with the potential
to destabilise key markets and in some cases disrupt our
operations. This includes domestic political developments
and regional tensions, the longer-term impact of Brexit,
fluctuations in oil prices, and changes to local regulations
impacting imports and exports e.g. subsidies, duties etc.
Potential impact
The potential impacts of any geopolitical volatility are wide-
ranging and include decreasing sales and revenue, fluctuations
in corporate finance and treasury, and fewer opportunities for
strategic growth. As we operate across a large global network,
geopolitical instability can also impact our supply chain operations,
workforce management practices and the safeguarding of our
data and intellectual property.
Mitigation
We closely monitor the global geopolitical climate to ensure we
understand any developments and their potential to impact our
business. Key measures include monitoring and analysis of any
political or regulatory uncertainty through our external affairs
network, engagement of advisors in critical markets and
identification of security threats facing the business through
our Corporate Security programme.
2. ECONOMIC VOLATILITY IN POST-COVID WORLD
The risk: Emerging from COVID-19, we are now faced with a
highly volatile global economy. Some economies that have
‘bounced back’ are seeing increasing inflationary pressure and
uncertainty whether such inflation is a structural or transitory
issue, while other countries are moving further into recession.
We are also seeing a surge in barriers to global trade, including
COVID-19 restrictions and global freight shortages. This
volatility impacts our commercial strategies, including pricing,
and may expose the Group to high levels of instability. Further,
the impact of COVID-19 on consumer behaviours is increasingly
uncertain, impacting our ability to accurately plan and forecast.
Potential impact
Economic volatility, including high inflation, may impact our pricing
and margin strategies. Our commercial teams closely monitor
economic trends, adapting commercial strategies to optimise
our business appropriately. High levels of demand volatility
may also adversely impact the accuracy of our planning and
forecasting activities.
Mitigation
Whilst we cannot fully protect our business from recessionary or
inflationary pressures, we take appropriate measures to maximise
and protect it during such periods of volatility. Key actions include:
portfolio rightsizing and review of pricing guidelines; adapting
our channel strategy with disruptive value offerings and the
acceleration of the e-commerce portfolio; ensuring we carefully
balance price and volume-led growth through targeted costing
programmes; maintaining prudent financial risk management
through clear metrics for large investments; and accurate
forecasting and cash flow management. In addition, a reset of
our sales and operations planning processes is underway, together
with a review of end-to-end planning processes and systems,
to improve planning and forecasting accuracy.
Reckitt Annual Report and Accounts 2021
101
Financial StatementsGovernanceStrategic Report 5. SCIENCE AND TECHNOLOGY ‘DISRUPTORS’
The risk: COVID-19 saw the development of the world’s first
mRNA vaccines, created using new technology that has
significant potential to be applied in the fight against other
diseases, including seasonal cold and flu. The use of mRNA
technology and other emerging science to create new
vaccines or novel therapies to fight seasonal cold and flu
could significantly disrupt the traditional cold and flu category
in the long term.
Potential impact
Failure to respond to disruptive science and technology may
impact the longer-term demand for our products.
Mitigation
We engage in a number of external partnerships which allow us
to participate in leading research around hygiene interventions,
epidemiology, and the development of emerging treatments.
These include our partnership with the Global Hygiene Council and
establishment of the independent Reckitt Global Hygiene Institute.
Our R&D and Science teams actively engage with the scientific
community through participation in conferences, thought
leadership and research projects. Working with this consortium of
external experts helps us to stay abreast of leading developments
in science and regulatory affairs, and the impact of emerging
technology. Horizon-scanning activities are undertaken internally
across a number of teams, including the Corporate Development
team and individual brand teams, helping to identify threats and
opportunities in each category.
Risk Management (Continued)
3. SECTOR CONSOLIDATION
The risk: Across the consumer products sector, we are seeing
increasing levels of consolidation combined with the rise
of private equity firms. Consolidation in the number of
players together with higher levels of competition for
potential acquisition targets may impact our ability to
drive inorganic growth.
Potential impact
Increasing sector consolidation and the associated increase
in competition may impact our ability to successfully drive
inorganic growth.
Mitigation
The Corporate Development team is responsible for identifying,
evaluating and executing Reckitt’s global M&A opportunities. This
involves regularly scanning the competitive landscape to identify
potential mergers, acquisitions, divestments, joint ventures or
long-term partnerships. Corporate Development partners closely
with each Global Business Unit and IMEX to help establish clear and
prioritised inorganic business development objectives, so the
business is focused on the right targets that will help create
long-term value.
4. EMERGENCE OF ENVIRONMENTAL TAX INSTRUMENTS
The risk: We see a potential increase in the use of taxes or other
fiscal instruments in areas such as materials (e.g. plastics),
packaging (e.g. single-use or non-recyclable), landfill disposal,
as well as emerging water or carbon taxes as governments
seek to encourage producer responsibility, promote behaviour
change and fully cost externalities. This is particularly the case
as governments seek to redress the financial impacts of
COVID-19 and ‘build back better’.
Potential impact
Introduction of environmental taxes or other related fiscal
instruments could impact our commercial strategies by increasing
the overall cost of production. Failure to comply with such
emerging regulations could also result in adverse financial
or reputational impact.
Mitigation
Our Sustainability Ambitions have been designed to reduce our
environmental footprint and allow us to respond to the Extended
Producer Responsibility (EPR) and tax regulation we are seeing
emerge across multiple geographies. Our ambitions include
combating climate change by reducing greenhouse gas emissions,
increasing our use of renewable energy sources and reducing
our overall carbon footprint. We are increasing water efficiency
and aim to be water positive in water-stressed areas through
catchment management; and we have set a target of zero waste
to landfill for all of our manufacturing sites. Progress in these areas
is tracked through quarterly reporting.
A number of initiatives are underway to reduce our use of plastics
and other non-recyclable packaging materials, including virgin
plastic, as well as our overall chemical footprint. These projects
have been built into product development pipelines across
each Global Business Unit. A working group has been established
to coordinate our response to emerging EPR and tax regulation
across 45 products. This will include an initial review of the data
required to support reporting and analysis, and subsequent
strategic intervention through innovation to lower the potential
cost burden.
102
Viability Statement
OUR VIABILITY
STATEMENT
THE ASSESSMENT PROCESS AND KEY ASSUMPTIONS
The Board’s Viability Review is based on the Group’s strategy,
its long-term financial plan and its principal risks.
A financial forecast covering a five-year period was prepared
(the base case). This period was selected as it is the period
covered in the Group’s long-term forecasting process, based on
the budget and projections for the following years and covers the
introduction to market of the current new product pipeline. The
period also covers the majority of Reckitt’s debt repayment profile.
The financial forecast is based on a number of key assumptions
aligned to the Group’s growth strategy, planned capital spending,
and capital allocation policy. The assessment of viability takes into
account the Group’s cash flow, its currently available banking
facilities and interest cover ratios in relevant financial covenants,
and does not assume the raising of additional new debt or equity
finance. If Reckitt performs in line with the base case forecasts,
it will have sufficient funds to trade, settle its liabilities as they
fall due, remain compliant with financial covenants, and remain
viable. Moreover, the Group has access to external debt markets
on account of its credit rating together with a well-diversified
supplier network, customer base and product range, and
geographical activities with a strong innovation pipeline, and
dividend cover.
ASSESSMENT OF PRINCIPAL RISKS AND VIABILITY
To further test the robustness of the base case forecast, further
analyses were prepared to consider the viability of the business
in the event of adverse unexpected circumstances. Such adverse
circumstances were modelled primarily upon the crystallisation of
the Group’s principal risks (see pages 90 to 102, including mitigation
and control strategies). Principal risks have the potential to create
adverse circumstances for the Group and can occur individually
or in combination with each other. The assessment of viability
considered the implications of crystallisation of each principal risk,
assigning each an estimated annual monetary value and estimating
the impact on interest cover ratios and headroom over available
borrowing facilities.
These principal risks were aggregated to create two scenarios
which model plausible downside scenarios of increasing severity
based on: (i) crystallisation of principal risks deemed to have the
most relevant potential impact on viability (see risks marked ‘1’ on
page 90); and (ii) crystallisation of all principal risks and the impact
of adverse movements in foreign exchange and interest rates. The
analysis indicated that even with unexpected events occurring
immediately and in combination, Reckitt 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 of greater adversity than those modelled above,
with sufficient potential impact to risk the future of Reckitt 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. On the basis of a comprehensive set of mitigating
controls in place across the business, considering the unknown
nature of a Black Swan event and that its occurrence is considered
highly unlikely, it has not been included in the Viability Review.
VIABILITY STATEMENT
The Board believes that the Group is well-positioned to manage
its principal risks successfully. The Board’s belief is based on
consideration of the historic resilience of Reckitt and has taken
account of its current position and prospects, the actions taken
to manage the Group’s debt profile, risk appetite and the
principal risks facing the business in unexpected and adverse
circumstances. Mitigating actions, should they be required, are all
within management’s control and could include reduced capital
expenditure or temporary suspension of dividend payments.
CONCLUSION
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 2 to 103, has been
approved by the Board.
On behalf of the Board
Catheryn O’Rourke
Company Secretary
Reckitt Benckiser Group plc
13 April 2022
Reckitt Annual Report and Accounts 2021
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Financial StatementsGovernanceStrategic Report Corporate Governance Report
“Good governance and a
strong culture and values are
integral to Reckitt’s Purpose.
We act responsibly and strive
to do the right thing always.
Our Board is committed
to upholding the highest
standards of governance
to protect our shareholders
and stakeholders’ long-term
interests and ensuring
social and environmental
obligations are fulfilled.”
Chris Sinclair
Chair
104
CHAIR’S
INTRODUCTION
TO GOVERNANCE
Dear Shareholder,
On behalf of the Board, I am pleased to present Reckitt’s Corporate Governance Report
for the financial year ended 31 December 2021. 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.
The Board provides leadership by setting the company’s Purpose, strategy and values,
monitoring culture and ensuring its alignment with the company’s Purpose, strategy and
values, and overseeing its implementation by management. All Directors must act with
integrity, lead by example and promote the company’s culture and values. The Board
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.
Effective governance during the COVID-19 pandemic
I am pleased to report that the Group’s governance framework operated effectively during
2021 in light of the continuing COVID-19 pandemic. Governance and risk management
have been important areas of focus for the Board over the last few years. Through our
Corporate Responsibility, Sustainability, Ethics and Compliance (CRSEC) Committee,
we have broadened our approach to managing safety and compliance risk, which is
discussed in more detail on page 144.
In addition, the impact of COVID-19 has reinforced a number of the UK Corporate
Governance Code 2018 (the Code) principles and provisions – the importance of effective
leadership, of the Group having a clear Purpose and strong values, and of these being
cohesive with the Group’s desired culture. Our response and decision-making throughout
the COVID-19 pandemic has paid due consideration to the wellbeing and safety of our
employees and our employees have adapted effectively and efficiently to new ways
of working. The Board recognises the exceptional way Reckitt continues to rise to
the challenge and is extremely proud of the enormous dedication and courage of
our employees.
Board focus and oversight
In 2020 we launched our Rejuvenating Sustainable Growth strategy, including our new
Purpose, Fight and Compass. Under the new strategy our business was split into three
Global Business Units (GBUs); Hygiene, Health and Nutrition. One year on, Reckitt is emerging
much stronger, as a more resilient and purposeful company. We have made significant
progress in building the foundations for rejuvenating sustainable growth. Our key areas of
Board focus during the year included: our response to COVID-19 and ensuring effective
governance and risk processes were in place; developing our strategy and seeking new
opportunities; building our new Reckitt brand, companioning stakeholder engagement and
wellbeing; enhancing our culture through our Purpose, Fight and Compass; and progressing
our diversity and inclusion agenda. Further details can be found on our Board activities
throughout the year on pages 119 and 120.
Our approach to sustainability
During 2021, we launched our sustainability ambitions, for a Cleaner, Healthier World, which
set out new ambitions to 2030, backed by an existing investment of more than £1 billion over
the next ten years to ensure we meet our goals. Our ambitions align with Reckitt’s Purpose
and our strategy for sustainable growth and focus on three areas: Purpose-Led Brands,
Healthier Planet and Fairer Society. We began our sustainability
agenda in 2012 and since then we have made significant progress,
but as the world’s social, health, and environmental needs have
intensified so will the role we play as a business. We were delighted
to be named as the official hygiene partner for the COP26 meeting
in November 2021, enabling a safe event that supports a healthy
future for the planet. Further details on our role and commitment
at COP26 can be found on pages 20 to 21. In addition, we are
forging new ways of working with like-minded partners to drive
meaningful, sustainable change for example, we have started
building partnerships with WWF and the Fair Rubber Association.
More information on our partnerships and progress towards our
sustainability ambitions can be found on pages 16 to 17.
Culture and values
Our culture and values define the way that Reckitt does business
and this starts with our employees. We aim to create the space and
opportunities to help our employees make a difference and do the
right thing, always. During 2020 and 2021, Reckitt has played an
important role in the global fight to stop the spread of COVID-19,
which would have not been possible without the efforts of our
diverse and talented employees across the world. Being diverse
and inclusive is not an additional principle for us, it is integral to
the way we think and act. It is our collective responsibility to build
inclusion into everything we do, while ensuring we represent the
people we are and the global community we serve. Our Code
of Conduct reinforces our principles of business conduct and is
communicated to all employees each year with mandatory training.
Our values underpin our Code of Conduct and were further
enhanced in early 2020 with our renewed Purpose, Fight and
Compass. Our Global Code of Conduct sets out the level of
conduct expected from all Reckitt employees, contractors,
outsourced personnel and joint ventures as well as the Board of
Directors, as accountable, ethical, and compliant owners of our
Hygiene, Health and Nutrition GBUs. Further details on our culture
and values can be found on pages 121 to 122.
Diversity and inclusion
The Board is committed to ensuring that Reckitt employees have
the Freedom to Succeed, which starts with creating an inclusive
environment where everyone feels able to participate and
realise their full potential. In 2020, we established our Stronger
Together sessions. During 2021, we continued to hold meaningful
discussions, share inspiring stories, and are now putting what
we’ve learnt into practice, with inclusion firmly at the heart of
Reckitt. We have made a five-year commitment to invite Reckitt
employees worldwide to attend Stronger Together conversations.
These conversations provide a regular forum to discuss important
issues relating to diversity and to inclusion. Since 2020, we are
proud to have held ten virtual global Stronger Together events
with over 4,000 attendees joining live each time. From race and
ethnicity, to LGBTQ+ matters, and from driving gender balance,
to confronting workplace exclusion, as well as recognising the
steps for change, we’re now charting a course for a more inclusive
future at Reckitt.
At the end of 2020, we established our Global Inclusion Board,
which is chaired by our Chief Executive Officer (CEO) and made
up of senior leaders and sponsors of our Employee Resource
Groups (ERGs). Together, they set and drive our inclusion agenda.
Our Global Inclusion Board is accountable for strategic delivery,
governance, monitoring, reporting and communication. Our
inclusion strategy rests on six pillars. The work we’re doing on the
leadership, people and policy pillars helps ensure we are building
an inclusive culture internally. Externally, our inclusive approach to
Reckitt, Thane Road, Nottingham, UK
Reckitt Annual Report and Accounts 2021
105
Financial StatementsGovernanceStrategic Report Corporate Governance Report (Continued)
procurement, brands and partnerships aligns what we do with
who we are. We also announced our aim of gender balance at all
management levels by 2030. I am pleased to report that we were
also ranked number three in the Consumer category of the FTSE
100 for board diversity, in the UK Consumer Diversity Index 2021.
UK Corporate Governance Code 2018 and section 172 reporting
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. This Governance report demonstrates how
we have applied the principles and complied with the provisions
of the Code during the year. Our statement of compliance with the
Code can be found on page 107.
Effective engagement with our shareholders, our employees and
wider stakeholders is of utmost importance to Reckitt’s sustainable
success. Under section 172 of the Companies Act 2006 (CA 2006),
Directors must act in good faith and in a way that would be likely
to promote the success of the company for the benefit of its
shareholders. In its decision-making, the Board considers wider
stakeholder interests. Our key stakeholders include our employees,
shareholders, customers, consumers, partners, government, and
industry associations, and the communities in which we operate.
Throughout 2021, we remained committed to listening and
engaging with our stakeholders on key areas of Reckitt’s business.
In May, the Board participated in a listening session held by external
stakeholders involved and knowledgeable in the area of Nutrition,
who provided a wide variety of perspectives on the topic of
nutrition. The session was interactive and Board members were
invited to ask questions to the stakeholders. Additionally, in
October, the Board participated in a listening session held by
external stakeholders on the topic of ecosystems, biodiversity and
nature-based solutions. Details of our stakeholder engagement
activities undertaken during the year can be found from page 50.
Board composition and succession planning
As part of the ongoing refreshment of the Board and following
an extensive search and recruitment process to strengthen the
knowledge and capabilities of the Board, in January 2021, we
appointed Olivier Bohuon as a Non-Executive Director and as a
member of the Remuneration Committee. Olivier has spent many
years as a successful CEO of a large global company. He has deep
experience in healthcare products and markets and his insights
have been valuable to Board discussions during the year. In
addition, we also announced during the year, certain changes
to the composition of our Board Committees. In October, it was
announced that Laxman Narasimhan, CEO had stepped down as a
member of the Nomination Committee and that Elane Stock had
stepped down as a member of the Remuneration Committee and
had been appointed as a member of the Audit Committee. In
February 2022, we were delighted to announce that Alan Stewart
had joined the Board as a Non-Executive Director and member of
the Remuneration Committee. Alan brings significant corporate
finance and accounting experience from a variety of industries, as
well as executive leadership experience within a listed company
environment.
In December 2021, we announced that Rupert Bondy, General
Counsel & Company Secretary would leave Reckitt at the end of
February 2022. On behalf of the Board, I would like to thank Rupert
for his outstanding contribution to the business over the last 5
years. Rupert has been material in guiding the transition of the
Board, and supporting a number of major acquisitions and
disposals. We wish him all the best in his future endeavours.
In February 2022, Catheryn (Cathy) O’Rourke joined the company
as General Counsel & Company Secretary and member of Group
Executive Committee (GEC), following Rupert’s resignation. Cathy
joins with more than 20 years of professional expertise in running
global legal and compliance teams, managing litigation and
corporate transactions, overseeing financial reporting and
disclosure as well as supporting Board governance.
Reckitt, Thane Road,
Nottingham, UK
106
Further details on the Board and GEC’s succession plans, including
the recruitment process and selection criteria, can be found in the
Nomination Committee Report, commencing on pages 128 to 132.
Biographies of the members of our Board and GEC can be found
on pages 108 to 116.
Board performance review
The Board undertakes an annual review of its own and its
Committees’ performance and effectiveness. Last year,
the Board performance review was facilitated by Lintstock Ltd,
who have been engaged to conduct a three-year Board
Development Programme. Following a similar format to 2020,
for 2021 we conducted a performance review of the Board and
Committee’s facilitated by Lintstock Ltd. Details of this year’s Board
performance review, our progress against the outcomes from our
2020 Board performance review and action to be taken to address
the 2021 feedback can be found on pages 126 to 127.
Annual General Meeting and shareholder voting
The Board views the Annual General Meeting (AGM) as a valuable
opportunity to meet with its shareholders as well as an opportunity
for shareholders to put questions to the Chair, the Chairs of the
Committees and the Board. The safety of our shareholders,
Directors, employees, and other stakeholders remains of utmost
importance to us. In light of this and the continuing COVID-19
pandemic, in May 2021, our AGM was held as a closed meeting,
with a virtual webcast which shareholders were able to view
online. Shareholders and their proxies were able to vote in advance
of the meeting. Questions were submitted in advance of the AGM
or during the meeting in real time, enabling the Board to engage
and interact directly with shareholders. At last year’s AGM
shareholders voted in favour of allowing us the flexibility to
hold a hybrid AGM going forward, if deemed necessary. At the
time of publication, we anticipate this year’s AGM will be held
as a physical meeting.
Conclusion
I am extremely proud of the Board and all our Reckitt employees
for their continued 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
Chair
Reckitt Benckiser Group plc
13 April 2022
UK CORPORATE GOVERNANCE CODE
2018 STATEMENT OF COMPLIANCE
For the year ended 31 December 2021, the company
complied with all the provisions of the Code which is
available to view on the Financial Reporting Council’s
(FRC) website www.frc.org.uk, and the Disclosure
Guidance and Transparency Rules requirements to
provide a corporate governance statement.
In accordance with Section 4, Principle N, Provision 27
of the Code the Board considers that, taken as a whole,
this Annual Report and Accounts is fair, balanced and
understandable and provides the information necessary
for shareholders to assess the company’s position,
performance, business model and strategy.
HOW WE COMPLY WITH THE CODE
1. Board leadership and company purpose
Page
Our Board of Directors
Group Executive Committee
Reckitt’s approach to governance
Board activities during 2021
Our Purpose, strategy, values and culture
108-113
114-116
117-118
119-120
121-122
2. Division of responsibilities
How we are governed
123-125
3. Composition, succession and evaluation
Board performance review
Nomination Committee Report
126-127
128-132
4. Audit, risk and internal control
Audit Committee Report
133-140
5. Remuneration
Remuneration Committee Report
148-187
Reckitt Annual Report and Accounts 2021
107
Financial StatementsGovernanceStrategic Report
Board Leadership and Company Purpose
OUR BOARD OF
DIRECTORS
The Board consists of a balance
of Executive and Non-Executive
Directors who together have
collective accountability to Reckitt’s
shareholders and stakeholders.
Chris Sinclair
Chair of the Board
N R C
Nationality American
Board tenure 7 years, 2 months
Appointment
Appointed as a Non-Executive Director in February
2015 and as Chair of the Board in May 2018.
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.
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.
Skills and experience
Chris brings strong leadership skills and valuable
strategic insight to the Board, through his experience
as CEO and Chair of other large companies. He also
has a strong understanding of international
consumer-focused businesses.
Current external appointments
None
Laxman Narasimhan
Chief Executive Officer
Nationality American
Board tenure 2 years, 8 months
Appointment
Appointed as CEO-Designate in July 2019 and as CEO
on 1 September 2019.
Career
Prior to joining Reckitt, 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 PepsiCo’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 Center 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 a Master’s degree 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 of developing purpose-led brands
and driving consumer-centric and digital innovation.
He has previously advised global organisations, 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
Non-Executive Director of Verizon
Communications Inc.
Trustee of Brookings Institution
Member of the Council on Foreign Relations
Key
Chair
R Remuneration
N Nomination
A Audit
C Corporate Responsibility, Sustainability,
Ethics and Compliance
Appointments after
31 December 2021
108
Jeff Carr
Chief Financial Officer
Nationality British
Board tenure 2 years
Appointment
Appointed as Chief Financial Officer on 9 April 2020.
Career
Prior to joining Reckitt, Jeff was 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 Reckitt. Jeff started
his career as a graduate trainee at Unilever plc.
Jeff holds a degree in Chemical Engineering from
the University of Exeter and is a Chartered
Management Accountant.
Skills and experience
Jeff brings extensive experience across consumer
and retail companies and is also an alumnus of Reckitt.
Jeff has a record of transformational strategic and
operational leadership, consistent performance
delivery, strong capital allocation discipline and
building strong teams; all of which lead to longer-term
shareholder value creation.
Current external appointments
Chair of the Audit Committee and Non-Executive
Director of Kingfisher plc
Olivier Bohuon
Non-Executive Director
R
Nationality French
Board tenure 1 year, 3 months
Appointment
Appointed as a Non-Executive Director in
January 2021.
Career
Olivier was CEO of FTSE 100 medical devices company
Smith & Nephew plc from 2011 to 2018. Prior to that,
he served as CEO of healthcare, cosmetology and
pharmaceutical company Laboratoires Pierre Fabre
from 2010 to 2011, and from 2003 to 2010 he worked
at Abbott Laboratories, rising to Corporate Executive
Vice President and President of the pharmaceutical
products division. Earlier in his career, Olivier worked
at GlaxoSmithKline plc in positions of increasing
seniority. He also served on the Board of Smiths Group
plc from July 2018 to November 2020. Olivier became
a Knight of the Legion of Honour in 2007. Olivier has a
doctorate in Pharmacy from the University of Paris-Sud
and an MBA from HEC Business School in Paris.
Skills and experience
Olivier is a successful leader, with many years’
experience as CEO of a large, global company. Olivier
has a wealth of experience in healthcare products and
markets and brings great insight to the Board.
Current external appointments
Chair of Majorelle
External Director of Takeda Pharmaceutical
Company Limited
External Director of Virbac SA
Co-Founder and Board member of
AlgoTherapeutix SAS
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Financial StatementsGovernanceStrategic Report Board Leadership and Company Purpose (Continued)
Andrew Bonfield
Non-Executive Director
A N
Nationality British
Board tenure 3 years, 8 months
Appointment
Appointed as a Non-Executive Director in July 2018
and as 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 experience
Andrew brings more than three decades of financial
expertise to the Board. He is a strong leader, with
experience gained in large, complex organisations,
and has a history of driving strong financial
performance in the UK and globally. These skills are
valuable to the Board and to his role as Chair of the
Audit Committee.
Current external appointments
Chief Financial Officer of Caterpillar Inc.
Margherita Della Valle
Non-Executive Director
A
Nationality Italian/British
Board tenure 1 year, 8 months
Appointment
Appointed as a Non-Executive Director in July 2020.
Career
Margherita has been Chief Financial Officer of
Vodafone Group Plc since July 2018. She also runs
Vodafone Shared Services, which was established
in 2011 to optimise quality and efficiency across
Vodafone’s customer, technology, finance and HR
operations. Prior to her current role, Margherita was
Deputy Chief Financial Officer of Vodafone, between
2015 and 2018, having held a number of senior
positions in finance beforehand, including Group
Financial Controller and Chief Financial Officer of
Vodafone’s Europe region. Earlier in her career, she
joined Omnitel Pronto Italia, which became Vodafone
Italy in 1994, and held various consumer marketing
positions in data analytics and consumer base
management. From 2004 to 2007, she was Chief
Financial Officer of Vodafone Italy.
Margherita holds a Master’s degree in Economics from
Bocconi University in Italy.
Skills and experience
Margherita has extensive experience of financial
markets and digital technologies. She is deeply
experienced in business in both developed and
developing markets, bringing great insight to the
Board. These skills, together with her strong
leadership background, are valuable to the Board
and her membership of the Audit Committee.
Current external appointments
Chief Financial Officer of Vodafone Group Plc
Nicandro Durante
Senior Independent Director
R N C
Nationality Brazilian/Italian
Board tenure 8 years, 4 months
Appointment
Appointed as a Non-Executive Director in
December 2013 and 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,
Chief Executive Officer. Nicandro holds a degree in
Business Administration from the Pontifical Catholic
University of São Paulo, Brazil, and has obtained
postgraduate qualifications in finance and economics.
Skills and experience
Nicandro has strong leadership skills, developed in
various senior positions held throughout his career.
He has a strong background in the consumer goods
industry and strong international business experience,
bringing a global perspective to his role.
Current external appointments
Chair of TIM Participações S.A. and Chair of the
ESG Committee
110
Mary Harris
Non-Executive Director
Designated Non-Executive Director for engagement
with the company’s workforce
R N
Nationality British/Dutch
Board tenure 7 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 Non-Executive
Director 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 and Risk
Committee, and the Nominations Committee, and
Chair of the Remuneration Committee. She is also a
member of the Remuneration Committee of St. Hilda’s
College, Oxford and a Supervisory Director of HAL
Holding N.V. 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 and was Vice-Chair of the
Supervisory Board and Chair of the Remuneration
Committee of Unibail-Rodamco-Westfield S.E.
She was formerly a Non-Executive Director and Chair
of the Remuneration Committee of J Sainsbury plc.
Mehmood Khan
Non-Executive Director
Mary graduated from the University of Oxford with a
Master’s degree in Politics, Philosophy and Economics
and completed her MBA at Harvard Business School.
Skills and experience
Mary has substantial experience in consumer and retail
businesses across China, Southeast 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 Remuneration Committee of St. Hilda’s
College, Oxford University
Supervisory Director of HAL Holding N.V.
C
Nationality American/British
Board tenure 3 years, 8 months
Appointment
Appointed as a Non-Executive Director in July 2018.
Career
Mehmood has been Chief Executive Officer of Life
Biosciences Inc. since April 2019. He was previously
Vice Chair 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 Limited. 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
Pam Kirby
Non-Executive Director
Physicians, London and of the American College
of Endocrinology, and holds two Honorary PhDs
in Humanities and International Law.
Skills and experience
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
research and development efforts to create
breakthrough innovations.
Current external appointments
Chief Executive Officer of Hevolution Foundation
Executive Chair of Life Biosciences Inc.
C A N
Nationality British
Board tenure 7 years, 2 months
Appointment
Appointed as a Non-Executive Director in February 2015
and as Chair of the CRSEC Committee in July 2016.
Career
Pam served as Chair 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 experience
Pam brings to the Board extensive knowledge of
the healthcare sector and a wealth of international
business and 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.
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Financial StatementsGovernanceStrategic Report Board Leadership and Company Purpose (Continued)
Sara Mathew
Non-Executive Director
A
Nationality American
Board tenure 2 years, 8 months
Appointment
Appointed as a Non-Executive Director in July 2019.
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 as 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 experience
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 has a proven track record of adding significant
strategic value, brings great insight to the Board
through her previous positions, and demonstrates
valuable leadership qualities.
Current external appointments
Chair of Freddie Mac
Director of Dropbox Inc.
Director of State Street Corporation
Director of XOS Corporation
Elane Stock
Non-Executive Director
A
Nationality American
Board tenure 3 years, 7 months
Appointment
Appointed as a Non-Executive Director in
September 2018.
Career
Elane has been Chief Executive Officer of
ServiceMaster Brands since October 2020. 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. She
has also held the position of Director at Equifax Inc.
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 experience
Elane brings great sector-relevant experience and
insight of consumer goods products to the Board,
particularly in personal care and wellness. She
also brings vast knowledge of emerging markets
and the changing channels of trade and
consumer preferences.
Current external appointments
Chief Executive Officer of ServiceMaster Brands
Director of Yum! Brands, Inc.
Alan Stewart
Non-Executive Director
R
Nationality British
Board tenure 2 months
Appointment
Appointed as a Non-Executive Director and member
of the Remuneration Committee in February 2022.
Career
Alan was Chief Financial Officer of Tesco PLC from
2014 to 2021 where he played a key role in the
turnaround of Tesco. Prior to his role at Tesco, Alan
was CFO of Marks & Spencer Group plc from 2010 to
2014. He previously served as CFO of AWAS, Group
Finance Director of WH Smith PLC and CEO and
CFO of Thomas Cook Holdings. He also served on
the board of Games Workshop Group plc as a
non-executive director. Alan is currently a
Non-Executive Director of Diageo plc having been
appointed in September 2014, has been a member
of the Nomination, Remuneration and Audit
Committees of Diageo plc from appointment, and
has been Chair of the Audit Committee since 2017.
Skills and experience
Alan brings to the Board significant corporate
finance and accounting experience from a variety of
industries, including retail, banking and travel, as well
as executive leadership experience within a listed
company environment.
Current external appointments
Non-Executive Director of Diageo plc
112
DIVERSE LEADERSHIP
The graphs below show the Board’s composition, tenure, nationality, ethnic diversity
and skills. Further details regarding diversity at Group Executive Committee level and
our approach to diversity and inclusion can be found on pages 130 to 131.
Directors as at 31 December 2021
Length of tenure as at 31 December 2021
7
5
5
3
4
Male
Female
0-3 years
3-6 years
6-9 years
9+ years
Nationality as at 31 December 2021
Ethnic diversity as at 31 December 2021
3
4
1
1
1
1
1
3
9
British
American
British/Dutch
American/British
Ethnic minority group
Non-ethnic minority group
Brazilian/Italian
Italian/British
French
Board members skills overview1
2
6
Financial
expertise
7
Strategy
13
Consumer goods
& retail
11
Leadership
13
7
Healthcare &
Pharmaceuticals
6
With skill
Without skill
1. The figures reflect the number of Board
members at the date of publication
Reckitt Annual Report and Accounts 2021
113
Financial StatementsGovernanceStrategic Report Board Leadership and Company Purpose (Continued)
GROUP EXECUTIVE
COMMITTEE
01
02
Laxman Narasimhan
Chief Executive Officer
Jeff Carr
Chief Financial Officer
03
04
Kris Licht
President Health &
Chief Customer Officer
Volker Kuhn
President Hygiene
05
06
Laxman Narasimhan
Chief Executive Officer
01
Nationality American
Company tenure 2 years, 8 months
Experience
Laxman joined Reckitt as CEO-Designate in July 2019 and was appointed as
CEO on 1 September 2019. Prior to joining Reckitt, 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 Center 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 a Master’s degree 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. Laxman is an outstanding leader who brings wide experience
across the consumer goods sector. He has previously 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 of developing purpose-led
brands and driving consumer-centric digital innovation.
Pat Sly
President Nutrition
Ranjay Radhakrishnan
Chief Human Resources Officer
Jeff Carr
Chief Financial Officer
02
07
08
Nationality British
Company tenure 2 years
Miguel Veiga-Pestana
Head of Corporate Affairs &
Chief Sustainability Officer
Sami Naffakh
Chief Supply Officer
09
10
Angela Naef
Chief R&D Officer
11
Filippo Catalano
Chief Information &
Digitisation Officer
12
Rupert Bondy
General Counsel &
Company Secretary
Catheryn O’Rourke
General Counsel &
Company Secretary
114
Experience
Jeff joined Reckitt as Chief Financial Officer on 9 April 2020. Prior to joining
Reckitt, Jeff was 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 Reckitt. Jeff started his career as a graduate trainee at Unilever plc.
Jeff is currently Chair 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.
Jeff brings extensive experience across consumer and retail companies. He has
a strong track record of transformational strategic and operational leadership,
consistent performance delivery, strong capital allocation discipline and
building strong teams.
Kris Licht
President Health & Chief Customer Officer
03
Nationality American
Company tenure 2 years, 5 months
Experience
Kris joined Reckitt in November 2019 as Chief Transformation Officer. On 1 July
2020, Kris became President Health and Chief Customer Officer. Prior to joining
Reckitt, 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 brings strong operational and strategic experience to
the Committee.
Volker Kuhn
President Hygiene
04
Nationality German
Company tenure 1 year, 8 months
Experience
Volker Kuhn has been President Hygiene since May 2021.
Prior to his current role, Volker was the Chief Transformation Officer at Reckitt
where he led the significant acceleration of our productivity program,
turbo-charged new growth platforms and led corporate strategy.
Prior to joining Reckitt, Volker spent 26 years with Procter & Gamble (P&G) in
a range of international finance, marketing, and senior general management
roles. In his last role with P&G, Volker led the fabric care business unit, Europe,
and the global unit-dose detergent platform.
Volker is a passionate brand builder and has a strong track record of leading
successful business turnarounds, growth initiatives and transformations,
including the carve-out and divestiture of Duracell from P&G. He started his
career at Deutsche Bank and subsequently worked for a small consulting firm
before joining P&G.
Volker currently serves as Chair and a Non-Executive Board member of FRoSTA
AG, a leading European frozen food company. He is based in Amsterdam.
Ranjay has experience in a number of specialist areas of HR such as talent,
diversity and inclusion, learning, reward, organisational effectiveness,
complementing large generalist roles in both mature and developing markets.
Ranjay has lived and worked in several countries, including the UK, the
Netherlands, Singapore, the 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.
Miguel Veiga-Pestana
Head of Corporate Affairs & Chief Sustainability Officer 07
Nationality British
Company tenure 5 years
Experience
Miguel joined Reckitt as the Head of Corporate Affairs in 2017, responsible for
all aspects of strategic communications, brand and reputation management.
He was subsequently appointed as Chief Sustainability Officer in 2018
responsible for overseeing the development and integration of Reckitt’s
sustainability and purpose-led agenda. He became Head of Corporate Affairs
& Chief Sustainability Officer and a member of the Group Executive Committee
in April 2020.
Pat Sly
President Nutrition
05
Prior to joining Reckitt, Miguel was Chief Communications Officer at the Bill &
Melinda Gates Foundation, based in Seattle, US. Previously, Miguel spent over
a decade at Unilever and held several regional and global roles, notably as the
Vice-President for Global Sustainability Strategy and Advocacy. Miguel has
more than 30 years’ external affairs, communications and sustainability
experience, having held positions in the UK, US and Brussels.
Nationality American
Company tenure 4 years, 7 months
Experience
Pat joined Reckitt as part of the Mead Johnson Nutrition (MJN) acquisition
in 2017. He was appointed as Chief Operating Officer, Nutrition in July 2021.
In February 2022, Pat was appointed as President Nutrition.
Pat has more than 20 years of experience in senior leadership roles in general
management, marketing, and sales across North America, Europe, Asia Pacific
and Latin America. In his role as Chief Operating Officer, Nutrition, Pat leads the
global Nutrition business which includes Infant Formula & Child Nutrition (IFCN),
Specialty Nutrition, Maternal Nutrition and Adult Nutrition.
Pat holds a degree in Business from the Kelley School of Business at Indiana
University and an MBA from the Olin Business School at Washington University
in St. Louis.
Ranjay Radhakrishnan
Chief Human Resources Officer
06
Nationality Indian
Company tenure 2 years, 1 month
Experience
Ranjay Radhakrishnan joined Reckitt as Chief Human Resources Officer on
1 March 2020. Ranjay has 29 years’ experience in the human resources function
across different geographies and industries. Prior to joining Reckitt, 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.
Sami Naffakh
Chief Supply Officer
08
Nationality French
Company tenure 1 year, 9 months
Experience
Sami joined Reckitt as Chief Supply Officer on 1 July 2020 and is responsible for
Reckitt’s global supply chain operations, which includes planning, procurement,
manufacturing and logistics. Since January 2021, he has also been responsible
for Reckitt’s Quality, Environmental Health & Safety (EHS) and Quality
Compliance teams.
Sami brings to Reckitt close to 30 years of broad international leadership
experience in fast-moving consumer goods companies such as Unilever,
Danone and Estée Lauder – as well as Reckitt, where he previously held
several leadership positions from 2003 to 2009. Most recently, Sami was
Executive Vice President at Arla Foods, the Danish farmer-owned dairy
cooperative, where he headed up supply chain operations globally. Sami is
skilled in leading major transformations of supply chain operations, increasing
competitiveness, agility and sustainability to quickly adapt to evolving
consumer trends and customer requirements.
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Angela Naef
Chief R&D Officer
09
Rupert Bondy
General Counsel & Company Secretary
11
Nationality American
Company tenure 1 year, 6 months
Nationality British
Company tenure 5 years, 2 months
(Resigned in February 2022)
Experience
Angela joined Reckitt as Chief R&D Officer in September 2020. Angela is
responsible for elevating Reckitt’s science capability and platforms as well as for
driving external partnerships. She is a passionate problem solver, innovator and
connector. With a strong belief in the power of collaboration, Angela is focused
on enabling the Research & Development organisation to deliver meaningful
solutions addressing both mega trends and sustainability, to deliver growth.
Angela brings to Reckitt over 22 years of diverse senior leadership experience in
product and business development roles. Most recently, Angela spent ten years
at DuPont, in various technical and commercial leadership roles, where she led
the Nutrition & Biosciences Global Technology and Innovation organisation.
Angela has a strong track record of accelerating innovation in the areas of food
and nutrition sciences, materials, health and clinical sciences, regulatory and
biotechnology. She is a passionate advocate for diversity and inclusion and
actively works on STEM education to inspire the next generation of new
scientists, engineers and experts. Angela is a graduate of the University of
California, Davis with a PhD in Physical Chemistry, and is a Six Sigma Black Belt.
Filippo Catalano
Chief Information & Digitisation Officer
10
Nationality Italian
Company tenure 1 year
Experience
Filippo joined Reckitt as Chief Information & Digitisation Officer on 1 April 2021.
Filippo is responsible for building and maintaining Reckitt’s competitive
leading-edge IT, data and digital capabilities. Filippo brings to Reckitt extensive
leadership experience in defining and shaping IT, digital portfolios and
technology-enabled new business models across leading consumer goods
organisations. In his previous role, Filippo was SVP, Global Chief Information
Officer at Nestlé, where he led the transformation of technology platforms,
data, analytics, e-business, processes and tech skills. Prior to Nestlé Filippo
worked at Procter & Gamble (P&G) across geographies, categories and IT
disciplines, leading the digital transformation in key brands and corporate
initiatives. Filippo currently serves as a Non-Executive Director at Farmer
Connect, a leading tech company providing blockchain-based traceability
for farm-to-fork supply chains.
Experience
Rupert joined Reckitt as General Counsel & Company Secretary in January 2017
and is responsible for legal matters across the Group. He 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 plc, 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 Reckitt. Rupert
is a seasoned general counsel with extensive experience across a number of
sectors, including consumer healthcare.
Catheryn O’Rourke
General Counsel & Company Secretary
12
Nationality American
Company tenure 2 months
Experience
Cathy joined Reckitt as General Counsel & Company Secretary in
February 2022, and is responsible for legal, company secretarial and
legal compliance matters across Reckitt.
Cathy brings more than 20 years of experience managing global teams
and handling complex legal and compliance matters. Most recently,
Cathy was Chief Legal and Compliance Officer at Smith & Nephew plc.
Prior to joining Smith & Nephew plc, Cathy spent 11 years of her career
with Davis Polk.
Cathy is a graduate of Princeton University, Harvard Law School and the
University of New South Wales, Australia.
Other Group Executive Committee members who served in
the year
Harold van den Broek
President Hygiene, joined Reckitt in 2014 and left in May 2021
Aditya Sehgal
President of Nutrition, e-RB & Greater China, joined Reckitt in 1994 and left in
October 2021
116
RECKITT’S APPROACH
TO GOVERNANCE
Leadership at Reckitt
There is a clear and effective leadership structure in place at
Reckitt. 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 CRSEC Committee. Each Committee operates
under terms of reference approved by the Board. The terms of
reference are reviewed regularly, with the last review taking place
in November 2021, and can be found on the company’s website,
at www.reckitt.com/investors/corporate-governance. The current
Committee membership of each Director is shown on pages 108
to 112. There are also three supporting Management Committees:
the Disclosure Committee; the Group Executive Committee (GEC),
and the Risk, Sustainability and Compliance Committee (RSCC).
Our Board
The Board is collectively responsible for the overall leadership of the Group and for promoting its long-term sustainable success whilst focusing
on its strategic direction, purpose, values and governance with the highest regard to the principles of the Code. There is a clear division of
responsibilities between the Board, its Committees and Management Committees.
Nomination Committee
Chaired by Chris Sinclair
Audit Committee
Chaired by Andrew Bonfield
Remuneration Committee
Chaired by Mary Harris
CRSEC Committee
Chaired by Pam Kirby
Responsible for monitoring the
integrity of Reckitt’s Financial
Statements and for ensuring
effective functioning of internal
audit, internal financial control
and risk management. It is
also responsible for managing
the company’s relationship
with its External Auditor.
Responsible for making
recommendations to the
Board on suitable candidates
for appointment to the Board,
its Committees and senior
management and to 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.
Responsible for assisting the
Board 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. The Committee
is responsible for determining
the remuneration for the
Chair, Executive Directors
and senior management.
Responsible for supporting
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.
More details are set out in
the Nomination Committee
Report on pages 128 to 132
More details are set out in
the Audit Committee Report
on pages 133 to 140
More details are set out in the
Remuneration Committee
Report on pages 148 to 187
More details are set out in
the CRSEC Committee
Report on pages 141 to 147
Disclosure Committee
Chaired by Laxman Narasimhan
Responsible for ensuring accuracy and
timeliness of disclosure of financial
and other public announcements.
Group Executive Committee (GEC)
Chaired by Laxman Narasimhan
The GEC is responsible for overseeing
Reckitt’s management and ensuring
collaboration between GBUs, functions and
in-market operations. It recommends and
implements the strategy and related budget
as approved by the Board. The GEC drives
business and cultural transformation, reviews
business performance and approves business
development plans and major investments. It
plays a critical role in talent management and
development and oversees the integration of
sustainability within business operations.
Risk, Sustainability and Compliance
Committee (RSCC)
Chaired by Laxman Narasimhan
Provides oversight of risk across the
organisation and makes recommendations
to the CRSEC Committee for actions to
be taken in respect of the Group’s legal
compliance & ethics, sustainability, external
affairs, employee health and safety, quality,
consumer safety and regulatory related
matters, including compliance strategies,
policies, programmes and key activities.
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Board attendance during 2021
In 2021, there were five scheduled Board meetings, three of which
were held via videoconference as permitted by the company’s
Articles of Association, owing to restrictions imposed by the
COVID-19 pandemic. An additional six Board meetings were held
during the year relating to various matters including; potential
mergers and acquisitions, review of going concern considerations,
approval of the Reckitt 2021 Annual Report and Notice of Meeting,
and confirmation of AGM arrangements. The formal meetings in
September each year are strategy sessions which are normally
held overseas, to allow the Board to immerse itself in the Group’s
operations, to visit local sites and meet the local workforce.
This year, in light of the easing of government restrictions, the
September 2021 strategy sessions were held in person in the UK.
As part of the September Board schedule, members of the Board
participated in a site visit to Reckitt’s Nottingham factory. In
addition, Board members held roundtable sessions with local
employees to listen to their experiences of working for Reckitt.
Following the conclusion of each scheduled Board meeting, the
Chair held a session with the Non-Executive Directors, without the
Executive Directors present. There were four scheduled and
two additional Audit Committee meetings, five scheduled
Remuneration Committee meetings, two scheduled and one
additional Nomination Committee meetings, and four scheduled
meetings of the CRSEC Committee.
The table below sets out the attendance by Directors at the
scheduled Board and 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 Chair 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 were convened at short notice,
which can make it difficult for some Directors to attend due to
prior commitments and their home locations.
Board
Audit
Committee
Remuneration
Committee
CRSEC
Committee
Nomination
Committee
5
Scheduled meetings
4
Scheduled meetings
5
Scheduled meetings
4
Scheduled meetings
2
Scheduled meetings
Andrew Bonfield
Jeff Carr
5/ 5
5/ 5
Margherita Della Valle
4 1/2 / 5
Nicandro Durante
Mary Harris
Mehmood Khan
Pam Kirby
Sara Mathew
Laxman Narasimhan1
Chris Sinclair
Elane Stock2
Olivier Bohuon
5/ 5
5/ 5
5/ 5
5/ 5
5/ 5
5/ 5
5/ 5
5/ 5
4 / 5
4 /4
3/4
3/4
4 /4
1 / 1
4 /4
4 /4
4 /4
4 /4
5/ 5
5/ 5
5/ 5
4 /4
4 / 5
1. Stepped down from the Nomination Committee on 1 October 2021
2. Stepped down from the Remuneration Committee and joined the Audit Committee on 25 October 2021
2 / 2
2 / 2
2 / 2
2 / 2
1 / 1
2 / 2
118
BOARD ACTIVITIES DURING 2021
How Board meetings are structured
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 Chair and CEO with
the support of the General Counsel & Company Secretary.
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, CRSEC and
Nomination Committees update the Board on the proceedings
of those meetings, including key topics and areas of concern.
Our activities during the year
Strategy and planning
At the conclusion of every scheduled Board meeting, the Chair
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 118.
The Board uses its meetings as a way of discharging its
responsibilities set out in section 172 of the CA 2006 and considers
its various stakeholder groups when making decisions to promote
the success of the company as a whole.
Group plans and budgets
• Reviewed forecasts and key performance targets, including
assumptions, scenarios and projections
•
In November, reviewed the Group’s financial plan for 2022
Strategy
• Board members met in person for a three-day meeting in
September 2021 to discuss strategy and the innovation pipeline
Mergers and acquisitions
• Sold the Scholl brand to Yellow Wood Partners to bring greater
focus and to strengthen our portfolio
• Completed the sale of our Infant Formula and Child Nutrition (IFCN)
business in China to Primavera Capital Group following a
comprehensive review by the Board of the strategic options for
the business, marking another step in our strategy to Rejuvenating
Sustainable Growth and create long-term value by actively, and
decisively, managing our portfolio
• Acquired the Biofreeze brand from Performance Health to
strengthen our Health portfolio and deepen Reckitt’s presence
within the broader pain category in the US
Rebranding as Reckitt
• Reviewed and approved the rebranding of the company as Reckitt,
as part of our transformation towards sustainable growth. The new
brand identity is more recognisable to our stakeholders and is built
on our Purpose: to protect, heal and nurture in the relentless
pursuit of a cleaner, healthier world
Business updates
• Reckitt strategic reviews, including COVID-19 impact at Group and
GBU level, functional reviews of certain business areas and capability
centres and status updates on transformation programmes
Sustainability strategy
• Launched our sustainability ambitions to 2030 to provide a road
map of how we embed sustainability in Reckitt activities, whilst
driving environment and societal impact
Financial oversight
Reporting
• Reviewed and approved Reckitt’s Annual Report and Financial
Statements including compliance with reporting requirements
for 2021
• Reviewed and approved Reckitt’s half-year results
• Provided results presentations to investors and employees during
the year
Going concern
• Reviewed going concern and liquidity considerations arising from
the COVID-19 pandemic
Financial resources
• Reviewed the company’s financial position, Group debt and
funding arrangements, including issuance of bonds
Interim and final dividend payments
• Approved the final 2020 and interim 2021 dividend payments
Key
Customers
Employees
Partners
Communities
Government
and industry
associations
Consumers
Shareholders
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Board Leadership and Company Purpose (Continued)
Leadership and governance
Board and Committee performance review
• Conducted the annual Board performance review, identified areas
for improvement and recommended actions
• Passed a special resolution to update Reckitt’s Articles of
Association, giving the Board the flexibility to hold a hybrid
AGM going forward
• Considered and proactively addressed actions from our 2020
• Held a Board listening session on Nutrition in which we heard
internal Board performance review
from external experts and were invited to ask questions
Composition and succession planning
• Alan Stewart was appointed as a Non-Executive Director and
member of the Remuneration Committee in February 2022
• Laxman Narasimhan, CEO stepped down as a member of the
Nomination Committee effective from 1 October 2021
• Elane Stock stepped down as a member of the Remuneration
Committee and was appointed as a member of the Audit
Committee, effective from 25 October 2021
• Management succession planning reviewed in November
Shareholders and stakeholders
• Held the 2021 AGM as a closed meeting. Shareholders had the
opportunity to pre-submit questions or ask them live during
the meeting
Risk management and internal control
Risk appetite
• The Board is responsible for compliance with the Code and the
FRC’s Guidance on Risk Management, Internal Control and Related
Financial and Business Reporting. The sectors and environment
within which Reckitt 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 Reckitt’s business objectives, and the Board relies on these
controls insofar as they are able to provide reasonable, but not
absolute, assurance against material misstatement or loss. The
Group’s principal and emerging risks and mitigating factors are
detailed on pages 88 to 102
• As part of its risk control, Reckitt 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
Principal risks and internal controls
• Conducted an annual review of Reckitt’s principal and emerging
risks and internal controls
• Reckitt is committed to maintaining strong internal controls and
further enhancing these. Further information on internal control
activities during the year can be pound on pages 137 to 138 of the
Audit Committee Report. Functional and operational 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 Reckitt’s business model, future performance,
solvency and liquidity. Each principal and emerging risk is overseen
by the Board, or a designated Committee of the Board, and is subject
to formal deep-dive reviews as appropriate at Board, GEC and GBU
meetings. More details on the Group’s principal strategic risks and
uncertainties can be found in the Strategic Report on pages 88 to 102
120
• Held a Board listening session on the topic of Ecosystems,
Biodiversity and Nature-based solutions
Compliance
• Reviewed and approved governance matters, such as the
Schedule of Matters Reserved for the Board, Committee terms
of reference, Directors’ conflicts of interest and compliance with
the Code and best practice
• Approved Reckitt’s 2020 Modern Slavery Act Statement,
as recommended by the CRSEC Committee
• 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 Accounts have been
satisfactorily completed with no significant failings or weaknesses
identified. Reckitt’s ongoing controls transformation program in
preparation for internal controls changes arising from the BEIS
consultation, together with the investigation referred to in the Audit
Committee Report on page 137, has identified certain control
improvement opportunities that management is currently undertaking
Viability Statement
• Considered and approved the 2021 Annual Report Viability
Statement upon recommendation of the Audit Committee
COVID-19
• Received updates on the company’s response to and the impact of
COVID-19 on the business, including focus on supply and consumer
demand, the workforce and risk management
Treasury policy
• Reviewed and approved of the Group’s Treasury policies
Climate-related risk and environmental, social and governance
(ESG) matters
• The Board oversees, considers and reviews the Group’s ESG
strategy and has oversight of climate-related risks and
opportunities. As part of the Board’s annual review of our principal
and emerging risks, sustainability was considered. The Board’s
focus included, both ESG performance, and the introduction of
the new Task Force on Climate-related Financial Disclosures (TCFD)
climate reporting regulation that impacts the way we report
key metrics. In addition, the Board identified and assessed the
principal ESG risks and the potential effects on Reckitt’s short- and
long-term value. More information on sustainability can be found on
pages 16 to 21. Our TCFD summary can be found on pages 66 to 67
• The CRSEC Committee supports the Board in reviewing,
monitoring, and assessing the Company’s approach to
sustainability, which includes climate change. The CRSEC
Committee reports to the Board regularly at Board meetings,
providing an update on sustainability objectives and progress
against our targets. Further details on the activities of the CRSEC
Committee can be found on pages 141 to 147
OUR PURPOSE, STRATEGY,
VALUES AND CULTURE
Our Purpose, Fight and Compass are fundamental to Reckitt’s
culture and values. Our success as a business is founded on our
strong, distinctive culture. We want all our employees to have a
sense of belonging and take personal pride in what they do. Our
approach is anchored by our Purpose: to protect, heal and nurture
in the relentless pursuit of a cleaner and healthier world. Our
Compass sets out our values and behaviours. At its heart is the
goal of always doing the right thing, putting consumers and people
first, seeking out new opportunities, striving for excellence and
building a culture of shared success.
To evolve our culture and achieve sustainable outperformance,
Leadership Behaviours are key. Our Leadership Behaviours set out
how we expect each of our leaders to behave and define what
good leadership looks like. Reckitt’s leaders are expected to Own,
Create, Deliver and Care, and in doing so, live our Purpose, Fight,
and Compass, actively listen, learn, seek new opportunities, and
focus on what matters. We have been proactively assessing our
culture, including not only the role of our leaders but also the
efforts of our employees. More information on our culture can
be found on pages 46 to 49 and pages 55 to 56.
Across the globe, we have an interconnected vision that all
our employees have the Freedom to Succeed. Our Freedom
to Succeed employee value proposition aims to instil, promote,
reinforce, and reward the positive behaviours and attributes
that make that real. Our focus is on maintaining an open, positive,
inclusive culture by promoting continuing dialogue across the
company. The innovative and entrepreneurial spirit of our
employees is at its best when diverse teams unite, share ideas,
and create pioneering solutions.
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121
Global
Headquarters,
Turner House,
Slough, UK
Financial StatementsGovernanceStrategic Report Board Leadership and Company Purpose (Continued)
How the Board monitors culture
A key focus of the Board is to monitor culture and ensure alignment between our Purpose, values, and behaviours. Our culture and values
at Reckitt are defined by the Board and the GEC. Regular interactions with employees help the Board monitor culture.
How we monitor culture
Board interactions and engagement to monitor culture throughout the year
Connecting directly with our employees
Monitoring employee perceptions
Creating a forum for employees
to be heard
Board members meet with employees regularly. As part of this year’s September Board meeting
schedule, Board members visited the Nottingham factory and held round table discussions with
employees on the topics of inclusion, consumers, innovation and science, sustainability and
business transformation. The Board reviewed feedback from the round table discussions at its
November meeting. Feedback showed that employees were proud to work for Reckitt, that
significant progress had been made in developing a positive company culture, the handling of
COVID-19 working arrangements showed the company putting people first and that there was
a real sense of care for employees. In addition, certain areas were highlighted as requiring more
work, such as, complexity in the organisation, improving female representation in senior roles,
and the need for stability during a period of significant change within the organisation. Based
on the feedback received, the Board continues to monitor actions being taken to address
employee concerns.
Regular global all-employee surveys include questions to gauge employees’ perceptions and
understanding of leadership, inclusion, and wellbeing at Reckitt, and identify areas which require
greater attention. This year’s survey highlighted that employees would recommend Reckitt as a
place to work; they feel there is a culture of achievement at Reckitt; they are proud to work for
Reckitt; and value the commitments Reckitt makes. Responses from the survey also identified
areas that need further improvement, such as: creating an even more inclusive workplace with
more transparency on equal opportunities and career progression; improving processes and
automation of manual tasks; and investing in and developing people. The Board will continue
to monitor progress against these areas.
Our Stronger Together conversations provide a forum for employees across the world to share
inspiring and challenging stories focused on issues relating to diversity and inclusion. Board
members attended Stronger Together conversations throughout the year and Mary Harris, our
Designated Non-Executive Director for engagement with the company’s workforce, addressed
employees during a session focused on race and ethnicity.
Ensuring employees are informed
Quarterly all-employee global live-streaming results broadcasts were held by the CEO and CFO
to present the company results and employees are invited to ask questions and interact directly
with presenters.
Staying informed of legal &
compliance matters
At each Board meeting, the CRSEC Committee reports to the Board on legal compliance and
ethics matters, including the Group’s Speak Up programme, which provides safe communication
channels for employees wishing to raise concerns on potential violations of regulations, internal
policies or any misconduct observed at Reckitt.
Maintaining open communication
Our Ask Laks forum on the employee intranet provides a place where any employee can post
questions to our CEO, which are answered via the intranet, or in an informal discussion video.
122
Division of Responsibilities
HOW WE ARE
GOVERNED
Defining roles and responsibilities
The Board consists of a balance of Executive and Non-Executive
Directors who, together, have collective accountability to Reckitt’s
shareholders and stakeholders as well as responsibility for the
overriding strategic, financial and operational objectives and
direction of Reckitt. 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 2021, and broadly covers:
• Matters which are legally required to be considered or decided
by the Board, such as approval of Reckitt’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
Non-Executive
• 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
• 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 on
the Reckitt website at www.reckitt.com/investors/corporate-
governance.
Board roles and responsibilities
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 the executive leadership
of the business. The key roles are defined in greater detail below.
The Chair
• Leading the Board and taking responsibility for the Board’s overall
• Ensuring an appropriate balance is maintained between the
effectiveness in directing the company
interests of shareholders and other stakeholders
• Upholding the highest standards of integrity and ethical leadership,
• Leading the annual performance review process for the Board and
leading by example and promoting a culture of openness and
debate, based on mutual respect, both in and outside the
boardroom and in line with our purpose, values, strategy and culture
• Chairing Board, Nomination Committee and shareholder meetings
and setting Board agendas
• Encouraging constructive challenge and facilitating effective
communication between the Board, management, shareholders
and wider stakeholders, whilst promoting a culture of openness
and constructive debate
The Senior Independent Director
• Acting as a sounding board for the Chair on Board-related matters
• Acting as an intermediary for other Directors as necessary
• Evaluating the Chair’s performance on an annual basis
• Chairing Board and Nomination Committee meetings in the
absence of the Chair
its Committees and addressing any subsequent actions
• Promoting the highest standards of corporate governance
• Building a well-balanced, diverse and highly effective Board
• Ensuring Directors receive accurate, timely and clear information
• Ensuring there are appropriate induction and development
programmes for all Board members
• Ensuring the long-term sustainability of the company
• Being available to shareholders and stakeholders to address
any concerns, which they have been unable to resolve through
normal channels
• Leading the search and appointment process for a new Chair,
when necessary
Non-Executive Directors
• Providing independent input into Board decisions through
constructive challenge and debate, strategic guidance and
specialist advice
• Ensuring there are effective systems of internal control and
risk management and that these are continually monitored
and reviewed
• Setting and approving the company’s long-term strategic, financial
• Setting appropriate levels of remuneration for Executive Directors
and operational goals
• Examining the day-to-day management of the business against the
and ensuring performance targets are closely aligned with
shareholder interests
performance targets and objectives set, ensuring that
management is held to account
• Development of succession planning and the appointment and
removal of senior management
• Reviewing financial information and ensuring it is complete,
• Taking into account and responding to shareholders’ views.
accurate and transparent
Reckitt Annual Report and Accounts 2021
123
Financial StatementsGovernanceStrategic Report Division of Responsibilities (Continued)
Designated Non-Executive Director for engagement with the company’s workforce
• Overseeing the Board’s engagement with the company’s
• Providing an employee voice in the boardroom and reporting
workforce together with management, to understand more about
engagement and the culture of the company
on certain matters relating to company culture, purpose,
and improvements
• Developing and implementing employee engagement initiatives
Executive
The Chief Executive Officer
• Principally responsible for the day-to-day management of Reckitt,
in line with the strategic, financial and operational objectives set
by the Board
• Chair of the GEC, 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
• Maintaining relationships with investors and advising the
Board accordingly
• Managing Reckitt’s risk profile and establishing effective
internal controls
• Ensuring there are effective communication flows to the Board
and the Chair, and that they are regularly updated on key matters,
including progress on delivering strategic objectives
• Regularly reviewing the organisation structure, developing a Group
executive team and planning for succession
• Providing clear leadership to promote the desired culture, values
and behaviours to inspire and support the company’s workforce
• Ensuring the long-term sustainability of the business
The Chief Financial Officer
• Supporting the CEO in developing and implementing the
company’s strategy
• Ensuring the Board receives accurate, timely and clear information
in respect of the Group’s financial performance and position
• Leading the global finance function, and developing key talent and
• Developing and recommending the long-term strategic and
planning for succession
financial plan
• Responsible for establishing and maintaining adequate internal
controls over financial reporting and for the preparation and
integrity of financial reporting
The Company Secretary
• Providing advice and support to the Chair and all Directors
• Facilitating an induction programme for all Board members
• 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
• Ensuring there are policies and processes in place to help the
Board function efficiently and effectively
• Keeping abreast of shareholders’ views
A full description of the roles and responsibilities of the Chair, Chief Executive Officer and Senior Independent Director can be found in the
Corporate Governance section of our website: www.reckitt.com.
How we manage conflicts of interest
Directors have a duty under the 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 General Counsel &
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 Nomination Committee
and 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 the
CA 2006 and the 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.
Managing time commitment and ‘overboarding’
On appointment, Non-Executive Directors are made aware of
the need to, 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
Chair 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 three months’
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 Chair and each Non-Executive
124
Alan Stewart received a tailored induction following his
appointment to the Board as a Non-Executive Director and
member of the Remuneration Committee. This included meetings
with key management across the business. He attended virtual
meetings, with the CEO, CFO and General Counsel & Company
Secretary. He also met with the Presidents of the three GBUs. In
addition, he had meetings with members of the GEC, including the
Chief R&D Officer, Chief Supply Officer, Chief HR Officer, Chief
Information & Digitisation Officer and Head of Corporate Affairs &
Chief Sustainability Officer. Alan is a member of the Remuneration
Committee and had discussions with Mary Harris, Chair of the
Remuneration Committee, and the Group Head of Reward.
Both Non-Executive Directors inductions covered legal compliance
matters including, a discussion on Directors’ duties and liabilities,
disclosure of conflicts of interest and persons closely associated,
the UK Market Abuse Regulation and Reckitt’s share dealing code.
The Directors received copies of the Board and Committee terms
of reference; Reckitt Benckiser Group plc Articles of Association;
past Board and Committee effectiveness review summaries; the
latest Annual Report and Sustainability Report; and Reckitt’s
company policies.
In previous years, ad-hoc site visits for newly appointed Directors
have been arranged to the Group’s operations to gain an insight
into the business, and usually form part of the annual Board
meeting cycle. We aim to have one Board strategy meeting
held at an off-site business location each year. This gives new
Directors an opportunity to engage directly with employees
and key personnel in other jurisdictions. As previously mentioned,
in 2021, the off-site meetings were held in the UK, where Board
members had the opportunity to meet in person, visit Reckitt’s
Nottingham factory and listen to the views of employees through
roundtable discussions.
The Chair has overall responsibility for ensuring that the Directors
receive suitable training to enable them to carry out their duties.
As part of their role, Directors are also expected to personally
identify any additional training requirements they feel would
benefit them in performing their duties to the company. Ongoing
training arranged by the company covers a wide variety of
sector-specific and business issues, as well as legal and financial
regulatory developments relevant to the 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.
The Directors may, at the company’s expense, take independent
professional advice and are encouraged to continually update
their professional skills and knowledge of the business and wider
industry. Throughout the year training materials have been made
available for Board members to view, including materials relating
to Directors’ duties in accordance with section 172 CA 2006.
Director standing for re-election or election at this year’s AGM is
independent. The Board considers all Non-Executive Directors who
served during the year to be independent. At the 2022 AGM, Sara
Mathew will not be standing for re-election.
The Board and each Director is 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 Chair of, a FTSE 100 company.
Laxman Narasimhan is currently a Non-Executive Director of
Verizon Communications Inc. and Jeff Carr is currently a Non-
Executive Director of Kingfisher plc.
Board support
The General Counsel & 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 Reckitt’s Secretariat function and additionally holds other
information which the Chair, the CEO or the General Counsel &
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
General Counsel & Company Secretary and a procedure exists
for Directors to take independent professional advice at the
company’s expense in furtherance of their duties.
Board induction, training and development
Reckitt has a comprehensive induction programme for new
Directors. The programme covers Reckitt’s business, together
with 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, including a focus on ESG matters,
supply and the company’s three GBUs – Hygiene, Health and
Nutrition. The induction programme has several aims and serves
multiple purposes. It provides new Directors with an understanding
of Reckitt, its businesses and the markets and regulatory
environments in which it operates, it provides an overview of the
responsibilities for Non-Executive Directors of Reckitt, and it builds
links to Reckitt’s people and stakeholders. Incoming Board members
will also have meetings with the Group’s legal and compliance
teams and an open offer to meet with the Group’s External Auditor.
Upon appointment, Olivier Bohuon received a comprehensive
induction tailored to his appointment as a Non-Executive Director
and member of the Remuneration Committee. This included
meeting with members of key management across the business
and external advisors. He attended virtual meetings, where he had
the opportunity to meet with the CEO, CFO and General Counsel &
Company Secretary. He also met with each of the Presidents of the
three GBUs. His induction further included meetings with members
of the GEC, including the Chief Transformation Officer, Chief
Supply Officer, Chief Human Resources Officer, Chief R&D Officer
and Head of Corporate Affairs & Chief Sustainability Officer. Olivier
is a member of the Remuneration Committee and had discussions
with Mary Harris, Chair of the Remuneration Committee, and the
Group Head of Reward.
Reckitt Annual Report and Accounts 2021
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Financial StatementsGovernanceStrategic Report Composition, Succession and Evaluation
BOARD PERFORMANCE REVIEW
Performance review of the Board
The Board undertakes an annual review of its own and its
Committees’ performance and effectiveness, with a formal
externally facilitated performance review of the Board conducted
at least every three-years. Last year we engaged Lintstock Ltd
(Lintstock) to facilitate a three-year Board Development
Programme. In the second year of the three-year Board
Development Programme with Lintstock a survey-based review
was conducted, consisting of an online questionnaire sent to
all Directors. The 2021 Board performance review considered
the effectiveness of the Board, as well as that of each Board
Committee and the individual Directors. The areas of focus were
Board composition, Board dynamics and support, management
and focus of meetings, strategic oversight and risk management
and internal control. A report, with action points and
recommendations for the Board to consider, was distributed
to Directors and the results of the review were subsequently
discussed by the Board at its November meeting.
In addition, the Chair’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 Chair present. The discussion concluded that the Chair
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.
Lintstock is independent of and has no other links with the
company or its Directors’ in connection with the performance
review. Actions taken to address the findings of the 2020 review
are also outlined below.
2020 recommendations
Action taken during 2021
Board composition
•
Identify skills and experience gaps and focus on succession
planning for key roles
• The Nomination Committee has met throughout the year to discuss
and review profiles of potential new Non-Executive Directors
taking into consideration feedback from Directors and the skills
required on the Board
Stakeholder oversight
• Broaden the Board’s understanding of and involvement with
consumers and customers
• Maintain visibility of the company culture
• Two Board listening sessions took place during the year, where
Board members heard perspectives on relevant topics from key
stakeholders, including customers and NGOs
• The Board reviewed the company’s culture and workforce
engagement methods at its September Board meeting
Board dynamics and support
• Regular Board training and information sessions
• Analyst reports and other information prevalent to the business
have been shared with Board members
•
Improve the length and structure of Board packs
• Board packs were more concise with shorter presentations, leaving
more time for Board discussion at meetings
Strategic oversight
• Focus on M&A, in particular IFCN China and understanding
competitor performance
•
In line with our strategy significant time at Board meetings were
focused on M&A. The level of information on competitor
performance has also increased
Succession planning and HR management
•
Increase Board oversight of talent management
• During the year the Board received presentations from HR on
people and succession
•
In April 2021, we were pleased to announce that Filippo Catalano
had joined Reckitt as Chief Information & Digitisation Officer
Risk management and internal controls
• Boards oversight of risk appetite and mitigation could receive
• The Board, supported by the Audit Committee, has reviewed
a number of risk management processes during the year
deeper review
126
2021 recommendations
Action to be taken in 2022
Board composition and succession planning
• The Board’s composition was rated highly overall. With regards to
key changes that ought to be made to the Board’s profile over the
next three to five years to match Reckitt’s strategic goals, the need
for further digital expertise was highlighted, as was the importance
of additional experience in emerging markets and increased UK
representation on the Board
• The GEC had been successfully embedded following the transition
in 2020, and the structure of Reckitt at senior levels was highly rated
Board dynamics and support
• Non-Executive Directors’ engagement with the CEO, CFO and the
wider Executive team was rated highly. The importance of face-to-
face engagement post COVID-19 was noted
• Whilst Board packs were positively rated, the use of summaries
was identified as an area for improvement
Strategic oversight
• Clarity of the current strategy, testing and development of strategy
and how the Board has monitored progress of the transformation
programme scored highly. The Board’s understanding of key
Reckitt markets and the Board’s understanding of the company’s
brands was also rated positively. It was noted that greater
oversight was required on Reckitt’s digital and cyber capabilities
• The Board will continue to monitor succession planning, focusing
on skills gaps and ensuring the Board has the right mix of Directors
with varied expertise and experience
• More face-to-face interactions between the Board and
management are expected, as COVID-19 restrictions ease
• Management will continue to provide timely and well-structured
papers, including succinct executive summaries
• Filippo Catalano joined Reckitt as Chief Information & Digitisation
Officer in April 2021 to bring greater focus on the area of digital
and cybersecurity. Further updates would be provided on Reckitt’s
digital and cyber capabilities through deep dives conducted
in 2022
Risk management and internal control
• The Board’s focus on risk was noted as a strength, particularly the
Board’s oversight of risk appetite and mitigation. There was scope
for more in-depth deep dives into specific areas of risk
• The Board, supported by the Audit Committee, is reviewing risk
management processes and allocating time at Board meetings
to conduct deep dives into specific areas of risk
Management and focus of meetings
• Management of meetings was rated highly. It was important to
ensure there was a continued focus on people, including talent
management and succession
The 2021 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
observed to have a good mix of skills, sector-relevant experience,
knowledge and diversity and the length of tenure of the Board as
a whole was deemed appropriate. Board members worked well
together to achieve objectives, with a sufficient degree of support
and challenge provided by Directors. The Board had a good
understanding of its stakeholders including its investors, customers,
consumers, partners and suppliers. The way the Board monitors
employee sentiment and culture was also noted as a strength.
•
Increase understanding, monitoring and time spent on talent and
succession planning, through greater focus at Board meetings
All individual Directors were considered to be contributing
effectively. The key priorities for the Board over the coming year
will be people and succession planning, developing relationships
with management and providing effective challenge where
necessary, meeting in person, transformation, managing the
Group’s portfolio, and performance. The Board has reviewed the
recommendations of the performance review and is taking steps
to address these. The principal outcomes of the review will
be reviewed and reassessed as part of the Board’s 2022
performance review.
Reckitt Annual Report and Accounts 2021
127
Financial StatementsGovernanceStrategic Report
“We continue to focus on
succession planning for our
Non-Executive Directors,
keeping in mind the
skills and experience
required to ensure our
long-term success.”
NOMINATION
COMMITTEE REPORT
Chris Sinclair
Chair of the Nomination Committee
Committee priorities for 2022
• To keep under review the overall skills and experience of the Board, and diversity,
equality and inclusion at Board as well as management level
• Succession planning for Board members, with particular regard that the current Senior
Independent Director was appointed to the Board in 2013
• Review the tenures of Directors holding leadership roles on the Board
Committee membership
The members of the Committee during the year were:
Member from
Meetings attended
Chris Sinclair (Chair)
Chair and member of the
Committee for the whole year
Andrew Bonfield
Member for the whole year
Nicandro Durante
Member for the whole year
Pam Kirby
Member for the whole year
Mary Harris
Member for the whole year
Laxman Narasimhan
Member until 1 October 2021
2 of 2
2 of 2
2 of 2
2 of 2
2 of 2
2 of 2
Members of the Committee are appointed by the Board. Membership is set out in the
Committee’s terms of reference and comprises of the Chair, Senior Independent Director
and the Chairs of each of the Board’s Committees. In accordance with the principles of the
UK Corporate Governance Code 2018 (the Code) the Committee is made up of a majority of
independent Non-Executive Directors. The General Counsel & Company Secretary acted as
Secretary to the Committee during the year.
The membership of the Committee is reviewed annually by the Chair as part of the annual
performance review of the Committee. All Directors are required to seek election or
re-election each year at the Annual General Meeting (AGM). Biographical details of the
Directors, including their skills and experience, can be found on pages 108 to 113.
Meetings
Meetings of the Committee are held as needed but are required to take place at least once
a year. In 2021, the Committee held two scheduled meetings which took place virtually due
to COVID-19 travel restrictions and held one additional meeting. Meetings usually take place
ahead of Board meetings and the Chair of the Committee reports formally to the Board on
its proceedings. Attendance at Committee meetings is set out above and in the Board
attendance schedule on page 118 of the Corporate Governance Report.
Role and responsibilities
The role of the Committee is to ensure that there is a formal, rigorous and transparent
procedure for the appointment of new Directors to the Board and to lead the process for
Board appointments. The Nomination Committee has principal responsibility for making
recommendations to the Board on new appointments and the composition of the Board and
its Committees. The Committee also assists the Board in succession planning for top senior
management. The role of the Committee includes, but is not limited to, the following matters:
• Regularly reviewing the composition (including skills, experience, independence,
knowledge and diversity) of the Board and making recommendations to the Board with
128
Reckitt, Thane Road,
Nottingham, UK
Key activities during 2021
New Director appointment process
The process for Board appointments is led by the Nomination
Committee. The Committee conducts a rigorous search for
suitable candidates with the objective of ensuring there is a
diverse talent pool on the Board with a mix of experience and skills
required to achieve the objectives of the business. The Committee
supports diversity in its widest sense and seeks to appoint Board
members from different backgrounds who will contribute a wealth
of experience and differing perspectives to the Board.
For new Board appointments, the Committee considers the
following matters:
• The purpose, values and culture of the business and the
company’s strategic priorities
• The key skills and experience which may be required on the
Board and its Committees
• The importance of diversity including gender, personal
strengths, and social and ethnic backgrounds
regards 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 both executive, non-executive and senior
management positions, 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. It is noted that the Committee considers management
succession planning to be so important that it is reviewed by
the full Board
• Ensuring that all newly appointed 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 a Board Committee(s)
• Keeping under annual 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
STEP 1
STEP 2
STEP 3
STEP 4
STEP 5
The Committee reviews
The Committee outlines
The Committee
Following the conclusion
Once the Board
the composition of
the Board and its
Committees to
identify which skills,
experiences and
expertise are required
a role specification
and engages an
evaluates the potential
of interviews,
candidates and considers
the Committee’s
external consultant to
the shortlist for meetings
recommendation is
conduct a search for
potential candidates
and interviews
submitted to the Board
for consideration
has approved the
recommendation,
the appointment is
announced in line
with FCA’s Listing Rules
and a formal induction
process commences
Reckitt Annual Report and Accounts 2021
129
Financial StatementsGovernanceStrategic Report Nomination Committee Report (Continued)
Non-Executive Director succession planning
During the year, the Committee conducted a search for new
Non-Executive Directors to diversify the skills and expertise of the
Board. In sourcing new Non-Executive Directors, the Committee
considered the tenure of the existing Board members and the
impact on the composition of the Board and its Committees. The
Committee identified specific desirable skills in the search for new
Non-Executive Directors including, the need for individuals with
financial expertise, experience in HR and reward, and experience
as UK-based operating leaders within public limited companies.
We instructed Egon Zehnder International Ltd to carry out a search
for new Non-Executive Directors. Upon their recommendation,
we reviewed a list of candidate profiles considering their skills,
experience, expertise and overall fit with Reckitt’s culture, and
the Committee Chair had exploratory meetings with potential
candidates. After shortlisting potential candidates, this was followed
up by individual meetings with each of the Committee members and
the CEO. During the recruitment process, the Committee followed
a formal, rigorous and transparent assessment with due regard to
diversity, skills, knowledge and level of experience. All potential
candidates are considered with regard to potential conflicts of
interest and consideration of the level of time required for other
appointments, in making recommendations to the Board.
Egon Zehnder International Ltd is an independent executive
search firm which undertakes a number of executive (as well as
non-executive) searches for the Group and is a signatory of the
Voluntary Code of Conduct for Executive Search Firms in the
UK to address diversity and best practice relating to Board
appointments. They do not have any connection to or provide
any other services to the company or its individual Directors.
We are delighted that Alan Stewart joined the Board as a
Non-Executive Director and member of the Remuneration
Committee in February 2022. Alan will become Chair of the
Remuneration Committee and a member of the Nomination
Committee at the conclusion of the 2022 AGM. Alan brings to the
Board significant corporate finance and accounting experience
from a variety of industries including retail, banking and travel, as
well as executive leadership experience within a listed company
environment. The Committee is confident that with Alan’s
experience, he will be a great contribution to the Board.
Furthermore, Sara Mathew signalled her intention not to stand for
re-election but to resign from the Board and Audit Committee
upon the conclusion of the company’s 2022 AGM. We would like
to take this opportunity to thank Sara for her services since joining
the company. Taking into consideration the composition of the
Audit Committee, in October 2021, Elane Stock stepped down as
a member of the Remuneration Committee and was appointed as
a member of the Audit Committee. In addition to this, in January
2022, we announced that Mary Harris would be stepping down
as Chair of the Remuneration Committee and a member of the
Nomination Committee upon the conclusion of the 2022 AGM.
Mary will remain on the Remuneration Committee and as the
Designated Non-Executive Director for engagement with the
company’s workforce.
Going forward, the main priority for the Committee in 2022
will be to continue to keep under review succession planning
of all long-standing Board members and key Board roles. The
Committee recognises that in sourcing new Non-Executive
Directors it should consider the skills and expertise that the
Board requires as highlighted in the Board performance review.
More information about the Committee performance review can
be found on page 132. The Board performance review can be
found on pages 126 to 127.
Renewal of existing Directors
Non-Executive Directors are initially appointed for a three-year
term and generally continue to serve one or more further terms.
All Directors are nominated for appointment by the Committee,
which is subsequently approved by the Board. During the year,
the Committee considered the renewal of existing Non-Executive
Directors. The Committee recommends 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 forthcoming AGM.
Details of the specific reasons each Director contributes to and
continues to be important to Reckitt’s long-term success are set
out in the Notice of AGM, available at www.reckitt.com.
Group Executive Committee (GEC) changes
The GEC changes during the year reflect the Committee’s focus
on succession planning and the alignment of our functional leaders
with Reckitt’s strategic priorities and growth opportunities.
While the Committee’s terms of reference include management
succession planning, this is considered so important as to be
reviewed and overseen by the full Board. With the establishment
of Global Business Solutions and our Global Business Units (GBUs),
the Committee focused on identifying and sourcing talent for the
GEC both internally and externally.
Building and maintaining a competitive, leading edge, IT and
Digital capabilities are key for Reckitt to be successful and agile.
To lead us into this digital era, we appointed Filippo Catalano as
the Chief Information & Digitisation Officer in April 2021. Filippo
has extensive leadership experience in defining and shaping the IT,
Digital Portfolios and Technology enabled new business models
across leading consumer goods organisations. Filippo’s experience
will contribute towards developing our digital backbone and
create innovative technological platforms that will support our
business growth.
In March 2021, we announced that Harold van den Broek would
be leaving Reckitt at the end of May 2021. We would like to thank
Harold for his outstanding contribution to the business over the
course of the last 7 years, most notably for his leadership in driving
the transformation of the Hygiene GBU during the most
challenging of times. We wish him well in his future endeavours.
At the same time, we announced that Volker Kuhn, Chief
Transformation Officer, would assume the role of President
Hygiene in May 2021, following a smooth transition of
responsibilities from Harold. Volker has made a significant impact
since joining Reckitt in August 2020, delivering major productivity
savings, establishing our new Global Business Solutions unit and
identifying further growth opportunities. Volker has a wealth of
experience across the fast-moving consumer goods industry
which makes him ideally suited for this leadership role.
130
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 or her duties and recommended
that the Board authorises each Director to continue in each of his
or her external commitments. Each Director standing for election
or re-election at the forthcoming AGM of the company has
individually provided assurances that they remain committed to
their roles and can dedicate sufficient time to perform their duties.
Composition
The Committee regularly evaluates the Board and its
Committees, and considers the composition, the balance of
skills and experience, diversity and how effectively Directors
work together to achieve Reckitt’s objectives. The Committee
ensures that plans are in place for orderly succession of the
Board and senior executive management, overseeing of a diverse
pipeline of succession. This ensures that the Board and GEC
benefit from fresh perspectives as well as the experience
of longer-serving members.
In October 2021, Laxman Narasimhan stepped down as member of
the Nomination Committee given that he is an Executive Director,
however he continues to attend Committee meetings to provide
input as appropriate.
Diversity and inclusion
The Board and Committee fully recognise the importance of
diversity, including gender and ethnicity, at Board and senior
management level in compliance with the Code. Inclusion is core
to Reckitt’s purpose to ‘Protect, Heal and Nurture in the relentless
pursuit of a cleaner and healthier world’ and to our employee value
proposition of Freedom to Succeed – there is no freedom without
inclusion and no success without diversity. We recognise that it
is critical for us to have a diverse employee population and also
a Board and senior management team that is reflective of the
markets we operate in and the consumers we serve.
In June 2021, we announced that Aditya Sehgal, President of
Nutrition, eRB & Greater China would be leaving Reckitt at the
end of October 2021. We would like to thank Aditya for his many
contributions to the business and our people over the past
decades and wish him well for the future. Aditya had an extensive
27-year career at Reckitt and positively impacted its people and
the business across Hygiene, Health and Nutrition. Following his
resignation, his portfolio of responsibilities was re-organised within
senior management and the CEO assumed a more direct oversight
of the Nutrition, e-commerce, and Greater China teams.
To support the changes within the Nutrition business, Pat Sly,
who joined Reckitt as part of the Mead Johnson Nutrition
acquisition in 2017, was appointed as Chief Operating Officer,
Nutrition and member of the GEC in July 2021. Pat has more
than 20 years of experience in senior leadership roles in general
management, marketing, and sales across North America, Europe,
Asia Pacific and Latin America. In his role as Chief Operating
Officer, Nutrition, Pat leads the global Nutrition business which
includes Infant & Child Nutrition (IFCN), Specialty Nutrition, Maternal
Nutrition and Adult Nutrition. In February 2022, Pat was appointed
as President Nutrition.
Further changes to the GEC took place during the year. In
December 2021, we announced that Rupert Bondy, General
Counsel & Company Secretary would be leaving Reckitt at the
end of February 2022. We would like to thank Rupert for his
outstanding contribution to the business over the last 5 years.
Rupert has had been material in guiding the transition of the Board
Directors and helped the company navigate a number of business
critical legal and reputational issues. He has overseen the legal and
contractual aspects of major acquisitions and disposals such as
sale of IFCN in China. In February 2022, Catheryn (Cathy) O’Rourke
joined the company and the GEC as the General Counsel &
Company Secretary following Rupert’s resignation. Cathy joins the
GEC with more than 20 years of professional expertise in running
global legal and compliance teams, managing litigation and
corporate transactions; overseeing financial reporting and
disclosure as well as supporting Board governance.
More information about our current GEC membership can be found
on pages 114 to 116.
Review of Committee terms of reference
The terms of reference for the Committee are reviewed on an
annual basis. During the November Committee meetings, we
reviewed our terms of reference in line with best market practice
guidance, the Code and the model terms of reference for
Nomination Committees issued by the Chartered Governance
Institute. The current terms of reference for the Nomination
Committee are available on our website at www.reckitt.com.
Reckitt Annual Report and Accounts 2021
131
Financial StatementsGovernanceStrategic Report Our Group diversity policy can be found at www.reckitt.com/
sustainability/policies-and-reports. 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
suitable candidates for any role, and we strive for a well-balanced
representation of backgrounds, nationalities, cultures, skills and
experiences, at all levels across the Group. Ultimate responsibility
and sponsorship for this policy rests with the GEC. Senior
management is accountable, and all Reckitt employees are
responsible for ensuring that our diversity policies and
programmes are actively implemented and followed.
We continue to put inclusion and diversity at the core of everything
we do. Further details can be found in our stakeholder
engagement section from page 50.
Performance review
Committee performance review
This year, the Committee participated in the main Board
performance review conducted by Lintstock Ltd, appointed
to facilitate a three-year Board Development Programme.
Respondents in the Committee questionnaire scored the
Committee highly in key areas, specifically noting the composition
of the Board was effective, balanced and diverse. The main area
of focus relevant to the Committee, identified as a result of the
performance review, is to continue to identify additional skills
required for the Board in areas that may be lacking such as digital
expertise and experience in emerging markets. Another area of
focus is to ensure succession planning remains a high priority for
key Board roles over a longer-term horizon and improving the
Board’s oversight of the company’s processes for managing and
developing talent. The Board performance review is discussed in
further detail on pages 126 to 127. Lintstock is independent of and
has no other links with the company or its Directors in connection
with the performance review.
Nomination Committee Report (Continued)
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 through our Board
composition which comprises of six nationalities, and five women,
two of whom are Committee Chairs. This includes Mary Harris,
who is Chair of the Remuneration Committee and the Designated
Non-Executive Director for engagement with the company’s
workforce, and Pam Kirby who is Chair of the CRSEC Committee.
I am pleased to report that as at 31 December 2021, 41% of our
Board members are women, which exceeds the 25% target set
by the Davies Review and we have achieved the 33% target as
outlined in the Hampton-Alexander Review. We also meet the
requirements of the Parker Review published in October 2017.
Our Board consists of three members from ethnic minorities, which
exceeds the Parker Review recommendation, Beyond One by ’21,
which is to have at least one person from an ethnic minority on
the Board.
Percentage of women Board members
Reckitt
Davies Review Target
Hampton‑Alexander Review Target
41%
33%
25%
Our GEC, comprising of the most senior management level in the
business, represents 7 different nationalities from across the globe,
embodying our corporate inclusion and diversity policy. Our GEC
also consists of three members from ethnic minority backgrounds.
The company’s wider global leadership community holds over
49 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. As at 31 December 2021, female
representation within the GEC (and their direct reports) was 26%.
Whilst progress has been made, we are cognisant of the gap in
performance towards the 33% for female leadership within the
GEC 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 at all management levels. We recognise
that female representation at our most senior levels needs
improvement and the Committee continues to make a
commitment to increase female representation at this level. We
were delighted that in February 2022, Cathy O’Rourke joined the
company and the GEC as General Counsel & Company Secretary.
As at 31 December 2021, female employees accounted for 44%
of our global workforce.
132
“The Committee plays a
key role in the governance
of the Group’s financial
reporting, risk management,
internal controls, and the
external audit. Maintaining
robust internal controls
remained a key focus for
the Committee, particularly
in light of the impact
of COVID-19.”
Andrew Bonfield
Chair of the Audit Committee
AUDIT COMMITTEE
REPORT
On behalf of the Board, I am pleased to present the
Audit Committee Report for the financial year ended
31 December 2021.
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.
Committee priorities for 2022
• Maintaining oversight and providing reassurance to the Board on Reckitt’s risk
management and internal control procedures, including monitoring key areas in
the context of risk and control, such as IT, tax, and legal and compliance
• Sustaining a strong culture of risk management across the Group
• Taking a proactive approach in preparing for legislative and regulatory changes which
may be required to internal controls and reporting, arising from the Department for
Business, Energy & Industrial Strategy (BEIS) consultation
• Continuing to holistically monitor legislative and regulatory changes which may affect
the work of the Committee
Reckitt Annual Report and Accounts 2021
133
Financial StatementsGovernanceStrategic Report Audit Committee Report (Continued)
Committee membership
Composition
Member from
Meetings attended1
Recent and relevant financial
experience
Sectoral experience relevant
to Reckitt’s operations
Andrew Bonfield (Chair) 2
July 2018
5 of 6
• Financial expert
• Consumer goods
• Chartered Accountant
• Pharmaceuticals/healthcare
• Currently CFO of a global US
Fortune 100 company
• Has held numerous CFO roles
at other large companies,
including those in the
consumer goods sector
Pam Kirby3
March 2016
5 of 6
• Sits on another FTSE 100
• Pharmaceuticals/healthcare
company’s Audit Committee
• Technology
Sara Mathew
July 2019
6 of 6
• Financial expert
• Consumer goods
• Holds Master’s degrees in
Finance and Accounting
• Has held senior finance
roles and CFO roles at other
large companies
• Pharmaceuticals/healthcare
Margherita Della Valle4
July 2020
5 of 6
• Financial expert
• Currently CFO of a
FTSE 100 company
• Holds a Master’s degree
in Economics
• Has held senior finance
roles and CFO roles at other
large companies
• Consumer goods
• Technology
Elane Stock5
25 October 2021
1 of 1
• Holds Master’s degrees
• Consumer goods
in Finance
• Emerging markets
1. There were six (four scheduled and two additional) Committee meetings (five of which were held by videoconference owing to COVID-19) during the year
2. Andrew was unable to attend one meeting owing to a prior commitment
3. Pam was unable to attend one meeting due to a scheduling conflict with the CRSEC Committee, of which she is Chair
4. Margherita was unable to attend one meeting owing to a prior commitment
5. Elane was eligible to attend one of the scheduled meetings during the year, having been appointed on 25 October 2021
The 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
other large companies.
All Committee members are independent Non-Executive Directors
who have financial, economics and/or business management
expertise in large companies. As Chair of the CRSEC Committee
Pam Kirby’s membership of the Audit Committee ensures that
relevant issues, such as risk, whistle-blowing and compliance are
shared and coordinated between the two Committees.
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
• The role of internal and external auditing and risk management
The Board is satisfied that, in compliance with the UK Corporate
Governance Code 2018 (the Code), Committee members as a
whole have competence relevant to the company’s sector
(consumer goods). The relevant financial and sectoral experience
of each Committee member is summarised in the table above.
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, knowledge and diversity
of gender, social and ethnic backgrounds, and cognitive and
personal strengths. 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
management on matters covering governance and legislative
developments, accounting policies and practices, and tax
and treasury.
During the year, the Head of Group Secretariat acted as Secretary
to the Committee.
Meetings
During 2021, the Committee held six meetings at times aligned to
the company’s reporting cycle. Of the six meetings held during the
year, five were held via videoconference, as permitted by the
company’s Articles of Association and the Committee’s terms of
reference, owing to COVID-19-related restrictions. Committee
meetings usually take place ahead of Board meetings and the
134
Committee Chair provides an update to the Board on the key
issues discussed at each meeting. Committee papers are provided
to all 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, and by the Group Head of Internal Audit, Chief Financial
Officer (CFO) and SVP Corporate Controller. The Chair of the
Board and the Chief Executive Officer are also invited to attend.
Other management attend when deemed appropriate by the
Committee. Time is allocated at the end of each meeting for
private discussion with the internal audit team and the External
Auditors without other invitees being present, as well as a private
session of the Committee members. Committee member meeting
attendance during the year is set out in the table on page 134.
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 are available on our website at www.reckitt.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 financial management and
the External Auditor.
Activity during the year
Standing agenda items reviewed by the Committee throughout
the year
• Received reports from the SVP Corporate Controller, internal
audit function and External Auditor
• Considered tax and treasury matters, including provisioning
for uncertain tax positions 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
• Annual review of risk management and internal controls
including in-depth review of risks across Group functions, and
of integrated risk management framework
• Monitored the Group’s risk assessment processes
Other items considered by the Committee at meetings during
the year
• Review of the 2020 preliminary results announcement, draft
unaudited Financial Statements and recommendation for
approval by the Board
• Review of the 2020 Annual Report and Accounts, the going
concern basis of preparation and Viability Statement, including
whether the Committee could recommend that the Board
approve the 2020 Annual Report and Accounts
• KPMG’s 2020 audit findings report, observations on Reckitt’s
internal controls for the 2020 financial year, management
representation letter and report on the 2020 Annual Report
and Accounts
• KPMG’s final non-audit fees for 2020 and approval of KPMG’s
2021 audit fees
• Review of the 2021 half-year results announcement, including
the going concern basis of preparation, and recommendation
for approval by the Board
• KPMG’s half-year review report findings to 30 June 2021 and
management representation letter
• KPMG’s assessment of its objectivity and independence
• KPMG’s strategy for the 2021 audit
• KPMG’s interim IT control findings relating to the 2021 audit
cycle and audit strategy update
• Work undertaken in respect of the 2020 internal audit plan and
monitoring of the 2021 internal audit plan
• Annual review of IT general controls, cyber security and
IT operations
•
Internal controls, maturity assessment and controls
transformation roadmap
• Review of the company’s ‘finance for the future’ transformation
• Review of the Committee’s 2022 standing agenda and terms
of reference
• Results of the performance reviews of the Committee,
the internal audit function and external audit
• Annual tax function deep dive
• Annual review and approval of Group Treasury policies
Significant and key financial reporting matters
The key matters reviewed and evaluated by the Committee during
the year were as follows.
Accounting and financial reporting
The 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 2021 Annual Report and Financial Statements,
management continued its focus on narrative reporting
and clear written and visual messaging to communicate the
Group’s strategy
• Reviewing the appropriateness of the accounting policies,
judgements and estimates used as set out on page 210,
and concluding that the judgements and assumptions used
are reasonable
• Reviewing the Group’s policy relating to, and disclosure of,
Alternative Performance Measures (APMs)
Areas of significant financial judgement
The significant financial judgements in relation to the 2021 Group
Financial Statements considered by the Committee, together with
a summary of the actions taken, were as follows:
Recoverability of goodwill and other intangible assets
Under International Financial Reporting Standards (IFRS), goodwill
and indefinite-life assets must be tested for impairment on at least
an annual basis. Impairment testing is inherently judgemental and
requires management to make multiple estimates, for example
around future price and volume growth, future margins, terminal
growth rates and discount rates. The Group’s impairment 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 terminal growth rates.
Reckitt Annual Report and Accounts 2021
135
Financial StatementsGovernanceStrategic Report Audit Committee Report (Continued)
At 31 December 2021 management determined that the Group’s
goodwill and indefinite-lived intangible assets remained
recoverable and no impairment charges were required
(2020: impairment charge of £985 million).
and at the year end, in relation to the HS issue. The Committee
challenged management on legal judgements made in
determining the level of provisions recognised and was satisfied
with the level of provisioning and associated disclosure.
The cash-generating unit for which headroom is most limited,
other than Biofreeze which was acquired and recorded at fair
value during the year, is Infant Formula and Child Nutrition (IFCN).
Accordingly, management has included disclosures in the
Financial Statements in relation to its IFCN impairment assessment,
the key estimates underpinning the IFCN recoverable amount
and the sensitivity of the IFCN recoverable amount to reasonable
changes in key assumptions. The Committee has reviewed
these disclosures, included within Note 1, and considers
them appropriate.
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 area 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 level of tax
provisions recognised and the associated disclosures to be
appropriate.
Trade spend accruals
Trade spend remains a significant cost for the Group, and the main
judgements relate to trade accruals, specifically the timing of
recognition and the amount of accruals for trade spend. In 2021,
the Committee reviewed the accuracy and utilisation of trade
spend accruals recorded in the 31 December 2020 financial
statements, given the increased uncertainty and judgement
in estimation of these accruals due to the COVID-19 pandemic.
The Committee focused on the level of trade spend accruals
at the year end to ensure they are sufficient and appropriate.
Legal liability provisioning
At 31 December 2021, a provision of £180 million (2020: £232
million) was held on the Group’s Balance Sheet in relation to
regulatory, civil and criminal investigations as well as litigation
proceedings, including a provision in respect of the South Korea
Humidifier Sanitiser (HS) issue. The Committee has reviewed the
status of potential legal and constructive liabilities during the year,
Acquisition of Biofreeze
The purchase price allocation exercise following the acquisition of
Biofreeze involved significant judgement to determine the split of
the purchase price between brand intangible assets and goodwill.
Management engaged external valuation experts to support
the allocation exercise. The Committee reviewed the work
performed by management and the external experts, challenged
the judgements underpinning the valuation, and considers the
allocation of the purchase price between intangible assets and
goodwill to be appropriate.
Other key financial reporting matters
Other key matters reviewed and evaluated in relation to the
2021 Group Financial Statements considered by the Committee,
together with a summary of the actions taken, were as follows.
Loss in relation to the Nutrition strategic review
The determination of the loss on disposal of IFCN China following
the strategic review involved judgement to allocate intangible
assets, including the IFCN brands and goodwill that arose on
the acquisition of Mead Johnson Nutrition, to the disposal group.
The calculation of the loss on disposal was reviewed during the
year by the Committee to assess the calculation, particularly in the
context of the allocation of intangible assets. The Committee also
reviewed the disclosure of the net assets disposed and the loss
on disposal, and was satisfied that the loss was calculated and
disclosed appropriately.
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. 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 103. The use of a
five year period for the viability review was approved by the Board
in 2021 as it is the period of the Group’s long-term forecasting
process and covers the various business cycles.
136
Boardroom, Global
Headquarters,
Turner House,
Slough, UK
Fair, balanced and understandable
The Committee reviewed the 2021 Annual Report and Financial
Statements to ensure that it is fair, balanced and understandable
and provides sufficient information to enable shareholders
to assess the Group’s position, performance, business model
and strategy.
The Annual Report project team was primarily comprised of
individuals in Reckitt’s company secretarial, finance, investor
relations, internal audit, reward, corporate communications and
sustainability teams. Individuals from those teams with sufficient
knowledge and experience undertook the drafting of the relevant
sections of this Annual Report. The overall governance and
coordination of the Annual Report was managed by an Annual
Report Project Manager, in conjunction with the corporate
communications team. The project team held regular meetings in
person and via telephone or videoconference and accountability
was ensured by obtaining internal sign-off from key stakeholders
in the project team for the section(s) they were responsible for.
Each section was drafted in accordance with an agreed standard
operating procedure, ensuring that facts, figures and statements
contained within the Annual Report were verified. The Committee
determined that the preparation and verification processes
were robust.
The Directors, individually and collectively, were provided
with drafts of the Annual Report at key stages. The Disclosure
Committee met three times to ensure sufficient oversight of the
preparation and verification processes and to review drafts ahead
of these being reviewed by the Board.
The Committee reviewed the form, content and consistency of
narrative within the 2021 Annual Report and Financial Statements,
the disclosures contained in the Financial Statements and the
underlying processes and controls, which were confirmed as
appropriate. The Committee also reviewed KPMG’s audit findings
report, draft audit opinion and draft management representation
letter. Following the Committee’s review, the Committee was
satisfied that the 2021 Annual Report and Financial Statements,
taken as a whole, met its objectives and accordingly we
recommended to the Board that the 2021 Annual Report and
Financial Statements be approved and we supported the Board
in making its statement on page 192.
Financial Reporting Council correspondence
During 2021, the company received two letters from the Financial
Reporting Council (FRC) in relation to its thematic review of
APMs contained in the company’s 2020 Annual Report and Financial
Statements. The first letter outlined that certain areas of the
disclosure on APMs were an example of better practice. The second
letter provided suggestions to improve the current APM disclosures,
which have been incorporated into this Annual Report. The FRC
did not raise any formal comments which required a response
from the company. The nature of the FRC review is that it provides
no assurance that the annual report and accounts are correct in
all material respects. The FRC’s role is not to verify the information
but is to consider compliance with reporting requirements.
Risk management
The Committee supports the Board in fulfilling its oversight
responsibilities in ensuring the integrity of the Group’s financial
reporting (including the Annual Report and Financial Statements),
internal controls and overall risk management process, and the
relationship with the External Auditor. The Committee makes
recommendations to the Board in relation to approval of the
Annual Report and Financial Statements.
In monitoring the adequacy and effectiveness of the system of
risk management and internal controls, the Committee reviewed
compliance procedures and Reckitt’s overall risk framework
(including the Group’s whistle-blowing arrangements) and
considered financial, operational risk and internal control processes
at Group, Global Business Unit (GBU), corporate and functional
levels. Following a routine second line of defence review, an
investigation was commissioned by management to assess
evidence supporting the creation, utilisation and release of certain
operational expenditure and trade investment accruals within the
Hygiene GBU. Although the investigation did not identify any
material misstatement in relation to the years ended 2020 and
2021, certain remediation actions are being undertaken by
management to improve the control processes regarding accruals
and provisions.
There were no significant failings or weaknesses during the year
meriting disclosure in this report. Reckitt’s ongoing controls
transformation program in preparation for internal controls
changes arising from the BEIS consultation, together with the
above mentioned investigation, has identified certain control
improvement opportunities that management is currently
undertaking. The Committee reported to the Board in February
2022 that it considers the internal control framework to be
functioning appropriately, to enable the Board to meet its
obligations under section 4 of the Code, to maintain sound risk
management and internal control systems, and to report to
shareholders on these in the Annual Report (see page 120). The
Committee also reviewed the ‘three lines of defence’ framework
and the Group’s principal and emerging risks.
Reckitt’s finance function, headed by the CFO, has implemented
policies, processes and controls to enable the company to review
and fully comply with changes in accounting standards and relevant
financial regulations. These policies, processes and controls are
kept under review on an ongoing basis to ensure both internal and
external developments are reviewed and responded to.
The basis for the preparation of the Group Financial Statements is
set out on page 210 under Accounting policies.
The company’s External Auditor’s report, setting out its work and
reporting responsibilities, can be found on pages 193 to 204. The
terms, areas of responsibility and scope of the External Auditor’s
work are agreed by the Committee and set out in the External
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 88 to 102.
The Viability Statement can be found on page 103.
The Statement of Directors’ Responsibilities on page 192 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.
Internal controls
Internal control processes are implemented through clearly
defined roles and responsibilities, supported by clear policies and
procedures, delegated to the Group Executive Committee (GEC)
and senior management. A new Group Head of Audit was
appointed on 1 September 2021 with objectives that are designed
to develop the function in line with the strategy of the Business.
Reckitt Annual Report and Accounts 2021
137
Financial StatementsGovernanceStrategic Report Audit Committee Report (Continued)
Reckitt operates a ‘three lines of defence’ model in monitoring
internal control systems and managing risk.
1. Management in the first line ensures that controls, policies and
procedures are followed in dealing with risks in day-to-day
activities. Such risks are mitigated at source with controls
embedded into 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. Throughout Reckitt, a key
responsibility for any line manager is to ensure the achievement
of business objectives with appropriate risk management and
internal control systems.
2. Each function and GBU has its own management which acts
as a second line of oversight. This second line sets the local
level policies and procedures, specific to its own business
environment, subject to Group policy and authorisation.
It further acts in an oversight capacity over the implementation
of controls in the first line. The financial performance of
each function and GBU is monitored against pre-approved
budgets and forecasts ultimately overseen by the executive
management and the Board. As part of the second line, the
Corporate Control team identifies financial risks and mitigates
these with appropriate internal controls, as well as establishing
the minimum expected financial control requirements. The
effectiveness of the global financial control framework is
reviewed annually. Further, the Group’s compliance controls
include the operation of an independent and anonymous
‘Speak Up’ whistle-blowing hotline, annual management
reviews and the provision of training specific to individual
needs within the business.
3. The third line of defence is provided by the internal audit
team which provides independent and objective assurance
to the Committee and management on the adequacy and
effectiveness of risk management systems and internal controls
operated by the first and second lines of defence. Internal
Audit also facilitates the integrated risk management process.
Reckitt’s internal control framework provides assurance that
business objectives are achieved, that business is conducted in an
orderly manner and in compliance with local laws, that records are
accurate, reliable and free from material misstatement, and that
risks are understood and managed.
The corporate control team is accountable for managing global
control policies and frameworks and for monitoring the
effectiveness of the Group’s internal control environment. Local
markets conduct an annual controls self-assessment comprising of
over 150 system-agnostic controls across key financial processes.
Corporate control is responsible for reporting and monitoring
of controls at local, GBU and global levels, working with markets
to improve risk and controls capability and to support the
development of remediation plans and corrective actions for
control weaknesses. The Committee receives a report at each
meeting summarising any notable controls activity since the
previous meeting.
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
138
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 Reckitt’s risk
management and internal controls in financial, information systems
and other business and operational areas in order to develop and
improve the effectiveness of the Group’s risk management control
and governance processes and strategies. The independence of
the Group Head of Internal Audit and the internal audit function is
considered as part of the annual internal audit effectiveness review.
Further details can be found on page 140.
The internal audit plan is prepared on a half yearly basis under
an agreed rotation and scope policy and reflects a risk-based
approach. Audit locations are selected based on a number of
factors including the risks related to the business as well as
the period since the last audit. Information systems, change
programmes and activities of Group functions 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 are tracked until they are
satisfactorily closed.
Due to the COVID-19 pandemic, the internal audit approach
and plan for 2021 continued through a series of ‘operational
resilience reviews’, focusing on priority areas of the business.
In 2021 routine internal audit work delivered audits which
covered 31% (by net revenue) of Reckitt’s global commercial
business and 39% (by industrial sales) of global manufacturing
facilities. Audits that identified significant weaknesses in the
control environment normally receive a follow-up audit within
six to 18 months as appropriate.
External Auditor
The Committee is responsible for maintaining the relationship
with the 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. For the year ended 31 December 2021, the company
has complied with the Competition and Markets Authority Order:
The Statutory Services for Large Companies Market Investigation
(Mandatory use of Competitive Tender Processes and Audit
Committee Responsibilities) Order 2014.
The 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 every five years in
accordance with the FRC’s Ethical Standard. The current lead audit
partner, Richard Broadbelt, has completed his fourth year as lead
audit partner. A new lead audit partner, Andrew Bradshaw, will
begin in 2022 following a transition period with Richard Broadbelt
in the 2021 audit cycle, before leading the audit for the year ended
31 December 2022.
During the year, KPMG’s reports to the Committee included the
following matters:
• Audit strategy, materiality and scope (and regular updates)
• Audit findings and half-year review findings (and any updates)
including identification of any significant risks to the audit
and other key accounting and reporting matters
• Report on audit findings in relation to the IFCN
impairment assessment
• Review of going concern and the Viability Statement
• Draft audit opinion
• Draft management representation letters
• Draft engagement letter
• Review of KPMG’s 2021 Audit Quality Inspection Report issued
by the FRC
• Analysis of non-audit services provided
•
IT and other control findings
Besides the annual evaluation of the External Auditor, the
Committee continually reviews the External Auditor’s effectiveness
through means such as the monitoring of its progress against the
agreed audit plan and scope. KPMG reports to the Committee
annually with an audit quality scorecard, providing a holistic view
of, and their investment in, audit quality and how they measure
their audit quality progress.
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. The Committee 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 cost-effective to appoint an auditor
that already has a good understanding of Reckitt. The total fees
paid to KPMG for the year ended 31 December 2021 were £16.5
million, of which £0.6 million related to non-audit and audit-related
work (to which KPMG was appointed principally for the above
reasons). The Group’s internal policy on non-audit fees (effective
1 January 2017) 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 2021, non-audit and audit-related fees were
3.8% of the audit fees. Details of services provided by the External
Auditor are set out in Note 4 on page 218.
Reckitt 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 2021, KPMG identified its
own safeguards in place to protect its independence and
confirmed its independence in February 2022 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 the 2022 financial year.
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 2022. In accordance with section 489 of the
Companies Act 2006, resolutions to propose the reappointment
of KPMG as the company’s External Auditor and to authorise the
Committee to fix its remuneration will be put to shareholders
at the AGM on 20 May 2022.
KPMG had no connection with any Directors during the
financial year.
Governance
Committee performance review
This year, a performance review of the Committee was conducted
as part of the Board’s external performance review, conducted by
Lintstock Ltd. Lintstock Ltd is independent of and has no
connections to the company.
The performance review of the Committee utilised a bespoke
questionnaire, sent to Committee members. Matters evaluated
by Committee members included time management and
composition, Committee processes and support, and the work
of the Committee and its priorities for change. All areas received
‘good’ or ‘excellent’ scores overall, with particularly positive
feedback given on the Committee’s composition, the
management of Committee meetings, Committee processes and
support, the Committee’s assessment of the work of the internal
audit function; and its relationships with the Group Head of Internal
Audit and the CFO. It was noted that a greater focus on risk
appetite and structured deep dives including KPIs tracking and
external benchmarking would be helpful in the coming year. It was
also noted that there would be value in GBU CFOs attending the
Committee meetings periodically.
The Board, having had sight of the results of the Committee’s
performance review, considers the Committee to be
operating effectively.
Reckitt Annual Report and Accounts 2021
139
Financial StatementsGovernanceStrategic Report Audit Committee Report (Continued)
Internal audit evaluation
The annual internal audit effectiveness review was conducted
in two parts. An internal audit and risk management survey was
circulated to internal stakeholders including Committee members,
the GEC and GBU, functional and regional leadership teams. The
Internal Audit team also performed a peer review for audits
completed during the year to request feedback.
The evaluation of the internal audit function covered the following
areas: risk management – objectives, skills and experience,
process and key opportunities; and internal audit – skills and
experience, quality, audit scope, audit cost, audit communication,
independence, change catalyst and key opportunities. The
effectiveness review reported strong, positive feedback which
demonstrated that the internal audit function was trusted and
respected. Key highlights are that the internal audit function: has
a broad range of skills and expertise; provides clear, concise and
consistent audit reports with opportunities to share learnings
and good practices across the business; and has opportunities
to continue to deepen business understanding and awareness.
It is also noted that the integrated risk management framework
is driving a better understanding of risk, with an opportunity for
internal audit function to use this ‘risk intelligence’ to move towards
a risk-based approach and broader range of strategic and
operational audits.
The independence of the Group Head of Internal Audit and the
internal audit function was confirmed.
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 is 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
The annual evaluation of the External Auditor was carried out
in May 2021. The assessment of the External Auditor was
conducted using a survey circulated to the Board, Group Executive
Committee, GBU, finance and other functional leadership, and
local finance management. The sample size of respondents was
increased to include markets and entities not in Group scope but
in statutory scope, to ensure coverage globally of a significant
number of entities. The survey covered the four competency
areas in the FRC’s Guidance on Audit Quality, Practice aid for Audit
Committees (published in December 2019) (Guidance): judgement;
quality control; skills and knowledge; and mindset and culture.
The Committee reviewed the results of the FRC’s Audit Quality
Review of KPMG’s audit of the financial statements of Reckitt
Benckiser Group plc for the year ended 31 December 2020 at its
meeting in November 2021. The scope of the review included the
audit of significant risk areas, oversight of the work of component
auditors and communications with the Committee. No areas for
improvement were noted in the report and three areas of good
practice were highlighted, including the audit of the IFCN
impairment assessment, the audit team’s oversight and involvement
with component auditors and the involvement of the Engagement
Quality Control Reviewer. The Committee was satisfied with the
outcome which was rated ‘good’, being the highest potential rating
awarded by the FRC, with no key findings noted.
Overall the Committee is satisfied with the effectiveness,
expertise, quality, review, and in particular, professional scepticism
and challenge from the External Auditor and believes that KPMG
remains best placed to conduct a high-quality audit of the Group
for the 2022 financial year.
Andrew Bonfield
Chair of the Audit Committee
Reckitt Benckiser Group plc
13 April 2022
140
“Our dedication to good
governance ensures that
our leaders operate with
integrity and compassion.
An ethical business is
a strong and resilient
business, which is evident
in our results.”
Pam Kirby
Chair of the Corporate
Responsibility, Sustainability, Ethics
and Compliance Committee
CORPORATE
RESPONSIBILITY,
SUSTAINABILITY,
ETHICS AND
COMPLIANCE
COMMITTEE REPORT
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 2021.
This report details how the Committee has discharged its role and responsibilities during
the year under review in relation to monitoring and assessing the company’s approach to
responsible, sustainable, ethical, and compliant corporate conduct in accordance with the
company’s Purpose, Compass, culture and values, the Group’s purpose-led strategy and
societal responsibility.
Committee priorities for 2022
• Oversee and make recommendations to the executives and the Board for actions to
be taken in respect of the Group’s corporate responsibility and sustainability, ethics
and compliance strategies, policies, programmes and activities
• Take a proactive approach in anticipating and preparing for legislative or regulatory
changes and reviewing processes to ensure compliance
• Review our sustainability objectives and chart progress against our targets, including
overseeing the Group’s conduct with regard to its corporate and societal obligations
as a responsible global citizen on behalf of all its stakeholders
• Monitor and review the processes for risk assessment as regards corporate responsibility
(including human rights and product safety), sustainability and compliance matters
(including regulatory and quality risk assurance and restrictive trade practices) and
ethical conduct, including the impact of COVID-19 and any associated risks to the Group
• Continued focus on delivering the safety, quality, and compliance agenda
Reckitt Annual Report and Accounts 2021
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Financial StatementsGovernanceStrategic Report Corporate Responsibility, Sustainability, Ethics and Compliance Committee Report
(Continued)
Committee membership
The members of the Committee during the year were:
Member from
Meetings attended
Pam Kirby (Chair)
Chair and member of the Committee for the whole year
Nicandro Durante
Member for the whole year
Mehmood Khan
Member for the whole year
Chris Sinclair
Member for the whole year
Members of the Committee are appointed by the Board on the
recommendation of the Nomination Committee, which reviews
membership in terms of skills, knowledge, diversity 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
the 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, product safety and corporate responsibility,
sustainability and ethics-related matters, and Reckitt practices
and policies in these areas. During the year, the Head of Group
Secretariat acted as Secretary to the Committee.
Meetings
The Committee is expected to meet at least three times per year.
In 2021, the Committee held four meetings, three of which were
held virtually due to COVID-19. Meetings usually take place ahead
of Board meetings and the Chair of the Committee reports
formally to the Board on the Committee’s proceedings. The CEO,
CFO, Chief R&D Officer, Group Head of Audit, General Counsel
& Company Secretary, Chief Supply Officer, Head of Group
Compliance, Head of Corporate Affairs & Chief Sustainability
Officer, Head of External Communications and Affairs, Global
Director of Sustainability, Environment and Human Rights, Chief
Safety Officer, and Global Head of Regulatory 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 R&D Officer, Head of Group Compliance,
Head of Corporate Affairs & Chief Sustainability Officer and
Group Head of Audit without other invitees being present, as
well as a private meeting of the Committee members. 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.
In addition to reviewing matters at our Committee meetings, the
Committee Chair held regular meetings with our CEO, Chief R&D
Officer, Head of Corporate Affairs & Chief Sustainability Officer,
and the Chief Ethics & Compliance Officer, to review progress
against the strategy and to represent the Board in supporting
the efforts in these critical areas.
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 corporate responsibility
and sustainability, ethics and compliance strategies, policies,
142
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4 of 4
4 of 4
4 of 4
programmes and activities. Its role and responsibilities are set out
in its terms of reference, which can be found at www.reckitt.com.
We review our terms of reference annually. During the year, the
Committee’s terms of reference were reviewed and considered
to be fit for purpose, in line with best practice.
The Audit Committee has a monitoring function in respect of risk
management and internal control systems, especially financial
controls, 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 and the Chair of the CRSEC Committee is a member
of the Audit Committee.
Activity during the year
Standing agenda items reviewed by the Committee throughout
the year
The Committee has a number of standing agenda items which
it considers in line with its terms of reference:
• Reviewing the constitution, terms of reference and
performance of the Committee
• Assessment, benchmarking and recommendations on policies,
processes and procedures for corporate responsibility,
sustainability and compliance and ethical conduct
• Overseeing the Group’s conduct with regard to its corporate
and societal obligations as a responsible global citizen on
behalf of all its stakeholders, including reviewing the company’s
statement on Modern Slavery and Trafficking
• Reviewing and monitoring implementation and compliance
with the company’s Speak Up Policy and review of reports
•
In conjunction with the Audit Committee, reviewing the
company’s whistle-blowing, fraud and compliance
arrangements, including the adequacy and security for the
workforce to raise concerns, procedures for detecting fraud,
systems and controls for the prevention of bribery and modern
slavery and the effectiveness of anti-money laundering
systems and controls
• Monitoring and reviewing processes for risk assessment for
corporate responsibility, sustainability, and compliance and
ethical conduct
• Agreeing targets and KPIs for corporate responsibility,
sustainability and compliance and ethical conduct. Reviewing
internal and external reports on progress towards set targets
and KPIs
• Reports from management committees in respect of corporate
responsibility, sustainability, ethics, and compliance and
investigating and taking action in relation to issues raised or
reported to it
Specific matters which were considered by the Committee at
its meetings during the year are shown below:
• Product safety evaluation, product integrity review and product
lifecycle management
• Supply chain quality performance
• Corporate employee health and safety
• Regulatory matters review and remediation programmes
• 2021 compliance and ethics priorities
• Ethics and compliance maturity evolution and communication plan
• Ethics and compliance scorecard
• Corporate security
• Annual compliance training
• Corporate policies
• Employee pulse survey – ‘Doing the right thing, always’
• Data privacy: Brexit and data incidents reported
• Third-party due diligence
• External affairs
• Fight for Access Fund
•
•
IFCN progress, including position on sugars
IFCN update – breast-milk substitute call to action
• Sustainability matters and target tracking
• Building on COP26 momentum on sustainability
• COVID-19 impact and related matters
Some of the key achievements in the reporting period follow.
Sustainability
2021 was a significant year in our environmental social and
governance (ESG) and sustainability agenda. At the end of 2020, we
measured our performance against our initial sustainability targets,
achieving 2020 environmental goals on carbon and water in
manufacturing and improving our social impact, but also recognising
the need to strengthen our focus on product sustainability
throughout our value chain. External scrutiny of packaging and
plastics continued alongside greater recognition of the importance
of biodiversity and reaffirmation of the significance of climate action
both for business and society. Our work up to 2021 built strong
foundations in these areas, most notably through our work on
plastics and our science-based targets approach on climate change
with ambitions to reach net zero. Together with a greater emphasis
on sustainable product formulation and even wider social impact
within both our business and value chain, these formed the basis of
our Sustainability Ambitions for 2030 which we launched in March
2021. Our ambition to reach half the world with products that enable
a cleaner, healthier world, while engaging two billion people through
our purpose-led brands, programmes and campaigns will help us
deliver lasting societal impact through a stronger business. In
delivering our specific ambitions on sustainable products, climate
action, inclusion and human rights we help deliver the United Nation’s
Sustainable Development Goals (SDGs) and our own ambitions for
a healthier planet and fairer society. Our latest materiality review
reaffirms that we are focused on the issues that matter most – for
our business, for wider society and for our stakeholders. This was
confirmed during 2021 as we communicated our Sustainability
Ambitions widely, and built new partnerships with stakeholders,
especially customers and governments, to help deliver them.
The United Nations COP26 conference was a great demonstration
of this and of our wider ESG and sustainability approach. As the
official hygiene partner at COP26, we helped deliver a safe
conference that furthered climate action. We also drew attention
to the increasingly obvious connection between climate change
and public health. This needs concerted cross-sectoral action
to protect people’s health around the world, and Reckitt is well
placed to drive and support that action. Our purpose-led brands’
activity on health literacy and preventative health and hygiene
measures help address exactly that. At the same time, through our
brands and the sustainable products we design, we help tackle
climate change when people use our products every day, by
saving energy and water. Again, at COP26, we drew attention
to how brands and business can connect with consumers
everywhere to promote this and create subtle but important
changes in behaviour that help address societal issues.
COP26 also saw our announcement of new programmes on
ecosystems and biodiversity. The opportunities and risks within
ecosystems, for a variety of issues such as climate change,
resource resilience or even new health solutions, are increasingly
visible. Stakeholders including governments, consumers and
investors recognise this within their support for stronger policy
frameworks and reporting activity through nature-related financial
risk reporting. Our new partnership with the University of Oxford
Nature Based Insetting team is helping us assess ecosystem
impacts and then build measurable interventions to reduce risk
and strengthen ecosystems for the future. It complements our
partnership with the University of Cambridge‘s Centre for Risk
Studies on climate change.
Reckitt Annual Report and Accounts 2021
143
Reckitt’s stand at
COP26, Glasgow, UK
Financial StatementsGovernanceStrategic Report Corporate Responsibility, Sustainability, Ethics and Compliance Committee Report
(Continued)
We have continued to progress on climate change by further
reducing carbon and greenhouse gases through increased use of
renewable electricity and energy efficiency. There has been similar
progress on water, with increased efficiency in manufacturing
alongside the development of water harvesting and catchment
area management. Collectively, these have enabled our first
net water-neutral site, at Hosur in India. Our increased focus
on sustainable products is led by ongoing development of our
Sustainable Innovation Calculator which is now used in each Global
Business Unit’s product development innovation programme. It
helps measure carbon, water, chemical and packaging footprints in
new products for our global brands, targeting their reduction to
enable more sustainable products in the future.
2021 also saw Reckitt strengthen its sustainable sourcing activity
with a focus on key ingredients including palm oil and latex.
We have reaffirmed our commitment to only using certified
sustainable palm oil. This is enabled by roadmaps with our
suppliers together with our collaboration with other Consumer
Goods Forum members and our own partner, Earthworm
Foundation, on landscape programmes. We began the certification
of latex through the Fair Rubber Association (FRA). We are working
with plantations in Malaysia and smallholder farmers in Thailand to
certify latex production, strengthen agronomy, protect ecosystems
and support sustainable livelihoods and communities to safeguard
them and latex production for the future.
Our ESG and sustainability agenda was a continuing element of this
Committee’s work, but also supported wider Board engagement.
Listening Sessions on infant nutrition and ecosystems supported
our oversight of the business’s strategy and approach, bringing
external expert perspective to the attention of Board members.
Safety, quality, regulatory and compliance
At the start of the year, the Consumer Safety and Regulatory
functions were aligned under our Chief R&D Officer, which has
delivered further continuity across the innovation and product
lifecycle management, enabling greater effectiveness and
efficiency. Quality, Employee Health and Safety and Quality
Compliance functions are aligned under the Chief Supply
Officer, which has delivered further continuity around critical
manufacturing and logistics processes and the necessary product
quality requirements.
R&D
•
Ingredients: Science platforms delivering new innovative
solutions in areas of packaging and science of sustainability –
e.g. Gaviscon coatings replacing outside plastic sleeve, Finish
packaging recycled content, fundamentals of polymer science
leading to upgraded shelf life performance, PU condom launch
and optimisation of material usage and manufacturing yields to
reduce waste
• Product Lifecycle Management (PLM): The PLM system is now
deployed across a number of sites and global functions with
focus on data governance and platforms required to ensure
efficient data flow and compliance. Continued learnings from
deployment are being applied to the programme approach
moving forward
• Animal testing for product safety: A new ‘Alternatives to
Animal Testing’ corporate policy was developed, emphasising
Reckitt’s commitment to minimising animal testing and using
alternatives where possible. Consumer safety is our number
one priority, and Reckitt must comply with the regulations
where our products are marketed. This may on limited
occasions require animal studies to support the safety or
144
efficacy of certain ingredients and/or products, when no
scientifically validated alternative test is available. It is our policy
not to conduct or commission tests unless scientifically justified
or required by government or scientific agencies. This same
policy is applied to our suppliers and third parties. Reckitt does
not test cosmetic products or any of its ingredients on animals
and supports a worldwide ban to end cosmetic product testing
on animals. Reckitt is committed to eliminating animal testing of
our products as far as possible, applying the principles of ‘3Rs’
(Reduce, Refine and Replace). Reckitt does not conduct animal
testing on cosmetic ingredients or raw materials for the
purposes of safety assessment, nor do we request our
suppliers to do this. In cases where animal testing is required,
we ensure that we use accredited and certified third-party
laboratories. Reckitt has no animal testing research facilities and
does not conduct in-house animal research. We do not request
third-party suppliers to conduct testing on our behalf. As part
of our commitment to ending animal testing, we are continuing
to collaborate with the scientific community and a number of
trade association partners to accelerate the development of
alternative approaches and methodologies, while ensuring
consumer safety and delivering product efficacy
Product integrity review: Completion of a 4.5-year programme to
review the safety and compliance of Reckitt’s portfolio in response
to the Humidifier Sanitiser (HS) tragedy. At peak a workforce of
90 dedicated cross-functional scientists reviewed over 21,000
stock-keeping units (SKUs) across 173 markets, manufactured at
over 280 locations. A comprehensive review of the company’s
response to the HS tragedy was also conducted. It found that
Reckitt’s product safety systems and processes had been
appropriately remediated since 2016.
• Brexit: Required changes have been implemented with
updated and adapted items such as testing protocols, to ensure
execution and no loss of business continuity
• Regulatory matters: The Committee continued to monitor
regulatory issues in many jurisdictions and the business’s
readiness to adapt. A new Public Policy & Advocacy Group of
cross-functional experts has been established to strengthen
this capability and ensure continued and long-term focus on
Reckitt’s policy priorities
• Our overall approach to CRSEC activities has moved to
continuous improvement, with a more effective topical
approach, as evidenced by the survey conducted in Q3
• COVID-19: Our focus continued to enable science support for
our products and consumer knowledge, drawing on medical
insight and product knowledge as new variants emerged
Supply
• Quality: QualityOne has now been launched for Change and
Deviation Management. As planned, work has commenced on
scoping the next phases of the programme – Documentation,
and Supplier & Audit Management. Progress continues on both
leading and lagging indicators across business units
• EH&S: enhanced programmes at factories; robust COVID-19
protocols and a strong performance maintained despite
COVID-19 related disruptions; and strong progress on
asset protection
• Transformation in Consumer Relations is reaching its conclusion
in Q1 2022 and will bring us data from our consumers to
drive improvements
Legal and compliance
• Culture of Integrity: Following the publication of Reckitt’s new
Compass and Code of Conduct in 2020, helping us ensure that
every employee has a clear understanding of the behaviours
we want to adopt and of the principles and values which we
uphold, in 2021 Reckitt rolled out a survey to measure the
‘Culture of Integrity’ within the organisation. This was done
through a company-wide ‘Doing the Right Thing, Always’ pulse
survey in Q2 2021. The survey obtained 19,498 responses, with
rich feedback provided
On the back of employees’ feedback on their feeling of
empowerment to ‘Do the Right Thing, Always’, Reckitt devised
a detailed action plan and put robust measures in place to
continuously enhance its Culture of Integrity. As an example
of the actions taken, the Company:
i. Continued the roll-out of the Honest Reflections on Ethics
training sessions, aimed at equipping employees with a
better understanding of the trade-offs involved in taking
risks and ‘getting the job done’ as opposed to making
ethical business decisions and ‘Doing the Right Thing,
Always’. To date, the ethics and compliance teams have
deployed the Honest Reflections on Ethics campaign to
thousands of employees worldwide and – in particular – to
those operating in high-risk countries and covering positions
with significant decision-making influence, such as general
management and commercial functions.
ii. Expanded the scope of the annual mandatory compliance
training to cover also the topic of human rights. Reckitt’s
mandatory training curriculum now spans from the Code of
Conduct to product safety, from human rights to privacy and
cyber security, from anti-bribery & corruption to competition
law. In 2021, over 94% of the employee base completed the
annual mandatory compliance training.
iii. Developed and rolled out role-specific training to high-risk
functions and jurisdictions on matters such as data privacy,
competition law and corporate security.
• Speak Up: 2021 was an opportunity to continue raising
awareness of the confidential Speak Up service, available
to employees and third parties to ask questions and raise
concerns on potential violations of regulations, internal policies
or any misconduct observed at Reckitt
Increased awareness of the Speak Up service, both internally
and externally, and availability of the Speak Up hotline externally,
led to a substantial increase in the volume of Speak Up cases
received in 2021. To ensure the increase in cases were managed
and investigated in a timely manner, in-depth Speak Up
investigation training was delivered to individuals responsible
for leading investigations, from ethics & compliance or other
relevant functions.
By the end of 2021, Reckitt had received 606 Speak Up reports.
Most cases were investigated and closed, and some are still
under investigation. 49% of Speak Up reports were considered
to be substantiated or partially substantiated during 2021.
Further to the above, Reckitt also took action to strengthen the
level of maturity of the controls relating to its top three areas of
risk exposure: data privacy, third-party non-compliances, and
bribery and corruption. Further information on actions taken
over 2021 is reported below.
• Data privacy: In 2020, the Group Privacy Office (under the
leadership of our Group Data Protection Officer) embarked
on the implementation of a long-term risk improvement
programme aimed at advancing Reckitt’s privacy practices
and aligning Reckitt’s residual risk exposure with its appetite.
As part of the ongoing implementation of its improvement
programme, in 2021 the Group Privacy Office completed
a number of workstreams, such as:
i. Strategy: Reckitt’s Improvement Programme Roadmap was
baselined, shared with several jurisdictions and localised to
allow each market to include further targeted actions to
meet local laws and regulations.
ii. Governance: a ‘Ways of Working’ manual outlining the
role of the Group Privacy Office, Heads of Privacy, Privacy
Counsels and of selected functions with respect to
the implementation of the privacy programme and to
business-as-usual data-handling practices was created
and supplemented through documented job descriptions
for stated stakeholders.
iii. Training: data privacy training was delivered to Reckitt’s
employee base; in addition, employees in high-risk functions
and jurisdictions were also assigned additional role-specific
training which, over the course of 2021, has been completed
by 10,439 employees.
• Third-party non-compliances: Over 2021, Reckitt also
strengthened its third-party risk management practices and
reaffirmed its ability to assess third parties before entering into
a business relationship with them
In March 2021, Reckitt rolled out its enhanced third-party due
diligence process with some of its highest-risk operating sites.
The new process tailors the thoroughness of due diligence
assessments to each third party’s risk profile, thus allowing Reckitt
to focus its attention on the areas where it matters the most and
thoroughly investigate the third parties which pose a high inherent
risk to our organisation. Following the roll-out to high-risk sites
in March 2021, the new due diligence process is being integrated
with the workflows and systems in place to enable third-party
creation and contract negotiation. The integrated due diligence
process is due to be launched across the rest of the organisation
in Q1 2022. This year, 13,505 third parties have been assessed via
the due diligence process.
We recognise that, whilst the execution of third-party due
diligence assessments is important, it is only one of the
components of an effective third-party risk management
programme. As such, in 2021 Reckitt also:
i. Developed guidelines setting out the most typical red flags
which may be identified in the course of a due diligence
assessment, and practical ways to resolve them.
Reckitt Annual Report and Accounts 2021
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Financial StatementsGovernanceStrategic Report
Corporate Responsibility, Sustainability, Ethics and Compliance Committee Report
(Continued)
ii. Strengthened Reckitt’s third-party risk management toolkit
through the development of i) Third-party training to ensure
our business partners understand Reckitt’s expectations
of them and can familiarise themselves with practical
dos and don’ts; ii) Supplementary material which may be
distributed to third parties needing to strengthen their
compliance position.
iii. Devised ways to continuously monitor changes in
third parties’ criticality, and risk profile through the
implementation of a robust assurance mechanism.
• Anti-bribery and corruption: To reinforce Reckitt’s
commitment to preventing any form of bribery and corruption,
between Q4 2020 and Q1 2021 Reckitt engaged Transparency
International (the leading anti-corruption NGO overseeing
anti-bribery and anti-corruption-related activities globally) to
carry out a benchmarking assessment on its Anti-Bribery and
Anti-Corruption programme against industry peers
The assessment found that Reckitt’s Anti-Bribery and Anti-
Corruption programme compares favourably against industry
peers with positive scores in important areas such as: senior
leaders’ commitment, monitoring risks, managing high-risk areas
and providing adequate training on bribery and corruption risks.
Furthermore, as part of its ongoing efforts in countering bribery
and corruption, during 2021 Reckitt:
i. Updated its Anti-Bribery Policy, Conflicts of Interest Policy
and supporting Standard Operating Procedures.
ii. Updated its Third Party Code of Conduct and rolled it out to
its suite of third parties.
iii. Created new processes and channels via which third parties
can report conflicts of interest.
iv. Handled a total of 3,785 Conflicts of Interest Disclosures
throughout 2021.
v. Handled a total of 642 Gifts & Entertainment Disclosures
throughout 2021.
• Compliance monitoring capabilities: To measure the
effectiveness of its Ethics & Compliance programme, Reckitt
also advanced its compliance monitoring capabilities. Data
analytics techniques were leveraged wherever possible to
gather insights on Reckitt’s state of compliance against the
requirements of the company’s policies and procedures. When
instances suggesting that our practices deviate from policy
requirements are identified, the Ethics & Compliance team
investigates them and devises supporting risk-mitigation plans.
The risk metrics and performance data gathered through
Reckitt’s growing data analytics capabilities are also being used
to support the business in executing periodic assessment of its
compliance risk exposure year on year.
External affairs
Policy and advocacy
Board Listening Sessions
In 2021, the Board undertook two Listening Sessions with key
external stakeholders, in line with section 172 of the Companies Act
2006 (the Act). At these sessions we invited a broad spectrum of
external speakers representing diverse opinions ranging from:
NGOs to investors; governments to consumers and retail partners
to industry. The 2021 sessions were focused on: the Power of
Nutrition (26 May) and Nature-based Solutions (6 October). After
each Listening Session a summary of our external speakers’ insights
and recommendations were produced and shared with the Board.
In 2022, our Listening Sessions will include a deep dive on
‘Self-Care’, one of the four global problems our Reckitt business
strategy focuses on.
Wet wipes and single-use plastic (SUP)
We are engaging with the UK Government regarding the proposals
to ban problematic plastic items, in an effort to reduce the strain
on waste management systems. Our consultation involves
highlighting our progress made on eliminating plastic in wet wipes,
particularly in Dettol products.
Build Back Better Business Council
Reckitt’s CEO was appointed to the UK government’s Build Back
Better Business Council (BBBBC), which brought together
government and business leaders to drive economic recovery
and growth across the UK, enable the transition to a net-zero
economy by 2050 and promote ‘Global Britain’. The work of the
council focuses on the three priority pillars of skills, innovation
and infrastructure.
Laxman Narasimhan has also been appointed as a member of the
Levelling Up Advisory Council and is chairing Opportunity Humber,
a private sector initiative to help drive the growth of the Humber
region and ensure it is delivering its full potential for the UK.
This spring Reckitt also launched the Oh Yes! Net Zero campaign
in Hull. This is a Reckitt-created coalition in collaboration with
the University of Hull, Hull City Council and over 30 companies
to achieve net zero in a region that has the UK’s largest Industrial
Cluster CO2 emissions.
Greater transparency
Reckitt became one of the first FTSE companies to go beyond UK
gender pay reporting requirements in 2020, increasing its scope to
five markets: China, India, Mexico, the UK and the US. In 2021, we
doubled (to ten) the number of markets covered by the report,
which represents almost 70% of our global Reckitt workforce.
In December 2021, we published our annual tax strategy, as
required by HMRC. Since 2016, it has been a legal requirement for
large UK companies to publish their tax strategies. Reckitt goes
over and above the legal requirements and includes voluntary
disclosures in the report.
In 2021, Reckitt was one of the 173 companies who took part in the
Workforce Disclosure Initiative (WDI), leading the way on
transparency around workforce issues. It represents the fourth
year Reckitt has submitted data to WDI.
146
In May 2021, Reckitt was ranked first (out of nine breast-milk
substitute (BMS) manufacturers) in the first ATNI Spotlight on
Lobbying Report.
Responsible business
Significant progress on our sugar commitment
In October 2020, we outlined our specific commitments on sugar
for our Infant Formula and Child Nutrition (IFCN) portfolio, to be
implemented by March 2024. We have made significant progress,
and as of November 2021, we were at 90% of our commitments,
with plans in place to meet our original target of full compliance
by March 2024.
ATNI and the BMS Marketing Index 2021
The Access to Nutrition Initiative (ATNI) undertook an independent
evaluation of our BMS Marketing Policy, internal systems, and
on-the ground marketing practices in the Philippines and Mexico.
This work was conducted in 2019/20, with the resulting report
published in May 2021. Reckitt improved its ranking from fifth
(out of six BMS manufacturers) to fourth (out of nine BMS
manufacturers), and with a score of 32% (versus 10%), this
represents more than a three-fold increase compared to the ATNI
BMS Marketing Index in 2018. This significant improvement is a
direct result of our BMS Marketing Policy, and our improved
transparency, disclosure and reporting on our BMS practices.
We published our response to the ATNI Marketing Index 2021 in
December. We engaged extensively with ATNI on the findings,
and as of January 2022, were the only company to date that
had responded.
FTSE4Good and independent verifications
Following our acquisition of Mead Johnson Nutrition in 2017,
we participated in the first FTSE4Good verification of our
BMS marketing practices over 2019-2021. The assessment was
carried out at our corporate head office, and in two countries,
the Philippines and Mexico. Whilst the verification reports
identified a number of areas for improvement, we are proud of
the significant progress we have made in our marketing practices,
four years post acquisition.
IFCN marketing practices
As part of our governance mandate and ensuring that we monitor
the proper implementation of Reckitt’s policy and procedures on
the marketing of breast-milk substitutes (BMS), we are apprised on
progress and developments in the marketing of our BMS products.
We employ a number of monitoring activities, and have
summarised below the key items from 2021:
• We completed our reporting on the responsible marketing of
BMS: summarising alleged non-compliances of our BMS
marketing practices versus the BMS Marketing Policy and/or
local legislation for 2020. Similar reports are available for earlier
years, and we will publish the report for 2021 later this year.
• We undertake independent verifications of our IFCN marketing
practices in two countries each year. The reports for Thailand
and Colombia, as well as our response and corrective action
plan are available www.reckitt.com/sustainability/purpose-led-
brands/infant-and-child-nutrition/policies-and-progress-reports.
Reckitt Global Hygiene Institute
Reckitt provided a founding donation of $25 million to set up
the Reckitt Global Hygiene Institute (RGHI) as an independent
US-based non-profit 501(c)(3) foundation in mid-2020. RGHI’s
mission is to enable and accelerate hygiene science to improve
public health through better outcomes and behaviours. It is guided
by an external panel of globally recognised public health experts.
In 2021, RGHI initiated several research grants and held its first
‘open call’ for three-year post-doctoral fellowships in hygiene,
awarding five of these from a large worldwide pool of applicants.
RGHI has attracted the support of several key organisations
including the World Bank, Chatham House, the Task Force for
Global Health and the UN’s Hand Hygiene for All, as well as a wide
network of academic institutions including Harvard, Emory and
Stanford universities and the Water Institute.
Committee performance review
Following the key outcomes of the 2020 performance review,
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.
In 2021, a performance review of the Committee was conducted
as part of the Board’s external performance review, conducted
by Lintstock Ltd. Lintstock Ltd is independent of and has no
connections to the company.
The performance review of the Committee utilised a bespoke
questionnaire, sent to Committee members. The 2021 performance
review focused on the Committee’s time management and
composition, processes and support, work carried out and its
priorities for change. Positive feedback was received in all areas.
Meetings were managed well in line with the annual cycle of
work. The time and input in meetings and the facilitation of virtual
meetings were rated highly. The composition of the Committee
was also highlighted, with members having a good balance of
knowledge and appropriate capabilities. It was noted that the
Committee played an important role in monitoring Reckitt’s
conduct with regard to its corporate and societal obligations and
compliance with laws, regulations, codes of conduct and internal
policies and procedures. To continually improve Committee
performance in 2022, the value of incorporating focused deep
dives into agendas would be beneficial. It was also recommended
that the Committee receive continual updates on ESG reporting
requirements and regulatory changes.
The Board, having had sight of the results of the Committee’s
evaluation, considers the Committee to be operating effectively.
Pam Kirby
Chair of the Corporate Responsibility, Sustainability, Ethics and
Compliance Committee
Reckitt Benckiser Group plc
13 April 2022
Reckitt Annual Report and Accounts 2021
147
Financial StatementsGovernanceStrategic Report “Central to our remuneration
philosophy are the principles
of pay for performance
and shareholder, as well
as strategic, alignment.”
Mary Harris
Chair of the Remuneration
Committee
DIRECTORS’
REMUNERATION
REPORT
Contents of Directors’ Remuneration Report
148 Letter from the Chair
155 Reckitt’s remuneration at a glance
158 Remuneration Committee governance
160 Directors’ Remuneration Policy
168 Annual Report on Remuneration
182 Additional remuneration disclosures
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.
LETTER FROM THE CHAIR
On behalf of the Board, I am pleased to present the
Directors’ Remuneration Report for the financial year
ended 31 December 2021.
In line with the three-year lifecycle, a new Directors’ Remuneration Policy is being put
forward for a binding shareholder vote at our AGM on 20 May 2022. On the following pages,
I have shared the context for the key decisions the Committee took during 2021, in
particular the decisions we took in connection with the updated Directors’ Remuneration
Policy, how we rewarded performance achieved during the year in line with the current
shareholder-approved Policy, decisions relating to remuneration arrangements in 2022
should the new Policy be approved and the context of wider workforce remuneration.
In light of the Committee’s review of the Directors’ Remuneration Policy and how this is
cascaded to the wider workforce, I have met and corresponded with many of our largest
shareholders and shareholder advisory bodies over the past year to discuss Reckitt’s
remuneration philosophy and the proposed changes to the Policy for 2022. I am pleased
to say that we have had the benefit of substantive feedback from more than 50% of our
shareholder register and that the majority of shareholders providing input were supportive
of the changes we are making to our Remuneration Policy, to even further align with the
strategic priorities of the Group. On behalf of the Remuneration Committee, I would like to
thank shareholders and their advisory bodies for the time taken and their feedback, which
has provided valuable input and assisted the Committee in developing the proposals. In
particular, this proposed Policy strengthens the link between remuneration and Reckitt’s
strategic priorities, and provides further alignment with shareholders and our sustainability
ambitions through new performance measures in the Long Term Incentive Plan (LTIP).
148
Context for executive remuneration at Reckitt
Reckitt strives for leading global performance. Our management
team is multinational, and we compete for talent against global
peers. Central to our remuneration philosophy are the principles
of pay for performance and shareholder, as well as strategic,
alignment. Combined with Reckitt’s Compass and business model,
these principles define how decisions are made, how people act
and how we assess and reward them.
As noted in the Chair of the Board’s statement, our workforce
has shown itself to be adaptable and highly effective in very
taxing conditions. I am incredibly proud of their resilience
and commitment which have brought tangible improvements
to execution across the Group. Our top leadership team has
integrated well and is making rapid inroads towards achieving
our strategic objectives, with the transformation firmly on track.
Our strategy seeks to drive a return to sustainable, mid-single-digit
revenue growth, with margins in the mid-20s by the mid-2020s
whilst ensuring return on capital is enhanced, in order to deliver
creation of value for shareholders. The repositioning of our
business towards higher growth is demonstrated in the
divestments of IFCN China, Scholl and E45 and the successful
acquisition of Biofreeze.
Sustainability is also a key strategic priority for Reckitt. In 2021
we launched our sustainability ambitions, ‘For a Cleaner, Healthier
World’. They set out our 2030 ambitions and are backed by more
than £1 billion of planned investment over the next ten years to
ensure we meet our goals. As set out on page 16 of the Strategic
Report, our science-based targets support a 65% reduction in
operational greenhouse gas (GHG) emissions, and an increase
to 50% of net revenue from more sustainable products by 2030.
We have been making tangible progress through the year and
are therefore pleased that this has been recognised externally.
For example, we re-joined the Dow Jones Sustainability Index and
were also awarded a Gold Class 2022 Sustainability Award from
S&P Global. We have an improved MSCI ESG rating from A to AA,
and a Sustainalytics score at 22.9, positioning Reckitt in the top 15%
of our industry group. Our ambition, by 2030, is to reach half the
world with products that contribute to a cleaner, healthier world,
and engage two billion people in our programmes, partnerships
and campaigns to create a positive impact and support the UN
Sustainable Development Goals.
To reinforce our remuneration philosophy, the new Policy proposes
that the majority of the Executive Directors’ remuneration
packages continue to be made up of variable at-risk pay,
which will be linked to stretching financial and newly proposed
environmental, social and governance (ESG) targets that align
with our strategy and shareholder value creation, and are largely
delivered in Reckitt shares. In addition, we continue to have
market-leading shareholding requirements for executives.
This approach is cascaded throughout our senior leadership.
Key proposed changes to the Remuneration Policy
and implementation of the Policy for 2022
Our current Remuneration Policy was approved at the 2019 AGM.
A significant number of changes were made to the remuneration
framework at that time to ensure that the management team is
rewarded appropriately for delivering against our key strategic
priorities, to reflect the global nature of our business and to deliver
significant benefits for shareholders.
These changes included: i) a reduction in the maximum LTIP award
limits; ii) the introduction of bonus deferral, a holding period to
all LTIP awards, and a post-employment shareholding requirement;
iii) alignment of Executive Director pension arrangements to the
wider workforce; iv) expansion of malus and clawback terms; and
v) the introduction of additional performance measures of net
revenue and return on capital employed (ROCE) to LTIP awards.
In developing the new Policy over the past year, the Remuneration
Committee was mindful of the UK Corporate Governance Code,
engaged extensively with shareholders and their representatives,
and ensured that the Policy continues to incentivise delivery of
the Group’s strategic priorities and creation of shareholder value.
The Committee also took into account the views of the Board,
management, employees and other key stakeholders on our
remuneration policies and practices across the Group, as well as
understanding market practice, both in the UK and amongst our
global peers.
Following this comprehensive review, the Committee has
concluded that the structure of remuneration under the current
Policy remains fit for purpose and supports the strategy of the
Group to rejuvenate sustainable growth, as well as our principles
of ownership and pay for performance.
In particular, having reviewed and substantially changed the
remuneration structure as part of the last Policy review, the focus
of the proposed changes are on what we pay for. The Committee
is keen to ensure that the LTIP performance measures are aligned
with our forward-looking strategy to create shareholder value,
through the rejuvenation of sustainable growth, and therefore
is proposing the changes described below.
Changes to LTIP performance measures
The Committee is proposing to introduce Relative Total Shareholder
Return (TSR) as a measure under the LTIP to directly align executives
with the shareholder experience. In addition we propose ESG
measures to align with our 2030 sustainability ambitions.
Having taken into account shareholder feedback we propose to
remove EPS and reduce the weighting on net revenue, to maintain
the weighting on ROCE once the ESG measures have been
introduced, as follows:
• Like-for-like (LFL) net revenue growth (40% weighting)
• ROCE (25% weighting)
• Relative TSR (25% weighting)
• ESG (10% weighting, split equally between two metrics)
Reckitt Annual Report and Accounts 2021
149
Financial StatementsGovernanceStrategic Report There are no changes proposed to the measurement of net
revenue growth or ROCE performance measures used under
the LTIP.
There are no changes proposed to the annual bonus structure or
performance measures, which will remain based on net revenue
and adjusted profit before tax on a multiplicative basis, a structure
which requires outperformance in both measures, with deferral of
one-third of the bonus into shares.
The measures used across the bonus and LTIP schemes are
balanced between top-line and bottom-line performance,
combining revenue, profit, and return financial measures alongside
a measure directly aligned to the shareholder experience and a
measure linked to our sustainability ambitions. The Remuneration
Committee is of the view that this is a balanced set of measures
linked to our Compass and Purpose and fully aligned with our
forward-looking business strategy.
LTIP award limits
As previously approved by shareholders, our LTIP award sizes are
expressed as a fixed number of performance share options and
performance shares, to provide full alignment with investors.
The award size is determined by the Remuneration Committee
taking into account performance, the prevailing share price, market
data and our pay positioning philosophy. In the event of a material
increase or decrease in the share price prior to grant, the
Committee will consider whether the prevailing award size
remains appropriate and adjust it appropriately.
Taking into account shareholder sentiment and the current external
environment, the Committee has introduced a new, lower, normal
operational limit on the number of LTIP performance share options
and performance shares that can be granted to an Executive
Director, which will not be greater than 200,000 performance share
options and 100,000 performance shares, reduced from 300,000
performance options and 150,000 performance shares in the
previous Remuneration Policy.
In addition, for future LTIP awards, we are proposing that dividend
equivalents will accrue on performance share awards granted
under the LTIP that ultimately vest subject to performance in order
to align participants with the overall shareholder experience and
to bring Reckitt in line with UK best practice. These dividend
equivalents will be delivered in shares, in line with shareholder
guidance. This change does not apply to performance share
options granted under the LTIP.
Directors’ Remuneration Report (Continued)
Relative TSR is proposed as it directly aligns LTIP participants
with the shareholder experience and will only reward for TSR
outperformance against our peers. Relative TSR will be measured
against a group of 19 global companies primarily drawn from
the constituents of the MSCI World House & Personal Products
Index, along with other competitors to ensure peers that are
appropriately comparable to Reckitt (further detail, including
an explanation of the selection of peers is set out on page 180).
The composition of the peer group directly reflects shareholder
feedback received during the consultation. The targets will be
in line with UK best practice, with threshold vesting for median
performance and only vesting in full for upper quartile
performance or above.
Our sustainability ambitions, ‘For a Cleaner, Healthier World’,
were communicated externally in April 2021 and the proposed
ESG measures in the LTIP are directly aligned to these ambitions.
Further details on these are set out on page 180 of this report.
The ESG metrics take into account shareholder views that
measures should stem from the wider ESG strategy and should
be transparent, quantifiable and measurable. We are therefore
proposing two equally weighted ESG measures for the 2022 award:
i) Percentage of net revenue from more sustainable products
– this has been an annual reporting KPI since 2012 and
supports our ambition of 50% of net revenue being from
more sustainable products by 2030. This is measured using our
Sustainable Innovation Calculator (SIC) which measures the
environmental footprint of new products using carbon, water,
plastics, ingredients and packaging indicators. It includes Scope
3 consumer use (including the carbon and water impact from
consumer use), which is the most impactful lifecycle stage
of our products
ii) Percentage reduction in GHG emissions in operations
– this supports the delivery of our externally validated
science-based targets for 2030 to help maintain global
warming at less than 1.5°C, including a 65% reduction in
GHG emissions in operations from our 2015 baseline. For the
purposes of reward outcomes, any offsetting activities will
not count towards achievement of these targets
The ESG targets are based on rigorous methodology, are
independently assured and, in the case of our carbon emissions,
support our delivery of externally validated science-based targets
on emissions reduction. The Remuneration Committee intends
to keep the ESG measures under review over the lifecycle of
this Remuneration Policy, and to consider the inclusion of other
measures, for example Scope 3 carbon emissions. However,
these are currently in the early stages of implementation and the
Committee determined that the two measures outlined above are
the most appropriate for the 2022 LTIP award as they are based
on rigorous methodology and independently assured. Further
detail and rationale for these measures, including targets for the
2022 LTIP can be found on page 180.
150
Further detail and rationale for the changes can be found in the ‘Directors’ Remuneration Policy’ section and a summary of the key features of
Reckitt’s remuneration arrangements is shown below:
Notable features of Reckitt’s remuneration arrangements under the new Remuneration Policy
Rewarding fairly and responsibly
• Executive Director pension contribution
at 10% of salary, in line with our wider
UK workforce
• Robust and thorough assessment of
performance in the round before
determining annual bonus payouts and LTIP
vesting. The Committee will use discretion
if it is considered appropriate
• Malus and clawback provisions apply to
bonus and LTIP in line with best practice
shareholder guidelines
Reinforcing shareholder alignment
• Mandatory bonus deferral of one-third of
Supporting business strategy
• Annual bonus based on achievement of
any bonus earned into awards over Reckitt
shares for three years
• Two-year holding period for LTIP awards
which starts at the end of the three-year
performance period
• Shareholding requirements for Executive
Directors of over c.1200% and c.850% of
salary1 for CEO and CFO respectively, which
are the most demanding in the UK market2.
These requirements are more than double
the annual LTIP award3
• Two-year post-employment shareholding
requirement of 50% of the shareholding
requirement (or actual shareholding on
leaving if lower). This is more than 600% of
salary1 for the CEO and 425% for the CFO,
and is more stretching and onerous than
almost all other UK-listed companies’
in-employment shareholding requirements
• Formal mechanism to enforce the
post-employment shareholding
requirement through our external share
plan administrators
objective financial performance measures,
being net revenue and adjusted profit
before income tax
• Multiplicative approach for the formulaic
calculation of annual bonus outturns
ensures that:
• outperformance on both top line and
bottom line is required for maximum
payouts; and
• underperformance in any one of the
performance metrics will reduce the
overall bonus payout despite
outperformance of the other.
For example, if profit is below threshold
then a zero bonus would be paid regardless
of net revenue performance
• Vesting of the LTIP subject to achievement
against a range of metrics which measure
different aspects of Group performance,
balanced between top-line and bottom-line
performance, combining revenue and return
financial measures alongside a measure
directly aligned to the shareholder
experience and a measure linked to our
sustainability ambitions
1. Based on the average closing share price in Q4 2021 of £59.84
2. Compared against constituents of the FTSE 30
3. Using a Black-Scholes valuation of 10% for performance share options
Remuneration decisions in relation to portfolio management
During 2021, the active management of the portfolio saw a 9%
portfolio turnover, including the strategic disposal of IFCN China
and Scholl and the acquisition of Biofreeze – a major step forward
in our strategy to rejuvenate sustainable growth. This activity to
strengthen the portfolio has meant that the targets set at the
beginning of each award under the Annual Performance Plan (APP)
and LTIP needed to be reviewed to ensure they remained
appropriate. In line with our current shareholder-approved
Remuneration Policy and shareholder views on adjusting targets,
the APP and LTIP targets were adjusted where needed to ensure
that participants are no better or worse off and in line with
shareholder expectations as follows.
Adjusting the APP for the 2021 financial year
The Committee resolved that for the APP, we included the
performance of disposed assets within the performance of the
year assessment until the closing date of sale. In order to ensure
we assessed performance on a fair and consistent basis the
targets were adjusted to include performance of disposed assets
to the date of sale and exclude them for the period of the year
that Reckitt no longer owned them. In respect of acquisitions,
we included the performance from the closing date of acquisition
and also increased the targets accordingly.
Adjusting in-flight LTIP performance measures
For the 2020-2022 and 2021-2023 LTIP awards, the Remuneration
Committee has determined to adjust the targets for the disposal
of IFCN China, given the size of this transaction, to ensure that the
new targets are no harder or easier to achieve than the original
targets. A consistent approach has been taken across all three
performance measures and the adjustments are in line with
generally accepted shareholder principles where there has been
material portfolio management.
•
•
•
The original EPS targets were set as final year EPS values,
based on a plan which included IFCN China at the time
the targets were set. These targets have been reduced to
recognise the impact of the reduced profit expected in the
final year of the LTIP cycle due to the disposal of IFCN China
The LFL net revenue targets have been reduced slightly to
recognise that the expected revenue growth for IFCN China
when the targets were set was higher than the remaining
portfolio. The challenge in the new targets for the remaining
portfolio remains equal to the original targets
The ROCE targets have been increased to reflect that
IFCN China was a lower return business than the remaining
portfolio and again the new targets contain the same level of
challenge as was contained in the original targets when set
Further detail, including full disclosure of the original targets and
the new targets for each award cycle is set out on page 181.
The Remuneration Committee decided that for the 2019-2021 LTIP
award, given the timing of the IFCN China sale is such that it was
under the Group’s ownership for most of the performance period,
no adjustments were to be made to the LTIP targets set at the
start of the performance period.
Reckitt Annual Report and Accounts 2021
151
Financial StatementsGovernanceStrategic Report Directors’ Remuneration Report (Continued)
Annual bonus in respect of 2021 performance
Reckitt operates an annual bonus plan that is strongly aligned to
performance, measured against stretching targets of net revenue
and adjusted profit before income tax.
As it does every year, the Committee evaluated the performance of
both the Group and the Executive Directors in the round and with
regard to broader circumstances to assess whether the formulaic
level of annual bonus payout is appropriate and justified, as
described below.
From a financial perspective, 2021 was another strong year for
Reckitt with growth ahead of expectations and resulting in
two-year stacked LFL net revenue growth significantly better than
peers. LFL net revenue growth was 3.5%, outperforming market
expectations and is notable progress on top of excellent growth
last year, resulting in 17.4% growth on a two-year stacked basis.
We also saw strong momentum, with brands less sensitive to
COVID-19 dynamics, representing c.70% of the portfolio, growing,
on average, by mid-single digits in each quarter of 2021.
The adjusted operating margin (excluding IFCN China) was 22.9%
in line with guidance and our operating profit was £2.9 billion. The
dividend was maintained at 174.6p. As set out in further detail on
pages 168 to 171, these results reflect strong performance ahead
of expectations and demonstrate that the transformation is firmly
on track. Based on targets set, the 2021 annual bonus for the CEO
and CFO is 91.3% of maximum, in line with all other employees on
the same Group-wide measures.
The framework which the Committee applied in a thorough
evaluation of the performance of the Group and the Executive
Directors in the round is set out on page 156. In addition to the
financial operating performance as summarised above, this year’s
assessment included, amongst others, the following areas:
Strategic delivery: The Committee has recognised that during
the year we have continued to strengthen the business. Our
innovation pipeline is 50% higher than the previous year and our
productivity capabilities are now firmly embedded within the
business. Our execution has improved and has been recognised
by both customers and suppliers. Based on the most recent
Advantage survey of retailers, the percentage of our markets rated
‘top tier’ by our customers improved by 20 percentage points, to
46%. For example, we were named Walmart’s supplier of the year,
reflecting the improvements in sales excellence capabilities.
We have been actively managing the portfolio to focus on higher
growth, with 9% portfolio turnover.
Competitive performance: The Committee reviewed financial
and market share performance against competitors. In both cases
Reckitt has performed strongly. There has been strong market
share growth during 2021 with 62% of our core CMUs holding or
gaining market share; Reckitt’s LFL net revenue growth of 3.5%
represents strong growth and is markedly ahead of market
expectations. On a two-year stacked growth basis our growth
of 17.4% is significantly better than peer group average.
People and Culture: During the year there was the successful
embedding of several Diversity & Inclusion (D&I) and employee
wellbeing initiatives. We have also rolled out our Leadership
Behaviours which are a key part of our leadership development
programme and annual review process. Our efforts have been
recognised as we have recently been named in Fortune’s 2022
World’s Most Admired Companies list.
152
Sustainability: We re-joined the Dow Jones Sustainability Index
and were also awarded a Gold Class 2022 Sustainability Award
from S&P Global. We have an improved MSCI ESG rating from A to
AA, and a Sustainalytics score at 22.9, positioning Reckitt in the top
15% of our industry group. In the face of significant input cost
pressures, our supply chain continued to significantly improve and
our commitment to quality in supply was a contributing factor in
Reckitt’s readmission to the Dow Jones Sustainability Index. Last
year, we committed the equivalent of 1% of net profit over three
years to social impact investments. This year, ahead of schedule,
we achieved it, with investments in more than 50 countries, worth
over £38 million via the Reckitt Fight for Access Fund, and
engaging 30 million people.
Challenges: The Committee also reviewed the significant
challenges that the business faced during the year and how
leadership responded to them. This included the weak cold
and flu season and a deteriorating input cost environment given
commodity and freight cost inflation increasing to double digits.
Taking all of the above into account, the Committee determined
that the level of annual bonus payout is appropriate and justified
and that no discretion would be applied.
Vesting of the 2019-2021 LTIP
The Reckitt LTIP is designed to align participants with shareholders
through making awards with stretching performance conditions
denominated in both performance share options and performance
share awards. Vesting of awards under the 2019 LTIP was
dependent on stretching LFL net revenue growth, EPS and ROCE
targets which constitute a broader set of performance measures
than in previous LTIP award cycles.
The Committee determined that for the 2019-2021 LTIP award,
given the timing of the disposals in 2021 is such that they have
been under the Group’s ownership for most of the performance
period, no reductions will be made to the LTIP targets. Further
detail is set out on page 171.
As set out in the 2020 Directors’ Remuneration Report, as the
goodwill impairment in respect of IFCN reduces the capital
employed it has the potential to increase the calculation of ROCE
for LTIP purposes. The Committee has ensured that the impairment
has not led to an increase in vesting in respect of the proportion of
the LTIP related to ROCE, by adding this back in the calculation of
Capital Employed.
The Committee is satisfied that this treatment is fair to participants
and aligned with the shareholder experience. As set out on page
172, the resultant vesting is that 21.5% of the total award vests,
with vesting in respect of net revenue growth, reflecting the
strong growth over the performance period, but with zero vesting
in respect of the EPS and ROCE targets, as performance was
below threshold of the stretching targets set.
As set out in more detail on page 172, the Committee also
evaluated the performance of both the Group and the CEO (the
CFO is not a participant in this LTIP award cycle) in the round using
the performance assessment framework and concluded that the
total vesting level of 21.5% is justified and appropriate in this
context and that no discretion would be applied.
There is a further two-year holding period attached to Laxman
Narasimhan’s LTIP award.
2021 single figure
The impact of this bonus payment and LTIP vesting is a total single
figure of £5.97 million for the CEO and £3.07 million for the CFO,
noting that the CFO was not with the Group at the time the
2019-2021 LTIP awards were made. The majority of this is variable
pay, linked to stretching financial targets:
Single figure illustration (£m)
CEO
CFO
£m
0
1
2
3
4
5
6
7
Fixed remuneration
Annual bonus (cash)
Annual bonus (shares)
LTIP
2022 remuneration
The Committee reviewed base salary levels for both the CEO
and CFO and determined that it was appropriate to award
a 3% increase in line with the salary increase budget for our
UK employee base and taking into account Group and individual
performance. Salaries for 2022 are £1,008,000 and £721,000 for the
CEO and CFO, respectively. The CEO’s salary remains towards the
lower end of FTSE 30 market practice.
There are no changes to the bonus opportunity for the CEO and
CFO, remaining at 120% and 100% of salary at target, respectively.
Performance measures and weightings for the 2022 annual bonus
will be the same as for 2021. In line with prior years, the Committee
has set the performance targets at a stretching level taking into
account the internal business plan and external expectations. As in
prior years, the Committee will carry out a thorough assessment of
performance in the round taking into account a wide range of
factors before determining bonus payouts.
There are also no changes proposed to LTIP award levels for 2022,
which have been reviewed in light of share price performance,
Group performance and individual performance. Laxman
Narasimhan’s 2022 LTIP award will consist of 150,000 performance
share options and 75,000 performance shares and Jeff Carr’s
award will be 80,000 performance share options and 40,000
performance shares. These awards are expected to be made
following the AGM in May 2022. As described earlier in this letter,
the Committee is proposing changes to the LTIP performance
measures and for the 2022 awards these will be LFL net revenue
growth, ROCE, Relative TSR and ESG (split equally between
two metrics).
As disclosed in last year’s Remuneration Report it was the
Committee’s intention to further review the Chair of the Board’s
fee during 2021 to ensure that the fee remains reflective of the
enlarged scope of the role and time commitment over recent
years, as well as considering market practice. Having undertaken
this assessment, the fee for the Chair of the Board has been
increased by 10% to £627,000, effective from 1 January 2022.
25% of the fee continues to be paid in shares. The new fee level
remains below the median of the FTSE 30.
During the year the Non-Executive Director (NED) fees have been
reviewed taking into account the time commitment required to
meet the scope and responsibilities of the roles, the increases
given to the wider workforce and market practice. The basic NED
fee is being increased by 3% to £98,000, with effect from 1 January
2022. 25% of the fee continues to be paid in shares. There are no
changes to the additional fees for the role of Senior Independent
Director (SID), Committee Chair, Committee member, or
Designated Non-Executive Director for engagement with the
company’s workforce.
Context for remuneration of the wider workforce
The Remuneration Committee has considered the remuneration of
Reckitt’s wider workforce during the year and has been provided
with a comprehensive overview of workforce remuneration
and related policies, as well as the alignment of incentives and
rewards with culture. It reviewed information on salary structures,
bonus design and targets, the LTIP, share ownership, Reckitt’s
International Transfer Policy, approach to employee benefits and
the all-employee share plans. The Committee is pleased to
note from this review that the company’s remuneration policies
continue to be aligned with those of the Executive Directors,
with a cascade throughout the organisation.
In particular, the Committee also reviewed incentive arrangements
for the wider workforce in light of the Remuneration Policy review,
and the changes to the LTIP performance measures will be applied
to all employees who also receive performance-based awards
under the LTIP. The Committee also took wider workforce salary
increases into account when determining base salary increases
for the CEO and CFO as discussed above.
We have been voluntarily paying the Living Wage to all employees
and on-site contractors within the UK for a number of years and
have been formally accredited as a UK Living Wage Employer since
2020. Given the increasing global focus on living wage and the
associated business, societal and wider economic benefits, we
are exploring how we could expand the Living Wage commitment
across our wider global footprint. Consequently, we are developing
our Sustainable Livelihood Framework (of which living wage is a
component) to outline our approach and will be piloting it within
selected factories in Thailand and India.
Our all-employee share plans are key to fostering a culture of
ownership amongst our employees. We currently have 50% of
our eligible global employees participating. These award-winning
share plans give our people the opportunity to save in order to
purchase Reckitt shares at a 20% discount to the share price at the
start of the period. In offering these plans, we make a conscious
effort to ensure that they are all inclusive and accessible to all
colleagues. To facilitate this, we utilise a global network of around
100 local champions and provide communications in 28 languages
in various formats, including letters to employees without an
email address, desk drops, webinars, virtual drop-in sessions with
specific contacts at each site for support. The annual enrolment
period for our UK and global plans this year benefited from an
enhanced and refreshed communication campaign which led to
another successful launch and strong employee take-up.
As discussed in the Strategic Report our employment policies drive
gender equality in our teams. We have mentoring schemes for
female employees, gender-balanced shortlists and proportional
targets at senior management level. Additionally, we continue to
review and monitor the gender pay gap of our workforce closely.
To increase transparency on this issue, we have again voluntarily
disclosed the gender pay gap for our ten largest markets by
workforce size in our 2021 report, which including the UK, make up
around 70% of our global permanent workforce. Further details of
our gender pay gap are on page 178 of this report.
Reckitt Annual Report and Accounts 2021
153
Financial StatementsGovernanceStrategic Report Directors’ Remuneration Report (Continued)
We have also continued with several initiatives that were launched
in 2020. These include the Stronger Together conversation series,
a five-year commitment focusing on diversity and inclusion (D&I)
and belonging topics that matter most to our people, and the
establishment of a D&I board comprising senior leaders and
sponsors of our Employee Resource Groups (ERGs) and chaired
by the CEO, to lead the D&I strategic agenda across Reckitt.
In March 2021 we launched our global wellbeing programmes for
leaders at all levels in partnership with Hintsa and Tignum, global
leaders in this field. We have also provided a rich bank of resources
for all employees to access, including global wellbeing sessions,
focusing on balance, burnout and the importance of mental
energy attracting over 3,000 participants each time. In July 2021
we launched a global employee pulse survey, focusing on
understanding our employee demographics and getting insights
on Leadership Behaviours and diversity topics.
Finally, as the designated NED for engagement with the company’s
workforce I have had the same access to internal communications
materials, channels and events, such as the Stronger Together
conversations, as Reckitt employees and have been involved in
key conversations with the workforce allowing me to feed back
employees’ views to the Remuneration Committee as well as the
Board. As set out in the Strategic Report, each year the company
holds several round-table discussions with employees and
organises site visits during which town hall meetings and smaller
group discussions with our people take place.
During the year we also communicated to the wider workforce
details of how executive pay is set, its alignment with the
company’s approach to the wider company pay policy and how
decisions are made by the Committee, giving employees the
opportunity to ask any questions on these topics.
Further information on wider workforce remuneration, and how
this compares to the remuneration of our Executive Directors,
is set out on pages 175 to 177.
Committee changes
During the year Olivier Bohuon joined the Board and Remuneration
Committee, whilst Elane Stock stepped down from the Committee
– I would like to welcome Olivier to the Committee and also thank
Elane for her valuable contributions to the Committee during
her tenure.
This will be my last Directors’ Remuneration Report as I will be
stepping down as Remuneration Committee Chair after the
AGM, although I will remain a member of the Committee. Upon
confirmation at the AGM, Alan Stewart will take over the role of
Remuneration Committee Chair. I would like to welcome Alan to
the Committee and wish him well in his new role. I would like to
thank my fellow Committee members during my tenure as Chair
for their insight and commitment and also shareholders for their
feedback and active engagement on remuneration whilst I have
been Chair.
Conclusion
I trust that you will find this report a clear account of the way in
which the Committee implemented the current Remuneration
Policy during 2021 and of the Committee’s proposed new
Remuneration Policy.
I look forward to your support as we put the new Policy to a
binding vote of shareholders at the upcoming AGM, as it continues
to drive the appropriate behaviours and performance to support
the Group’s business strategy and delivery of shareholder value.
I will be available to answer any questions shareholders may have
at the company’s AGM on 20 May 2022.
Mary Harris
Chair of the Remuneration Committee
Reckitt Benckiser Group plc
13 April 2022
154
RECKITT’S REMUNERATION AT A GLANCE
As discussed in the Chair’s letter, Reckitt strives for leading global
performance. Our management team is multinational, and we
compete for talent globally. Central to our remuneration philosophy
are the principles of pay for performance and shareholder, as well
as strategic, alignment. Combined with Reckitt’s Compass and
business model, these principles define how decisions are made,
how people act and how we assess and reward them.
To reinforce our philosophy, the majority of the Executive Directors’
remuneration packages are made up of variable at-risk pay, linked
to stretching targets that align with our strategy and shareholder
value creation, and are largely delivered in Reckitt shares.
In addition, we have market-leading shareholding requirements
for executives. This approach is cascaded throughout our
senior leadership.
Context for remuneration at Reckitt
Reckitt’s Compass
Put consumers
and people first
Build shared
success
Do the
right thing.
Always.
Seek out new
opportunities
Strive for
excellence
Reckitt’s strategic priorities
• Rejuvenate Reckitt to deliver
shareholder value
• Restore organic top-line growth
• Achieve sustainable increased
medium-term earnings growth
• Maintain disciplined capital allocation
• Embed sustainability ambitions
Reckitt’s remuneration philosophy
Pay for
performance
Strategic
alignment
Shareholder
alignment
Combining Reckitt’s Compass, strategy and remuneration philosophy drives Reckitt’s remuneration principles
1. High proportion of variable pay
7%
31%
34%
26%
67%
CEO
35%
Fixed pay
Annual bonus
LTIP
Target 2022 package
Maximum 2022 package
Note: Value of the CEO’s target and maximum 2022 package. Target illustrates fixed remuneration, plus target
payout of annual bonus and threshold vesting of the LTIP. Maximum illustrates fixed remuneration, plus full payout
of the annual bonus and full vesting of the LTIP awards including 50% share price growth.
3. Market-leading share ownership policy
In-employment shareholding
requirement
Post-employment
shareholding requirement2
Number of
shares
Value of
shares1
% of 2021
salary
Number of
shares
Value of
shares1
% of 2021
salary
CEO
CFO
200,000 £11,968,000
1200%
100,000 £5,984,000
100,000 £5,984,000
850%
50,000 £2,992,000
600%
425%
1. Based on the average closing share price in Q4 2021 of £59.84
2. Reflecting 50% of in-employment shareholding requirement as a minimum
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
Reckitt Annual Report and Accounts 2021
155
Financial StatementsGovernanceStrategic Report Directors’ Remuneration Report (Continued)
Summary of our proposed Remuneration Policy
Element
Key features of operation
of proposed Policy
How we will implement
for 2022
Link to strategy
2022
2023
2024
2025
2026
2027
Salary, benefits
and pension
• Salary increases and
pension contribution
set in context of
wider workforce
• Salaries and benefits
set competitively
against peers
• 3% salary increase, in line
with wider workforce
• Pension contribution of
10% of salary in line with
the wider workforce in
the UK
Annual bonus
(APP)
• Target bonus of 120% of
salary for CEO and 100%
for CFO
• Targets set for net revenue
and adjusted profit before
income tax
• One-third deferred into
awards over Reckitt
shares for three years
• Malus and clawback
provisions apply
LTIP Performance
shares and
performance
share
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
Shareholding
requirements
• CEO: 200,000 shares
• CFO: 100,000 shares
• Threshold performance
results in zero payout,
with maximum of
3.57x target for truly
exceptional performance
on both metrics
• Assessment of
performance in the round
• Targets set for LFL net
revenue growth (40%
weighting); ROCE (25%
weighting); Relative TSR
(25% weighting); ESG (10%
weighting, split equally
between two metrics)
• Performance conditions
are applied to both
performance share options
and performance shares
• Remuneration Committee
assessment of
performance in the round
• Period of eight years from
appointment to achieve
• Two-year shareholding
requirement post-
departure
• To enable the total
package to support
recruitment and retention
• To drive strong
performance, with
significant reward
for overachievement
of annual targets
linked to Reckitt’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
• Promotes long-term
alignment with
shareholders
• Promotes focus on
management of
corporate risks
Cash APP
paid
Deferred
APP
vests
Award
granted
Award
vests
Holding
period
ends
Assessment of incentive outcomes
The Committee thoroughly evaluates the performance of both the company and the Executive Directors in the round to assess whether
the formulaic level of annual bonus payout and long-term incentive vesting are appropriate and justified. The Committee has formalised
its approach to this assessment and the framework which it applied is illustrated below.
What is the formulaic outcome for APP and LTIP?
Committee to consider year-on-year change, whether this reflects performance trend and impact on the single figure outcome
Consider the quality
of earnings
Committee to review the
results to ensure they
reflect the underlying
performance and
also consider any
exceptional items
Compare outcome
against the shareholder
experience
Committee to consider
absolute and relative
shareholder return over
the relevant periods, the
dividend payment(s) etc.
Compare outcome with
overall Group
performance
E.g. market share,
competitor
benchmarking,
sustainability, people and
culture, strategic
progress, wider
stakeholder experience
and analyst feedback
Consider any other
events and other input
E.g. Reputation/risk-
related, any change of
accounting standards.
Draw on input from other
Committees and
management functions
and consider the impact
of any external headwinds
or tailwinds
Consistency of
outcomes
E.g. Compare with
historical use of
discretion; consider
whether bonus and LTIP
outcomes are consistent
Final APP and LTIP outcomes
Committee to agree whether adjustments are required to formulaic results and
determine the final outcomes for APP payouts and LTIP vesting
156
Pay outcomes for current Executive Directors in the year
2021 fixed remuneration
Base salary
CEO
CFO
Pension
CEO
CFO
£979,000
£700,000
10% of salary
10% of salary
2021 variable remuneration
Annual performance plan
The performance outcome for the annual bonus was 91.3% of
maximum in light of achievement against both metrics, which is in
line with all other employees on the same Group-wide measures.
A third of the bonus is deferred, by way of an award over
Reckitt shares.
Base salary
Target
Multiplier
Delivery
Cash
Shares
Executive Director shareholding
Reckitt operates a market-leading shareholding requirement
with an eight-year timeframe for achievement and a two-year
post-employment holding period. The chart below illustrates
the progress towards this of the Executive Directors.
CEO
CFO
Shareholding requirement
Current shareholding
£5.4m1
Shareholding requirement
Current shareholding
£2.5m1
0
20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 200,000
Shares held2
2022 vesting4
Shares deferred from annual bonus3
3.26
2/3
1/3
1. Current shareholding value based on the average closing share price in Q4
2021 of £59.84
CEO £979,000
CFO £700,000
120%
100%
Long Term Incentive Plan
Performance
Vesting as a
share
Performance
percentage
2.
Includes shares owned outright and shares subject to post-vesting
holding restrictions
3. This is the estimated number of shares awarded, after tax under the Deferred
Bonus Plan, including those to be deferred from the 2021 annual bonus
4. For Laxman Narasimhan this is the number of shares vesting in May 2022 under
options
shares
of maximum
Delivery
the 2019 LTIP
Options
Shares
CEO 150,000
75,000
21.5%
32,250
16,125
2021 single figure
The single figure for 2021 is comprised of the elements in the
graph below.
CEO
CFO
£m
0
1
2
3
4
5
6
7
Fixed remuneration
Annual bonus (cash)
Annual bonus (shares)
LTIP
Reckitt Annual Report and Accounts 2021
157
Financial StatementsGovernanceStrategic Report
Directors’ Remuneration Report (Continued)
REMUNERATION COMMITTEE GOVERNANCE
Who’s on the
Committee
The Remuneration Committee is made up entirely of Non-Executive Directors who are appointed by the Board on the
recommendation of the Nomination Committee. Membership of the Remuneration Committee during the year was as follows:
Mary Harris (Chair)
Olivier Bohuon1
Nicandro Durante
Chris Sinclair
Elane Stock2
1. Joined the Board as a Non-Executive Director on 1 January 2021 and appointed onto the Remuneration Committee on the same date
2. Stepped down from the Committee on 25 October 2021
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 designed to support the strategy and long-term success
of the company, 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:
• regularly reviews and provides feedback on the company’s overall remuneration strategy;
•
in respect of the Chair of the Board, the Executive Directors and members of the Group Executive Committee, sets, reviews
and approves:
• remuneration policies, including annual bonuses and long-term incentives;
•
•
individual remuneration arrangements;
individual benefits including pension arrangements;
• terms and conditions of employment including the Executive Directors’ service agreements;
• participation in any of the company’s bonuses and LTIPs; and
• the targets and outcomes 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, taking
these into account when setting the policy for Executive Director remuneration and when determining variable pay
outcomes;
• takes into account employees’ views on remuneration; and
• when determining Executive Director Remuneration Policy and practices, considers the Code requirements for clarity,
simplicity, risk mitigation, predictability, proportionality and alignment to culture.
The Executive Directors and the Chair of the Board 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. The attendance of members at meetings is set out in the table
on page 118. In addition, during the year the Committee considered ad-hoc topics between meetings.
The Chief Human Resources Officer was Secretary to the Committee throughout the year. Meetings were also attended by the
CEO, CFO, General Counsel & Company Secretary and the Group Head of Reward by invitation. Deloitte was the appointed
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.
158
The table below summarises the key activities at the Committee’s meetings in 2021:
Meeting
Topic
February 2021
• Reviewed performance to 2020 in respect of bonus outcomes and LTIP vesting
• Carried out assessment of wider performance of the company and Executive Directors
• Final approval of 2020 bonus payout
• Final approval of 2018-2020 LTIP vesting
• Confirmed the 2021 bonus performance targets
• Agreed 2021 LTIP award date, performance measures and weighting
• Reviewed feedback from shareholders
• Reviewed disclosures in the Directors’ Remuneration Report
May 2021
• Discussed and agreed approach to the review of the 2022 Directors’ Remuneration Policy and wider workforce
remuneration arrangements
• Reviewed performance conditions used in bonus and LTIP
• Reviewed 2021 AGM voting and wider market trends
• Reviewed shareholder/proxy guidelines and UK best practice
• Approved 2021 LTIP measures, definitions and targets
July 2021
• Thorough review of Remuneration Policy, including:
• Reviewed prior shareholder feedback on remuneration arrangements
• Discussed bonus and LTIP performance measures
• Reviewed framework for APP target setting
• Considered assessment of performance to date for 2021 bonus targets and LTIP
• Discussed principles for adjusting incentives for M&A activities
September 2021
• Agreed initial proposals for the 2022 Directors’ Remuneration Policy, including performance measures and other
amendments to policy
• Determined approach to shareholder consultation
• Reviewed framework for target setting process and ‘performance in the round assessment’
• Approved principles for adjusting APP targets for M&A and assessed performance to date for 2021 APP
• Reviewed market data on remuneration packages for the Group Executive Committee
• Reviewed wider workforce remuneration arrangements
• Approved awards under the all-employee share plans for UK participants
November 2021
• Reviewed feedback from shareholder consultation on the Directors’ Remuneration Policy
• Reviewed updates to shareholder guidelines and corporate governance
• Finalised proposals for the 2022 Directors’ Remuneration Policy
• Agreed changes to wider workforce remuneration arrangements as part of the Remuneration Policy review
• Determined 2022 remuneration packages for Executive Directors
• Determined 2022 remuneration packages for Group Executive Committee members
• Reviewed current shareholdings for senior employees with share ownership requirements
• Determined 2022 bonus targets
• Approved awards under all-employee share plans for participants outside the UK
• Approved revised Remuneration Committee terms of reference
• Reviewed Remuneration Committee effectiveness
• Considered assessment of performance to date for the 2021 bonus
Reckitt Annual Report and Accounts 2021
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Financial StatementsGovernanceStrategic Report Directors’ Remuneration Report (Continued)
DIRECTORS’ REMUNERATION POLICY
This section of the report sets out the Remuneration Policy for
Executive Directors and Non-Executive Directors, which shareholders
will be asked to approve at the 2022 AGM on 20 May 2022 and, if
approved, will take effect from this date. Until this time, the Policy
approved by shareholders on 9 May 2019 will continue to apply.
The Policy was developed over the course of the last year.
The Committee undertook a thorough review of remuneration
arrangements with a particular focus on alignment to Reckitt’s
Purpose and Compass, as well as the forward-looking business
strategy and priorities. Input was received from Remuneration
Committee members, the Chair of the Board, other Non-Executive
Directors and management (including the CEO, CFO, CHRO),
and other key stakeholders, whilst ensuring that conflicts of
interest were suitably mitigated. Input was also provided by the
Committee’s appointed independent advisors throughout the
process. The Committee undertook an extensive consultation
process with shareholders whilst developing the new Policy. The
remuneration policies and practices across the whole of the Group,
and market practice, both in the UK and against our global peers,
were also taken into account. The key features of our approach
were also assessed against the principles of clarity, simplicity,
risk management, predictability, proportionality and alignment
to culture and as described on page 167.
A significant number of changes were made to the remuneration
framework as part of the previous Policy approved by shareholders
in 2019, including: i) a reduction in the maximum LTIP award limits;
ii) the introduction of bonus deferral, a holding period to all LTIP
awards, and a post-employment shareholding requirement;
iii) alignment of pension arrangements to the wider workforce;
iv) expansion of malus and clawback terms to include corporate
failure; and v) the introduction of additional performance measures
of net revenue and ROCE to LTIP awards.
Following a comprehensive review, the Committee has concluded
that the current Policy remains fit for purpose and supports the
strategy of the Group to rejuvenate sustainable growth as well
as our principles of ownership and pay for performance – and
therefore only minor changes to the Policy are proposed.
The Committee considered the following areas of the current
Policy (amongst others) when determining that the overall Policy
remains appropriate:
• Annual bonus structure – the current bonus structure is aligned
to the Group’s pay-for-performance culture, requiring
outperformance of both metrics to achieve above-target
outturns, and is well understood by participants. This approach
is cascaded throughout the Group
• Combination of performance shares and performance share
options – the LTIP structure strongly incentivises future share price
growth, providing strong alignment to the shareholder experience,
whilst also requiring strong performance against stretching
targets. Unlike many other share option schemes, these are
performance share options and are subject to the same stretching
performance measures and targets as the performance shares,
in addition to the inherent requirement for the share price to
increase, which ensures alignment with shareholder value creation
160
• Granting LTIP awards as a fixed number of shares/options –
this approach incentivises share price growth and is well
understood across the organisation. It also mitigates the effect
of any potential ‘windfall gains’ due to share price falls and
subsequent recovery. There is a robust adjustment mechanism
in place – award levels are reviewed every year by the
Committee taking into account the share price, company
performance, individual performance, and the approach for
the wider employee population
• Post-employment shareholding requirement – Executive
Directors are required to hold the lower of 50% of their
shareholding requirement or their actual shareholding
at departure, for a period of two years. The Committee
is of the view that this is appropriate on the basis that the
in-employment requirements are market-leading amongst
UK-listed companies (based on current share price levels the
CEO’s shareholding requirement is c.1200% of salary). At 50%
of the in-employment requirement, the post-employment
requirement is more stretching than almost all other UK-listed
companies’ in-employment requirements and is more than
the annual LTIP award
On this basis, the focus of the review of the Policy was on what
we pay for. In particular, the Committee is keen to ensure that
performance measures are aligned with our forward-looking
strategy and therefore is proposing the changes set out below.
The Committee has reviewed the annual bonus and LTIP
performance measures, taking into account the views raised
by our shareholders in recent years and to ensure alignment with
our strategy to rejuvenate sustainable growth. The Committee
is proposing to introduce Relative TSR into the LTIP scheme to
directly align participants with the shareholder experience, as
well as ESG measures to align participants with our sustainability
ambitions. Taking into account shareholder feedback, we propose
to remove EPS and reduce the weighting on net revenue to ensure
that the weighting on ROCE remains the same once the ESG
measure has been introduced. Full details of the performance
measures to be used going forwards are set out in the Annual
Report on Remuneration.
Again taking into account shareholder feedback, the Committee
has introduced a new, lower operational limit on the number of
performance share options and performance shares that can
granted to an Executive Director, under the LTIP which will not
be greater than 200,000 performance share options and 100,000
performance shares. The previous limit of 300,000 performance
share options and 150,000 performance shares will remain in place
for exceptional circumstances only and the Committee would
consult with shareholders if it used this headroom.
We are also proposing that, in line with typical market practice
amongst UK-listed companies, dividend equivalents will accrue on
performance share awards granted under the LTIP that ultimately
vest subject to performance. These dividend equivalents will be
delivered in shares, in line with shareholder guidance. This change
does not apply to performance share options granted under the LTIP.
Executive Director Remuneration Policy Table
Fixed pay policy for Executive Directors
Component purpose and link to
strategy
Operation
Base salary
To enable the total package to
support recruitment and retention
Base salaries are normally reviewed annually,
typically with effect from 1 January.
Salary levels/increases take account of a number
of factors including (but not limited to):
• salary increases awarded across the Group
as a whole; and
•
individual performance.
The Committee also reviews market data for the
FTSE 30 excluding financial services and also the
company’s remuneration peer group, comprising
international companies of a similar size and scope
of operations.
Pension
To provide appropriate levels of
retirement benefit
Executive Directors may receive contributions into
a defined contribution pension scheme, a cash
allowance or a combination thereof.
Benefits
To enable the total package to
support recruitment and retention
Base salary is the only element of remuneration
that is pensionable.
Executive Directors receive benefits which consist
primarily of the provision of a company car/
allowance and healthcare, although the package
can include other benefits that the Committee
deems appropriate, for example, (but not limited
to) the cost of legal fees or preparing tax returns
(including tax thereon). Benefits include the
provision of a car and driver for business use,
including travel from home to office, and any tax
liability that may be due on this benefit.
Relocation allowances and international transfer-
related benefits may also be paid (including tax
thereon), where required.
Executive Directors are also eligible to participate
in the all-employee Sharesave Scheme on the
same basis as all employees.
Opportunity
Salary increases for Executive Directors will not
normally exceed those of the wider workforce,
which take into account performance.
Increases may be made above this level to take
account of individual circumstances, which may
include (but are not limited to):
•
•
Increase in the size or scope of the role or
responsibilities
Increase to reflect the individual’s development
and performance in the role – for example,
where a new incumbent is appointed on a
below-market salary
Salaries in respect of the year under review (and
for the following year) are disclosed in the Annual
Report on Remuneration.
To avoid setting expectations of Executive
Directors and other employees, no maximum salary
is set under the Remuneration Policy.
Where increases are awarded in excess of those
to the wider employee population, the Committee
will provide the rationale in the relevant year’s
Annual Report on Remuneration.
The maximum pension contribution or allowance
for Executive Directors will be in line with that
available to UK employees or to participants in the
pension plan relevant to the country where they
are employed, if different. For UK employees this
is currently 10% of base salary.
Whilst there is no maximum level of benefits
prescribed, they are generally set at an appropriate
market-competitive level determined by
the Committee.
Benefits in respect of the year under review,
and participation in the all-employee Sharesave
Scheme, are disclosed in the Annual Report
on Remuneration.
Reckitt Annual Report and Accounts 2021
161
Financial StatementsGovernanceStrategic Report Directors’ Remuneration Report (Continued)
Variable pay policy for Executive Directors
Component purpose and
link to strategy
Operation
Opportunity
Performance measures
Annual bonus
To drive strong
performance, with
significant reward for
overachievement of
annual targets
Use of deferral for
longer-term
shareholder alignment
LTIP (performance
share options and
performance
share awards)
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
Targets are set by the Committee
at the start of the year. At the
end of the year, the Committee
determines the extent to which
these have been achieved.
Performance is assessed on an annual
basis, using a combination of the
payouts for performance against each
of the targets.
At least one-third of bonus payouts are
deferred into share awards (in the form
of options or conditional awards) for a
period of three years.
The Committee has discretion to adjust
the formulaic bonus outcomes both
upwards and downwards (including to
zero) to ensure alignment of pay with
performance, e.g. in the event
performance is impacted by
unforeseen circumstances outside of
management control.
Annual bonuses and deferred bonus
awards are subject to malus and
clawback provisions.
The LTIP comprises grants of
performance share options and/or
performance share awards (based on
a fixed number), which vest subject
to the achievement of stretching
performance targets.
The LTIP has a performance period
of at least three years. Additionally,
there is normally a two-year holding
period following the end of the
performance period.
The performance conditions are
reviewed before each award
cycle to ensure they remain
appropriately stretching.
The Committee has discretion to adjust
the formulaic LTIP outcomes both
upwards and downwards (including to
zero) to improve the alignment of pay
with value creation for shareholders
and to ensure the outcome is a fair
reflection of the performance of the
company and the individual.
Awards granted under the LTIP
are also subject to malus and
clawback provisions.
Target opportunity:
• CEO: 120% of salary
• Other Executive Directors:
100% of salary
Maximum opportunity:
• 3.57x target
• CEO: 428% of salary
• Other Executive Directors:
357% of salary
Dividend equivalents accrue on
deferred share awards during the
deferral period.
The Committee calibrates LTIP share
and option grant sizes as a fixed
number to provide full alignment with
investors, with a robust adjustment
mechanism in place to ensure that the
value of an Executive Director’s total
remuneration is appropriate.
The award size is determined by the
Committee taking into account
performance, the prevailing share
price, market data and our pay
positioning philosophy.
Notwithstanding the above, the
normal limit on the number of options
and shares that can be granted to an
individual in respect of any financial
year will be 200,000 options and
100,000 shares (and 300,000 options
and 150,000 shares in exceptional
circumstances). Details of the LTIP
opportunity in respect of each year
will be disclosed in the Annual Report
on Remuneration.
Dividend equivalents may accrue on
performance share awards that vest.
Neither dividends nor dividend
equivalents accrue on unvested or
vested performance share options
before they are exercised.
Performance measures may
be a mix of financial and
non-financial measures. For 2022
the bonus is based on 100%
financial measures.
Financial performance will be
assessed against one or more
key metrics of the business
determined on an annual basis.
The weighting between different
metrics will be determined
each year according to
business priorities.
For performance below
threshold, the bonus payout
will be nil.
Further details, including the
performance measures for the
current financial year, are
disclosed in the Annual Report
on Remuneration.
Vesting of the LTIP is subject
to continued employment
and the achievement of
stretching targets.
Performance measures may be a
mix of financial and non-financial
measures (including ESG). For
2022 the LTIP is based on 90%
financial measures and 10% on
ESG measures.
Threshold performance will result
in 20% of maximum vesting. The
vesting level will increase on a
sliding scale from this threshold
to 100% vesting for stretch levels
of performance.
Further details, including the
performance targets attached to
the LTIP in respect of each year,
are disclosed in the Annual
Report on Remuneration.
Notes to the Policy Table
Performance measure selection and approach to target setting
The measures used under the annual bonus are selected to reflect the Group’s main priorities for any given financial year. With regard to the
LTIP, the Committee regularly reviews the performance measures to ensure that they align well with the company’s strategy and with our
shareholders’ interests. A combination of net revenue growth, ROCE, Relative TSR and ESG are considered the most appropriate 2022 LTIP
performance measures for a number of reasons:
162
•
•
•
•
•
•
they are aligned to the company’s strategic priorities;
they combine a focus on top-line growth and profitability,
also capturing how efficient profit generation has been;
they provide well-recognised and accepted measures of the
company’s underlying financial performance;
they include focus on shareholder value creation;
they provide a link to our 2030 sustainability ambitions; and
they are measures that the plan participants can directly
impact, and are easily measurable from time to time.
Targets applying to the bonus and LTIP are reviewed annually,
based on a number of internal and external reference points.
Bonus targets take into account prevailing growth rates in Reckitt’s
peer group, and as appropriate across the healthcare and/or FMCG
industries more broadly. LTIP targets reflect industry context,
expectations of what will constitute performance at the top of
the peer group, and factors specific to the company.
The rules of the LTIP allow the Committee, to waive or change
performance conditions (including how performance is measured)
in accordance with their terms or if anything happens which
causes the company reasonably to consider it appropriate
(including in contemplation of a corporate event), provided that
any changed performance conditions will be no more difficult to
satisfy. The same principles apply to the annual bonus scheme.
Malus and clawback
The Committee has the discretion to apply malus and/or clawback
in the event of the following circumstances in relation to awards
under the annual bonus, Deferred Bonus Plan or the LTIP in the
circumstances set out in the relevant plan rules and award
documentation which includes:
• a material misstatement of the company’s financial results;
• gross misconduct by a participant (or serious misconduct in
relation to malus). This includes reputational damage as a result
of the misconduct;
• an erroneous calculation in assessing the number of shares
subject to an award or the payout/vesting outcome; and/or
• corporate failure of the company.
In these circumstances, the Committee may adjust the amount of
cash bonus payable and/or operate clawback of the annual bonus
for up to three previous years. Deferred bonus awards are subject
to malus and clawback until the third anniversary of grant and the
clawback period applicable to LTIP awards ends on the earlier of
(i) the second anniversary of the vesting date and (ii) the fifth
anniversary of the date of grant.
Shareholder alignment
The Committee recognises the importance of aligning Executive
Directors’ and shareholders’ interests through executives building
up significant shareholdings in the company. Executive Directors
are expected to acquire a significant number of shares over a
period of eight years and retain these until retirement from the
Board of Directors.
The shareholding requirement for the current CEO is 200,000
shares and for the current CFO is 100,000 shares. The shareholding
requirement for new Executive Directors will be determined at
the time of appointment, taking into account a number of factors,
including (but not limited to) the LTIP award levels, share price
at the time of appointment and market practice. Details of the
Executive Directors’ personal shareholdings will be provided in the
Annual Report on Remuneration.
A formal post-employment shareholding requirement applies to
Executive Directors. They are required to hold the lower of 50%
of their shareholding requirement or their actual shareholding
at departure, for a period of two years. The Committee is of the
view that this is appropriate on the basis that the in-employment
requirements are market leading amongst UK-listed companies
(based on current share price levels the CEO’s shareholding
requirement is c.1200% of salary). At 50% of the in-employment
requirement, the post-employment requirement is more stretching
than almost all other UK-listed companies’ in-employment
requirements and is more than the annual LTIP award.
The Committee retains discretion to amend the post-employment
shareholding requirement in exceptional circumstances
(for example, in the case of ill-health).
Remuneration Policy for other employees
Reckitt’s approach to setting remuneration is consistent across
the Group, with consideration given to the level of experience,
responsibility, individual performance and remuneration paid for
comparable roles in comparable companies.
The principles that apply to Executive Directors are cascaded
to other employees. Approximately 16,000 employees are eligible
to participate in an annual bonus scheme with similar metrics to
those used for the Executive Directors, in order to drive alignment
and a focus on results. Opportunities and specific performance
conditions vary by organisational level, with business area-specific
metrics incorporated where appropriate. Senior managers who
comprise c.600 employees are eligible to participate in the LTIP
with performance conditions the same as the Executive Directors,
although award sizes vary by organisational level. In addition, the
Group Leadership Team are also required to build up significant
shareholdings in Reckitt. The current shareholding requirement
levels are between 10,000 and 50,000 shares which generally
represents between 2x to 6x base salary.
All UK employees are eligible to participate in the company’s
Sharesave plan on identical terms, with similar plans also operated
for employees working outside of the UK.
Legacy arrangements and amendments to the Policy
This Policy is intended to apply with effect from 20 May 2022,
subject to shareholder approval at the AGM.
The Committee reserves the right to make any remuneration
payments and payments for loss of office (including exercising
any discretions available to it in connection with such payments)
notwithstanding that they are not in line with the Policy set out in
this report where the terms of the payment were agreed (i) before
the Policy came into effect (provided that the commitment to
make the payment complied with any applicable Remuneration
Policy of the company at the time it was agreed) or (ii) at a time
when the relevant individual was not a Director of the company
and, in the opinion of the Committee, the payment was not in
consideration for the individual becoming a Director of the
company. For these purposes ‘payments’ includes the Committee
satisfying awards of variable remuneration, and an award over
shares is ‘agreed’ at the time the award is granted.
The Committee may make minor amendments to the Policy to
aid its operation or implementation without seeking shareholder
approvals (e.g. for regulatory, exchange control, tax or
administrative purposes or to take account of a change in
legislation) provided that any such change is not to the material
advantage of the Director.
Reckitt Annual Report and Accounts 2021
163
Financial StatementsGovernanceStrategic Report Directors’ Remuneration Report (Continued)
In the event of a variation of capital in the company which impacts the value of a share, which may include, but is not limited to, a capitalisation
or rights issue, consolidation, subdivision or reduction of capital, stock-split or demerger, then:
•
•
the maximum number of share awards and options which may be granted under the LTIP may be adjusted to ensure that the overall
maximum value of awards would be the same immediately before and after any such event; and
the maximum number of shares subject to an award granted under the LTIP or the Deferred Bonus Plan, the option price (where applicable)
and the identity of the company whose shares are subject to the award may be adjusted in accordance with the rules of the plan, as the
Committee considers appropriate. The Committee can also, subject to the rules of the plan, require that awards are automatically
exchanged for awards over shares in another company which are, in the opinion of the Committee, equivalent.
Non-Executive Director remuneration
Non-Executive Directors do not have service agreements but are engaged on the basis of a letter of appointment. In line with the UK
Corporate Governance Code (July 2018) guidelines, all Directors are subject to re-election annually at the AGM.
It is the policy of the Board of Directors that Non-Executive Directors are not eligible to participate in any of the company’s bonus, share
option, long-term incentive or pension schemes. An element of the basic fee is, however, paid in Reckitt shares.
Details of the policy on fees paid to our Non-Executive Directors are set out in the table below:
Component and objective Approach of the company
Fees (cash and shares)
To attract and retain
Non-Executive Directors
of the highest calibre with
broad commercial
experience relevant to
the company
The fees paid to Non-Executive Directors are determined by the Board of Directors, with recommendations
provided by the Chair of the Board and CEO. The fees of the Chair of the Board are determined by the
Remuneration Committee.
Additional fees may be payable for acting as the Senior Independent Non-Executive Director, as Chair and/or a
member of a Committee or for other additional responsibilities (including the Designated NED for engagement with
the company’s workforce).
Fee levels may be reviewed annually, with any adjustments normally effective from 1 January. Fees are reviewed by
taking into account external advice on best practice and competitive levels, in particular at FTSE 30 companies. Time
commitment and responsibility are also taken into account when reviewing fees.
Chair of the Board and Non-Executive Director fees are normally delivered partly in cash and partly in Reckitt shares
or equivalent (e.g. ADRs) which must normally be held until retirement from the company. The fees paid to the Chair
of the Board and Non-Executive Directors in respect of the year under review (and for the following year), including
the split between cash and shares, are disclosed in the Annual Report on Remuneration.
Aggregate fees are limited by the company’s Articles of Association. Travel and expenses for Non-Executive
Directors (including the Chair of the Board) 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. The
company may also meet the costs (including tax thereon) of providing tax advice and tax return assistance for the
Chair of the Board and Non-Executive Directors.
Scenarios of total remuneration
The charts below provide an estimate of the potential future total remuneration for the Executive Directors. Four scenarios of potential
outcomes are provided based on underlying assumptions shown in the notes to the chart. It should be noted that the LTIP awards granted
in a year do not normally vest until on or after the date of the AGM which follows the end of the performance period.
CEO
Minimum
100%
£1.2m
Target
34% 35% 31%
£3.5m
Maximum1
11%
40%
Maximum2
7%
26%
£0.0m
49%
67%
CFO
Minimum
100%
£0.8m
Target
38%
34% 27%
£2.1m
£10.9m
Maximum1
13%
41%
£16.7m
Maximum2
9%
27%
£16.7m
£0.0m
46%
64%
£6.3m
£9.4m
£9.4m
Long-term incentives
Annual bonus
Salary, pension and benefits
1
2
Excluding share price growth
Including 50% share price growth
Notes
The scenarios in the chart above have been calculated on the following assumptions:
The ‘Minimum’ scenario reflects base salary, pension and benefits (i.e. fixed
remuneration), being the only elements of the Executive Directors’ remuneration
package not linked to performance. This is based on the base salary and pension
allowance as at 1 January 2022 and an illustrative value of the benefits, based on
amounts paid in 2021.
The ‘Maximum including 50% share price growth’ scenario sets out fixed
remuneration, plus full maximum payout of the annual bonus, full vesting of the LTIP
awards and 50% share price growth.
As LTIP awards are set as a fixed number of shares and options, the LTIP value is
based on the number of shares and share options to be granted to the Executive
Directors, in 2022. The value has been calculated assuming a share price at grant of
£59.84. Under the disclosure requirements the first three scenarios above exclude
share price appreciation; share options have therefore been valued using a
Black-Scholes option pricing model and assumptions aligned to the three-year
performance period, at 10% of the assumed face value. The final scenario includes
The ‘On-target’ scenario illustrates fixed remuneration as above, plus target payout
a 50% share price growth assumption, over the performance period, in line with
of annual bonus and threshold vesting of the LTIP.
The ‘Maximum excluding 50% share price growth’ scenario sets out fixed remuneration,
plus full maximum payout of the annual bonus and full vesting of the LTIP awards.
legislation. It should be noted that if the share price appreciation over the
performance period is greater than that assumed then the actual total
remuneration may be more than that shown in the above charts.
164
External appointments
With the approval of the Board of Directors in each case, and
subject to the overriding requirements of the company, Executive
Directors may accept external appointments as a Non-Executive
Director of another company and retain any fees received.
Approach to recruitment remuneration
External appointment
In cases of hiring or appointing a new Executive Director from
outside the company, the Remuneration Committee may make use
of all existing components of remuneration, as follows:
Consideration of conditions elsewhere in the company
Across Reckitt, remuneration is reviewed regularly with the
intention that all employees are paid appropriately in the context
of their local market and given their role, experience and
performance. The company seeks to promote and maintain good
relations with employee representative bodies – including trade
unions and works councils – as part of its employee engagement
strategy, and consults on matters affecting employees and
business performance as required in each case by law and
regulation in the jurisdictions in which the company operates.
The company publishes annually to all employees details of
executive remuneration and also invites employees to ask any
questions or provide any feedback they may have on the topic.
As part of the recent review of remuneration arrangements and
in the development of the Directors’ Remuneration Policy over the
past year, the Committee took into account the views of senior
management and other employees. The company commissioned
external consultants to undertake detailed stakeholder interviews
with senior management on remuneration arrangements which
apply to them and their teams and, in addition, Reckitt operated
focus groups with employees to understand views on the
incentives. The Board also conducted formal Listening Sessions
with employees. Groups of colleagues with a wide range of
backgrounds met in person and virtually with Board members to
discuss topics such as inclusion, consumer focus, innovation and
R&D, business transformation and sustainability.
The Committee reviews the overall pay framework of the Group
including internal relativities, gender pay and participation
in all-employee share plans. The company encourages share
ownership amongst employees and those who hold shares will
be able to participate in the vote on the Directors’ Remuneration
Policy at the AGM.
Consideration of shareholder views
The Committee considers shareholder views received during the
year and at the Annual General Meeting each year, as well as
guidance from shareholder representative bodies more broadly,
in shaping the Remuneration Policy. The Committee Chair speaks
with many of the company’s largest shareholders on the subject of
executive remuneration and the Committee is grateful for all of the
feedback which is provided. In developing this Policy, the company
consulted with its major shareholders and amended its proposal
based on the feedback received. This included changes to the
peer group of companies to be used to measure Reckitt’s Relative
TSR performance for the purposes of the LTIP. The majority of
shareholders are supportive of the company’s philosophy and
policy on remuneration, and the Committee will continue to keep
its Remuneration Policy under regular review, to ensure it continues
to reinforce the company’s long-term strategy and aligns closely
with shareholders’ interests. The Committee will continue to
consult our major shareholders before making any significant
changes to our Remuneration Policy.
Component Approach
Base
salary
Pension
Benefits
Annual
bonus
LTIP
The base salaries of new appointees will be
determined by reference to relevant market data,
experience and skills of the individual, internal
relativities and their current basic salary. Where new
appointees have initial base salaries set below market,
or the previous incumbent’s salary, the shortfall may
be managed with phased increases subject to their
development in the role.
The maximum pension contribution or allowance for
new appointees will be in line with that available to
UK employees or to participants in the pension plan
relevant to the country where they are employed, if
different. For UK employees this is currently 10% of
base salary.
New appointees will be eligible to receive benefits
which may include (but are not limited to) the
provision of a car allowance, car and driver,
healthcare and any necessary relocation expenses
in line with the ongoing Remuneration Policy
(including tax thereon).
The structure described in the Policy Table
will apply to new appointees with the relevant
maximum opportunity.
New appointees will be granted awards under the
LTIP on the same terms as other executives, as
described in the Policy Table. LTIP grants can take the
form of performance share awards, performance
share options or a combination of the two.
The overall limit of variable remuneration will be as set out in the
Policy Table, taking into account the maximum value of the annual
bonus and the maximum awards of options and share awards
under the LTIP.
The Committee may make an award in respect of a new
appointment to ‘buy out’ incentive arrangements forfeited on
leaving a previous employer, including by utilising Listing Rule 9.4.2,
i.e. over and above the approach outlined in the table above.
In doing so, the Committee will consider relevant factors
including any performance conditions attached to these awards
and the likelihood of those conditions being met, with the intention
that the value awarded would be no higher than the expected
value of the forfeited arrangements and would be made on a
like-for-like basis.
Internal promotion
In cases of appointing a new Executive Director by way of internal
promotion, the policy will be consistent with that for external
appointees, as detailed above; except that where an individual
has contractual commitments made prior to their promotion to
Executive Director level, the company will continue to honour
these arrangements even in instances where they would not
otherwise be consistent with the prevailing Directors’
Remuneration Policy at the time of appointment.
Reckitt Annual Report and Accounts 2021
165
Financial StatementsGovernanceStrategic Report Directors’ Remuneration Report (Continued)
Recruitment of a new Non-Executive Director
In recruiting a new Non-Executive Director, the Remuneration Committee will use the policy as set out in the table on page 164. A base fee
in line with the prevailing fee schedule will be payable for membership of the Board of Directors, with additional fees payable for acting
as Senior Independent Non-Executive Director, as Chair or member of a Committee, or for other additional responsibilities (including the
Designated NED for engagement with the company’s workforce). Fees will normally be delivered partly in cash and partly in Reckitt shares
to be held until retirement from the company.
The fee for a new Non-Executive Chair of the Board will be set with reference to the time commitment and other requirements of the role
and the experience of the candidate. To provide context for this decision, appropriate market data would also be referenced.
Service contracts and exit payment policy
Executive Director service contracts, including arrangements for early termination, are carefully considered by the Committee. In accordance
with general market practice, each of the Executive Directors has a rolling service contract which is terminable on 12 months’ notice and this
practice will also apply for any new Executive Directors. In such an event, the compensation commitments in respect of their contracts could
amount to up to one year’s remuneration based on base salary and benefits in kind, and pension rights, during the notice period. Termination
payments may take the form of payments in lieu of notice. Copies of Executive Director service contracts are available to view at the
company’s registered office.
The Committee may agree exit payments in connection with a Director’s cessation of office or employment where the payments are made
in good faith in discharge of an existing legal obligation (or by way of damages for breach of such an obligation) or in settlement of any claim
arising in connection with the cessation of a Director’s office or employment. This may include the provision of outplacement support. The
Group may also pay reasonable fees for a departing Director to obtain independent legal advice in relation to their termination arrangements
and nominal consideration for any agreement to any contractual terms protecting the company’s rights following termination.
The company’s policy on any termination payments is to consider the circumstances on a case-by-case basis, taking into account the relevant
contractual terms in the executive’s service contract and the circumstances of the termination. The table overleaf summarises how awards
under the annual bonus (including deferred bonus awards) and LTIP are typically treated in specific circumstances, with the final treatment
remaining subject to the Committee’s discretion as provided under the rules of the plan.
Reason for cessation
Timing of vesting/payment
Calculation of vesting/payment
Annual bonus
Voluntary resignation or termination
with ‘cause’
Not applicable.
No bonus to be paid for the financial year.
All other circumstances
Following the end of financial year.
Bonuses will be paid only to the extent that objectives set
at the beginning of the plan year have been met. Any such
bonus will normally be paid on a pro-rata basis up to the
termination date and will be subject to deferral requirements
where applicable.
Deferred bonus share awards
Voluntary resignation or termination
with ‘cause’
Not applicable.
Unvested awards lapse, unless the Committee, at its
discretion, decides otherwise.
All other circumstances
Subject to the original time horizons,
unless the Committee, at its discretion,
decides these will vest on cessation
of employment.
Shares vest in full.
LTIP
Voluntary resignation or termination
with ‘cause’
Not applicable.
Unvested awards lapse. From the 2022 LTIP award, vested
but unexercised options lapse. Vested share awards and
the resultant shares from vested and exercised share
option awards in the holding period after the end of the
performance period are retained, with the holding period
continuing to apply (unless the Committee decides that they
will be released early), save that they will lapse if the holder
is summarily dismissed.
166
Reason for cessation
Timing of vesting/payment
Calculation of vesting/payment
Ill-health, injury, permanent disability,
retirement with the agreement of
the company, the participant’s
employing entity ceasing to be
under the control of the company,
transfer of the undertaking in which
the participant works outside the
Group, redundancy or any other
reason that the Committee
determines in its absolute discretion.
Death
Awards will vest in line with the original
performance, vesting and holding periods
(unless the Committee decides that they
will be released early, in the case of awards
in the holding period).
The Committee determines whether and to what extent
outstanding awards vest based on the extent to which
performance conditions have been achieved and the
proportion of the performance period worked.
In the event of an employee leaving the Group due to
ceasing to be under the control of the company, transfer
of undertaking, or change of capital structure, such as
demerger, IPO, etc., the Committee will retain the discretion
for awards to be exchanged for new equivalent awards in
the new company, where appropriate and permitted by the
rules of the LTIP.
As soon as practicable after date of death
(which could be at the end of the relevant
financial year). No holding period will apply.
Performance conditions will be measured at the end of
the financial year in which the holder dies, and awards may
be reduced to reflect the proportion of the performance
period worked.
Change of control
On change of control.
Awards will vest to the extent that any performance
conditions have been satisfied (unless the Committee
determines that the performance conditions should not apply).
Awards will also be reduced pro rata to take into account the
proportion of the performance period not completed, unless
the Committee decides otherwise.
Awards may alternatively be exchanged for new equivalent
awards in the acquirer or another company where appropriate.
Reckitt’s Remuneration Policy and the Corporate Governance Code
Reckitt’s Remuneration Policy reflects the philosophy of pay for performance, shareholder alignment and strategic alignment over the short,
medium and long term. The current 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 new Policy, provision 40 of the UK Corporate Governance Code was taken into account as follows:
Clarity
Simplicity
Arrangements are transparent, and reflect shareholder alignment and Reckitt’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 and communicated to the wider workforce details of how executive pay is set, its alignment with the company’s approach
to the wider pay policy, and how decisions are made by the Committee; it also gave employees the opportunity to ask any
questions on these topics.
The Policy is simple and clear, comprising fixed pay, such as salary and benefits, pension schemes that are offered to most of the
workforce, plus variable pay which incorporates the annual bonus, LTIP (performance 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 and
LTIP outcomes both upwards and downwards.
Predictability
The total of fixed pay and 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 business strategy, with stretching financial targets applied to annual
bonus payouts and LTIP vesting.
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 Reckitt. The remuneration arrangements of the wider workforce
reinforce employee engagement.
Reckitt Annual Report and Accounts 2021
167
Financial StatementsGovernanceStrategic Report
Directors’ Remuneration Report (Continued)
ANNUAL REPORT ON REMUNERATION
The rest of this report sets out how we have implemented the previous shareholder-approved Remuneration Policy in 2021, and how we
intend to implement the revised Policy in 2022, subject to shareholder approval of the revised Policy. It also provides detail of the remuneration
decisions in relation to the impact of the management of the portfolio over 2021.
2021 PERFORMANCE AND REMUNERATION OUTCOMES
In reviewing Executive Director remuneration, the Remuneration Committee took into account remuneration decisions for the wider workforce
and individual performance of the Directors. The Committee also reviewed market practice, primarily against the FTSE 30 (excluding financial
services companies), and took into account an international remuneration peer group, comprising 21 companies as set out below. The latter
peer group is the same group used to benchmark remuneration of senior managers across the company. The companies included are Abbott
Laboratories, Bayer, Campbell Soup, Church and Dwight, Clorox, Coca-Cola, Colgate, Danone, GSK, Henkel, Johnson & Johnson, Kellogg,
Kimberly-Clark, Kraft Heinz, Nestlé, Novartis, PepsiCo, Pfizer, Procter & Gamble, Sanofi and Unilever.
Base salary
Base salaries are reviewed taking into account the salary increases for the wider workforce and individual performance. During 2021, the
Remuneration Committee reviewed salaries and determined that there would be a 3% salary increase for the CEO and CFO in 2022, taking into
account Group and individual performance, in line with the salary increase budget for the UK wider workforce. The CEO’s salary remains
towards the lower end of FTSE 30 market practice.
The table below sets out annual base salaries with effect from 1 January 2022:
Executive Director
Laxman Narasimhan
Jeff Carr
Annual base salary
2021
£979,000
£700,000
Annual base salary
from 1 January 2022
Percentage
increase
£1,008,000
£721,000
3%
3%
Annual bonus in respect of 2021 performance
Executive Director 2021 bonus opportunity
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
• The two individual multipliers are then multiplied together to provide the total performance multiplier
Net revenue
multiplier
(up to 1.89x)
x
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 formulaic bonus outcome. This is
different to usual UK market practice whereby performance measures are assessed independently and payment under one metric may
result in payout regardless of performance in other metrics. In Reckitt the two measures combine to give the resultant payout
Performance
multiplier
x
Target
bonus
=
Final
bonus outcome
2/3
+
1/3
Delivery
Cash
Shares
• 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 performance
• Similarly, underperformance in one of the performance metrics will reduce the overall bonus payout, even in the case of outperformance
of the other
168
• For example, if we grow net revenue above the stretching
requirement for maximum performance but fail to meet the
profit threshold, the bonus payout will be zero (i.e. 1.89 x 0)
• One-third of any APP is deferred into an award over Reckitt
shares, to strengthen alignment with shareholders
2021 performance targets
The Remuneration Committee set targets for the Executive
Directors at the beginning of the 2021 financial year. These were
based on net revenue and adjusted profit before income tax
targets, both measured in GBP at a constant exchange rate.
They were primarily based on the business plan at the time,
with reference also being made to external expectations of
performance and market practice of companies in a similar
stage of the business cycle to Reckitt and to the change in
business strategy.
During the year, the active management of the portfolio saw a 9%
portfolio turnover, including the strategic disposal of IFCN China
and Scholl and the acquisition of Biofreeze – a major step forward
in our strategy to rejuvenate sustainable growth. This activity
to strengthen the portfolio has meant that the targets set at
the beginning under the APP needed to be reviewed to ensure
they remained appropriate. In line with our current shareholder-
approved Remuneration Policy and shareholder views on adjusting
targets, the APP targets were adjusted where needed to ensure
that participants are no better or worse off and in line with
shareholder expectations.
The Committee resolved to include the performance of disposed
assets within the performance of the year assessment until the
closing date of sale. In order to ensure we assessed performance
on a fair and consistent basis the targets were adjusted to include
performance of disposed assets to the date of sale and exclude
them for the period of the year that Reckitt no longer owned
them. In respect of acquisitions, we included the performance
from the closing date of acquisition and also increased the targets
accordingly. The Committee considers that these revised targets
maintain the same levels of stretch and that participants were no
worse or better off.
2021 financial performance against APP targets
As stated earlier in the Annual Report, 2021 marked a year of
growth ahead of expectations and a strong year in terms of
revenue. LFL net revenue growth was 3.5%, outperforming market
expectations of approximately -0.4% at the time targets were
set, and building on the outstanding growth of last year gives a
two-year stacked growth of 17.4%, significantly ahead of the peer
group average. For the purpose of annual bonus calculations, after
the adjustments for the acquisitions and disposals, net revenue
growth was 2.2% to £13.95 billion (on a constant foreign exchange
basis). This strong year reflects market share growth with 62% of
our core CMUs holding or gaining share.
For 2021, operating margin (excluding IFCN China) was 22.9%,
in line with guidance, resulting in the bonus metric of adjusted
profit before income tax (on a constant foreign exchange basis)
of £2.84 billion which reflects performance towards the top end
of the target range set by the Committee at the start of the year.
The chart below illustrates this performance compared to
the targets.
Performance
Measure
Threshold
(zero bonus)
Maximum
(3.57 x target) Actual
Net revenue
£13.22bn
£13.95bn
£14.06bn
1.77x
Adjusted
profit before
income tax
Achieved
£2.58bn
£2.84bn
£2.85bn
1.84x
As illustrated above, 2021 net revenue and adjusted profit
before income tax both approached the maximum level of the
performance ranges set for the 2021 annual bonus resulting in a
formulaic bonus multiplier of 3.26x of target (91.3% of maximum).
These results reflect the strong 2021 performance ahead of
expectations, the strengthened portfolio and strong momentum.
For example, brands less sensitive to COVID-19 dynamics,
representing c.70% of the portfolio grew, on average by mid-single
digits in each quarter of 2021. We are firmly on track with our
transformation programme to achieve our target of mid-single
digits net revenue growth and adjusted operating margins in the
mid-20s by the mid-2020s.
Overall Group performance taken into consideration
As it does every year, the Committee thoroughly evaluated the
performance of both the Group and the Executive Directors in
the round to assess whether the level of annual bonus payout
is both appropriate and justified. The framework that the
Committee applies is set out on page 156 and more details
are set out overleaf.
Competitor performance
Top-line performance significantly better than peers
Reckitt (ex. IFCN China)
13.9%
3.5% 17.4%*
Peer group average1
5.2%
3.3% 8.5%*
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%
2020 growth
2021 growth
*2-year stacked growth
1. Peer group data based on latest data publicly available for FY 2021.
Where this data was not available, comparison is based on latest results
covering Q3 2021 or later
Portfolio performance and mid-single-digit growth
c.70%
of portfolio* already growing at >5%
*
Excluding brands more impacted by COVID-19 – Lysol, Dettol and
cold and flu brands
Adjusted operating margin ahead of peers
Reckitt (ex. IFCN China)
22.9%
Peer group average1
20.9%
20.0%
21.0%
22.0%
23.0%
1. Peer group data based on latest data publicly available for FY 2021.
Where this data was not available, comparison is based on latest results
covering Q3 2021 or later
Strong market share performance
+62%
of core CMUs holding/gaining share
Reckitt Annual Report and Accounts 2021
169
Financial StatementsGovernanceStrategic Report Directors’ Remuneration Report (Continued)
The Remuneration Committee also reviewed the progress on delivery of the strategy and wider people, culture and sustainability, a summary
of which is provided below.
Strategic delivery
People and culture
Sustainability
• Strong progress in repositioning
• Significant focus on embedding Diversity
• Launch of our Sustainability Ambitions,
our business towards higher growth:
We entered the important US analgesic
market with the acquisition of the high
growth Biofreeze business, whilst
divesting our lower growth businesses,
of IFCN China, Argentina, Scholl
and E45. Approximately 9% of the
portfolio repositioned
• Strong market share performance:
62% of our Core Category Market Units
(CMUs), held or gained share
• New corporate brand launched in
March 2021: Reflects our refreshed
outlook and Purpose. The
redevelopment of the corporate identity
from RB to Reckitt is a key milestone for
the company’s ongoing journey of
transformation towards sustainable
growth and reflects our renewed
Purpose and strategy. The new brand is
built on how stakeholders recognise the
brand; it is more powerful, consistent,
and impactful. The launch saw high
levels of engagement across all
stakeholder groups, and was met by
almost universal acclaim
• Drove new business and channels:
Our Global Business Solutions (GBS)
has further developed its channel
and geographic footprint through
partnerships with operators such as
Diversey. E-commerce net revenue,
excluding IFCN China, grew by 17% in
2021, resulting in a two-year stacked
growth of 85% and now accounts for
12% of group net revenue
•
Improvement in regulatory capability:
Our regulatory capability has improved in
both the quality and the speed with
which we operate. Our innovation
pipeline value is 50% higher than the
previous year and our investment in
digital has driven continued high growth
in our e-commerce platforms
• Stronger R&D function: We launched
the Innovation Council to harmonise
innovation across each GBU, market and
functions including Marketing, R&D and
Supply. The Global R&D function now
includes Regulatory, Global Safety
Assurance (GSA) and Operational
Excellence, driving greater partnerships
and operational efficiencies. Frontline
resources have been deployed in-market
to drive proximity to consumers
and Inclusion:
‘For a Cleaner, Healthier World’:
• Since launching our five-year
• Launched in March 2021, this sets out our
commitment in June 2020, the Stronger
Together conversation series has
continued to create opportunities for
sharing inspiring and challenging stories
from our colleagues across the world.
Seven live global events in 2021 reached
almost 30,000 people
• Employee Resource Groups (ERGs) are
employee networks that aim to raise
the profile of underrepresented people.
Three global ERGs have all made progress
in their respective areas with a focus on
gender balance, the LGBTQ+ community,
and race and ethnicity. The ERGs are
represented on the Global Inclusion
Board and provide input on consumer
perspectives which informs our
innovation process
•
Initiated the Conscious Inclusion
programme in order to promote the
benefits of conscious inclusion. Almost
90% of our senior managers have
attended these sessions so far
• Focus on employee wellbeing:
• All through the pandemic we have
focussed on ‘Doing the right thing’ and
‘Putting our Consumers and People first’.
In every country we took necessary
steps to help our colleagues with
the consequences of the pandemic
(e.g. facilitating vaccination drives in many
emerging markets, EAP support etc.)
•
In March 2021 we launched our global
wellbeing programmes for leaders at all
levels in partnership with global leaders in
this field. Together, we delivered bespoke
wellbeing resources including one-to-one
and group performance coaching,
training, social learning events and access
to resources via digital apps
• Embedded our hybrid working model,
taking into consideration direct feedback
received from our employees through
surveys. Launched our ‘Future of Work’
approach, providing greater flexibility and
creating a seamless, inclusive and
consistent experience in a hybrid world.
Our approach is underpinned by the 4 Cs
– Connect, Create, Coach and Collaborate
– which will help to guide choices around
where employees work
• Rolled out Leadership Behaviours: These
behaviours are a key part of our leadership
development programme and annual review
process. In the June 2021 Glint survey,
colleagues scored leadership highly in all
categories. The highest scores registered
were for decisiveness, purpose and
speaking direct with respect and over 75%
of employees feel a positive impact of
Leadership Behaviours launched in 2021
2030 ambitions and is backed by more than
£1 billion of planned investment over the
next ten years to ensure we meet our goals
• Achieved 66% reduction in absolute carbon
in operations since 2015, 100% renewable
electricity purchased for our manufacturing
operations and 24.9% of 2021 net revenue
from more sustainable products
• Ongoing development of our Sustainable
Innovation Calculator, now used in each
GBU’s product innovation programme
to enable more sustainable products in
the future
• Sustained commitments to aid programmes:
Including investments worth over £38 million
via the Reckitt Fight for Access Fund and
distributing 24 million products to worthy causes
such as the Red Cross with 3.4 million people
across 50 countries measurably impacted by our
social impact work
• Hygiene partner of the United Nations COP26
conference: Partnered to deliver a safe
conference that furthered climate action.
Co-authored a white paper with EcoHealth
Alliance and the London School of Hygiene and
Tropical Medicine, setting out the risks to human
health of unabated climate change and presented
recommendations to address these potentially
existential threats
• Strengthened sustainable sourcing activity,
supporting more sustainable livelihoods and
working conditions for our suppliers: Focus on
key ingredients including palm oil and latex
through various initiatives, and collaboration
with, for example, Consumer Goods Forum
members and our own partner, Earthworm
Foundation, on landscape programmes; initiated
certification of latex through the Fair Rubber
Association and currently working with
plantations in Malaysia and smallholder farmers
in Thailand to certify latex production, protect
ecosystems and support sustainable livelihoods
and communities
• Early signatory and the first consumer
packaged goods company to join Amazon’s
Climate Pledge: This commits us to net-zero
emissions by 2040. We now sell over 60
products which are labelled as Climate Pledge
Friendly on Amazon
• External benchmarks of progress: Reckitt
retained its position in the FTSE4Good Index
with ongoing delivery through our ESG agenda
and Sustainability Ambitions, coupled with
transparent reporting of our progress and
systems. We re-joined the Dow Jones
Sustainability Index and were also awarded
a Gold Class 2022 Sustainability Award from
S&P Global. We have an improved MSCI ESG
rating from A to AA, and a Sustainalytics score
at 22.9, positioning Reckitt in the top 15% of our
industry group
170
Decision on 2021 bonus outcomes
Taking into account the very strong year of financial performance, ahead of expectations, the management to strengthen the portfolio and
the wider assessment of performance as described above, which sees the transformation firmly on track, the Committee concluded that
the formulaic APP payout based on performance against targets is justified and no discretion will be applied.
Under the Remuneration Policy, one-third of the annual bonus will be delivered by way of an award over Reckitt shares and deferred for
a three-year period. The bonuses are as follows:
Base salary
Laxman Narasimhan
£979,000
Jeff Carr
£700,000
Target
bonus
120%
100%
x
x
x
x
x
x
Performance
multiplier
=
Total
bonus
3.26
3.26
= £3,829,848
= £2,282,000
Deferred into
shares
Cash
£2,553,232
£1,276,616
£1,521,333
£760,667
=
=
=
Vesting of the 2019 LTIP – performance versus targets
The Reckitt LTIP is designed to align participants with shareholders through making awards with stretching performance conditions
denominated in both performance share options and performance share awards. The 2019 LTIP awards were made following the approval of
the Group’s Remuneration Policy in May 2019. The award was made to Laxman Narasimhan on 5 August 2019. Jeff Carr was not with the Group
at the time these awards were made.
2019 performance targets
Vesting of awards under the 2019 LTIP was dependent on the performance conditions set out in the table below.
EPS growth (3-year CAGR)
(50% weighting – 25% actual FX; 25% constant FX)
LFL net revenue growth (3-year CAGR)
(25% weighting)
ROCE (final year)
(25% weighting)
The performance assessment is provided below:
Threshold
(20% vesting)
Maximum
(100% vesting)
4%
2%
9%
6%
10.8%
12.8%
Assessment of performance versus targets
As discussed under the ‘Remuneration decisions in relation to portfolio management’ section of the Chair’s letter, the Remuneration
Committee decided that for the 2019-2021 LTIP award, given the timing of the IFCN China sale is such that it was under the Group’s ownership
for most of the performance period, no adjustments were to be made to the LTIP targets set at the start of the performance period.
For the portion of the LTIP awards subject to ROCE performance, as stated in our 2018 Annual Report, ROCE is measured in the final year of the
performance period and is measured using the same principles as the ROCE figure disclosed elsewhere in the Annual Report, other than the
fact that ROCE for LTIP purposes is measured on a constant currency basis. This is on a consistent basis in line with the definition agreed when
targets were set. This means that capital employed has been calculated on a monthly average basis including IFCN China for the period of
ownership by Reckitt of January through to August 2021. IFCN China is also included in the adjusted operating profit after tax for the whole
period of ownership ensuring that the numerator and denominator of the ROCE calculation are on a consistent basis.
Similarly, no adjustments have been made to targets for the adverse impact on ROCE of other acquisitions and disposals, e.g. the acquisition of
Biofreeze or the sale of Scholl. Finally, as disclosed in the 2020 Annual Report, we have ensured that the goodwill impairment in respect of IFCN
did not lead to an increase in vesting in respect of the proportion of the LTIP related to ROCE by adjusting the capital employed accordingly.
Reckitt Annual Report and Accounts 2021
171
Financial StatementsGovernanceStrategic Report Directors’ Remuneration Report (Continued)
The chart below illustrates performance compared to the targets. As set out below, the strong LFL net revenue growth over the three-year
performance period results in 21.5% vesting in respect of this element of the award. The remainder of the award related to EPS growth and
ROCE will not vest as performance was below the stretching targets set.
Performance measure
LFL net revenue growth CAGR
(25% weighting)
EPS CAGR – actual FX
(25% weighting)
-5.3%
EPS CAGR – constant FX
(25% weighting)
ROCE (final year)
(25% weighting)
Total vesting
Achieved
Threshold
(20% vesting)
Maximum
(100% vesting)
Vesting
(% of total award)
2%
4%
4%
-2.9%
10.3%
10.8%
5.3%
6%
9%
9%
12.8%
21.5%
0.0%
0.0%
0.0%
21.5%
Overall Group performance taken into consideration
As it does every year, the Committee thoroughly evaluated the performance of both the Group and the Executive Directors in the round to
assess whether the level of vesting under the LTIP is both appropriate and justified. The framework that the Committee applies is set out on
page 156. The Committee took into account the progress on delivery of the strategy and wider people, culture and sustainability in 2021 as
disclosed on page 170 of this report and over the performance period of the 2019 LTIP, as disclosed in previous Annual Reports as well as the
shareholder experience.
Delivery of shareholder value: £6,480 million of shareholder value generated
Market capitalisation as at 1 January 2019 (£m)
Shareholder value as at 31 December 2021 (£m)
42,542
42,542
2,766
3,714
30,000
32,000
34,000
36,000
38,000
40,000
42,000
44,000
46,000
48,000
50,000
Market capitalisation as at 1 January 2019 (£m)
Increase in market capitalisation
Dividends paid 2019 – 2021
Decision on 2019 LTIP vesting outcome
The Committee is satisfied that this outcome is aligned with the shareholder experience and the wider assessment of performance over the
last three years and concluded that the overall vesting level is justified and appropriate in this context and that no discretion will be applied.
Based on the performance assessment above, the 2019 LTIP award to the CEO will vest as detailed below. These awards did not accrue
dividends during the vesting period.
CEO awards – Laxman Narasimhan
Performance shares
Performance share options
Interests
held
Exercise
price
Vesting %
Interests
vesting
Share
price1
Estimated
value
75,000
n/a
150,000
£63.72
21.5%
21.5%
16,125
£59.84
£964,920
32,250
£59.84
£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 2021 of £59.84.
The actual value at vesting will be disclosed in the 2022 Annual Report
There is a further two-year holding period attached to Laxman Narasimhan’s LTIP award which means that vested performance shares (net of
tax withholding) will not be released to the CEO until 1 January 2024, and the resultant shares (net of any tax withholding and the exercise cost
as appropriate) from the exercise of any vested performance share options will not be released to Mr Narasimhan until 1 January 2024.
172
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 2021,
based on the information set out in the previous sections. This is compared to the prior year figure:
Base salary
Taxable benefit2
Pension benefit3
Annual bonus4
LTIP5
Buyout arrangements6
Fixed remuneration
Variable remuneration
Total
Executive Directors
Laxman Narasimhan
Jeff Carr1
2021
£
2020
£
2021
£
2020
£
979,000
950,000
700,000
494,545
95,322
251,689
16,756
97,900
95,000
70,000
12,201
49,455
3,829,848
4,069,800
2,282,000
1,765,526
964,920
n/a
n/a
n/a
3,067,845
1,172,222
1,296,689
786,756
556,201
4,794,768
4,069,800
2,282,000
1,765,526
5,966,990
8,434,334
3,068,756
2,321,727
1. Joined the Board and was appointed as CFO on 9 April 2020
2. Benefits for Laxman Narasimhan in 2021 primarily consist of car, healthcare, and tax filing support as a result of his relocation. For Jeff Carr the benefits include car allowance
and healthcare. Where relevant the costs above include a gross-up for tax
3. 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 a defined contribution basis, with no defined benefit accrual
4. Annual bonus reflects financial performance approaching the maximum level of the performance ranges set for the 2021 bonus; the Committee’s assessment of
performance of both the company and the Executive Directors in the round; and the Committee’s determination of the level of annual bonus payout at 91.3% of the
maximum level in line with the formulaic outcome is appropriate as set out on pages 168 to 171. One-third of this is deferred into share awards for three years
5. Reflects the estimated value of LTIP performance share options and performance shares granted to Laxman Narasimhan in August 2019, which are due to vest on 20 May
2022 at 21.5% of maximum. Valued using an average share price over Q4 2021 of £59.84. See the relevant section on pages 171 and 172 for more details. 0.2% is attributable
to share price growth over the vesting period. The Committee did not apply discretion in determining the remuneration resulting from the 2019 LTIP vesting as a result of
share price appreciation
6. The buyout includes awards made to Laxman Narasimhan, related to legacy arrangements implemented by his previous employer. The value of this buyout was estimated in
the 2020 Annual Report. The long-term share award vested at 52.6% of target on 25 March 2021 and the long-term cash award was paid at 110% of target in March 2021. The
value has been restated to reflect this and the actual closing Reckitt share price on the date of vesting of £64.12 for the long-term share award, including accumulated
dividends. 6.63% of the value of the share award included in the buyout is attributable to share price growth over the vesting period
Shareholding of Executive Directors compared to requirements
The bar chart below illustrates the Executive Directors’ shareholding compared to the company’s shareholding requirements. Executives have
a period of eight years from appointment to achieve the requirements of 200,000 shares for the CEO and 100,000 for the CFO and both
Executive Directors are showing good progress towards meeting these requirements as reflected below.
Shareholding requirement
Current shareholding
Shareholding requirement
CEO
CFO
Current shareholding
£2.5m1
£5.4m1
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
Shares held2
Shares deferred from annual bonus3
2022 vesting4
1. Current shareholding value based on the average closing share price in Q4 2021 of £59.84
2.
Includes shares owned outright and shares subject to post-vesting holding restrictions
3. This is the estimated number of shares under the Deferred Bonus Plan, after tax, including those to be deferred from the 2021 annual bonus
4. For Laxman Narasimhan this is an estimate of the number of shares vesting in May 2022 under the 2019 LTIP, after tax
Reckitt Annual Report and Accounts 2021
173
Financial StatementsGovernanceStrategic Report Directors’ Remuneration Report (Continued)
Executive Directors’ shareholding requirements (audited)
Executive Directors are expected to acquire significant numbers of shares over eight years and retain these until retirement from the Board,
with a portion required to be retained post-employment as described below.
These shareholding requirements (200,000 shares for the current CEO and 100,000 shares for the current CFO) are the most demanding
in the market and are equivalent to c.1200% and c.850% of salary for the CEO and CFO, respectively (based on a share price of £59.84).
These requirements are also more than double the current annual LTIP award (using a Black-Scholes valuation of 10% for the performance
share options).
We also have post-employment shareholding requirements for a further two years. The post-employment shareholding requirement is
enforced through a restriction on Executive Directors’ vested shares, held by our external share plan administrator, which requires company
permission before these shares can be sold. This restriction excludes shares awarded to the CEO as buyout for legacy awards from his
previous employer and shares purchased by the Executive Directors.
The two-year post-employment shareholding requirement is 50% of the shareholding requirement (or actual shareholding on leaving if lower).
This represents more than c.600% of salary for the CEO and c.425% for the CFO and is more stretching than almost all other UK companies’
in-employment shareholding requirements; it is also greater than the current annual LTIP award.
The table below shows the current shareholding of each Executive Director against their respective shareholding requirements as of
31 December 2021:
Performance shares
Options held
Shareholding
requirement
(number of
shares)
Laxman Narasimhan
Jeff Carr
200,000
100,000
Total
beneficial
interests
(number of
shares)1
56,917
30,000
Shares
awarded
under the
Deferred
Bonus Plan2
25,199
11,592
To vest
in 20223
8,546
n/a
Unvested,
subject to
performance
Vested but
not exercised
150,000
80,000
0
0
To vest
in 2022
32,250
n/a
Unvested,
subject to
performance
300,000
160,000
1.
‘Total beneficial interests’ includes shares owned outright and shares subject to post-vesting holding restrictions
2.
‘Shares awarded under the Deferred Bonus Plan’ shows the estimated number of shares awarded under the Deferred Bonus Plan, after tax, including an estimate of those to
be deferred from the 2021 annual bonus
3. This is an estimate of the number of shares vesting to Laxman Narasimhan in May 2022 under the 2019 LTIP, after tax as detailed on page 172
The Executive Directors are also eligible to participate in the all-employee Sharesave Scheme. Details of options held under this plan are set
out on page 187.
2021 LTIP awards (audited)
The table below sets out the LTIP awards which were made to Laxman Narasimhan and Jeff Carr on 28 May 2021. These awards do not accrue
dividends during the performance period. Vesting of these awards in full requires achievement of stretching performance conditions over the
three-year period. In line with the Directors’ Remuneration Policy, for Executive Directors there is a further two-year holding period
commencing after the end of the three-year performance period.
Shares
over which
awards
granted
Market
price at
date of
award1
Date
of grant
Performance shares
Exercise
price2
Face
value3
Performance period
Exercise/vesting
period
Holding
period
Laxman Narasimhan
28 May 2021
75,000
£63.68
Jeff Carr
28 May 2021
40,000
£63.68
n/a
n/a
£4,776,000
1 Jan 2021–31 Dec 2023
May 2024
1 Jan 2026
£2,547,200
1 Jan 2021–31 Dec 2023
May 2024
1 Jan 2026
Performance share options
Laxman Narasimhan
28 May 2021
150,000
£63.68
£64.67
Jeff Carr
28 May 2021
80,000
£63.68
£64.67
£0
£0
1 Jan 2021–31 Dec 2023 May 2024–May 2031
1 Jan 2026
1 Jan 2021–31 Dec 2023 May 2024–May 2031
1 Jan 2026
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 performance criteria are met to achieve full vesting. For performance-based 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 £9,552,000 for Laxman Narasimhan and £5,094,400 for Jeff Carr if calculated as the number of shares multiplied by the market price at date of award
As disclosed in the 2020 Annual Report, the performance measures and weightings used for the 2021 LTIP were unchanged from the 2020 LTIP
award, being 50% based on net revenue, 25% based on ROCE and 25% based on EPS (split equally between actual exchange rate and
constant exchange rate).
174
Net revenue continues to be measured as LFL 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. As stated in our 2018 Annual Report the definition of
ROCE used for the purposes of the LTIP differs from that disclosed elsewhere in the Annual Report as it is measured on a constant currency
basis. 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 using both constant and actual foreign exchange bases (with an equal weighting on each)
and is based on the final year of the performance period. The Committee disclosed the targets which apply to these LTIP awards in June 2021.
As discussed in the Chair’s letter and set out in further detail on page 181, during 2021, the active management of the portfolio saw a 9%
portfolio turnover, including the disposals of IFCN China and Scholl and the acquisition of Biofreeze, a major step forward in our strategy to
rejuvenate sustainable growth. This activity to strengthen the portfolio has meant that the targets set at the beginning of each award under
the LTIP needed to be reviewed to ensure they remained appropriate. In line with our current shareholder-approved Remuneration Policy and
shareholder views on adjusting targets, the LTIP targets were adjusted where needed to ensure that participants are no better or worse off
and in line with shareholder expectations. Further detail on these adjustments and the vesting schedule that applies to awards granted under
the 2021-2023 LTIP are presented on page 181.
Wider workforce pay arrangements
Reckitt cascades its 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. During the year, the Committee considered workforce
remuneration and related policies on several occasions, as well as the alignment of incentives and rewards with culture.
Information reviewed by the Remuneration Committee includes salary structures, bonus design and targets, the LTIP, share ownership, our
International Transfer Policy, provision of benefits and Reckitt’s all-employee share plans. The Committee is pleased to note from this review
that the company’s remuneration policies continue to be aligned with those of the Executive Directors, with a cascade throughout the
organisation. In addition, as part of the wider review of remuneration arrangements and in the development of the Directors’ Remuneration
Policy over the past year, the Committee took into account views of senior management and other employees. The company commissioned
external independent consultants to undertake detailed stakeholder interviews with senior management on remuneration arrangements
which apply to them and their teams, and internally, Reckitt operated focus groups with employees to understand views on incentives. We
also communicated to the wider workforce details of how executive pay is set, its alignment with the company’s approach to the wider
company pay policy and how decisions are made by the Committee; giving employees the opportunity to ask any questions on these topics.
As mentioned in the Chair’s letter, in March 2021 we launched our global wellbeing programmes for leaders at all levels in partnership with
Hintsa and Tignum, global leaders in this field. We have also provided a rich bank of resources for all employees to access including global
wellbeing sessions, focusing on balance, burnout and the importance of mental energy and attracting over 3,000 participants each time. In
July 2021 we launched a global employee pulse survey, focusing on understanding our employee demographics and getting insights on our
Leadership Behaviour and diversity topics.
As discussed in the Strategic Report our employment policies drive gender equality in our teams. We have mentoring schemes for female
employees, gender-balanced shortlists and proportional targets at senior management level. We have also continued with several initiatives
that were launched in 2020, such as the Stronger Together conversation series, a five-year commitment focusing on diversity and inclusion
(D&I) and belonging topics that matter most to our people. During 2021, another seven virtual global sessions have been held, reaching almost
30,000 people, with more watching the sessions later on demand. Our Global Inclusion Board comprises senior leaders and sponsors of our
Employee Resource Groups (ERGs) and is chaired by the CEO, who leads the D&I strategic agenda across Reckitt.
As set out earlier in the Annual Report, we continue to focus on maintaining an open, transparent culture by promoting continuing dialogue
across the company. During 2021 Mary Harris’s activity as the Designated Non-Executive Director for engagement with the company’s
workforce has allowed her to feed back the views of the workforce to the Remuneration Committee as well as the wider Board. Each year
the company holds several round-table discussions with employees and organises site visits during which town hall meetings and smaller
group discussions with our people take place. Details of this engagement are set out in the Section 172 Statement, which can be found on
pages 68 to 73.
Reckitt Annual Report and Accounts 2021
175
Financial StatementsGovernanceStrategic Report Directors’ Remuneration Report (Continued)
The table below summarises the remuneration structure for the wider workforce:
Element
Implementation below the Board
Comparison with Executive Director
remuneration
Salary
Salary increases are determined by line managers based on factors such as individual
performance ratings, talent ratings and local market practice. Country-specific
conditions such as inflation are also taken into account.
Salary increases are normally aligned
with those of the wider workforce,
which take into account performance.
The average total pay during 2021 to all employees across the Group is £48,445 and we
review pay ratios of the Chief Executive Officer’s total remuneration to the remuneration
of UK employees, as set out on page 178 of this report.
In the UK, Reckitt has been voluntarily paying the Living Wage for a number of years and
is accredited by the Living Wage Foundation as paying a living wage to employees and
contractors. This certifies our commitment to employees and staff that they will receive
a wage that not only exceeds the minimum wage but also recognises the actual cost of
living in the UK. We are developing our global Sustainable Livelihood Framework (of
which living wage is a component) to outline our approach and will be piloting it within
selected factories in Thailand and India.
Salaries are also set competitively
against peers in support of
the recruitment and retention
of Executive Directors.
Annual bonuses for Executive Directors
are directly related to Reckitt’s
financial performance measured
by net revenue and adjusted profit
before income tax targets. These
measures also apply to other Group
employees who participate in the APP.
The bonus for all participants in the APP
operates on a multiplicative basis, in the
same way as for the Executive Directors.
One-third of annual bonus payments
for Executive Directors are subject
to a three-year deferral into
awards over Reckitt shares.
Executive Directors’ LTIP grants
comprise performance share
options and performance share
awards (based on a fixed number),
which for the 2022 awards will vest
subject to the achievement of LFL
net revenue, ROCE, Relative TSR
and ESG performance targets.
In addition to the LTIP’s three-year
performance period, Executive Directors
are subject to an additional two-year
holding period commencing at the
end of the performance period.
Executive Directors are eligible
to participate in the all-employee
Sharesave Scheme on the same
basis as all employees.
Annual
bonus
Our Annual Performance Plan (APP) is operated consistently across the organisation
and has more than 16,000 employees participating. As employees progress and are
promoted their target bonus and maximum multiplier typically increase.
In common with the Executive Directors, bonus payouts are based on Reckitt’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,
typically related to net working capital or innovation.
We also operate local bonus plans, for example for employees in sales and factories.
Long-term
incentives
Reckitt grants LTIP awards to members of the Group 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 also made to selected high-potential employees below these levels.
The 2022 awards will continue to use the same performance measures and three-year
performance period as for the Executive Directors. Awards are made as a fixed
number of share options and shares, with grants applied consistently depending on an
employee’s level in the organisation. Adjustments can be made to the award level based
on performance and managers can also recommend additional awards to key employees.
All-
employee
share plans
We operate an award-winning global all-employee share plan to foster our culture of
ownership amongst employees. This gives employees the opportunity to save over
a three-year period to purchase Reckitt shares at a discount to the share price.
As well as ensuring individuals feel a sense of ownership, Reckitt is keen to ensure that
the plans are inclusive and accessible to all colleagues, with the plan being offered on
equivalent terms to all eligible employees globally, subject to local regulation.
Around 50% of Reckitt employees have signed up to one of our three share plans with
total savings of around £171 million across all cycles. Over the last three-year period,
2019-2021, just over 6,900 employees saved in one of our plans, making a gain of around
10% over the period.1
In order to encourage take-up and ensure that the plans are inclusive and accessible to
all employees, we utilise around 100 local champions and provide communications in 28
languages. Champions are responsible for local communications throughout the offices
and factories. Examples include desk drops, webinars, virtual drop-in sessions with
specific contacts at each site for support.
Further, in line with Reckitt’s commitment to diversity and inclusiveness, Reckitt has
included and promoted a 12-month savings sabbatical for employees on maternity leave.
176
Element
Implementation below the Board
Share
ownership
Reckitt is proud of our ownership culture. In addition to the market-leading participation
rates in our all-employee share plans, members of the Group Executive Committee and
Group Leadership Team have shareholding requirements in order to further align the
interests of management and shareholders. These requirements are amongst the most
demanding in the market and we expect participants to meet them within eight years
of appointment. There is an annual review of progress by the Remuneration Committee.
Amongst the Group Executive Committee the total shareholding requirement
is around £42 million1 and the aggregate actual holding is currently £15
million1 which reflects good progress towards the requirement given the
changes to the Group Executive Committee over the past two years.
Overall the total shareholding requirement for all employees with requirements is
£80 million,1 with the current actual holding being £48 million.1 This also reflects good
progress towards the requirement given the number of new appointments made in
light of the company’s strategic transformation goals and reorganisation of structure.
Pension
A pension/gratuity scheme is offered to more than 80% 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.
In the UK, all Reckitt employees are eligible to receive a company pension contribution
of at least 10% of pensionable salary, irrespective of any personal contribution made.
Comparison with Executive Director
remuneration
The Executive Directors have
shareholding requirements of 200,000
shares for the CEO and 100,000
for the CFO, the most demanding
requirements in the UK market2.
These are equivalent to c.1200% and
c.850% of salary1 respectively.
Executive Directors are additionally
subject to a post-employment
shareholding requirement which is
enforced through restrictions put in
place by our share plan administrator.
The table on page 174 sets out
the progress of the Executive
Directors towards their
shareholding requirements.
Our Executive Directors receive a
company pension contribution of
10% of salary, in line with the wider
workforce in the UK. They are eligible
to take this as a cash alternative.
Benefits
Reckitt regularly reviews the core benefits it provides in each country to ensure they
remain appropriate, equally inclusive and in line with our philosophy of providing
market-competitive benefits. In addition to aligning with the local market Reckitt
ensures that there is a core level of benefits provided to all employees. These include:
Executive Directors receive benefits
which consist primarily of the provision
of a company car/allowance, pension
scheme, risk insurances and healthcare.
In addition, Executive Directors are
eligible for the benefits available
to the wider UK workforce, as
described in this table.
• Life insurance for all of our global employee population. All of our employees are
insured for at least two times base salary
• Global parental leave policy which provides for at least 26 weeks paid and 26 weeks
unpaid maternity leave, and four weeks paid and four weeks unpaid paternity leave,
for all employees. The policy recognises that today’s families come in all shapes and
sizes, so the same principles apply to all LGBTQ+ employees, as well as adopting and
surrogacy families
• An Employee Assistance Programme is provided in every country, providing valuable
assistance to our employees during the pandemic and beyond
• Reckitt also provides health insurance, where it is not adequately provided for by the
state, for most of our global employee population. In the UK and US our healthcare
insurer provides access to a video GP. This allows our employees to speak to a doctor
whenever they want. In a number of markets this also extends to cover spouse and/or
children
Reckitt’s unique International Transfer Policy is key to ensuring global mobility, which
is a critical part of Reckitt’s career development and our culture. Employees transfer
consistently on a local terms basis, to remove inequities of home/host practices.
Depending on the type of international move additional benefits such as international
healthcare, international pension, school fees, tax return support and home leave may
be provided to foster ongoing mobility.
1. Based on the average closing share price in Q4 2021 of £59.84
2. Compared against constituents of the FTSE 30
Reckitt Annual Report and Accounts 2021
177
Financial StatementsGovernanceStrategic Report Directors’ Remuneration Report (Continued)
Gender pay gap
The Board reviews the company’s gender pay gap and publishes an annual gender pay report that can be found on our website under
the People and Communities heading of our Sustainability section. To increase transparency on this issue Reckitt voluntarily discloses
the gender pay gap for our ten largest markets by workforce size, including the UK, which together make up around 70% of our global
permanent workforce.
As disclosed in our gender pay gap report Reckitt has set targets to increase the number of women in senior leadership positions and has
a number of initiatives to increase this representation.
A summary of the gender pay statistics is also included below:
• The gender pay gap in the UK for the year to April 2021 is -7.4% at median and 5.0% at mean
• This compares to the year to April 2020 when the gender pay gap was -6.1% at median and 5.1% at mean
Further data and information on the initiatives Reckitt is taking on diversity and inclusion are set out in our gender pay gap 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 UK 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 for 2019. It should be noted that for Laxman this included both the one-off relocation benefits
and the buyout in respect of legacy arrangements provided by his previous employer.
For 2020, the pay ratio reflects the actual buyout awards to Laxman that are in respect of legacy arrangements from his previous employer
and which vested in March 2021. This is disclosed in the 2020 column of the single figure table on page 173 of this report. The disclosure will,
over time, cover a ten-year rolling period.
CEO
Year
2021
2020
2019
Method
25th percentile pay ratio
Median pay ratio
75th percentile pay ratio
Option A
Option A
Option A
1:170
1:244
1:158
1:121
1:177
1:115
1:78
1:100
1:70
The calculations reflect the application of Reckitt’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 Group’s wider policies on employee pay, reward and
progression. Reckitt 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 the CEO.
The median pay ratio has decreased in line with the reduction in the CEO’s single total figure of remuneration as set out on page 173.
In calculating the ratio we have used Option A, in line with shareholder guidelines. The employees used in the calculations were selected on
23 February 2022, following the end of the financial year.
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 2021 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 these to full-time equivalent
values) 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
The table below summarises the identified employees in 2021:
Total employee pay and benefits
Salary component
25th
percentile
Median
pay
75th
percentile
£35,045
£49,261
£76,581
£28,268
£40,906
£67,771
In addition, Note 5 to the Financial Statements sets out the total employment costs and average number of employees globally, during 2021.
Based on these, the average global pay during 2021 was £48,445 and consequently the pay ratio between the CEO and average global
employee was 1:123.
178
IMPLEMENTATION OF DIRECTORS’ REMUNERATION POLICY FOR 2022 OUTCOMES
Salary
As set out earlier in this report, there will be a 3% increase in salaries for 2022 for the CEO and the CFO in line with the budgeted average
increase for the UK workforce. The CEO’s salary will be £1,008,000 and the CFO’s will be £721,000.
Pension
The CEO and CFO are eligible to receive a pension contribution, or equivalent cash allowance, of 10% of salary, which is equivalent to the
company’s level of contribution for all UK employees.
Annual bonus in respect of 2022 performance
There are no changes to the bonus opportunity for the CEO and CFO, remaining at 120% and 100% of salary at target, respectively.
Bonuses for 2022 will remain based on Reckitt’s net revenue and adjusted profit before income tax targets, 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 targets are met. One-third of any bonus earned will be deferred into Reckitt shares for three years.
As previously noted in the Chair’s letter, as it does every year the Committee will continue to evaluate the performance of both the Group and
the Executive Directors in the round and with regard to broader circumstances to assess whether the level of annual bonus payout is
appropriate and justified, before determining the final bonus payout.
We have not disclosed the performance target ranges for 2022 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 2022.
2022 LTIP awards
Award levels
There are no changes to the LTIP award levels for the CEO or CFO for 2022. These have been reviewed in light of share price performance,
Group performance and individual performance. Laxman Narasimhan’s 2022 LTIP award will consist of 150,000 performance share options and
75,000 performance shares and Jeff Carr’s award will be 80,000 performance share options and 40,000 performance shares. These awards
are expected to be made following the May 2022 AGM.
Performance conditions
As disclosed in the Chair’s letter, the Committee reviewed the performance measures with the aim of ensuring alignment with our strategy to
rejuvenate sustainable growth. The 2022 LTIP performance conditions and weightings are as follows; each element is considered
independently:
• LFL net revenue growth (40% weighting)
• Relative TSR (25% weighting)
• ROCE (25% weighting)
• ESG (10% weighting)
The Committee went through a robust process when setting these targets, taking into account a number of factors and different reference
points, and the Committee considers that the targets set are very stretching. Awards granted in 2022 will vest in line with the descriptions
below, which require significant outperformance of targets.
LFL net revenue growth
Net revenue is measured as LFL growth over three years. As previously stated, our guidance is for LFL net revenue growth of 1-4%, for 2022
with a longer-term target of mid-single-digit growth. In this context, the Remuneration Committee believes that the performance ranges are
appropriately stretching and incentivise management to deliver outperformance. 20% of this element will vest for achieving 2.0% per annum
growth increasing to full vesting for achieving 5.0% per annum growth. This represents an increased threshold compared to the 2021 LTIP target.
ROCE
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. As stated in our 2018 Annual Report the definition of ROCE used for the purposes of the LTIP differs from that disclosed in the
Annual Report, as it is measured on a constant currency basis. 20% of this element will vest for achieving 13.2% increasing to full vesting for
achieving 15.2%.
Reckitt Annual Report and Accounts 2021
179
Financial StatementsGovernanceStrategic Report Directors’ Remuneration Report (Continued)
Relative TSR
Relative TSR directly aligns LTIP participants with the shareholder experience and will only reward for TSR outperformance against our peers.
The Committee deliberated over the constituents of the Relative TSR peer group as part of the Committee’s review of the Remuneration
Policy. The proposed group of 19 companies represents companies that we compete with for capital and which shareholders compare us to
and is also an appropriate group to incentivise LTIP participants to outperform.
Relative TSR will be measured against a group of 19 global companies that directly reflects shareholder feedback received during the
consultation. The peer companies are primarily drawn from the constituents of the MSCI World House & Personal Products Index. The
Committee determined to also include appropriate comparators that form part of the broader ‘Fast Moving Consumer Goods’ industry and are
subject to similar industry dynamics and market challenges as Reckitt. The Committee was also keen to have a sufficient number of companies
in the peer group so that the relative TSR comparison remains robust throughout the performance period. The constituents will be reviewed on
an annual basis and, in particular, as new comparators come to the market. The TSR peer group for the 2022 LTIP award is set out below:
Beiersdorf
Church & Dwight
Danone
Essity
JDE
Kao
Clorox
Estée Lauder
Kimberly-Clark
L’Oréal
Mondelēz
Nestlé
Shiseido
Unicharm
Unilever
Colgate Palmolive
Henkel
Lindt
Procter & Gamble
Under the Relative TSR measure, 20% of the award will vest for TSR at the median of the peer group, increasing to full vesting for upper
quartile performance or above. In line with shareholder guidance, a common currency will be used for TSR purposes.
ESG
The introduction of ESG measures aligns participants with, and incentivises delivery of, our 2030 sustainability ambitions. There are two equally
weighted metrics for the 2022 LTIP award. The ESG targets are based on rigorous methodology, are independently assured and, in the case of
our carbon emissions, support our delivery of externally validated science-based targets on emissions reduction. Targets are based on
achievement in the final year of the performance period and take into account the plans that we have to achieve the sustainability ambitions.
The measures and targets are as follows:
i. Percentage of net revenue from more sustainable products – this has been an annual reporting KPI since 2012 and supports our
ambition of 50% of net revenue being from more sustainable products by 2030. This is measured using our Sustainable Innovation
Calculator (SIC). The calculator evaluates the sustainability impact of every new product versus existing products and established
benchmarks. It helps measure carbon, water, plastics, ingredients and packaging footprints in new products for our global brands, targeting
their reduction to enable more sustainable products in the future. It includes Scope 3 product emissions (including the carbon and water
impact from consumer use) which is the most impactful lifecycle stage of our products. We achieved 24.9% of net revenue from more
sustainable products in 2021 and have set the targets for this measure based on the Plan to 2030, such that 20% of this element will vest
for achieving 30% of net revenue from more sustainable products increasing to full vesting for achieving 33%.
ii. Percentage reduction in GHG emissions in operations – this supports the delivery of our externally validated science-based targets for
2030 to help maintain global warming at less than 1.5°C, including a 65% reduction in GHG emissions in operations against our 2015 baseline.
For the purposes of reward outcomes, any offsetting activities will not count towards achievement of these targets. A total of 20% of this
element will vest for achieving a 65% reduction in GHG emissions in operations increasing to full vesting for achieving a 69% reduction. The
threshold of a 65% reduction is in line with the goal that we set for ourselves by 2030, with the maximum target of a 69% reduction
significantly beyond this, requiring us to exceed our 2030 science-based target ahead of schedule.
Summary of 2022 LTIP targets
Performance will be assessed for each measure, at the end of the three-year performance period. Performance will be assessed on a sliding
scale as set out below:
LFL net revenue growth (3-year CAGR)
(40% weighting)
ROCE (final year)
(25% weighting)
Relative TSR
(25% weighting)
ESG: % of net revenue from more sustainable products (final year)
(5% weighting)
ESG: % reduction in GHG emissions in operations (final year)
(5% weighting)
Threshold
(20% vesting)
Maximum
(100% vesting)
2.0%
5.0%
13.2%
15.2%
Median Upper quartile
30%
65%
33%
69%
180
REMUNERATION DECISIONS IN RELATION TO PORTFOLIO MANAGEMENT
During 2021, the active management of the portfolio saw a 9% portfolio turnover, including the disposals of IFCN China and Scholl and the
acquisition of Biofreeze, a major step forward in our strategy to rejuvenate sustainable growth. This activity to strengthen the portfolio has
meant that the targets set at the beginning of each award under the APP and LTIP needed to be reviewed to ensure they remained
appropriate. In line with our current shareholder-approved Remuneration Policy and shareholder views on adjusting targets, the LTIP targets
were adjusted where needed to ensure that participants are no better or worse off and in line with shareholder expectations as follows.
Adjusting in-flight LTIP performance measures
For the 2020-2022 and 2021-2023 awards, the Committee has determined to adjust the targets for the disposal of IFCN China, given the size of
this transaction, to ensure that the new targets are no harder or easier to achieve than the original targets.
A consistent approach has been taken across all three performance measures and the adjustments are in line with generally accepted
shareholder principles where there has been material portfolio management.
• The original EPS targets were set as final year EPS values, based on a plan which included IFCN China at the time the targets were set.
These targets have been reduced to recognise the impact of the reduced profit expected in the final year of the LTIP cycle due to the
disposal of IFCN China
• The LFL net revenue targets have been reduced slightly to recognise that the expected revenue growth for IFCN China when the targets
were set was higher than the remaining portfolio. The challenge in the new targets for the remaining portfolio remains equal to the
original targets
• The ROCE targets have been increased to reflect that IFCN China was a lower return business than the remaining portfolio and again the
new targets contain the same level of challenge as was contained in the original targets when set
The tables below show the original targets, the impact of IFCN China and the new targets for the remaining period of the in-flight awards. The
Committee will continue to monitor future portfolio activity across the Group, if any, and may decide to adjust the targets again, if appropriate.
2020 LTIP targets
LFL net revenue growth (3-year CAGR)
(50% weighting)
ROCE (final year)
(25% weighting)
EPS (final year) on a constant foreign exchange basis
(12.5% weighting)
EPS (final year) on an actual foreign exchange basis
(12.5% weighting)
2021 LTIP targets
LFL net revenue growth (3-year CAGR)
(50% weighting)
ROCE (final year)
(25% weighting)
EPS (final year) on a constant foreign exchange basis
(12.5% weighting)
EPS (final year) on an actual foreign exchange basis
(12.5% weighting)
Original targets
Adjusted targets for portfolio
management
Threshold
(20% vesting)
Maximum
(100% vesting)
Threshold
(20% vesting)
Maximum
(100% vesting)
2.0%
11.8%
5.0%
13.1%
1.9%
13.5%
4.9%
14.8%
323 pence
360 pence
304 pence
341 pence
302 pence
337 pence
283 pence
318 pence
Original targets
Adjusted targets for portfolio
management
Threshold
(20% vesting)
Maximum
(100% vesting)
Threshold
(20% vesting)
Maximum
(100% vesting)
1.0%
12.3%
5.0%
14.0%
0.9%
13.7%
4.9%
15.4%
327 pence
401 pence
308 pence
382 pence
308 pence
379 pence
289 pence
360 pence
Reckitt Annual Report and Accounts 2021
181
Financial StatementsGovernanceStrategic Report Directors’ Remuneration Report (Continued)
ADDITIONAL REMUNERATION DISCLOSURES
Percentage change in the remuneration of Directors
Following amendments to UK reporting regulations, companies are required to publish the annual percentage change in remuneration (salary
or fees, benefits and annual bonus) for each Director compared to the annual average percentage change in remuneration for the employees
(excluding Directors) of the Parent Company. Since the CEO is the sole employee of Reckitt Benckiser Group plc, this statutory disclosure is not
possible. In the table below we are therefore voluntarily disclosing the percentage change in remuneration for all UK employees in order to
provide a representative comparison.
The company considers UK employees to be an appropriate comparator group as the Executive Directors’ remuneration arrangements are
similar in structure to the majority of these employees and it reflects the economic environment where the Executive Directors are employed.
The analysis is based on a consistent set of employees, i.e. the same individuals or roles appear in the 2020 and 2021 populations.
All UK employees1
Andrew Bonfield
Olivier Bohuon3
Jeff Carr (CFO)4
Nicandro Durante
Mary Harris
Mehmood Khan
Pam Kirby
Sara Mathew5
Laxman Narasimhan (CEO)6
Chris Sinclair (Chair of the Board)
Elane Stock
Margherita Della Valle7
2020/21
2019/20
Salary/fee
Benefits
Bonus
Salary/fee
Benefits
Bonus
5.9%
2.4%
n/a
6.2%
-8.9%
n/a
n/a
n/a
n/a
41.5%
37.3%
29.3%
1.9%
2.0%
2.7%
2.0%
2.7%
3.1%
3.6%
2.7%
105.4%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
–62.1%
-5.9%
n/a
n/a
n/a
n/a
n/a
n/a
4.5%
4.1%
n/a
n/a
14.1%
14.4%
4.7%
7.3%
109.3%
117.3%
10.0%
4.7%
n/a
1.5%2
505.4%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
–23.4%
1747.2%
n/a
n/a
n/a
n/a
n/a
n/a
1. The percentages for ‘All UK employees’ reflect the average percentage change in full-time equivalent salary, taxable benefits and allowances, and bonus for colleagues
based in the UK between 2019 and 2020 and similarly between 2020 and 2021. It only includes colleagues employed in both years in the comparison
2. The percentage change in taxable benefits for all UK employees excludes international transfer benefits as this is volatile from year to year based on each
individual’s circumstances
3. Olivier Bohuon was appointed to the Board on 1 January 2021 and so no comparison is shown for 2020 to 2021
4. Jeff Carr joined on 9 April 2020 so no comparison is shown for 2019 to 2020. The percentage change shown for 2020 to 2021 reflects actual remuneration received during
2020 for service from Jeff Carr’s appointment on 9 April 2020 to 31 December 2020
5. Sara Mathew was appointed to the Board in July 2019 and the comparison reflects that the 2019 fee was only received for part of the year. Similarly, the salary/fee, benefits
and bonus for Jeff Carr and Margherita Della Valle (where applicable) for 2020 reflects the time served on the Board
6. Laxman Narasimhan received no increase to his annual salary during 2020. The percentage change shown in 2019 to 2020 above reflects actual salary received during 2019
for service from his appointment on 16 July to 31 December 2019
7. Margherita Della Valle joined on 1 July 2020 so no comparison is shown for 2019/2020
The change in annual bonus for all UK employees reflects the performance of the company in 2021 which resulted in lower bonuses in 2021
compared to 2020. For reference, the 2020 annual bonus for UK employees was 505.4% higher than that paid in 2019 due to performance of
the company in 2020 compared to 2019.
Relative importance of spend on pay
The table below shows shareholder distributions (i.e. dividends) and total employee pay expenditure for 2020 and 2021, along with the
percentage change in both.
Total shareholder distribution1
Total employee expenditure2
1. Details of shareholder distribution are set out in Note 28 to the Financial Statements
2. Details of employee expenditure are set out in Note 5 to the Financial Statements
182
2021
£m
1,246
2,276
2020
£m
% change
2020/21
1,241
2,302
0.4%
-1.1%
Exit payments made in the year (audited)
No exit payments were made to Executive Directors during the year.
Payments to past Directors (audited)
No other benefits or payments were delivered to former Directors in the year in excess of the minimum threshold of a pre-tax value of £15,000
set by the Remuneration Committee for this purpose.
Performance graph
The graph below shows the TSR of the company and the UK FTSE 100 Index over the period since 1 January 2012. This shows the growth in the
value of a hypothetical holding of £100 invested on 31 December 2011. The FTSE 100 Index was selected on the basis that it contains
companies of a comparable size, in the absence of an appropriate industry peer group in the UK.
Total Shareholder Return since 1 January 2012
£ value of £100 invested at 1 January 2012
300
250
200
150
100
100
100
50
0
2012
253
260
226
232
184
161
126
110
130
131
130
173
158
154
267
266
194
164
244
185
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Reckitt
FTSE 100
Source: Thompson Reuters Datastream
The table below sets out the single figure of total remuneration for the role of CEO over the last ten years.
(£000)
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
CEO single figure of remuneration
Laxman Narasimhan
Rakesh Kapoor
Annual bonus
(as a percentage of maximum)
LTIP vesting
(as a percentage of maximum)
£8,411
£6,840
£12,787
£25,527
£15,289
£8,999
£14,314
£938
£4,5991
£8,4341
£5,967
53%
100%
72%
100%
0%
0%
84%
12%2
100%
91%
100%
40%
40%
80%
50%
50%
65%
0%3
n/a3
21.5%
1.
Includes buyouts in respect of legacy arrangements from previous employer, restated, and reflects the actual value of the buyout award that vested
2. Zero for Rakesh Kapoor
3. Laxman Narasimhan was not with the Group at the time these awards were granted
Reckitt Annual Report and Accounts 2021
183
Financial StatementsGovernanceStrategic Report Directors’ Remuneration Report (Continued)
Single total figure of 2021 remuneration for Non-Executive Directors and implementation for 2022 (audited)
The following Non-Executive Director fee policy was in place for the year ended 31 December 2021. The table also sets out the fees that will
apply from 1 January 2022.
Role
Base fees
Chair of the Board
Non-Executive Director
Additional fees
Chair of Committee
Member of Committee
Designated Non-Executive Director for engagement with the company’s workforce
Senior Independent Director
2021 fees
2022 fees
Fee
delivered
in Reckitt
shares
Cash fee
Cash fee
Fee
delivered
in Reckitt
shares
£427,500
£142,500
£470,250
£156,750
£71,250
£23,750
£73,500
£24,500
£35,000
£20,000
£20,000
£30,000
–
–
–
–
£35,000
£20,000
£20,000
£30,000
–
–
–
–
The fee for the Chair of the Board has been increased to £627,000, an increase of 10%. 25% of the fee continues to be paid in shares.
As disclosed in last year’s Remuneration Report the Committee reviewed the Chair of the Board’s fee during 2021 to reflect the enlarged
scope of the role and time commitment required over recent years and ensure that the fee remains broadly competitive and aligned to the
market. The new fee level remains below the median of the FTSE 30.
The base fee for NEDs has been increased to £98,000, an increase of 3%, broadly in line with the salary increase budget across the UK
workforce. In line with last year, the proportion delivered in Reckitt shares continues to be 25% of the base fee (£24,500).
In addition, subject to shareholder approval of the new Remuneration Policy, NEDs will become eligible to receive support from the company
to complete a UK tax return, if required. Under the current Remuneration Policy, the Chair of the Board and NEDs are not eligible to receive
benefits and so the flexibility to provide this benefit has been included in the revised Remuneration Policy that is presented for approval.
Any benefits provided to NEDs will be disclosed in the 2022 Directors’ Remuneration Report.
The table below sets out a single figure for the total remuneration received by each Non-Executive Director for the year ended 31 December
2021 and the prior year:
Chris Sinclair
Andrew Bonfield
Olivier Bohuon1
Nicandro Durante
Mary Harris
Mehmood Khan
Pam Kirby
Sara Mathew
Elane Stock
2021 fees
2020 fees
Cash
Shares
Total
Cash
Shares
Total
£427,500
£142,500
£570,000
£412,500
£137,500
£550,000
£106,250
£23,750
£130,000
£105,250
£21,750
£127,000
£91,250
£23,750
£115,000
–
–
–
£141,250
£23,750
£165,000
£140,250
£21,750
£162,000
£126,250
£23,750
£150,000
£125,250
£21,750
£147,000
£91,250
£23,750
£115,000
£90,250
£21,750
£112,000
£126,250
£23,750
£150,000
£125,250
£21,750
£147,000
£91,250
£23,750
£115,000
£90,250
£21,750
£112,000
£91,250
£23,750
£115,000
£90,250
£21,750
£112,000
Margherita Della Valle2
£91,250
£23,750
£115,000
£45,125
£10,875
£56,000
1. Olivier Bohuon was appointed to the Board on 1 January 2021
2. Margherita Della Valle joined the Board on 1 July 2020. Fees shown are paid from this date
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.
184
Summary of shareholder voting at the 2021 AGM
The following table shows the results of the voting on the 2020 Directors’ Remuneration Report at the 2021 AGM and 2019 Directors’
Remuneration Policy at the 2019 AGM:
Votes for
For
%
Votes
against
Against
%
Total
Votes
withheld
Approve the 2020 Directors’ Remuneration Report
434,137,976
82% 92,915,499
18% 527,053,475
7,630,753
Approve the Directors’ Remuneration Policy
461,396,628
87% 66,134,073
13% 527,530,701
1,370,761
The Remuneration Committee has had extensive discussions with shareholders with a view to obtaining shareholder support for our
remuneration arrangements. In particular, in 2019, 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 has had extensive dialogue with shareholders during 2021 on the proposed changes to the
Remuneration Policy, including engaging with shareholders representing more than 50% of our shareholder register. The majority of
shareholders providing input were supportive of the changes we are making to our Remuneration Policy to even further align with the
strategic priorities of the Group. We are grateful to shareholders and their advisory bodies for the time taken and their feedback, which
has provided valuable input and assisted the Committee in developing the proposals.
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
Chris Sinclair
Olivier Bohuon
Date of appointment
10 February 2015 (appointed Chair of the Board on 3 May 2018)
1 January 2021
Andrew Bonfield
1 July 2018
Nicandro Durante
1 December 2013
Mary Harris
10 February 2015
Mehmood Khan
1 July 2018
Pam Kirby
Sara Mathew
Elane Stock
10 February 2015
1 July 2019
1 September 2018
Margherita Della Valle
1 July 2020
Length of service as at
31 December 2021
Years
Months
6
1
3
8
6
3
6
2
3
1
11
0
6
1
11
6
11
6
4
6
Executive Directors’ service contracts contain a 12-month notice period, as set out in the Directors’ Remuneration Policy. Laxman Narasimhan
was appointed to the Board as CEO-Designate on 16 July 2019 and became CEO on 1 September 2019. Jeff Carr was appointed to the Board
as CFO on 9 April 2020. Directors’ service contracts and letters of engagement are available for inspection at the registered office.
Reckitt Annual Report and Accounts 2021
185
Financial StatementsGovernanceStrategic Report Directors’ Remuneration Report (Continued)
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 of and signatory to the Code of Conduct
for Remuneration Consultants, details of which can be found at www.remunerationconsultantsgroup.com. During 2021, Deloitte LLP also
provided the Group with advice in numerous areas, including corporate, indirect and employment taxes, global mobility, and advisory and
technology consulting.
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 £412,500
on the basis of time and materials. It should be noted that although we are only required to 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.
Directors’ interests in shares and options under the LTIP1 (audited)
Laxman Narasimhan
Performance-
based share options
Performance-
based share awards
Grant
date
At
1.1.21
Granted
during
the year
05.08.19 150,000
01.05.20 150,000
0
0
28.05.21
150,000
05.08.19
75,000
01.05.20
75,000
0
0
28.05.21
75,000
Buyout awards2
05.08.19
84,717
Jeff Carr
Performance-
based share options
Performance-
based share awards
0
–
01.05.20
80,000
28.05.21
80,000
01.05.20
40,000
–
28.05.21
40,000
Exercised/
vested
during the
year
(including
dividend
shares)2
Lapsed
during
the year
At
31.12.21
Option
price
(£)
Market
price at
date of
award
(£)
Market
price at
date of
exercise/
vesting
(£)
–
–
–
–
–
–
– 150,000
63.72
– 150,000
65.20
– 150,000
64.67
–
–
–
75,000
75,000
75,000
59.72
65.70
63.68
Exercise/
vesting period
May 2022-Aug 2029
May 2023-May 2030
May 2024-May 2031
May 2022
May 2023
May 2024
26,354
59,254
0
59.72
64.12
Mar 2021
–
–
–
–
–
–
–
–
80,000
65.20
80,000
64.67
May 2023-May 2030
May 2024-May 2031
40,000
40,000
65.70
63.68
May 2023
May 2024
1. Vesting of these awards is subject to performance conditions set by the Remuneration Committee
2. Buyout awards in respect of legacy awards from previous employer that vest subject to PepsiCo performance and include 891 dividends accrued on vested shares
186
Directors’ interests in shares in the Deferred Bonus Plan1 (audited)
Grant
date
At
1.1.21
Granted
during
the year
Exercised/
vested
during the
year
Lapsed
during
the year
At
31.12.21
Option
price
(£)
Laxman Narasimhan
Deferred Bonus Plan
23.03.20
Deferred Bonus Plan2
23.03.20
Deferred Bonus Plan
25.03.21
Jeff Carr
Deferred Bonus Plan
25.03.21
1,259
3,832
0
0
0
0
21,124
9,163
–
–
–
–
–
–
–
–
1,259
3,832
21,124
9,163
Market
price at
date of
award
(£)
Market
price at
date of
vesting
(£)
Vesting
period
58.35
58.35
64.22
– Mar 2023
– Mar 2023
– Mar 2024
64.22
– Mar 2024
1. One-third of the annual bonus is delivered in the form of conditional share awards which are deferred for three years
2. One-third of the payment made by Reckitt in respect of the PepsiCo bonus that was forfeited by joining Reckitt. The award was made on the same terms as the other
aforementioned award under the Deferred Bonus Plan
Executive employees may 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
Jeff Carr
Grant
date
02.09.19
31.08.21
Granted
during
At
1.1.21
the year
Exercised
during the
year
Lapsed
during the
year
379
0
0
403
–
–
–
–
At
31.12.21
379
403
Option
price
(£)
47.44
44.56
Market
price at
exercise
(£)
Exercise
period
–
–
Feb 23-Jul 23
Feb 25-Jul 25
There have been no changes to the Directors’ interests as set out in the above tables between 31 December 2021 and 13 April 2022.
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 13 April 2022 had the following beneficial interests in the ordinary shares of
the company:
Olivier Bohuon1
Andrew Bonfield
Jeff Carr
Nicandro Durante
Mary Harris
Mehmood Khan
Pam Kirby
Sara Mathew2
Laxman Narasimhan
Chris Sinclair
Elane Stock
Margherita Della Valle
13 April
2022
31 December
2021
31 December
2020
711
639
711
639
–
403
30,000
30,000
20,000
1,105
2,784
594
4,998
487
56,917
11,328
2,487
296
1,105
2,784
594
4,998
487
56,917
11,328
2,487
296
883
2,554
399
3,768
244
42,104
9,906
2,246
74
1. Olivier Bohuon was appointed to the Board on 1 January 2021
2 Sara Mathew held her shares in the form of 2,436 American Depositary Receipts (ADR). Each ADR is equivalent to five ordinary shares at 10 pence each in the company
3. No person who was a Director (or a Director’s connected person) on 31 December 2021 and at 13 April 2022 had any notifiable share interests in any subsidiary
4. 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
Reckitt Benckiser Group plc
13 April 2022
Reckitt Annual Report and Accounts 2021
187
Financial StatementsGovernanceStrategic Report REPORT OF THE
DIRECTORS
Introduction
The Directors present their report, together with the Financial
Statements of the Group for the year ended 31 December 2021,
in accordance with section 415 of the Companies Act 2006
(CA 2006). In accordance with section 414C (11) of CA 2006
certain matters required to be included in this Directors’ Report
are included in the Strategic Report on pages 2 to 103. 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 104 to 127 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, the Financial Conduct
Authority’s (FCA) Listing Rules and the 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 2021, and are
incorporated into this Directors’ Report by reference:
Acquisitions and disposals
Awards under employee share schemes and
long-term incentive 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
250-252
245-249
104-127
192
73
190
Engagement with employees, suppliers, customers
and others
52-65 and 68-71
Environmental, social and
governance (ESG) matters
16-21, 50-73 and 88-102
Financial risk management and financial instruments
229-236
Future developments in the business
Post Balance Sheet events
Research and development activities
Shareholder information
Sustainability and corporate responsibility
Viability Statement
Charitable donations
02-103
252
10-67
268-270
10-67
103
270
Subsidiary undertakings (including overseas branches)
259-267
Information on the Board’s stakeholder engagement and activities
is set out in the s172 Statement, which can be found on pages 68
to 71.
There is no additional information requiring disclosure under Listing
Rule 9.8.4R.
188
Results and dividends
The Consolidated Income Statement can be found on page 205.
The loss for the year attributable to equity shareholders of the
company amounted to £32 million.
The Directors resolved to pay an interim dividend of 73.0 pence
per ordinary share (2020: 73.0 pence), which was paid to
shareholders on 14 September 2021.
The Directors recommend a final dividend for the year of 101.6
pence per share (2020: 101.6 pence) which, together with the
interim dividend, makes a total dividend for the year of 174.6 pence
per share (2020: 174.6 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 (AGM) of the company, will
be paid on 9 June 2022 to shareholders on the register at the close
of business on 29 April 2022.
Directors
Details of the company’s Directors who served during the financial
year ended 31 December 2021 can be found on pages 108 to 113.
The rules governing the appointment and retirement of Directors
are set out 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 2022 AGM all Directors will offer themselves for
election or re-election in compliance with the Code. Details of the
Directors standing for election or re-election can be found in the
2022 Notice of AGM. Information on the service agreements of
Executive Directors can be found in the Directors’ Remuneration
Report on pages 148 to 187. 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 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.reckitt.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
section 236 of CA 2006 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 2021 at the company’s expense.
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 2022, whichever
is the sooner.
Directors’ interests
A statement of Directors’ interests in the share capital of the
company is shown on page 187 of the Directors’ Remuneration
Report. Details of Executive Directors’ options to subscribe for
shares in the company are included on page 186 in the audited
part of the Directors’ Remuneration Report.
During the year, none of the Directors had a material interest in any
derivative or financial instrument relating to the company’s shares.
Details of the Directors’ remuneration are disclosed in the
Directors’ Remuneration Report on pages 148 to 187.
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 2021.
Share capital
As at 31 December 2021, the company’s issued share capital
consisted of 736,535,179 ordinary shares of 10 pence each of which
714,412,199 were with voting rights and 22,122,980 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 24 and 25 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)
• 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 2021 AGM, authority was granted to the Directors under
section 551 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 2022 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.
Under section 561 CA 2006, shareholders have a right of first
refusal in relation to certain issues of new shares. A special
resolution will also be proposed to renew the Directors’ power
to make non-pre-emptive issues for cash up to a nominal amount
representing less than 10% of the company’s issued share capital
as at the latest practicable date prior to the publication of the
Notice of AGM. The resolution would also permit Directors, within
the same aggregate limit, to sell for cash, shares that may be held
by the company in Treasury.
In accordance with the Pre-Emption Group’s Statement of
Principles, 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 2021 AGM for the
purposes of section 701 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 2021.
At the 2022 AGM, the Directors will seek to renew the authority
granted to them. Such authority, if approved, will be limited to a
maximum of 71,480,000 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.
Reckitt Annual Report and Accounts 2021
189
Financial StatementsGovernanceStrategic Report Report of the Directors (Continued)
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. The
shareholder agreement between the company and JAB Holdings
B.V. (JAB) at the time of the merger in 1999 entitled JAB to
nominate Board Directors. A holding in excess of 20% or 10% of the
company’s ordinary shares entitles JAB to nominate two Directors
or one Director respectively. JAB’s current holding is below this
amount and there is currently no nominated Director on the Board.
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, and if the employment of an Executive Director or other
employee is terminated by the company following a takeover
then there may be an entitlement to appropriate notice and/or
compensation as provided in applicable contracts or terms
of employment.
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 2021, the Group employed an average of 41,800 (2020:
43,500) employees worldwide, of whom 4,670 (2020: 4,328) 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, disability, sexual orientation
or any other protected characteristics.
Employment applications are considered on the basis of a
person’s aptitude and ability, and fair consideration is given to all
applications regardless of nationality, age, gender, religion, race,
ethnicity, disability, sexual orientation, or any other protected
characteristics. Where an employee has an existing disability or
becomes disabled during their employment, every practical effort
is made to assist the employee in continuing their employment and
arranging appropriate training, All employees, including those with
a disability, are treated in a fair and inclusive way throughout their
careers, whether that means accessing training, development
opportunities or when seeking career progression. Further details
of our Inclusion and Anti-Harassment policies can be found
at www.reckitt.com.
It is essential to the continued improvement in performance,
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 organisational performance
management process. The Group operates multi-dimensional
two-way internal communications programmes which include the
provision of a Group intranet and the publication of regular Group
newsletters. Opinions of employees are sought on a variety of
issues through mechanisms including global surveys, opinion polls,
team meetings and feedback forums. Further information on the
Group’s employee engagement activities is included on pages 46
to 49 and pages 55 to 56.
A continuing programme of training and development reinforces
the Group’s commitment to employee development. The Group
provides all employees with equal opportunities and the freedom
to succeed at work and recognises the importance of employee
health and well-being. Reckitt’s Leadership Behaviours create
an inclusive environment for employees to act with integrity,
responsibility and consistency in line with our renewed purpose,
fight and compass set out on pages 14 to 15.
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 making regular
savings. We currently have around 50% of eligible employees
participating. Further details on our all-employee share plans and
awards made under executive share plans can be found in Note 25
from page 245 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 section 366 and section 376 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 2022.
190
Application of the UK Corporate Governance Code 2018
We report against the requirements of 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 104 to 127.
Annual General Meeting (AGM)
The forthcoming AGM of Reckitt Benckiser Group plc will be held
on 20 May 2022 at 2.00pm at London Heathrow Marriott Hotel,
Bath Road, Hayes, Middlesex, UB3 5AN.
A separate Notice of Meeting, setting out the resolutions to
be proposed to shareholders, is available at www.reckitt.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
Catheryn O’Rourke
Company Secretary
Reckitt Benckiser Group plc
103-105 Bath Road
Slough, Berkshire SL1 3UH
Company registration number: 6270876
Legal Entity Identifier: 5493003JFSMOJG48V108
13 April 2022
Financial instruments and risk
The financial risk management objectives and policies of the
Group are set out in Note 15, from page 229 of the Financial
Statements. The Note sets out information on the company’s policy
for hedging each major type of forecasted transactions for which
hedge accounting is used, and our exposure to currency, price risk,
credit risk, liquidity risk and cash flow risk in relation to the use of
financial instruments.
Amendment to Articles of Association
The Articles of the company were adopted in 2012 and amended
in 2015 and 2021. 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 2022, 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 reasonable steps to ascertain any
relevant audit information and to ensure that the company’s
auditor is aware of that information.
Substantial shareholdings
As at 31 December 2021, pursuant to DTR 5 of the FCA’s Disclosure
Guidance and Transparency Rules and in accordance with section
13(C) of Schedule 7 of the Large and Medium-sized Companies
and Groups (Accounts and Reports) Regulations 2008, 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
Morgan Stanley Investment
Management Limited
Date of last TR-1
notification
Nature
of
interest
% of
voting
rights
16 January 20131
Indirect
5.00
20 May 2020
Direct
5.04
1 Under a section 793 CA 2006 request, Massachusetts Financial Services
Company confirmed on 8 January 2021 that its aggregate holding had
increased. The voting percentage was not disclosed
As at 13 April 2022, the company has not received any further
notifications under DTR 5 of the Disclosure Guidance and
Transparency Rules.
Reckitt Annual Report and Accounts 2021
191
Financial StatementsGovernanceStrategic Report STATEMENT OF DIRECTORS’
RESPONSIBILITIES
IN RESPECT OF THE ANNUAL REPORT AND THE FINANCIAL STATEMENTS
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 Accounting Standards in conformity
with the requirements of the Companies Act 2006 (CA 2006) 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’. In addition, the Group Financial
Statements are required under the UK Disclosure Guidance and
Transparency Rules to be prepared in accordance with
International Financial Reporting Standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union.
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 and reliable
• For the Group Financial Statements, state whether they have
been prepared in accordance with International Accounting
Standards in conformity with the requirements of the
Companies Act 2006, International Financial Reporting
Standards adopted pursuant to Regulation (EC) No 1606/2002
as it applies in the European Union and, due to a requirement
of the US SEC, state they have been prepared in accordance
with IFRS 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
• 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
CA 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.
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
• 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
On behalf of the Board
Catheryn O’Rourke
Company Secretary
Reckitt Benckiser Group plc
103-105 Bath Road
Slough, Berkshire SL1 3UH
13 April 2022
192
INDEPENDENT AUDITOR’S
REPORT
TO THE MEMBERS OF RECKITT BENCKISER GROUP PLC
1 Our opinion is unmodified
We have audited the Financial Statements of Reckitt Benckiser
Group plc (“the Company”) for the year ended 31 December 2021
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 Group
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:
•
•
•
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 2021 and of the Group’s loss for the year
then ended;
the Group Financial Statements have been properly prepared in
accordance with UK-adopted international accounting
standards;
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
•
the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Additional opinion in relation to IFRS as issued by the IASB:
As explained in Note 1 to the Group Financial Statements, the
Group, in addition to complying with its legal obligation to apply
UK-adopted international accounting standards, has also applied
IFRSs as issued by the International Accounting Standards Board
(“IASB”).
In our opinion the Group Financial Statements have been properly
prepared in accordance with IFRS as issued by the IASB.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities are described below. We believe that the audit
evidence we have obtained is a sufficient and appropriate basis
for our opinion. Our audit opinion and matters included in this
report are 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
four financial years ended 31 December 2021. The Group lead
engagement partner is required to rotate after five years. This
is Richard Broadbelt’s fourth year as lead engagement partner.
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.
Overview
Materiality:
Group Financial
Statements as
a whole
Coverage
£135 million (2020: £150 million)
5.2% (2020: 5.1%) of normalised Group profit/loss
before tax as defined in section 3
76% (2020: 79%) of Group Net Revenue 83%
(2020: 83%) of total profits and losses that made
up Group loss/profit before tax 84% (2020: 87%)
of Group total assets
Key audit matters
vs 2020
Recurring risks Revenue recognition in relation to trade
spend arrangements and associated
accruals
Recoverability of goodwill and indefinite
life intangible assets relating to the IFCN
Cash Generating Unit (CGU)
Provisions for uncertain tax positions
(UTPs)
Contingent liabilities arising from the
amendment to the South Korean
Humidifier Sanitiser (HS) law
Recoverability of the Parent Company’s
investment in Reckitt Benckiser Limited
New: Allocation of consideration
between the Biofreeze brand intangible
and goodwill
Event driven
Reckitt Annual Report and Accounts 2021
193
Financial StatementsGovernanceStrategic Report Independent Auditor’s Report (Continued)
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 include 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.
Revenue recognition in
relation to trade spend
arrangements and
associated accruals
Trade spend accruals: (£1,137
million; 2020: £1,275 million)
Refer to page 136 (Audit
Committee Report), Note 1 on
page 216 (accounting policy)
and Note 21 on page 240
(financial disclosures).
The risk: subjective estimate
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 and fraud.
The Group operates a variable compensation scheme with outturns directly linked to financial performance
against targets. Strong financial performance could create an incentive to defer revenues into the next
financial year by overstating trade spend accruals. Conversely, weaker financial performance may create a
bias to understate trade spend accruals. Whilst the risk of a material misstatement in an individual market is
remote, there is a risk that unacceptable judgements in multiple markets may, in aggregate, misstate the
Group Financial Statements.
The effect of these matters is that, as part of our risk assessment, we determined that trade spend accruals
carry a high degree of estimation uncertainty, with a potential range of reasonable outcomes greater than our
materiality for the Group Financial Statements as a whole.
Our procedures included:
Accounting policies: We critically assessed the appropriateness of the Group’s accounting policies relating
to trade spend.
Historical comparisons: We assessed the accuracy of the Group’s accruals by comparing, for a selection of
the more judgemental accruals, those recognised in the prior year to the actual trade spend incurred.
With the assistance of KPMG Forensic specialists, we assessed the results of the investigation performed by
management to assess evidence supporting the creation, utilisation and release of certain accruals within the
Hygiene GBU. Where we identified significant differences between the expected and final quantum of outflow,
we considered whether such differences were as a result of a change in estimate or error. We performed an
assessment of whether an overstatement of accruals identified through these procedures was material.
Tests of detail: We focused our testing on those trade spend accruals we considered to be more judgemental
or potentially subject to management bias and fraud. For a sample of these trade spend accruals, we:
•
•
reperformed the calculation to assess whether it was mathematically accurate;
identified the key assumptions in the calculation of each accrual selected, such as forecast sales volumes,
rebate structure and settlement mechanism;
• agreed those key assumptions to relevant documentation, such as invoices received after the balance
sheet date, customer agreements or third-party consumption data; and
• assessed whether the key assumptions were consistent with external data points and the Group’s historic
experience of comparable trade spend arrangements.
Incorporating unpredictability into our audit: A requirement of auditing standards is that we undertake
procedures which are deliberately unexpected and could not have reasonably been predicted by
management. We performed unpredictable procedures over certain trade spend accruals in seven out of
scope components in different geographic locations in the current year.
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 accruals and the resulting amount of trade spend deducted
in determining Net Revenue.
We performed the detailed tests above rather than seeking to rely on any of the Group’s controls because
the detailed testing described is inherently the most effective means of obtaining audit evidence in this area.
Our results:
We found the trade spend accruals recognised to be acceptable (2020 result: acceptable).
194
2 Key audit matters: our assessment of risks of material misstatement continued
Recoverability of goodwill
and indefinite life intangible
assets relating to the IFCN
CGU
IFCN goodwill and indefinite
life intangible assets (£5,668
million; 2020: £9,849 million)
Impairment charge (£nil
million; 2020: £985 million)
Refer to page 136 (Audit
Committee Report), Note 1 on
page 216 (accounting policy)
and Note 9 on pages 222 to
225 (financial disclosures).
The risk: forecast-based valuation
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 disposal of IFCN China in 2021, and the resulting impact on the composition of the CGU has reduced the
risk around the recoverability of goodwill and indefinite life intangible assets. Nonetheless, the model remains
highly sensitive to changes in key assumptions, both in relation to forecast financial performance, in particular,
Net Revenue growth and margin improvements, as well as external factors such as discount rates and
terminal growth rates.
The specific assumptions considered most critical are the impact of long term birth rate trends, future
category growth, the commercial success of new product launches including adult nutrition, the expansion of
specialty nutrition, the ability to pass on inflationary pressures through price rises, and the delivery of margin
improvements through productivity initiatives.
While the current year carrying amount of the IFCN CGU is supported by the value of the model, the
recoverable amount of the IFCN CGU is subject to a high degree of estimation uncertainty.
When conducting an impairment assessment, there is an inherent risk of fraud that the Group may use
assumptions that are overly optimistic and which could result in no impairment charge being recognised.
The effect of these matters is that, as part of our risk assessment, we determined that the value in use of the
IFCN CGU has a high degree of estimation uncertainty and there exists a reasonably possible set of changes
in key assumptions that would result in a change to the IFCN valuation in excess of our materiality for the
Group Financial Statements as a whole and possibly many times that amount. The Group Financial Statements
(note 9) disclose the sensitivity estimated by the Group.
Reckitt Annual Report and Accounts 2021
195
Financial StatementsGovernanceStrategic Report Independent Auditor’s Report (Continued)
2 Key audit matters: our assessment of risks of material misstatement continued
Our procedures included:
Sensitivity analysis: We considered the sensitivity of the recoverable amount of the IFCN CGU to reasonably
possible changes in key assumptions, 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 actual performance of IFCN since acquisition against previous
budgets and forecasts to assess the Group’s ability to forecast accurately and considered the impact on our
evaluation of forecast growth. We critically challenged the margin projections by reference to those achieved
historically, forecast volume trends, forecast and realised savings from the productivity programme and the
Group’s historic ability to pass on cost inflation through price rises.
We challenged the Group on the forecast commercial success of new product launches, particularly in
relation to adult nutrition, and its ability to deliver forecast Net Revenue growth by assessing the Group’s past
experience in bringing new or improved products to market.
Benchmarking assumptions: We critically evaluated differences between Net Revenue growth assumptions
within the model and external market data relating to projected growth for the product category. We
critically challenged the Group on its assumptions relating to the expectations of long term birth rates and
inflationary effects including through comparison to external market data sources.
We benchmarked margin assumptions against industry competitors, external market volume growth
forecasts and our assessment of the Group’s ability to achieve productivity savings. We also benchmarked
the terminal growth rate assumptions against long-term estimates of inflation.
Personnel interviews: We compared judgements made centrally to direct discussions with Nutrition GBU
leadership, country General Managers and Finance Directors. We considered and challenged the Group’s
assumptions with reference to any alternative views provided.
We corroborated the consistency of key assumptions used within the model to papers presented to, and
minutes taken at, meetings of the Board.
Our valuation expertise: We independently derived a reasonable range of appropriate discount rates, with
the assistance of our own valuation specialists, compared these to those calculated by the Group and
challenged differences in assumptions between the calculations. We benchmarked the recoverable amount
of the IFCN CGU using implied earnings multiples to comparative companies, historic transactions within the
industry, including the Group’s disposal of IFCN China in 2021, and stockbrokers’ reports with the assistance of
our own valuation specialists.
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 the
transparency of the sensitivity disclosures, including that they appropriately reflect uncertainty inherent in the
assessment of recoverable amount, as well as the impact of reasonable changes in key assumptions.
We performed the tests above rather than seeking to rely on any of the Group’s controls because the nature
of the balance is such that we would expect to obtain audit evidence primarily through the detailed
procedures described.
Our results:
We found the Group’s conclusion that there is no impairment of goodwill and indefinite life intangible assets
relating to the IFCN CGU to be acceptable (2020 result: we found the goodwill and indefinite life intangible
assets, and the related impairment charge, to be acceptable).
196
2 Key audit matters: our assessment of risks of material misstatement continued
Provisions for uncertain tax
positions (UTPs)
(£770 million; 2020: £950
million)
The risk: subjective estimate
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.
Refer to page 136 (Audit
Committee Report), Note 1 on
page 216 (accounting policy)
and Note 22 on page 240
(financial disclosures).
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;
•
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 where the Group may be challenged by local tax authorities on its interpretation of
tax legislation. Auditor judgement is required to assess whether the Directors’ overall estimate, taking into
account the Group’s internally derived key assumptions such as the risk rating applied to a certain jurisdiction
and the consequential percentage applied to calculate the provision, falls within an acceptable range.
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 Group Financial Statements as a whole.
Our procedures included:
Our tax expertise: We used our own international and local tax specialists to assist us to:
•
Inspect and assess the Group’s 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 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.
We performed the tests above rather than seeking to rely on any of the Group’s controls because the nature
of the balance is such that we would expect to obtain audit evidence primarily through the detailed
procedures described above.
Our results:
We found the level of uncertain tax provisioning to be acceptable (2020 result: acceptable).
Reckitt Annual Report and Accounts 2021
197
Financial StatementsGovernanceStrategic Report Independent Auditor’s Report (Continued)
2 Key audit matters: our assessment of risks of material misstatement continued
Contingent liabilities arising
from the amendment to the
South Korean Humidifier
Sanitiser (HS) law
Refer to page 136 (Audit
Committee Report), Note 1 on
page 216 (accounting policy)
and Note 20 on page 239
(financial disclosures).
Allocation of consideration
between the Biofreeze
brand intangible and
goodwill
Biofreeze brand intangible
asset £564 million; goodwill
£271 million.
Refer to page 136 (Audit
Committee Report), Note 1 on
page 211 (accounting policy)
and Note 29 on pages 250 to
252 (financial disclosures).
The risk: dispute outcome
The Group is involved in an ongoing litigation relating to the HS issue in South Korea. The HS law amendment
enacted on 25 September 2020 significantly altered the legal framework under which HS claims were
previously made and settled. As a result, judgement is needed to assess whether the recognition criteria for a
provision have been met for additional litigation under the HS law amendment.
The Group must assess the likelihood and extent of any future economic outflow arising from the HS law
amendment. The amounts involved are potentially significant, and the application of accounting standards to
determine the amount, if any, to be provided for, is inherently subjective.
Our procedures included:
Enquiry of lawyers: We enquired of the Group’s internal and external counsel to obtain an understanding of
this year’s developments, in particular the progress of litigations and the establishment of a mediation panel
between HS companies and claimant groups.
We made inquiries of the Group’s external legal counsel to understand developments in the matter. We
requested and received formal correspondence directly from the Group’s external counsel that evaluated the
current status of legal proceedings, the probability of economic outflow in relation to the law amendment,
and the ability to reliably estimate such economic outflow.
We corroborated the consistency of the judgement made by management to inquiries with both internal and
external legal counsel.
Assessing transparency: We assessed the adequacy of the Group’s disclosures of contingent liabilities
related to the HS law amendment in Note 20 of the Group Financial Statements, particularly the uncertainties
relating to the amount and timing of outflow.
We performed the tests above rather than seeking to rely on any of the Group’s controls because the nature
of the balance is such that we would expect to obtain audit evidence primarily through the detailed
procedures described.
Our results:
We found the Group’s treatment of the impact of the HS law amendment as contingent liabilities to be
acceptable (2020: acceptable).
The risk: forecast based valuation
On 12 July 2021, the Group purchased the Biofreeze and TheraPearl brands from Performance Health for
cash consideration of £766 million. The acquisition was accounted for as a business combination with net
identifiable acquired assets of £495 million – substantially comprising of the Biofreeze brand intangible of
£564 million – and goodwill of £271 million being recognised.
The Biofreeze brand intangible is recognised at fair value at the date of acquisition. To estimate fair value, the
Directors use a discounted forecast cash flow model (‘the model’), which requires the application of complex
valuation techniques and is sensitive to changes in key assumptions. Any changes in identifiable asset
valuation would impact the value of goodwill recognised.
Key assumptions in the model include forecast financial performance, in particular net revenue and margin
growth; as well as external factors such as forecast growth of the topical analgesic category as a whole and
discount rates.
As part of our risk assessment, we therefore determined that the allocation of consideration between the
Biofreeze brand intangible and goodwill is dependent upon a number of key assumptions. There exists a
reasonably possible set of changes in such assumptions that could result in a material change to value of
consideration allocated to the Biofreeze brand intangible.
198
2 Key audit matters: our assessment of risks of material misstatement continued
Our procedures included:
Sensitivity analysis: We considered the sensitivity of the Biofreeze brand intangible valuation to reasonably
possible changes in assumptions and focused our attention to those assumptions which we considered the
most critical to the valuation.
Benchmarking assumptions: We evaluated the Net Revenue growth assumptions in the model with
reference to historic Biofreeze performance and external market data relating to projected growth for the
product category as a whole.
Personnel interviews: We compared judgements made centrally to direct discussions with the relevant
Finance Directors and Sales Managers. We considered and challenged the Group’s assumptions with
reference to any alternative views provided in-market.
Valuation expertise: With the assistance of our own valuation specialist we evaluated the basis used by the
Group to value the acquired intangible assets. We challenged the appropriateness of the key assumptions
underlying the Biofreeze brand intangible valuation, including the discount rate used.
We performed the tests above rather than seeking to rely on any of the Group’s controls because the nature
of the balances is such that we would expect to obtain audit evidence primarily through the detailed
procedures described.
Our results:
We found the Group’s valuation of the Biofreeze brand intangible and the consequential goodwill balance at
the acquisition date to be acceptable (2020 result: n/a).
Recoverability of the Parent
Company’s investment in
the subsidiary, Reckitt
Benckiser Limited
(£15,001 million, 2020: £14,975
million)
The risk: low risk, high value
The carrying amount of the Parent Company’s investment in its subsidiary, Reckitt Benckiser Limited,
represents 99.5% (2020: 99.6%) 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.
Refer to page 257
(accounting policy) and page
258 (financial disclosures).
Our procedures included:
Comparing valuations: We performed a reconciliation of the carrying amount of the investment to the
market capitalisation of the Group as Reckitt Benckiser Limited, either directly or indirectly, owns all other
subsidiaries of the Group.
We performed the tests above rather than seeking to rely on any of the company’s controls because the
nature of the balance is such that we would expect to obtain audit evidence primarily through the detailed
procedures described above.
Our results:
We found the Company’s conclusion that there is no impairment of its investment in the subsidiary to be
acceptable (2020 result: acceptable).
Reckitt Annual Report and Accounts 2021
199
Financial StatementsGovernanceStrategic Report Group loss before tax normalised
to exclude adjusting items
£2,593 million (2020: £2,934 million)
Group loss before tax normalised
to exclude adjusting items
Group materiality
Group Materiality
£135 million
(2020: £150 million)
£135 million
Whole financial
statements materiality
(2020: £150 million)
£100 million
Range of materiality at
48 components
(£8 million to £100 million)
(2020: 54 components
(£8 million to £100 million))
£6.0 million
Misstatements reported
to the Audit Committee
(2020: £7 million)
Group profits and losses
that made up Group loss
before tax
17%
17%
1%
83%
(2020: 83%)
82%
76%
83%
Group Net Revenue
24%
21%
76%
(2020: 79%)
79%
Group total assets
16%
13%
1%
84%
(2020: 87%)
86%
84%
Key:
Full scope for Group audit
purposes 2021
Audit of account balances 2021
Full scope for Group audit
purposes 2020
Specified risk-focused
procedures 2020
Residual components 2021
Residual components 2020
Independent Auditor’s Report (Continued)
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 £135 million, determined with reference to a benchmark of
normalised Group loss before tax, of which it represents 5.2%. In
2020 materiality for the Group Financial Statements as whole was
set at £150 million with reference to a benchmark of normalised
Group profit before tax (PBT), of which it represented 5.1%.
We normalised PBT (2020: PBT) by adding back adjustments that
do not represent the normal, continuing operations of the Group.
The items we adjusted for were acquisition advisor costs,
inventory fair value adjustments, losses on disposal of brands,
reclassified foreign exchange translation on liquidation of
subsidiaries and other individually material items of income or
expense as defined on pages 85 to 86 totalling £2,854 million
(2020: £1,061 million).
Materiality for the Parent Company Financial Statements as a whole
was set at £65 million (2020: £75 million) determined with
reference to a benchmark of Parent Company total assets of
£15,071 million (2020: £15,034 million) of which it represents 0.4%
(2020: 0.5%).
In line with our audit methodology, our procedures on individual
account balances and disclosures were performed to a lower
threshold, performance materiality, so as to reduce to an
acceptable level the risk that individually immaterial misstatements
in individual account balances add up to a material amount across
the Financial Statements as a whole. Performance materiality was
set at 75% (2020: 75%) of materiality for the financial statements as
a whole, which equates to £100 million (2020: £110 million) for the
Group and £49 million (2020: £55 million) for the parent Company.
We applied this percentage in our determination of performance
materiality because we did not identify any factors indicating an
elevated level of risk.
We agreed to report to the Audit Committee any corrected or
uncorrected identified misstatements exceeding £6.0 million
(2020: £7.0 million) in addition to other identified misstatements
that warranted reporting on qualitative grounds.
Scope
The Group operates in more than 60 countries across six
continents with the largest market being the United States of
America. The Group is organised into three Global Business Units
being Hygiene, Health and Nutrition.
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 Net
Revenue, total profits and losses that made up Group loss/profit
before tax and Group total assets. Of the Group’s 422 (2020: 429)
reporting components, as instructed by us, component teams in 20
countries (2020: 21 countries) subjected 47 (2020: 54) to full scope
audits for Group purposes and 1 (2020: 1) to an audit of account
balance over inventory, cost of sales, property, plant and
equipment, trade payables and cash. The component for which we
performed work other than an audit for Group reporting purposes
was not individually significant but was included in the scope of our
Group reporting work in order to provide further coverage over the
Group’s results. The components within the scope of our work
accounted for the percentages illustrated opposite.
200
3 Our application of materiality and an overview of the scope
of our audit continued
The Group team performed procedures on the items excluded
from normalised Group loss before tax (2020: Group profit
before tax).
The remaining 24% (2020: 21%) of Group Net Revenue, 17% (2020:
17%) of total profits and losses that made up Group loss/profit
before tax and 16% (2020: 13%) of Group total assets is represented
by a number of other reporting components, none of which
individually represented more than 1% (2020: 3%) of any of Group
Net Revenue, total profits and losses that made up Group profit
before tax or Group total assets. For these residual 374 (2020: 375)
components, we performed analysis at an aggregated Group level
to re-examine our assessment that no significant risks of material
misstatement exist in those components.
The scope of the audit work performed was predominately
substantive as we placed limited reliance upon the Group’s internal
control over financial reporting.
Team Structure
The Group audit team is required to instruct the component teams
about their responsibilities in relation to the consolidated Group
audit and to understand the approach taken by component
auditors to meet these responsibilities. The Group audit team is
also required to understand the conclusions reached by
component auditors and to review and challenge the work they
have performed to reach these conclusions.
Due to the continuation of travel restrictions imposed as a result of
COVID-19, the Group audit team was again unable to physically visit
any overseas components in 2021 (2020: no components). Instead,
the virtual communication and oversight strategy implemented in
2020 remained in place between the Group audit team and
component auditors. This included:
• Virtual global planning conferences led by the Group audit
team to discuss key audit risks and obtain input from
component auditors;
•
Instructions issued by the Group audit team to component
auditors setting out the significant areas to be covered,
including the relevant key audit matters identified above and
the information to be reported back to the Group audit team;
• Approval by the Group audit team of the component materiality
for all components, which ranged from £8 million to £100 million
(2020: £8 million to £100 million), having regard to the mix of
size and risk profile of the Group across the components,
including considering the benchmark for each component;
• Attendance by senior members of the Group audit team and
relevant component auditors at management’s balance sheet
reviews for all in-scope component locations and by the Group
audit team at 1 out-of-scope component locations, the latter to
incorporate an element of unpredictability into our audit and to
reconfirm our risk;
• Risk assessment and challenge sessions with each component
audit team in the planning and final phases of the audit led by a
senior member of the Group audit team;
• Attendance by members of the Group audit team and relevant
component auditors at year end clearance meetings where the
findings reported to the Group audit team were discussed in
more detail and any further work required by the Group audit
team was then performed by the component auditors; and
• Review of key working papers within component audit files
(using remote technology capabilities) to understand and
challenge the audit approach and audit findings of each
component audit.
The work on 46 of the 48 components (2020: 52 of the 54
components) was performed by component auditors and the rest,
including the audit of the Parent Company, was performed by the
Group audit team.
4 The impact of climate change on our audit
In planning our audit, we have considered the potential impact of
risks arising from climate change on the Group’s business and its
financial statements. This included considering the Group’s
exposure to supply chain risks, physical risks, regulatory risks, market
risks, and consumer preference risks. We considered that the key
estimate or judgement contained within the financial statements
for which climate change could have the greatest impact was the
recoverability of goodwill and indefinite life intangible assets
relating to the IFCN CGU and considered the adequacy of the
Group’s sensitivity disclosures in relation to the impact of climate
change on the impairment test. We concluded that, given the likely
impact of the Group’s current climate plans, climate-related risks
were not a key assumption in the value in use calculation.
While the impact of climate change on the Group is inherently
uncertain, our risk assessment was therefore that the impact of
climate change does not currently have a material impact on the
financial statements. Climate change therefore only had a limited
impact on the overall audit strategy, the allocation of resources in
the audit and directing the efforts of the engagement team.
We have read the Group’s TCFD Summary on pages 66 to 67 of the
Strategic Report and considered the consistency of this disclosure
with the financial statements and our audit knowledge.
5 Going Concern
The Directors have prepared the Financial Statements on the going
concern basis as they do not intend to liquidate the Group or the
Parent Company or to cease their operations, and as they have
concluded that the Group’s and the Parent Company’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”).
We used our knowledge of the Group, its industry, and the general
economic environment to identify the inherent risks to its business
model and analysed how those risks might affect the Group’s and
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 Parent
Company’s available financial resources and metrics relevant to
debt covenants over this period were:
•
In relation to the COVID-19 pandemic, disruption at a number of
the Group’s key production facilities, the viability of key
suppliers and customers, and the impact of consumer demand
for the Group’s brands;
• A significant product safety issue leading to reputational
damage with customers, consumers or regulators; and
• The impact of a significant business continuity issue, outside of
those risks presented by the COVID-19 pandemic, affecting the
Group’s manufacturing facilities or those of its suppliers.
Reckitt Annual Report and Accounts 2021
201
Financial StatementsGovernanceStrategic Report Independent Auditor’s Report (Continued)
5 Going Concern continued
We considered whether these risks could plausibly affect the
liquidity or covenant compliance in the going concern period by
comparing severe, but plausible downside scenarios that could
arise from these risks individually and collectively against the level
of available financial resources and covenants indicated by the
Group’s financial forecasts.
Our procedures also included an assessment of whether the going
concern disclosure in note 1 to the Financial Statements gives a
complete and accurate description of the Directors’ assessment of
going concern.
Our conclusions based on this work:
• we consider that the Directors’ use of the going concern basis
of accounting in the preparation of the Financial Statements is
appropriate;
• we have not identified, and concur with the Directors’
assessment that there is not, a material uncertainty related to
events or conditions that, individually or collectively, may cast
significant doubt on the Group’s or Parent Company’s ability to
continue as a going concern for the going concern period;
• we have nothing 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 Parent Company’s use of that basis for the going
concern period, and we found the going concern disclosure in
note 1 to be acceptable; and
•
the related statement under the Listing Rules set out on page
192 is materially consistent with the Financial Statements and
our audit knowledge.
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 above conclusions are not a guarantee that the Group or
the Parent Company will continue in operation.
6 Fraud and breaches of laws and regulations – ability to detect
Identifying and responding to risks of material misstatement
due to fraud
To identify risks of material misstatement due to fraud (“fraud
risks”) we assessed events or conditions that could indicate an
incentive or pressure to commit fraud or provide an opportunity to
commit fraud.
Our risk assessment procedures included:
• Enquiry of Directors, operational managers, the General
Counsel, the Chief Ethics and Compliance Officer and members
of the Internal Audit function as well as inspection of minutes of
meetings of the Board, Audit Committee, Executive Committee
and CRSEC Committee;
•
Inspection of the Group’s policies and procedures to prevent,
detect and respond to the risks of fraud, Internal Audit reports
issued during the year and reports to the Group’s
whistleblowing hotline and the responses to those reports,
including those concerning investigations;
• Consideration of the Group’s results against performance
targets and the Group’s remuneration policies;
• Consultation with our own forensic specialists to assist us in
identifying fraud risks based on their experience of comparable
businesses, similar sectors; as well as of the geographies in
202
which the Group operates. The forensic specialists participated
in the initial fraud risk assessment discussions and were
consulted throughout the audit when further guidance was
deemed necessary.
We communicated identified fraud risks throughout the audit team
and remained alert to any indications of fraud throughout the audit.
This included communication from the Group to component audit
teams of relevant fraud risks identified at the Group level and
request to all component audit teams to report to the Group audit
team any instances of fraud that could give rise to a material
misstatement at Group.
As required by auditing standards, and after considering the
impact of the Group’s results against performance targets, we
perform procedures to address the risk of management override
of controls and the risk of fraudulent revenue recognition. We
assessed that there is an inherent risk that Group and component
management may be in a position to make inappropriate
accounting entries, and risk of bias in accounting estimates and
judgements. We determined that these risks would most likely
manifest themselves in two key areas being:
• Trade spend accruals may be manipulated to alter the timing of
recognition of revenue and profit; and
• Management bias in the recoverability of goodwill and
indefinite life intangible assets relating to IFCN arising from
external pressure to demonstrate improved business
performance since the disposal of IFCN China in 2021.
Further detail in respect of both matters is set out in the key audit
matter disclosures in section 2 of this report.
We performed procedures including:
• For all components within scope, identifying journal entries to
test based on risk criteria and comparing the identified entries
to supporting documentation. These included unusual journal
entries associated with trade spend.
We discussed with the audit committee matters related to actual
or suspected fraud, which included the results of an investigation
commissioned by management to assess evidence supporting
the creation, utilisation and release of certain operational
expenditure and trade investment accruals within the Hygiene
GBU (page 137), and considered any implications for our audit.
Identifying and responding to risks of material misstatement
related to compliance with laws and regulations
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, through
inquiries with the Directors and other management (as required
by auditing standards), and from inspection of the Group’s
regulatory and legal correspondence, relevant discussion with the
Group’s external legal counsel and inspection of 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
to all component audit teams of relevant laws and regulations
identified at the Group level, and a request for component auditors
to report to the Group audit team any instances of non-compliance
with laws and regulations that could give rise to a material
misstatement at the Group level.
6 Fraud and breaches of laws and regulations – ability to detect
continued
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
impact the Financial Statements including financial reporting
legislation (including related companies legislation), distributable
profits legislation, and taxation legislation (direct and indirect). We
assessed the extent of compliance with these laws and
regulations as part of our procedures on the related Financial
Statement items.
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 permission to operate in countries where the
non-adherence to laws could prevent trading in such countries.
We identified the following areas as those most likely to have such
an effect:
In addition, as with any audit, there remained a higher risk of
non-detection of fraud, as these may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of
internal controls. Our audit procedures are designed to detect
material misstatement. We are not responsible for preventing
non-compliance or fraud and cannot be expected to detect
non-compliance with all laws and regulations.
7 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.
• Employee health and safety, reflecting the nature of the Group’s
production and distribution process;
Based solely on that work we have not identified material
misstatements in the other information.
• Anti-bribery and corruption, reflecting that the Group operates
in a number of countries where there is an opportunity to
engage in bribery given more limited regulation;
•
Interaction with healthcare professionals, reflecting the nature
of the Group’s products in the Health and Nutrition Global
Business Units;
• Global competition laws, reflecting the nature of the Group’s
business and certain market share positions;
• Consumer product law such as product safety, quality
standards and product claims, reflecting the nature of the
Group’s diverse product base;
• Data privacy laws, reflecting the Group’s growing amounts of
personal data held; and
•
Intellectual property legislation, reflection the potential of 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. Therefore, if a breach of operational
regulations is not disclosed to us or evident from relevant
correspondence, an audit will not detect that breach.
Further detail in respect of the effect of ongoing litigation relating
to the HS issue in South Korea is set out in the key audit matter
disclosures in section 2 of this report.
Context of the ability of the audit to detect fraud or breaches
of law or regulation
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 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.
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
We are required to perform procedures to identify whether there
is a material inconsistency between the Directors’ disclosures in
respect of emerging and principal risks and the viability statement,
and the financial statements and our audit knowledge.
Based on those procedures, we have nothing material to add or
draw attention to in relation to:
•
•
•
the Directors’ confirmation within the Viability Statement (page
103) 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 principal and emerging risk disclosures describing these
risks and how emerging risks are identified, 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.
Reckitt Annual Report and Accounts 2021
203
Financial StatementsGovernanceStrategic Report Independent Auditor’s Report (Continued)
7 We have nothing to report on the other information in the
Annual Report continued
We are also required to review the Viability Statement, set out on
page 103 under the Listing Rules. Based on the above
procedures, we have concluded that the above disclosures are
materially consistent with the Financial Statements and our audit
knowledge.
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 perform procedures to identify whether there
is a material inconsistency between the Directors’ corporate
governance disclosures and the Financial Statements and our
audit knowledge.
Based on those procedures, we have concluded that each of the
following is materially consistent with the Financial Statements
and our audit knowledge:
•
•
•
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;
the section of the Annual Report describing the work of the
Audit Committee, including the significant issues that the
Audit Committee considered in relation to the Financial
Statements, and how these issues were addressed; and
the section of the Annual Report that describes the review of
the effectiveness of the Group’s risk management and
internal control systems.
We are also required to review the part of the Corporate
Governance Statement relating to the Group’s compliance with
the provisions of the UK Corporate Governance Code specified
by the Listing Rules for our review.
We have nothing to report in this respect.
8 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.
204
9 Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 192, 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 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 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.
10 The purpose of our audit work and to whom we owe our
responsibilities
This report is made solely to the 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 Company. Our audit work
has been undertaken so that we might state to the 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 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 Company and the Company’s members, as a body, for our
audit work, for this report, or for the opinions we have formed.
Richard Broadbelt (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London
E14 5GL
13 April 2022
GROUP INCOME STATEMENT
For the year ended 31 December
CONTINUING OPERATIONS
Net Revenue
Cost of sales
Gross profit
Loss on disposal of intangible assets and related businesses
Impairment of goodwill and other intangible assets
Other net operating expenses
Total net operating expenses
Operating (loss)/profit
Foreign exchange net gains on liquidation of subsidiaries
Other net finance expense
Net finance income/(expense)
Share of loss of equity-accounted investees, net of tax
(Loss)/profit before income tax
Income tax credit/(charge)
Net (loss)/income from continuing operations
Net income 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)
Note
2021
£m
2020
£m
2
13,234
(5,558)
7,676
13,993
(5,558)
8,435
29
(3,518)
–
9
3
2
6
6
6
7
30
8
8
8
8
8
8
–
(4,962)
(8,480)
(804)
766
(219)
547
(3)
(260)
208
(52)
31
(21)
11
(32)
(21)
(8.8)
4.3
(4.5)
(8.8)
4.3
(4.5)
(985)
(5,290)
(6,275)
2,160
–
(286)
(286)
(1)
1,873
(720)
1,153
50
1,203
16
1,187
1,203
160.0
7.0
167.0
159.3
7.0
166.3
Reckitt Annual Report and Accounts 2021
205
Financial StatementsGovernanceStrategic Report GROUP STATEMENT OF
COMPREHENSIVE INCOME
For the year ended 31 December
Net (loss)/income
Other comprehensive expense
Items that have or may be reclassified to the Income Statement in subsequent years
Net exchange losses on foreign currency translation, net of tax
Reclassification of foreign currency translation reserves on disposal or liquidation of foreign operations,
net of tax
Gains/(losses) on net investment hedges, net of tax
Gains/(losses) on cash flow hedges, net of tax
Items that will not be reclassified to the Income Statement in subsequent years
Remeasurements of defined benefit pension plans, net of tax
Revaluation of equity instruments – FVOCI
Other comprehensive expense, 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
Note
2021
£m
(21)
2020
£m
1,203
7
26
7
7
7
7
(374)
(207)
(550)
84
30
–
(75)
(17)
(810)
(299)
133
(1)
132
(678)
(699)
11
(710)
(699)
(741)
31
(710)
(60)
19
(41)
(340)
863
16
847
863
797
50
847
206
GROUP BALANCE SHEET
As at 31 December
ASSETS
Non-current assets
Goodwill and other intangible assets
Property, plant and equipment
Equity instruments
Deferred tax assets
Retirement benefit surplus
Other non-current receivables
Total non-current assets
Current assets
Inventories
Trade and other receivables
Derivative financial instruments
Current tax recoverable
Cash and cash equivalents
Total current assets
Assets 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
Total current liabilities
Non-current liabilities
Long-term borrowings
Deferred tax liabilities
Retirement benefit obligations
Provisions for liabilities and charges
Non-current tax liabilities
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Capital and reserves
Share capital
Share premium
Merger reserve
Other reserves
Retained earnings
Attributable to owners of the parent company
Attributable to non-controlling interests
Total equity
Note
9
10
11, 15
12
23
14
13
14
15
22
16
17
18
21
15
22
17
12
23
18
22
21
24
26
2021
£m
2020
£m
18,868
2,178
194
197
355
149
21,941
1,459
1,926
61
155
1,261
4,862
143
26,946
(2,485)
(191)
(5,267)
(52)
(93)
(8,088)
(7,078)
(2,806)
(318)
(44)
(826)
(333)
(11,405)
(19,493)
7,453
74
253
(14,229)
(1,189)
22,490
7,399
54
7,453
22,979
2,233
136
258
226
146
25,978
1,592
1,921
30
125
1,646
5,314
–
31,292
(763)
(243)
(5,742)
(118)
(72)
(6,938)
(9,794)
(3,562)
(372)
(49)
(1,021)
(397)
(15,195)
(22,133)
9,159
74
252
(14,229)
(379)
23,397
9,115
44
9,159
The Financial Statements on pages 205 to 252 were approved by the Board of Directors and signed on its behalf on 13 April 2022 by:
Christopher Sinclair
Director
Reckitt Benckiser Group plc
Laxman Narasimhan
Director
Reckitt Benckiser Group plc
Reckitt Annual Report and Accounts 2021
207
Financial StatementsGovernanceStrategic Report GROUP STATEMENT OF
CHANGES IN EQUITY
Share
capital
£m
Share
premium
£m
Notes
Merger
reserves1
Other
reserves2
£m
Balance at 1 January 2020
74
245
(14,229)
Comprehensive income
Net income
Other comprehensive
(expense)/income
Total comprehensive (expense)/
income
Transactions with owners
Treasury shares reissued
Share-based payments
Purchase of ordinary shares by
employee share ownership trust
Tax on share awards
Cash dividends
Total transactions with owners
24
25
7
28
–
–
–
–
–
–
–
–
–
–
–
–
7
–
–
–
–
7
–
–
–
–
–
–
–
–
–
Comprehensive income
Net (loss)/income
Other comprehensive
(expense)/income
Total comprehensive (expense)/
income
Transactions with owners
Treasury shares reissued
24
Purchase of ordinary shares by
employee share ownership trust
Issuance of shares to non-
controlling interest
Share-based payments
Cash dividends
Transactions with non-
controlling interests
Disposal of non-controlling
interest in IFCN China
Total transactions with owners
25
28
27
29
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1
–
–
–
–
–
–
1
–
–
–
–
–
–
–
–
–
–
–
Total
attributable
to owners
of the
parent
company
£m
Retained
earnings
£m
Non-
controlling
interests
£m
23,353
9,363
44
Total
equity
£m
9,407
£m
(80)
–
1,187
1,187
16
1,203
(299)
(41)
(340)
(299)
1,146
847
–
–
–
–
–
–
124
15
(4)
4
131
15
(4)
4
(1,241)
(1,241)
(1,102)
(1,095)
–
(32)
(32)
(810)
(810)
–
–
–
–
–
–
–
–
132
100
79
(5)
–
30
(678)
(710)
80
(5)
–
30
135
–
135
–
(1,007)
(1,006)
–
16
–
–
–
–
(16)
(16)
44
11
–
11
–
–
7
–
(340)
863
131
15
(4)
4
(1,257)
(1,111)
9,159
(21)
(678)
(699)
80
(5)
7
30
–
9
(1)
54
135
9
(1,007)
7,453
(1,246)
(1,246)
(17)
(1,263)
Balance at 31 December 2020
74
252
(14,229)
(379)
23,397
9,115
Balance at 31 December 2021
74
253
(14,229)
(1,189)
22,490
7,399
1. 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
2. Refer to Note 26 for an explanation of other reserves
208
GROUP CASH FLOW
STATEMENT
For the year ended 31 December
CASH FLOWS FROM OPERATING ACTIVITIES
Operating (loss)/profit from continuing operations
Losses on sale of property, plant and equipment and intangible assets
Depreciation, amortisation and impairment
Share-based payments
Increase in inventories
(Increase)/decrease in trade and other receivables
(Decrease)/increase in payables and provisions
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
Proceeds from sale of intangible assets and related businesses, net of cash disposed
Acquisition of businesses
Purchase of equity instruments and convertible notes
Net cash generated from / (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Treasury shares reissued
Purchase of ordinary shares by employee share ownership trust
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 (decrease) / increase 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
Note
29
24
17
17
28
16
17
2021
£m
(804)
3,442
481
30
(57)
(130)
(126)
2,836
(251)
29
(915)
(2)
2020
£m
2,160
3
1,457
15
(317)
94
1,145
4,557
(323)
56
(762)
(10)
1,697
3,518
(373)
(77)
9
1,622
(915)
(27)
239
80
(5)
38
(1,044)
(1,246)
(17)
(92)
(394)
(92)
10
–
–
(36)
(512)
131
(4)
2,903
(4,583)
(1,241)
(16)
(47)
(2,286)
(2,857)
(350)
1,644
(35)
1,259
149
1,547
(52)
1,644
1,261
1,646
(2)
(2)
1,259
1,644
Reckitt Annual Report and Accounts 2021
209
Financial StatementsGovernanceStrategic Report NOTES TO THE
FINANCIAL STATEMENTS
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 the recognition, measurement and presentation requirements
of UK-adopted International Accounting Standards and in
accordance 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 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 amended standards and interpretations were
adopted by the Group during the year ending 31 December 2021.
These amended standards and interpretations have not had a
significant impact on the Group Financial Statements.
•
Interest Rate Benchmark Reform – Phase 2 (Amendments to
IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
A number of new standards are effective for annual periods
beginning on or after 1 January 2022 and earlier application
is permitted; however, the Group has not early adopted the
new or amended standards in preparing these consolidated
Financial Statements.
• Onerous Contracts – Cost of Fulfilling a Contract (Amendments
to IAS 37).
• Property, Plant and Equipment: Proceeds before Intended Use
(Amendments to IAS 16).
• Classification of Liabilities as Current or Non-current
(Amendments to IAS 1).
• Annual Improvements to IFRS Standards 2018–2020
• Reference to the Conceptual Framework (Amendments to IFRS 3)
• Deferred Tax related to Assets and Liabilities arising from
a Single Transaction (Amendments to IAS 12)
210
• Disclosure of Accounting Policies (Amendments to IAS 1 and
IFRS Practice Statement 2)
• Definition of Accounting Estimates (Amendments to IAS 8)
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. When reaching
this conclusion, the Directors took into account the Group’s
overall financial position, exposure to principal risks and future
business forecasts. At 31 December 2021, the Group had cash
and cash equivalents of £1.3 billion. The Group also had access
to committed borrowing facilities of £4.5 billion, which were
undrawn at year-end and are not subject to renewal until 2024
onwards. Further detail is contained within the Viability Statement
on page 103.
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. The accounting policies of subsidiaries have been changed
where necessary to ensure consistency with accounting 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 of foreign currency denominated monetary assets and
liabilities are recognised in the Income Statement, except where
hedge accounting is applied.
1 Accounting Policies continued
The Financial Statements of subsidiary undertakings with a
non-Sterling functional currency are translated into Sterling on the
following basis:
• Assets and liabilities, at the rate of exchange ruling at the
year-end date.
•
Income Statement items, at the average rate of exchange for
the year.
Exchange differences arising from the translation of the net
investment in subsidiary undertakings with a non-Sterling
functional currency, and of borrowings and other currency
instruments designated as hedges of such investments, are
recorded in equity on consolidation.
Business combinations
The acquisition method is used to account for the acquisition
of subsidiaries and businesses. Identifiable net assets acquired
(including intangible assets) 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 at the fair value of the
assets given, equity instruments issued (if any), and liabilities
assumed or incurred at the date of acquisition.
Acquisition-related costs are expensed as incurred.
The results of the subsidiaries and businesses acquired are included
in the consolidated Financial Statements from the acquisition date.
Assets held for sale and disposal groups
Non-current assets, or disposal groups comprising assets and
liabilities, are classified as held-for sale and presented separately in
the balance sheet when the following criteria are met: the Group is
committed to selling the asset or disposal group, it is available for
immediate sale in its current condition, an active plan of sale has
commenced and approved in line with Group policy, and in the
judgement of Group management it is highly probable that the
sale will be completed within 12 months.
Immediately before the initial classification of the assets and
disposal groups as held for sale, the carrying amounts of the assets
(or all the assets and liabilities in the disposal groups) are measured
in accordance with the applicable accounting standards. Goodwill
(including cost and accumulated impairment) is allocated to the
disposal group using a relative value approach, unless a different
method better reflects goodwill associated with the disposal.
Assets held for sale and disposal groups are subsequently measured
at the lower of their carrying amount and fair value less costs of
disposal. Impairment losses on initial classification as held-for-sale,
and subsequent gains and losses on remeasurement to fair value
less costs of disposal, are recognised in the Income Statement.
Once classified as held-for-sale, intangible assets and property,
plant and equipment are no longer amortised or depreciated.
Disposals of intangible assets and subsidiaries
The financial performance of subsidiaries and businesses are
included in the Group Financial Statements up to the point on
which the Group ceases to have control over that subsidiary.
Intangible assets not disposed of through the sale of shares in
subsidiaries are treated as disposed at the point that the Group
ceases to control the asset.
The difference between the fair value of the consideration (net of
costs) and the carrying value of the assets and liabilities disposed
is recognised as a gain or loss in the Income Statement. Any
amounts previously recognised in other comprehensive income in
respect of that subsidiary or asset, 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
results in a reclassification of amounts previously recognised in
other comprehensive income to the Income Statement and
included within the Loss on disposal of intangible assets and
related businesses.
Where the assets and liabilities disposed represent a partial
disposal of a cash generating unit to which goodwill has been
allocated, goodwill is allocated using a relative value approach to
the disposal group, unless a different method better reflects
goodwill associated with the disposal.
Where the tax base will not be transferred with the disposed
assets, the deferred tax balances relating to the intangible assets
are not considered part of the assets disposed and are instead
credited or charged to the Income Statement within Income
tax expense.
Liquidation of subsidiaries
The Group liquidates subsidiaries that are no longer required in
order to simplify the group structure. As part of this process, the
Group ensures any outstanding matters relating to the subsidiary
are resolved. Once this is completed, control is passed to the
liquidator and any amounts previously recognised in other
comprehensive income in respect of that subsidiary, including
exchange gains or losses on foreign currency translation, are
reclassified to the Income Statement, and included within net
finance income/(expense).
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.
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.
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1 Accounting Policies continued
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.
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/(loss) 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 which 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 or substantively enacted in each
jurisdiction 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 at 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 the reversal of the 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, and that are separately identifiable are recognised
at fair value and amortised over their useful economic life as
determined at the acquisition date (up to 20 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 continuing 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
its remaining estimated useful economic life.
(iii) Software
Expenditure relating to the acquisition of computer software
licences 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
reacquired 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.
(vi) Customer relationships
Customer relationships are shown at cost less accumulated
amortisation and impairment. Customer relationships acquired as
part of a business combination, and that are separately identifiable
are recognised at fair value and amortised over their useful
economic life as determined at the acquisition date (up to 10 years).
212
1 Accounting Policies continued
(vii) Acquired intellectual property
Intellectual property rights acquired as part of the business and
that are separately identifiable are recognised at fair value and
amortised over their useful economic life as determined at the
acquisition date (up to 20 years).
Amortisation of intangible assets in (ii) to (vii) is charged to cost of
goods sold or net operating expenses depending on the use of
the asset.
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 depreciated 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 30 years).
In general, production plant and equipment and office equipment
are depreciated 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 subject
to domestic rules and regulations. 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 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.
Low value leases are those with an underlying asset value of
US$5,000 or less. For these leases, the Group recognises the lease
payments as an operating expense on a straight-line basis over the
term of the lease.
Right of use assets
At commencement date, right of use assets are measured at cost,
which comprises the following:
• The initial measurement of the lease liability;
• Prepayments before commencement date of the lease;
•
Initial direct costs; and
• Costs to restore.
Subsequent to initial recognition right of use assets are
depreciated on a straight-line basis over the duration of the
contract. Right of use assets are assessed for impairment where
indicators of impairment are present.
Lease liabilities
At commencement date, lease liabilities are measured at the
present value of lease payments not yet paid including:
• 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.
Subsequent to initial recognition lease liabilities are increased by
the interest costs on the lease liabilities and decreased by lease
payments made. Lease liabilities held are remeasured to account
for revised future payments.
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 CGUs and GCGUs are tested for
impairment if there is an event or circumstance that indicates that
their carrying value may not be recoverable. If the carrying value
exceeds its recoverable amount an impairment loss is recognised
in the Income Statement. The recoverable amount is the higher
of the CGU or GCGU’s value in use and its fair value less costs
of disposal.
Value in use is calculated with reference to the future and terminal
cash flows expected to be generated by each CGU or GCGU (or
group of assets where cash flows are not identifiable to specific
assets). The discount rates used in the impairment reviews are
based on weighted-average cost of capital (WACC) specific to
each CGU and GCGU, with the WACC converted to the implied
pre-tax rates.
Fair value less costs of disposal is calculated using a discounted
cash flow approach prepared on a market participant basis, 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.
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1 Accounting Policies continued
Trade and other receivables
Trade and other receivables are initially recognised at the fair value
of consideration 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.
214
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 continue 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.
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.
Investment in associates
Investments in associates are accounted for using the equity
method. An associate is an entity over which the Group has
significant influence, being the power to participate in the
investee’s financial and operating policy decisions without control
or joint control.
Interests in associates are stated in the consolidated balance sheet
at cost, adjusted for the movement in the Group’s share of their
net assets and liabilities. The Group’s share of the profit or loss
after tax of associates is included in the Group’s consolidated
profit before taxation. Unrealised intragroup profits or losses
from transactions are offset against the carrying amount of the
investment on a pro-rata basis during consolidation, if material.
1 Accounting Policies continued
When the Group’s share of losses exceeds its interest in an
associate, the Group does not recognise further losses, unless
it has incurred obligations or made payments on behalf of
the associate.
The Financial Statements of the companies accounted for using
the equity method are prepared in accordance with uniform
accounting and measurement methods throughout the Group.
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.
Additional employer costs, including social security taxes,
in respect of options and awards are charged 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.
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 an outflow of resources may
be required to settle the obligation 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.
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 (including the Korea HS
issue) that may incur liabilities in the future but does not
recognise these liabilities when it is too early to determine the
likely outcome or make a reliable estimate (Note 18, Note 20).
• The continuing enduring nature of the Group’s brands supports
the indefinite life assumption of these assets (Note 9).
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1 Accounting Policies continued
• Assumptions are made as to the recoverability of tax assets
• 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 as at 31 December 2021 are £770 million
(2020: £950 million) (Note 22).
Trade spend:
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. As there is a timing difference between that initial
estimation and final settlement of trade spend with our customers,
differences can result on final settlement. As at 31 December 2021,
the Group recognised total accruals of £1,137 million (2020: £1,275
million) in respect of amounts payable to trade customers and
government bodies for trade spend. The Group’s trade spend
arrangements vary considerably by market and category, and the
Group’s trade spend accruals are made up of many individually
small accruals. Therefore, an aggregated disclosure of sensitivity
analysis on the key inputs to trade spend accrual estimates would
not be practicable nor meaningful. Nevertheless, a 12% (2020: 12%)
difference between those initial estimates and final settlement
would cause a material adjustment in the next financial year.
Other estimates
Set out below are other estimates where there is a risk of
adjustment to the carrying amounts of assets and liabilities
within the next financial year, but the risk of a material adjustment
is not significant.
Legal provisions:
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 are 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 2021, the Group recognised legal provisions of £180
million (2020: £232 million) in relation to a number of historical
regulatory and other matters in various jurisdictions.
Defined benefit pension plan:
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 23.
especially as to whether there will be sufficient future taxable
profits in the same jurisdictions to fully utilise losses in future
years (Note 12).
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.
Goodwill and Indefinite life intangible assets:
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 2021, the Group recognised impairment losses of £nil (2020: £985
million, all of which related to IFCN goodwill). In addition to the
estimates outlined above, the IFCN impairment assessment
incorporated estimates relating to future birth rates and future
WIC tendering in the US. Refer to Note 9 for further information,
including details on the sensitivity of IFCN value-in-use to
reasonable changes in key assumptions.
Tax:
The actual tax paid on profits is determined based on tax laws and
regulations that differ across the numerous jurisdictions in which
the Group operates. Assumptions are made in applying these laws
to the taxable profits in any given period in order to calculate
the tax charge for that period. Where the eventual tax paid or
reclaimed is different to the amounts originally estimated, the
difference 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. The exposure recognised is calculated based on
the expected value method or the most likely outcome method,
depending on whether there are a wide range of possible
outcomes or if resolution of the uncertainty is concentrated on one
outcome. In particular, the range of possible outcomes relating to
transfer pricing exposures can be wide and in these scenarios the
expected value method is employed. 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;
216
2 Operating Segments
The Group’s operating segments comprise of the Hygiene, Health and Nutrition business units reflecting the way in which information is
presented to and reviewed by the Group’s Chief Operating Decision Maker (CODM) for the purposes of making strategic decisions and
assessing Group-wide performance. The CODM is the Group Executive Committee. This Committee is responsible for the implementation of
strategy (approved by the Board), the management of risk (delegated by the Board) and the review of Group operational performance and
ongoing business integration.
The Group Executive Committee assesses the performance of these operating segments based on net revenue from external customers and
segment profit being adjusted operating profit. Intercompany transactions between operating segments are eliminated. Finance income and
expense are not allocated to segments, as each is managed on a centralised basis.
The segment information for the operating segments for the year ended 31 December 2021 and 31 December 2020 is as follows:
Year ended 31 December 2021
Net Revenue
Depreciation & amortisation
Operating profit/(loss)
Net finance Income
Share of loss from associates
Loss before income tax
Income tax credit
Net loss from continuing operations
Hygiene
£m
Health
£m
Nutrition1
£m
Adjusting
Items
£m
5,911
4,646
2,677
(111)
1,401
(146)
1,187
(105)
289
–
(61)
(3,681)
Total
£m
13,234
(423)
(804)
547
(3)
(260)
208
(52)
1. Following the start of the strategic review of IFCN China, the CODM also reviewed financial information for net revenue and adjusted operating profit excluding IFCN China.
In 2021, Nutrition net revenue excluding IFCN China was £2,294 million (2020: £2,426 million) and Nutrition adjusted operating profit excluding IFCN China was £356 million
(2020: £377 million)
Year ended 31 December 2020
Net Revenue
Depreciation & amortisation
Operating profit
Net finance expense
Share of loss from associates
Profit before income tax
Income tax
Net income from continuing operations
Hygiene
£m
Health
£m
Nutrition
£m
5,816
(128)
1,505
4,890
(142)
1,334
3,287
(122)
462
Adjusting
Items
£m
–
(80)
(1,141)
Total
£m
13,993
(472)
2,160
(286)
(1)
1,873
(720)
1,153
Financial information for the Hygiene, Health and Nutrition operating segments is presented on an adjusted basis which excludes certain cash
and non-cash items. These items have a pattern of recognition that is largely uncorrelated with the trading performance of the business.
Financial information on an adjusted basis is consistent with how management reviews the business for the purpose of making operating
decisions. Further details on adjusting items is included in pages 81 to 87.
The company is domiciled in the UK. The split of net revenue from external customers and Non-Current Assets (other than equity instruments,
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:
2021
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
UK
£m
739
1,843
316
29
US
£m
3,873
9,905
669
63
Greater
China1
£m
All other
countries
£m
1,112
393
164
–
7,510
6,727
1,029
57
Total
£m
13,234
18,868
2,178
149
Reckitt Annual Report and Accounts 2021
217
Financial StatementsGovernanceStrategic Report Notes to the Financial Statements (Continued)
2 Operating Segments continued
2020
Net Revenue
Goodwill and other intangible assets
Property, plant and equipment
Other non-current receivables
UK
£m
811
2,018
324
25
US
£m
3,955
9,473
563
55
Greater
China1
£m
All other
countries
£m
1,561
4,303
170
1
7,666
7,185
1,176
65
Total
£m
13,993
22,979
2,233
146
1. Greater China represents mainland China, Hong Kong and Taiwan
Major customers are typically large grocery chains, mass markets and multiple retailers. The Group’s customer base is diverse with only one
customer (2020: none) accounting for more than 10% of net revenue. This customer accounts for £1,337 million (2020: £1,351 million) and has
revenue across all segments.
3 Analysis of Other Net Operating Expenses
Distribution costs
Research and development
Other administrative expenses
Other net operating income
Other net operating expenses
2021
£m
(3,460)
(313)
2020
£m
(3,611)
(288)
(1,190)
(1,393)
1
2
(4,962)
(5,290)
A net foreign exchange loss of £2 million (2020: £5 million loss) has been recognised through the Income Statement.
4 Auditor Remuneration
During the year, the Group (including its overseas subsidiaries) obtained the following services from the company’s Auditor and its associates.
Audit services pursuant to legislation
Audit of the Group’s Annual Report and Financial Statements
Audit of the Financial Statements of the Group’s subsidiaries
Audit-related assurance services
Total audit and audit-related services
Fees payable to the company’s 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 Group Executive Committee) was:
Short-term employee benefits
Share-based payments
218
2021
£m
2020
£m
6.4
9.5
0.5
16.4
0.1
0.1
16.5
2021
£m
1,935
251
60
30
4.4
7.5
0.6
12.5
0.2
0.2
12.7
2020
£m
1,970
263
54
15
2,276
2,302
2021
£m
25
9
34
2020
£m
26
9
35
Note
23
25
5 Employees Staff Costs continued
Staff numbers
The monthly average number of people employed by the Group, including Directors, during the year was:
North America
Europe/ANZ
Rest of world
6 Net Finance Income/(Expense)
Foreign exchange net gain on liquidation of subsidiaries
Gains on liquidation
Losses on liquidation
Total foreign exchange net gain on liquidation of subsidiaries
Other finance income
Interest income on cash and cash equivalents
Movement on put option liability
Finance income on tax balances
Other finance income
Total other finance income
Other finance expense
Interest payable on borrowings
Finance expense on tax balances
Movement on put option liability
Other finance expense
Total other finance expense
Other net finance expense
Net finance Income/(expense)
2021
’000
5.0
14.8
22.0
41.8
2021
£m
1,048
(282)
766
29
14
1
1
45
2020
’000
4.7
14.1
25.1
43.9
2020
£m
–
–
–
61
–
–
16
77
(244)
(276)
–
–
(20)
(264)
(219)
547
(26)
(9)
(52)
(363)
(286)
(286)
During 2021, as a result of the simplification of the Group’s legal entity structure, a number of entities were liquidated and the cumulative
foreign exchange reserves were recycled to the Income Statement, resulting in a net foreign exchange gain of £766 million, principally from
the liquidation of intermediate financing and holding companies.
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
Cumulative foreign exchange on deferred tax balances reclassified to the Income Statement
Income tax (credit)/charge
2021
£m
711
53
764
(1,089)
185
(904)
(68)
(208)
2020
£m
740
(45)
695
(56)
81
25
–
720
Current tax includes tax incurred by UK entities of £133 million (2020: £135 million). This is comprised of UK corporation tax of £55 million
(2020: £85 million) and overseas tax suffered of £78 million (2020: £50 million). UK current tax is calculated at 19% (2020: 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 £915 million (2020: £762 million). The variance from the current tax charge of £711 million is attributable to
movements on non-current tax liabilities (shown in Note 22) and timing differences arising between accrual and payment of income tax liabilities.
Reckitt Annual Report and Accounts 2021
219
Financial StatementsGovernanceStrategic Report Notes to the Financial Statements (Continued)
7 Income Tax Expense continued
Origination and reversal of temporary differences includes adjustments in respect of prior periods of £86 million benefit (2020: £22 million expense).
Cumulative foreign exchange on deferred tax balances reclassified to the Income Statement relates to deferred tax on assets disposed in the
year (see note 29).
The total tax charge on the Group’s (loss)/profit 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% (2020: 19%)
Effect of:
Overseas tax rates
Movement in provision related to uncertain tax positions
Net impact of divestments and assets reclassified to held for sale
Unrecognised tax losses, other unrecognised tax assets and deferred tax liability on unremitted earnings
Cumulative foreign exchange on deferred tax balances reclassified to the Income Statement
Withholding and local taxes
Reassessment of prior year estimates
Impact of changes in tax rates
Non-taxable foreign exchange gain arising from legal entity simplification (Note 6)
Permanent differences
Income tax (credit)/charge
2021
£m
(260)
(49)
112
(43)
(264)
68
(68)
43
(33)
185
(146)
(13)
(208)
2020
£m
1,873
356
43
41
–
(38)
–
31
(23)
81
–
229
720
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. In December 2021 the OECD published the
Pillar Two GloBE rules, which seek to ensure multinationals pay a minimum tax of 15% in each jurisdiction. The Group is examining the detail of
the Pillar Two rules and the tax accounting impact will be considered when the rules are translated into UK domestic legislation. Pillar Two is
expected to be effective from 1 January 2023.
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.
The net impact of divestments and assets reclassified to held for sale represents the net tax effect of the sale of IFCN China, Scholl, EnfaBebé
and the reclassification of E45 to held for sale. The bases on which tax charges are calculated differ from the accounting bases.
Other movements on deferred tax assets and liabilities relates to the impairment of deferred tax assets previously recognised on losses and
the recognition of deferred tax liabilities on unrepatriated earnings (Note 12) (2020: previously unrecognised losses).
Withholding and local taxes suffered in the year are adjusted for previously accrued deferred tax liabilities on unremitted earnings.
The reassessment of prior year estimates includes settlements reached following conclusion of tax authority review and differences between
final tax return submissions and liabilities accrued in these financial statements.
The impact of changes in tax rates in 2021 primarily results from the revaluation of deferred tax liabilities relating to intangible assets following
substantive enactment of the increase in the UK corporation rate from 19% to 25% (effective 1 April 2023) on 24 May 2021.
UK deferred tax assets and liabilities have been calculated based on the substantively enacted rate of 25% after factoring in the expected
timing of reversal of the related temporary differences (2020: 19%). This tax rate change will increase the company’s future tax charge on
profits arising in the UK.
Permanent differences in 2020 principally related to the non-deductible impairment of 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
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 condition and results of operations.
EC state aid
During the year the European Commission’s (EC) challenge that the UK Controlled Foreign Company (CFC) Legislation up to 31 December 2018
partially represented state aid was heard before the General Court. 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 and our application was stayed pending the outcome of
this hearing which is expected in 2022. Management’s continued assessment is that no uncertain tax provision is required for this potential
exposure. Further, the EC’s challenge to certain aspects of the Gibraltar tax system was heard in front of the General Court during 2021.
This impacts a former MJN subsidiary and a preliminary judgement was received in April 2022 which is currently under review.
220
7 Income Tax Expense continued
The tax (charge)/credit relating to components of other comprehensive income is as follows:
Net exchange (losses) on foreign currency translation
Reclassification of foreign currency translation reserves on
disposal or liquidation of foreign operations
Gains/(losses) on cash flow and net investment hedges
Remeasurement of defined benefit pension plans (Note 23)
Revaluation of equity instruments – FVOCI
Other comprehensive loss
Current tax
Deferred tax (Note 12)
Before
tax
£m
(374)
(550)
118
179
(1)
(628)
2021
Tax
(charge)/
credit
£m
–
–
(4)
(46)
–
(50)
–
(50)
(50)
After
tax
£m
(374)
(550)
114
133
(1)
(678)
Before
tax
£m
(207)
–
(95)
(75)
31
(346)
The tax credited/(charged) directly to the Statement of Changes in Equity during the year is as follows:
Current tax
Deferred tax (Note 12)
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
2020
Tax
(charge)/
credit
£m
–
–
3
15
(12)
6
1
5
6
2021
£m
4
(4)
–
After
tax
£m
(207)
–
(92)
(60)
19
(340)
2020
£m
6
(2)
4
2021
pence
2020
pence
(8.8)
4.3
(4.5)
(8.8)
4.3
(4.5)
160.0
7.0
167.0
159.3
7.0
166.3
Basic
Basic earnings per share is calculated by dividing the net (loss)/income attributable to owners of the Parent Company from continuing
operations (2021: £63 million loss, 2020: £1,137 million income) and discontinued operations (2021: £31 million income; 2020: £50 million income)
by the weighted average number of ordinary shares in issue during the year (2021: 713,758,909; 2020: 710,907,200)
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 2021 there were 10,683,109 (2020: 1,865,524) 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.
On a basic basis
Dilution for Executive Share Awards1
Dilution for Employee Sharesave Scheme Options outstanding1
On a diluted basis
1. As there was a loss in 2021, the effect of potentially dilutive shares is anti-dilutive
2021 Average
number of
shares
2020 Average
number of
shares
713,758,909
710,907,200
–
–
61,251
2,778,499
713,758,909
713,746,950
Reckitt Annual Report and Accounts 2021
221
Financial StatementsGovernanceStrategic Report Notes to the Financial Statements (Continued)
9 Goodwill and Other Intangible Assets
Cost
At 1 January 2020
Additions
Disposals
Reclassifications
Exchange adjustments
At 31 December 2020
Additions
Arising on business combinations
Disposals
Reclassifications to held for sale
Exchange adjustments
At 31 December 2021
Accumulated amortisation and impairment
At 1 January 2020
Amortisation and impairment
Disposals
Exchange adjustments
At 31 December 2020
Amortisation and impairment
Disposals
Exchange adjustments
At 31 December 2021
Net book value
At 31 December 2020
At 31 December 2021
Brands
£m
Goodwill
£m
Software
£m
Other
£m
Total
£m
17,811
11,516
3
–
–
–
–
–
(141)
(108)
416
84
(1)
(10)
1
175
29,918
5
–
10
(5)
92
(1)
–
(253)
17,673
11,408
490
185
29,756
5
596
–
370
(4,494)
(1,543)
(112)
(220)
(28)
5
72
–
(2)
–
(13)
–
76
–
–
5
77
1,042
(6,039)
(140)
(223)
13,448
10,212
547
266
24,473
390
63
–
(4)
449
39
(143)
(3)
342
5,054
985
–
–
6,039
–
(1,176)
21
136
55
(1)
–
190
66
(2)
(2)
77
25
–
(3)
99
27
–
1
5,657
1,128
(1)
(7)
6,777
132
(1,321)
17
4,884
252
127
5,605
17,224
13,106
5,369
5,328
300
295
86
139
22,979
18,868
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 £28 million (2020: £37 million).
The majority of brands, all of goodwill and certain other intangibles are considered to have indefinite lives for the reasons noted in the
accounting policies and therefore are subject to an annual impairment review. The MJN global brand, 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 or cost of goods sold depending on the use of the asset.
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
222
2021
£m
2020
£m
12,983
5,328
39
16,857
5,369
36
18,350
22,262
123
295
100
518
367
300
50
717
18,868
22,979
9 Goodwill and Other Intangible Assets continued
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 Health, Hygiene and IFCN, with the Group’s CGUs being VMS and Biofreeze.
An analysis of the net book value of indefinite life assets and goodwill by GCGU/CGU is shown below:
GCGU/CGU
Health
Hygiene
IFCN
VMS
Biofreeze
GCGU/CGU
Health
Hygiene
IFCN
VMS
Indefinite
life assets
£m
2021
Goodwill
£m
5,455
1,760
4,260
971
576
3,350
45
1,408
248
277
Total
£m
8,805
1,805
5,668
1,219
853
13,022
5,328
18,350
Indefinite
life assets
£m
2020
Goodwill
£m
6,028
1,780
8,124
961
16,893
3,354
45
1,725
245
5,369
Total
£m
9,382
1,825
9,849
1,206
22,262
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 GCGUs. The CGUs tested
separately in 2021 are shown below.
Indefinite life assets excluding goodwill
Intimate Wellness
Oriental Pharma
Indefinite life assets excluding goodwill
Intimate Wellness (previously called Sexual Wellbeing)
Oriental Pharma
2021
£m
2,124
51
2020
£m
2,170
49
Annual impairment review
Goodwill and other indefinite life intangible assets must be tested for impairment on at least an annual basis. An impairment loss is recognised
when the recoverable amount of a GCGU or CGU falls materially below its net book value at the date of testing.
The determination of recoverable amount, being the higher of value-in-use and fair value less costs to dispose, is inherently judgemental and
requires management to make multiple estimates, for example around individual market pressures and forces, future price and volume
growth, future margins, terminal growth rates and discount rates.
When forecasting the annual cash flows that support the recoverable amount calculations, the Group generally uses its short-term budgets
and medium-term strategic plans, with additional senior management and Board-level review. Cash flows beyond the five-year period are
projected using steady or progressively declining terminal growth rates. These rates do not exceed the long-term average growth rate for the
products and markets in which the GCGU or CGU operates.
The cash flows are discounted back to their present value using a pre-tax discount rate considered appropriate for each GCGU and CGU.
These rates have been derived from management’s views on the relevant weighted average cost of capital, subsequently converted to the
pre-tax equivalent discount rate.
Reckitt Annual Report and Accounts 2021
223
Financial StatementsGovernanceStrategic Report Notes to the Financial Statements (Continued)
9 Goodwill and Other Intangible Assets continued
For the Health and Hygiene GCGUs as well as the Intimate Wellness and VMS CGUs, any reasonably possible change in the key valuation
assumptions would not imply possible impairment. The recoverable amount for these GCGUs and CGUs was determined utilising a pre-tax
discount rate of 9% (Health, Hygiene and Intimate Wellness) or 10% (VMS) and a terminal growth rate of either 2.5% (Health, Intimate Wellness
or VMS) or 2% (Hygiene).
For the Biofreeze CGU, following acquisition on 12 July 2021, the recoverable amount was calculated using the income approach on a fair value
less costs of disposal basis utilising a post-tax discount rate of 11% representative of the geographical spread and product portfolio. An eight
year cash flow model was used with a terminal growth rate of 2.5%. The key assumptions in determining the recoverable amount include net
revenue growth rates, gross margins and discount rates. The fair value measurement of Biofreeze is categorised within level 3 of the fair value
hierarchy, based on inputs into the valuation technique used. At 31 December 2021, the fair value was determined to be consistent with the
acquisition price for Biofreeze, such that there was no headroom between the recoverable amount and the net book value of £762 million.
As there is no headroom between recoverable amount and net book value, if future trading was to fall below the model this would result in
an impairment in the associated goodwill in the Biofreeze CGU given the recent acquisition of the business.
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.
Following impairment losses of £5,037 million in 2019 and £985 million in 2020, at 31 December 2020 IFCN was recorded at its then recoverable
amount of £8,810 million. Following these impairment losses, no headroom remained between the IFCN recoverable amount and net book
value at 31 December 2020.
On 5 June 2021, the Group announced the definitive agreement to sell IFCN China to Primavera Capital Group for an implied enterprise value
of $2.2 billion. On announcement of the definitive agreement to sell IFCN China, the global IFCN CGU was split into two CGUs, being IFCN and
IFCN China (the disposal group). The disposal of IFCN China completed on 9 September 2021, with the Group recognising a pre-tax loss on
disposal of £3.3 billion in the year to 31 December 2021, see Note 29.
The recoverable amount for the remaining IFCN business has been determined on a value-in-use basis. The value-in-use of IFCN was
determined using a discounted cash flow approach with future cash flows derived from a detailed five-year plan. Cash flows beyond the
five-year plan have been projected using a steady or progressively declining terminal growth rate. At 31 December 2021, management has
determined that the recoverable amount of IFCN is higher than its carrying value, such that no impairment is required.
The determination of the recoverable amount for IFCN at 31 December 2021 incorporates certain key assumptions, some of which are subject
to considerable uncertainty. These assumptions include but are not limited to the effects of the COVID-19 pandemic, the estimation of future
birth rates, the commercial success of new product launches, including adult nutrition, and the expansion of specialty nutrition. Although there
is headroom between the IFCN recoverable amount and its carrying value, changes to these assumptions, or any deterioration in other macro
or business-level assumptions supporting the IFCN recoverable amount could reduce this headroom or could necessitate the recognition of
impairment losses in future periods.
The key assumptions used in the estimation of value in use within the 2021 impairment assessment of the remaining IFCN business are outlined
below. Following the disposal of IFCN China, the 2021 key assumptions are not directly comparable to those of the 2020 impairment
assessment that related to the global IFCN CGU.
Pre-tax discount rate
Terminal growth rate
Annual growth in Net Revenue between 2022 and 20261
Annual growth in Gross Margin between 2022 and 20261
Pre-tax discount rate
Terminal growth rate
Annual growth in Net Revenue between 2021 and 20301
Annual growth in Gross Margin between 2021 and 20301
1. At constant exchange rates, excluding the impact of future foreign exchange movements
2021
9.7%
2%
3% to 4%
4% to 6%
2020
9.6%
2.5%
3% to 5%
3% to 6%
224
9 Goodwill and Other Intangible Assets continued
The key estimates incorporated within the determination of the IFCN recoverable amount in 2021 are summarised below:
Key estimates
Commentary
Market
In the US, management expects market conditions to be relatively stable, with birth-rates steadily returning to pre-COVID
trends. Tendering for WIC contracts continues to remain highly competitive.
Net Revenue
Margins
Discount rate
Within ASEAN and LATAM, management expects conditions to remain relatively stable, with net revenue growth broadly in
line with regional inflation.
In the short to medium term, management expects to achieve net revenue growth (excluding the impact of foreign
exchange movements) of between 3% and 4% per annum. This is expected to be achieved through a mix of ongoing
premiumisation, price increases, and revenues from new products/category launches including adult nutrition and the
expansion of speciality nutrition.
In the short to medium term, management expects IFCN margins (both gross and operating) to increase from current levels
as IFCN realises benefits from Reckitt’s on-going productivity programme, and operational leverage from the growth of
adult nutrition. Cost inflation in the short term is expected to be offset with price increases.
Management determined an IFCN specific weighted average cost of capital (WACC) and the implied pre-tax discount rate
with the support of a third-party expert. In addition, management performed benchmarking against other comparable
companies. For valuation purposes management used the upper end of the calculated range in 2021 to reflect uncertainty in
certain key assumptions.
Terminal
growth rate
Management engaged a third-party expert to help calculate an IFCN -specific terminal growth rate. Management is satisfied
with the reasonableness of this rate when compared against independent market growth projections and long-term
country inflation rates.
The table below shows the sensitivity of the recoverable amount to 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 (2022 to 20261) adjusted by 100bps
Expected EBIT growth rates (2022 to 20261) adjusted by 100bps
Terminal growth rate (applied from 2027) adjusted by 50bps
Pre-tax discount rate adjusted by 50bps
Expected Net Revenue growth rates (2021 to 20301) adjusted by 100bps
Expected EBIT growth rates (2021 to 20301) adjusted by 100bps
Terminal growth rate (applied from 2031) adjusted by 50bps
Pre-tax discount rate adjusted by 50bps
2021
£m
+510 / -500
+/- 190
+490 / -410
+410 / -360
2020
£m
+/-900
+/- 600
+600 / -500
+700 / -600
The table below shows the percentage movement in the 2021 key assumptions that (individually) would be required to reach the point at
which the IFCN value in use approximates its carrying value. In 2020, the global IFCN CGU had no headroom between the recoverable amount
and the net book value.
Expected Net Revenue growth rates (2022-20261)
Expected EBIT growth rates (2022-20261)
Terminal growth rate
Pre-tax discount rate
1. At constant exchange rates, excluding the impact of future foreign exchange movements
2021
140bps decrease
390bps decrease
90bps decrease
100bps decrease
Reckitt Annual Report and Accounts 2021
225
Financial StatementsGovernanceStrategic Report Notes to the Financial Statements (Continued)
10 Property, Plant and Equipment
Cost
At 1 January 2020
Additions
Disposals
Reclassifications
Exchange adjustments
At 31 December 2020
Additions
Arising on business combinations
Disposals
Reclassifications (Including held for sale)
Exchange adjustments
At 31 December 2021
Accumulated depreciation and impairment
At 1 January 2020
Charge for the year
Disposals
Impairment
Exchange adjustments
At 31 December 2020
Charge for the year
Disposals
Impairment
Reclassifications (including held for sale)
Exchange adjustments
At 31 December 2021
Net book value
As at 31 December 2020
As at 31 December 2021
Land and
buildings
£m
Plant and
equipment
£m
Right of use
Assets
£m
Assets under
construction
£m
1,152
1,937
27
(9)
98
(23)
58
(48)
183
(29)
1,245
2,101
20
5
(81)
51
(20)
61
15
(210)
151
(45)
1,220
2,073
381
62
(8)
1
(5)
431
58
(33)
38
(2)
(10)
482
814
738
1,181
185
(46)
1
(20)
1,301
168
(105)
8
1
(32)
1,341
800
732
353
89
(21)
–
(12)
409
110
–
(50)
–
(8)
461
64
80
(17)
–
(5)
122
71
(34)
1
(1)
(3)
156
287
305
324
309
(6)
(281)
(14)
332
292
–
(8)
(207)
(1)
408
–
–
–
–
–
–
–
–
5
–
–
5
332
403
Total
£m
3,766
483
(84)
–
(78)
4,087
483
20
(349)
(5)
(74)
4,162
1,626
327
(71)
2
(30)
1,854
297
(172)
52
(2)
(45)
1,984
2,233
2,178
At 31 December 2021, the Group’s right of use assets included land & buildings of £284 million (2020: £267 million) and other assets of £21 million
(2020: £19 million). The Group recognised depreciation of £58 million (2020: £66 million) on the land & buildings and depreciation of £13 million
(2020: £14 million) on the other assets.
The Group has commitments to purchase property, plant and equipment of £80 million (2020: £96 million).
11 Equity Instruments
Equity investments – fair value other comprehensive income1
Investments in associates accounted for using the equity method
Total equity instruments
2021
£m
171
23
194
2020
£m
114
22
136
1. Equity investments is composed of £114 million (2020: £94 million) representing 13% of the outstanding units in Packable Holdings LLC (previously Pharmapacks LLC),
£33 million representing 8% of issued shared capital in Jadestone One Cayman Limited which was received as part of the consideration for the sale of IFCN China
(see note 29), £14 million (2020: £16 million) representing less than 1% of the issued share capital of China Pharmaceutical Resources Limited and £10 million (2020: £4 million)
of other equity investments
Investments accounted for using the equity method predominantly relates to the Group’s investment in Your.MD AS (trading as Healthily). The
Group has recognised a loss of £3 million (2020: £1 million) within the Group Income Statement with respect to this investment. There are no
gains or losses recognised within other comprehensive income with respect to the Group’s associates.
226
12 Deferred Tax
Deferred tax
At 1 January 2021
Credited/(charged) to the Income Statement
(Charged) to other comprehensive income
(Charged) directly to equity
Arising on business acquisitions/ disposals
Exchange differences
At 31 December 2021
3
–
–
4
(1)
(49)
864
–
–
(151)
30
Accelerated
capital
allowances
£m
Intangible
assets
£m
Short-term
temporary
differences
£m
Retirement
benefit
obligations
£m
Tax
losses
£m
(55)
(3,766)
Total
£m
(3,304)
904
(50)
(4)
(178)
23
38
2
(46)
–
–
–
427
59
(4)
(4)
(31)
(5)
52
(24)
–
–
–
(1)
27
(3,023)
442
(6)
(2,609)
2021
Deferred tax assets
Deferred tax liabilities
Deferred tax
Deferred tax
At 1 January 2020
(Charged)/credited to the Income Statement
Credited/(charged) to other comprehensive income
Exchange differences
At 31 December 2020
2020
Deferred tax assets
Deferred tax liabilities
Deferred tax
Accelerated
capital
allowances
£m
Intangible
assets
£m
Short-term
temporary
differences
£m
Retirement
benefit
obligations
£m
Tax
losses
£m
(2)
(47)
(49)
(37)
(2,986)
(3,023)
189
253
442
24
3
27
23
(29)
(6)
Accelerated
capital
allowances
£m
(42)
(14)
–
1
Intangible
assets
£m
(3,710)
(78)
–
22
(55)
(3,766)
Accelerated
capital
allowances
£m
4
(59)
(55)
Intangible
assets
£m
(64)
(3,702)
(3,766)
Short-term
temporary
differences
£m
Tax
losses
£m
Retirement
benefit
obligations
£m
381
70
(8)
(16)
427
44
10
–
(2)
52
38
(13)
13
–
38
Short-term
temporary
differences
£m
Tax
losses
£m
Retirement
benefit
obligations
£m
244
183
427
48
4
52
26
12
38
Total
£m
197
(2,806)
(2,609)
Total
£m
(3,289)
(25)
5
5
(3,304)
Total
£m
258
(3,562)
(3,304)
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 £2,091 million (2020: £1,534 million)
have not been recognised at 31 December 2021 as the likelihood of future economic benefit is not sufficiently assured. These assets will be
recognised if utilisation of the losses and other temporary differences becomes sufficiently probable.
13 Inventories
Raw materials and consumables
Work in progress
Finished goods and goods held for resale
Total inventories
2021
£m
383
70
1,006
1,459
2020
£m
352
87
1,153
1,592
The total cost of inventories recognised as an expense and included in cost of sales amounted to £5,292 million (2020: £5,309 million).
This includes inventory write-offs and losses of £191 million (2020: £187 million).
The Group inventory provision at 31 December 2021 was £151 million (2020: £119 million).
Reckitt Annual Report and Accounts 2021
227
Financial StatementsGovernanceStrategic Report Notes to the Financial Statements (Continued)
14 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
Sterling
Brazilian Real
Other currencies
2021
£m
1,587
(36)
1,551
291
84
1,926
2021
£m
574
302
167
128
755
2020
£m
1,584
(27)
1,557
290
74
1,921
2020
£m
477
281
155
117
891
Trade and other receivables
1,926
1,921
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 experience, future expectations and other relevant factors. Individual credit limits are established 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
2021
£m
1,318
219
50
2020
£m
1,346
193
45
1,587
1,584
At 31 December 2021, a provision of £36 million (2020: £27 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 2021, trade receivables of £233 million (2020: £211 million) were past due but not impaired. These receivables were not
impaired because having considered their nature and historical collection experience, recovery of the unprovided amounts is expected in
due course.
b. Other receivables
Other receivables includes recoverable indirect tax of £212 million (2020: £213 million). This contains £2 million (2020: £3 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 2021 of £149 million (2020: £146 million) includes non-current indirect tax, long-term
prepayments, and non-current derivatives of £1 million (2020: £19 million)
d. Financial instruments (Note 15)
At 31 December 2021 £1,926 million (2020: £1,918 million) of the current and non-current receivables totalling £2,075 million (2020: £2,067
million) are financial assets. These mainly related to amounts owed from customers or government bodies and are typically non-interest
bearing. Amounts that are not financial assets are mostly prepayments and employee benefit assets.
228
15 Financial Instruments and Financial Risk Management
Financial instruments by category
At 31 December 2021
Assets as per the Balance Sheet
Amortised
cost
£m
Note
Derivatives
used for
hedging
£m
Fair value
through
the
Income
Statement
£m
Equity
instruments
£m
Carrying
value
total
£m
Current and non-current trade and other receivables
14d
1,926
Derivative financial instruments – FX forward exchange
contracts
Equity instruments – FVOCI
Cash and cash equivalents
Liabilities as per the Balance Sheet
Borrowings (loans and overdrafts)1
Lease obligations
Bonds
Senior notes
Derivative financial instruments – FX forward exchange
contracts
Derivative financial instruments – Interest rate swaps
Derivative financial instruments – Cross currency interest
rate swaps
Current and non-current trade and other payables
17
11
21
21
21
–
–
1,261
37
328
7,969
1,229
–
–
–
5,193
–
41
–
–
–
–
–
–
16
22
49
–
–
21
–
–
–
–
–
–
36
–
–
–
–
–
171
–
–
–
–
–
–
–
–
–
1,926
62
171
1,261
37
328
7,969
1,229
52
22
49
5,193
At 31 December 2020
Assets as per the Balance Sheet
Amortised
cost
£m
Note
Derivatives
used for
hedging
£m
Fair value
through
the
Income
Statement
£m
Equity
instruments
£m
Carrying
value
total
£m
Current and non-current trade and other receivables
14d
1,918
Derivative financial instruments – FX forward exchange
contracts
Derivative financial instruments – Interest rate swaps
Derivative financial instruments – Cross currency interest
rate swaps
Equity instruments – FVOCI
Cash and cash equivalents
14c
14c
11
Liabilities as per the Balance Sheet
Borrowings (commercial paper, bank loans & overdrafts)1
Lease obligations
Bonds
Senior notes
Term loans
Derivative financial instruments – FX forward exchange
contracts
–
–
–
–
1,646
691
313
8,041
1,221
291
–
Current and non-current trade and other payables
21
5,777
–
24
7
12
–
–
–
–
–
–
–
50
–
–
6
–
–
–
–
–
–
–
–
–
68
–
–
–
–
–
114
–
–
–
–
–
–
–
–
1,918
30
7
12
114
1,646
691
313
8,041
1,221
291
118
5,777
1. The categories in this disclosure are determined by IFRS 9
Lease obligations are outside the scope of IFRS 9, but they remain within the scope of IFRS 7, and therefore have been shown separately
Reckitt Annual Report and Accounts 2021
229
Financial StatementsGovernanceStrategic Report
Notes to the Financial Statements (Continued)
15 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 2021
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
Derivative financial instruments – Cross currency interest rate swaps
At 31 December 2020
Assets as per the Balance Sheet
Derivative financial instruments – Interest rate swaps
Derivative financial instruments – Cross currency interest rate swaps
Derivative financial instruments – FX forward exchange contracts
Equity instruments – FVOCI
Liabilities as per the Balance Sheet
Derivative financial instruments – FX forward exchange contracts
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
–
14
–
–
–
62
114
52
22
49
–
43
–
–
–
62
171
52
22
49
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
–
–
–
16
–
7
12
30
–
118
–
–
–
98
–
7
12
30
114
118
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 and the cross currency interest rate swaps was calculated using discounted future cash
flows at floating market rates and the fair value of the investment in Packable Holdings LLC (previously Pharmapacks) was calculated using
a publicly available valuation from the latest funding round (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 2021 is a liability of £8,238 million (2020: £8,562 million) and the fair value of the senior
notes as at 31 December 2021 is a liability of £1,400 million (2020: £1,445 million). The fair value of the bonds and senior notes was derived using
quoted market rates in an active market (level 1 classification).
Offsetting financial assets and financial liabilities
The Group enters into derivative transactions under International Swaps and Derivatives Association (ISDA) master netting agreements.
In certain circumstances – e.g. when a credit event such as a default occurs – all outstanding transactions under the agreement are
terminated, the termination value is assessed and only a single net amount is payable in settlement of all transactions.
The ISDA agreements do not meet the criteria for offsetting in the statement of financial position. This is because the Group does not
currently have any legally enforceable right to offset recognised amounts, because the right to offset is enforceable only on the occurrence
of future events such as a default event.
230
15 Financial Instruments and Financial Risk Management continued
The following table sets out the carrying amounts of recognised financial instruments that are subject to the above agreements.
At 31 December 2021
Financial assets
FX forward exchange contracts
Other financial assets
Financial liabilities
FX forward exchange contracts
Other financial liabilities
At 31 December 2020
Financial assets
FX forward exchange contracts
Other financial assets
Financial liabilities
FX forward exchange contracts
Other financial liabilities
Gross amounts
of recognised
financial assets/
liabilities in the
Balance Sheet
£m
Related financial
instruments that
are not offset
£m
Net
amount
£m
62
1,261
1,323
(52)
(73)
(125)
30
1,665
1,695
(118)
(2)
(120)
(32)
–
(32)
32
–
32
(27)
–
(27)
27
–
27
30
1,261
1,291
(20)
(73)
(93)
3
1,665
1,668
(91)
(2)
(93)
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 reviews and agrees policies, guidelines and authority levels for all areas of Treasury activity and individually approves
significant activities. The GT function 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, 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.
Reckitt Annual Report and Accounts 2021
231
Financial StatementsGovernanceStrategic Report Notes to the Financial Statements (Continued)
15 Financial Instruments and Financial Risk Management continued
The notional principal amount of the outstanding forward foreign exchange contracts at 31 December 2021 was £7,036 million receivable
(2020: £6,146 million) and £7,027 million payable (2020: £6,234 million).
The Group held forward foreign exchange contracts designated as cash flow hedges primarily in Euro, Sterling, US dollar, Canadian dollar,
Australian dollar, Philippine peso and Mexican peso. The notional value of the payable leg resulting from these financial instruments was
as follows:
Cash Flow Hedge Profile
Euro
Sterling
US dollar
Canadian dollar
Australian dollar
Philippine peso
Mexican peso
Other
2021
£m
2020
£m
327
310
273
113
107
54
51
444
423
438
84
92
46
53
422
1,657
708
2,288
These forward foreign exchange contracts are mainly expected to mature over the period January 2022 to December 2022 (2020: January
2021 to December 2021). Of the total amount, £11 million (2020: nil) is due between January 2023 and January 2024.
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 (2020: immaterial).
Gains and losses recognised in other comprehensive income and the hedging reserve on forward exchange contracts in 2021 of £30 million
gain, net of tax (2020: £17 million loss, net of tax) are recognised in the Income Statement in the periods in which the hedged forecast
transaction affects the Income Statement.
At 31 December 2021, the Group had forward contracts used for cash flow hedging with total fair value of £15 million asset (2020: £26 million
liability). These contracts are denominated in a diverse range of currency pairings, where a fluctuation of 5% in any one of the contract
pairings, with all others remaining constant, would have a maximum effect of £6 million (2020: £8 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, US dollar/Canadian dollar, and Euro/Australian dollar.
Where the Group is exposed to currency risk on its borrowings, the Group seeks to minimise the impact of foreign exchange on the Income
Statement through placing debt within a net investment hedge or using financial instruments.
As at 31 December 2021, the Group had designated a 2023 US dollar bond totalling $500 million (2020: $500 million), 2030 Euro bond totalling
€850 million (2020: €850 million) and forward currency swap contracts totalling €750 million (2020: nil) as the hedging instruments in a net
investment hedge relationship. During the year commercial paper of €750 million (2020: €750 million) was also in a hedge relationship,. As the
commercial paper was repaid during the year, this relationship was ended as it was replaced with the forward currency swap contracts.
Possible sources of ineffectiveness include any impairments to 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 is recognised in other comprehensive income. The net effect on other comprehensive income
for the year ended 31 December 2021 was a £84 million gain (2020: £75 million loss). If Sterling weakens by 5% against the US dollar and Euro,
the maximum impact on shareholders’ equity due to the net investment hedging on US dollar bond and Euro bond/ swaps would be £19
million loss and £51 million loss respectively.
In 2020, the Group issued a €850 million bond due in 2026. Concurrent with the issue of the bond, the Group entered into a €850 million cross
currency interest rate swap on similar terms to the 2026 bond to mitigate foreign exchange currency risk, for which hedge accounting has
been applied. Sources of ineffectiveness on this hedge relationship will come from a difference in credit ratings between the counterparties
and modifications to the terms of either hedged item or instrument. At 31 December 2021 no material ineffectiveness (2020: no material
ineffectiveness) has been recognized in the Income Statement as the effect is not material. The interest rate element of the swap is
discussed in interest rate risk below.
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 2021, was a £6 million gain (2020: £2 million loss).
232
15 Financial Instruments and Financial Risk Management continued
(b) Cost inflation risk
Due to the nature of its business the Group is exposed to commodity, freight and other inflation risks. Short term volatility in pricing of these
products is mitigated through medium-term contracts, inventories of key materials and financial hedging. Over the medium and long term,
the Group mitigates the impact of inflation through: implementing pricing and revenue growth management, identifying productivity and
efficiencies and improving sales mix.
(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 sets its desired level of fixed and floating rate exposure as part of its interest risk management
strategy. The mix of fixed and floating exposure on interest-bearing assets is managed by using a mixture of fixed and floating rate deposits.
The fixed/floating mix on liabilities is managed by using a mixture of fixed and floating rate borrowings as well as by using derivatives to swap
fixed to floating rate.
In 2020 the Group issued two €850 million bonds due in 2026 and 2030. In order to maintain a level of floating rate debt in line with the Group’s
interest management strategy the Group entered into a €850 million cross currency interest rate swap on similar terms to the 2026 bond and
interest rate swap on the coupon payments due on the 2030 bond. The accounting for the foreign exchange element of the cross currency
swap is described above. The interest rate element swaps the fixed coupon payments on the bond for floating rate (the cross currency
interest rate swap with reference to LIBOR, and the interest rate swap with reference to EURIBOR). The interest rate swaps have been
placed into a fair value hedge relationship with the related bonds. Sources of ineffectiveness on this hedge relationship will come from
a difference in credit ratings between the counterparties and modifications to the terms of either the hedged item or the hedging instrument.
At 31 December 2021 no material ineffectiveness (2020: no material ineffectiveness) has been recognised in the Income Statement.
Various scenarios are simulated taking into consideration refinancing, renewal of existing positions, alternative financing and hedging. Based
on these scenarios, the Group calculates the impact on the Income Statement of a defined interest rate shift. For each simulation, the same
interest rate shift is used for all currencies, calculated on a full-year and pre-tax basis.
The scenarios are only run for liabilities that represent the major interest-bearing positions. Based on the simulations performed, the impact on
the Income Statement of a 50 basis-point shift in interest rates would be a maximum increase of £10 million (2020: £14 million) or decrease of
£10 million (2020: £14 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.
(d) Managing interest rate benchmark reform and associated risks
A fundamental reform of major interest rate benchmarks is being undertaken globally, including the replacement of some interbank offered
rates (IBORs) with alternative nearly risk-free rates (referred to as ‘IBOR reform’).
The Group’s main exposure to IBOR reform is through cross currency interest rate swaps that reference a floating Sterling LIBOR. The swaps
were executed as hedging instruments of the €850 million bond maturing in 2026 in which the Group pays interest on a floating sterling
rate based on 3-month GBP LIBOR. As the swap agreements are governed by contracts based on the International Swaps and Derivatives
Association (ISDA)’s master agreements, by adhering to the ISDA LIBOR Fallback Protocol during the year ended 31 December 2021, the Group
amended contractual terms of financial instruments indexed to the relevant LIBORs, such that these will be replaced by risk-free rates after
IBOR cessation, thereby removing IBOR reform-related uncertainty.
During 2021, the Group’s committed bank facilities totalling £4,500 million (2020: £5,500 million) were amended or renewed to include rate
switch provisions, thus addressing IBOR reform, predominantly in the form recommended by the Loan Market Association. These committed
facilities were undrawn at 31 December (2020: undrawn).
At 31 December, the Group had contracts of cross currency interest swap liabilities with a carrying value of £49 million referenced to GBP
LIBOR but with appropriate fallback clauses (2020: Unreformed contracts of cross currency interest swap asset of £12 million)
On 5 March 2021, the FCA confirmed that certain LIBOR benchmark settings – including the 3-month USD benchmark – would continue to be
published until 30 June 2023. Consequently, the Group expects that the $750 million floating rate note maturing in June 2022 that references
3-month USD LIBOR will not be affected by IBOR reform. The Group’s EURIBOR interest rate swap is unaffected as EURIBOR is not impacted by
IBOR reform.
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 14. 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.
Reckitt Annual Report and Accounts 2021
233
Financial StatementsGovernanceStrategic Report Notes to the Financial Statements (Continued)
15 Financial Instruments and Financial Risk Management continued
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. For risk management purposes the Group assesses the exposure to major financial institutions by looking at
the deposits, cash and cash equivalents and a percentage of the nominal amount of derivative contracts taking into account the time to maturity
and the nature of the product. 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
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
2021
Credit
rating
Limit
£m
Exposure
£m
A+
A+
A+
A+
A+
A
A
AAA
A
A+
Credit
rating
AAA
A+
A+
AAA
A
A+
A+
A
A
AAA
250
250
250
250
250
200
200
300
200
250
210
160
147
127
115
115
102
83
70
54
2020
Limit
£m
Exposure
£m
300
150
150
300
125
143
100
103
116
300
201
141
130
125
121
102
96
93
93
85
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 and senior note principal repayments due between 2022 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 2021, the Group had long-term debt excluding lease liabilities of £6,812 million (2020: £9,553 million), of which £6,445 million
(2020: £6,889 million) is repayable in more than two years. In addition, the Group has committed borrowing facilities totalling £4,500 million
(2020: £5,500 million), of which £4,500 million (2020: £3,500 million) expires after more than two years. These facilities were undrawn at year
end. The committed borrowing facilities, 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.
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 2021 calculated in accordance with the Articles of Association was £22,197 million
(2020: £27,345 million).
The table on the next page 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.
234
15 Financial Instruments and Financial Risk Management continued
At 31 December 2021
Bonds
Senior notes
Trade payables
Other payables
At 31 December 2020
Commercial paper
Bonds
Term loans
Senior notes
Trade payables
Other payables
Less than
1 year
£m
Total
£m
Between
1 and 2
years
£m
Between
2 and 5
years
£m
Over
5 years
£m
(8,642)
(2,552)
(496)
(2,430)
(3,164)
(1,855)
(53)
(2,064)
(2,064)
(3,129)
(3,048)
(53)
–
(81)
(690)
(1,059)
–
–
–
–
Less than
1 year
£m
Between
1 and 2
years
£m
Between
2 and 5
years
£m
Over
5 years
£m
(671)
(174)
(3)
(52)
(2,159)
(3,418)
–
–
–
(2,527)
(2,119)
(4,023)
(294)
(52)
–
(53)
–
–
(706)
(1,078)
–
(172)
–
–
Total
£m
(671)
(8,843)
(297)
(1,888)
(2,159)
(3,643)
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 2021
FX forward exchange contracts
Outflow
Inflow
Cross currency interest rate swap
Outflow
Inflow
Interest rate swap
Outflow
Inflow
At 31 December 2020
FX forward exchange contracts
Outflow
Inflow
Cross currency interest rate swap
Outflow
Inflow
Interest rate swap
Outflow
Inflow
Less than
1 year
£m
Between
1 and 2
years
£m
Between
2 and 5
years
£m
Over
5 years
£m
(7,016)
7,024
(9)
3
(3)
5
(10)
11
(9)
3
(3)
5
(1)
1
(770)
723
(9)
16
–
–
–
–
(10)
21
Less than
1 year
£m
Between
1 and 2
years
£m
Between
2 and 5
years
£m
Over
5 years
£m
(6,234)
6,146
(9)
3
(3)
5
–
–
(9)
3
(3)
5
–
–
(26)
8
(10)
17
–
–
(785)
773
(16)
29
Reckitt Annual Report and Accounts 2021
235
Financial StatementsGovernanceStrategic Report Notes to the Financial Statements (Continued)
15 Financial Instruments and Financial Risk Management continued
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 above.
4. Capital Management
The Group considers capital to be net debt plus total equity. Net debt is calculated as total financing liabilities less cash and cash equivalents
and short-term deposits. Total equity includes share capital, reserves and retained earnings as shown in the Group Balance Sheet.
Cash and cash equivalents including overdrafts
Financing liabilities
Net debt
Total equity
Note
2021
£m
1,259
2020
£m
1,644
17
(9,637)
(10,598)
8,378
7,453
15,831
8,954
9,159
18,113
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 2021, the Group provided returns to shareholders in the form of dividends. Refer to Note 28 for further details.
The Group monitors net debt and at year end the Group had net debt of £8,378 million (2020: £8,954 million). The Group seeks to pay down
net debt using cash generated by the business to maintain an appropriate level of financial flexibility.
Supply chain finance
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 £372 million (2020: £392 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, being
payments for the purchase of goods and services.
16 Cash and Cash Equivalents
Cash at bank and in hand
Short-term bank deposits
Cash and cash equivalents
2021
£m
587
674
1,261
2020
£m
499
1,147
1,646
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, £66 million (2020: £136 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.
236
17 Financial Liabilities – Borrowings
Current
Bank loans and overdrafts1
Commercial paper
Bonds
Lease liabilities
Total short-term borrowings
Bonds
Senior notes
Term loans
Other non-current borrowings
Lease liabilities
Total long-term borrowings
Total borrowings
Derivative financial instruments
Less overdrafts presented in cash and cash equivalents in the cash flow statement
Note
19
19
2021
£m
22
–
2,401
62
2,485
5,568
1,229
–
15
266
7,078
9,563
76
(2)
2020
£m
20
671
–
72
763
8,041
1,221
291
–
241
9,794
10,557
43
(2)
Total financing liabilities
9,637
10,598
1. Bank loans are denominated in a number of currencies: all are unsecured and bear interest based on market short term interest rates
The Group uses derivative financial instruments to hedge certain elements of interest rate and exchange risk on its financing liabilities.
The split between these items and other derivatives on the Balance Sheet is shown below:
2021 (£m)
Derivative financial instruments (financing liabilities)
Derivative financial instruments (non-financing liabilities)
At 31 December 2021
1.
Included within Other non-current receivables on the Balance Sheet
2.
Included within Other non-current liabilities on the Balance Sheet
2020 (£m)
Derivative financial instruments (financing liabilities)
Derivative financial instruments (non-financing liabilities)
At 31 December 2020
1.
Included within Other non-current receivables on the Balance Sheet
Reconciliation of movement in financing liabilities to cash flow statement
At 1 January
Proceeds from borrowings
Repayment of borrowings
Other financing cash flows
Total financing cash flows
New lease liabilities
Exchange, fair value and other movements
Total non-cash financing items
At 31 December
Assets
Liabilities
Current
Non-
Current1
Current
Non-
Current2
31
30
61
–
1
1
(36)
(16)
(52)
(71)
–
(71)
Assets
Liabilities
Current
Non-
Current1
Current
Non-
Current
6
24
30
19
–
19
(68)
(50)
(118)
–
–
–
2021
£m
10,598
38
2020
£m
12,298
2,903
(1,044)
(4,583)
(92)
(47)
(1,098)
(1,727)
109
28
137
86
(59)
27
9,637
10,598
Reckitt Annual Report and Accounts 2021
237
Financial StatementsGovernanceStrategic Report Notes to the Financial Statements (Continued)
17 Financial Liabilities – Borrowings continued
Maturity of borrowings (excluding lease liabilities)
Bank loans and overdrafts repayable:
Within one year or on demand
Other borrowings repayable:
Within one year:
Commercial paper
Bonds
After one year and in less than five years:
Bonds
Senior notes
Term loans
After five years or longer:
Bonds
Senior notes
Other non-current borrowings
Gross borrowings (unsecured)
18 Provisions for Liabilities and Charges
At 1 January 2020
Charged to the Income Statement
Utilised during the year
Released to the Income Statement
Reclassifications
Exchange adjustments
At 31 December 2020
Charged to the Income Statement
Utilised during the year
Released to the Income Statement
Exchange adjustments
At 31 December 2021
Provisions have been analysed between current and non-current as follows:
Current
Non-current
2021
£m
2020
£m
22
20
–
2,401
2,546
572
–
3,022
657
15
9,213
9,235
671
–
4,194
569
291
3,847
652
–
10,224
10,244
Legal
provisions
£m
Other
provisions
£m
Total
provisions
£m
151
160
(13)
(61)
(2)
(3)
232
39
(69)
(15)
(7)
180
83
19
(13)
(27)
2
(4)
60
10
(4)
(11)
–
55
2021
£m
191
44
235
234
179
(26)
(88)
–
(7)
292
49
(73)
(26)
(7)
235
2020
£m
243
49
292
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.
As at 31 December 2021, the Group recognised legal provisions of £180 million (2020: £232 million) in relation to a number of historical
regulatory and other matters in various jurisdictions. These provisions relate to matters where the Group is currently involved with, or
potentially will be involved in litigation. The provision represents the Group’s best estimate of the likely settlement. Due to the uncertain nature
of the resolution of majority of these matters, £144 million (2020: £192 million) is recorded as a current provision as it is possible the matter
could be settled in the next 12 months, however, it is possible that they may not be. Legal provisions includes £75 million (2020: £83 million)
relating to the Humidifier Sanitiser (HS) issue in Korea (see Note 20).
Other provisions include environmental and other obligations throughout the Group, the majority of which are expected to be utilised within
five years.
238
19 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.
Interest on lease liabilities amounted to £13 million (2020: £13 million)
2021
£m
2020
£m
64
222
140
426
328
62
266
86
176
122
384
313
72
241
20 Contingent Liabilities and Assets
The Humidifier Sanitiser (HS) issue in South Korea was a tragic event. The Group continues to make both public and personal apologies to the
victims who have suffered lung injury as a result of the Oxy HS product and the role that the Oxy HS product played in the issue.
As previously reported, over the last several years the South Korean government has designated a number of diseases as HS injuries, in
addition to the HS lung injury for which RB Korea’s (RBK) compensation plan was established. These include asthma, toxic hepatitis, child
interstitial lung disease, bronchitis and upper airway disease. On 29 October 2021, the South Korean Government published a report that
concluded epidemiological correlation exists between HS use and asthma, ILD and pneumonia. Our expert advisors have reviewed the report
and concluded that it does not clearly support causation between HS use and the above injuries.
The Korean National Assembly passed a bill on 6 March 2020 to amend the HS law. The amendment became effective on 25 September 2020.
The main changes in the amendment relate to: (i) the definition of HS injury (removing the requirement for ‘substantial causation’ with HS
exposure); (ii) the legal presumption of causation (shifting the burden of proof for causation to the defendant if the plaintiff demonstrates
‘epidemiological correlation’ between HS exposure and their injury), and (iii) amendments to the fund set up by the government and funded by
the government and HS companies (the Special Relief Fund (SRF), now called the Injury Relief Fund (IRF)) to provide expanded support
payments to HS victims (which would cover all elements of court awarded damages except mental distress, aside from KRW 100 million
consolation payments for death cases, and partial lost income). The government can also impose on HS manufacturers an additional levy for
the IRF of up to the amount previously collected for the SRF.
Further, under the amended HS law, HS victims will no longer be classified as Categories 1 to 5 based on the likelihood that HS exposure
caused their lung injury. As RBK’s compensation plan was dependent on the previous classification system, it will no longer be possible for
the compensation plan to operate and it is now closed. The pending civil actions filed by HS claimants against RBK will also be impacted by
the amended HS law, e.g. due to the lowered causation standard of ‘epidemiological correlation’. Thus, we have seen the number of civil
claimants to increase, primarily seeking awards for mental distress and lost income (for portions not already covered by the IRF).
The HS mediation committee (HSMC) was established in October 2021 and has been meeting with claimant groups and industry companies
to discuss various issues related to designing a comprehensive mediation plan to cover all HS victims. It is our current understanding that the
HSMC plans to announce a mediation proposal in the second quarter of 2022. Reckitt Korea will not be bound to accept its mediation proposal
and could not do so without financial support from the Group.
The Group currently has a provision of £75 million (2020: £83 million) in relation to the HS issue in South Korea. In addition, there are further
potential costs that either are not considered probable or cannot be reliably estimated at the current time. The impact of the HS law
amendments will require further monitoring and analysis, in particular those which will be subject to court interpretation, such as the new
epidemiological correlation standard, any limitation applied by courts to damage awards and the interest rate applied by individual courts to
damage awards and external factors such as the rate of future IRF applications/recognitions. Accordingly, it is not possible to make any reliable
estimate of liability for individuals recognised by the government as having HS injuries.
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.
Reckitt Annual Report and Accounts 2021
239
Financial StatementsGovernanceStrategic Report Notes to the Financial Statements (Continued)
21 Trade and Other Payables
Trade payables
Other payables
Other tax and social security payable
Accruals
Trade and other payables
2021
£m
2,064
100
155
2,948
5,267
2020
£m
2,159
92
164
3,327
5,742
Included within accruals is £1,137 million (2020: £1,275 million) in respect of amounts payable to trade customers and government bodies for
trade spend.
Other Non-current Liabilities
Financial liability in respect of put option to non-controlling interest1
Interest accrued on tax balances
US employee related payables
Derivative financial instruments
Other
Other non-current liabilities
2021
£m
–
135
46
71
81
333
2020
£m
148
157
39
–
53
397
1.
In 2020, this liability was 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 27 this option has lapsed in the year to 31 December 2021 and has accordingly been credited to equity
Financial instruments (Note 15)
At 31 December 2021 £5,193 million (2020: £5,777 million) of the current and non-current payables totalling £5,600 million (2020: £6,139 million)
are financial liabilities. These mainly related to amounts owed to suppliers in respect of goods or services and are typically non-interest
bearing. Amounts that are not financial instruments comprise of employee related liabilities, social security liabilities and accrued interest.
22 Current and Non-current Tax Assets and Liabilities
Current tax liabilities
Non-current tax liabilities
Total current and non-current tax liabilities
2021
£m
93
826
919
2020
£m
72
1,021
1,093
Included in total current and non-current tax liabilities is an amount of £770 million (2020: £950 million) 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.
23 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 pension plan (UK) is set up under Trust and is a separate entity from the Group. It
has two sections, a defined contribution section which remains open and a defined benefits section, which closed to accrual from
31 December 2017. Members have a normal retirement age of 65. 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 of the defined benefit
section and compliance with regulations. The defined benefit section of the plan is funded by the payment of contributions as required,
following each Triennial Valuation.
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 agreed that its aim was to eliminate the pension plan technical provisions deficit in the UK by the end of 2020. Funding
levels are monitored on an annual basis and the current agreed annual deficit reduction contributions are £nil. It is expected that contributions
to the UK defined benefit plan in 2022 will be £nil (2021: £nil).
The Group continues to monitor the impact of UK High court rulings clarifying the requirements to equalise the Guaranteed Minimum Pension
element of benefits for men and women within the UK Pension schemes from Guaranteed Minimum Pension accrued from post 17 May 1990
pensionable service. Discussions are ongoing with the pension trustees from all defined benefit schemes in the UK, but no final agreement has
yet been reached.
240
23 Pension and Post-Retirement Commitments continued
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 healthcare 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 healthcare 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.
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 2022. For the Mead Johnson & Company, LLC Medical Plan, the most recent valuation was carried out at 1 January
2022. 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 2022 will be £7 million (2021: £7 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 2021. The UK plans have a weighted average duration of the
deferred benefit obligation of 17.0 years (2020: 17.0 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
2021
2020
UK
%
5.4
3.4
3.25
1.9
3.4
–
US (Medical)
%
–
–
–
2.7
–
5.0-8.0
UK
%
5.1
3.1
2.9
1.5
3.1
–
US (Medical)
%
–
–
–
2.3
–
5.0-8.5
Assumptions regarding future mortality experience are set in accordance with published statistics and experience in each territory. The
expected lifetime of a participant aged 60 and the expected lifetime of a participant who will be aged 60 in 15 years (20 years in the US) are
detailed below:
Number of years a current pensioner is expected to live beyond 60:
Male
Female
Number of years a future pensioner is expected to live beyond 60:
Male
Female
2021
2020
UK years
US years
UK years
US years
27.5
28.9
28.7
30.2
25.1
27.2
26.8
28.8
27.5
28.7
28.8
30.0
25.3
27.3
27.0
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 2020 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-2020
No adjustment has been made for the impact of COVID-19 on mortality assumptions as it is too early to conclude on any evidence to support
the impact.
Reckitt Annual Report and Accounts 2021
241
Financial StatementsGovernanceStrategic Report Notes to the Financial Statements (Continued)
23 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 asset/(liability)
The funded and unfunded amounts recognised on the Balance Sheet are determined as follows:
2021
US
(Medical)
£m
UK
£m
Other
£m
Total
£m
2020
US
(Medical)
£m
UK
£m
Present value of funded obligations
(1,486)
Fair value of plan assets
Surplus/(liability) of funded plans
Present value of unfunded obligations
Irrecoverable surplus
1,788
302
–
(4)
(481)
(1,967)
(1,547)
496
15
(107)
(169)
–
–
2,284
317
(276)
(4)
37
1,754
207
–
(19)
188
–
–
–
(125)
–
(125)
Net pension surplus/(liability)
298
(107)
(154)
2021
£m
(107)
(211)
(318)
298
57
355
37
2020
£m
(125)
(247)
(372)
188
38
226
(146)
Other
£m
Total
£m
(538)
(2,085)
510
(28)
(181)
–
(209)
2,264
179
(306)
(19)
(146)
The UK surplus of £298 million (2020: £188 million) relates mainly to the Reckitt Benckiser Pension Fund. This surplus has been recognised as the
Group has concluded it has an unconditional right to a refund of any surplus once all member benefits have been paid. The Group’s judgement
is based on legal advice that the trustees would be unable to unconditionally wind up the plan or enhance members benefits without the
Group’s consent.
Group plan assets are comprised as follows:
Equities
Government bonds
Corporate bonds
Real Estate/property – unquoted
Insurance contracts
Other assets – unquoted
UK
£m
178
215
356
113
388
538
Fair value of plan assets
1,788
2021
US
(Medical)
£m
Other
£m
Total
£m
2020
US
(Medical)
£m
Other
£m
Total £
m
–
–
–
–
–
–
–
217
137
92
51
–
13
399
819
487
161
350
48
510
2,264
UK
£m
182
682
395
110
350
35
202
230
25
19
–
20
380
445
381
132
388
558
496
2,284
1,754
–
–
–
–
–
–
–
–
–
–
In 2021, the Trustees of two of the UK pension plans entered into an annuity buy-in agreement which covers, in aggregate, £48 million of
pension liabilities (valued under IAS19 at 31 December 2021). The buy-in involved the purchase of a bulk annuity policy under which the insurer
will pay the UK pension funds amounts equivalent to the benefits payable to members. This purchase was conducted by the trustees to
ensure the pension fund had an asset that would match its obligation to members. The pension liabilities remain with, and the matching
annuity policies are held within, the UK pension funds. As this was an investment decision by the trustees the immaterial reduction in the
valuation of plan assets (due to the difference between the purchase price of the annuity policy and the accounting value of the buy-in asset)
is recorded within Other comprehensive income.
In 2020 the trustees of the principle UK pension plan entered into a similar arrangement, a similar immaterial downward remeasurement of
pension assets was recorded within Other comprehensive income. At 31 December 2021 this arrangement covered £340 million (2020: £350
million) of pension liabilities (valued under IAS19).
At 31 December 2021 the Group has not committed to any Buy-out arrangements in respect of any of the UK pension schemes.
242
23 Pension and Post-Retirement Commitments continued
Included in Other assets are £466 million (2020: nil) relating to liability driven investment funds. This is a bespoke pooled investment vehicle
with underlying listed bonds and structured notes. The trustees have purchased these investments during the year to lower risk within the
portfolio without reducing potential returns. The remaining other assets are cash.
The present value of obligations for the combined UK plans and the US Medical plans at last valuation date is attributable to participants as follows:
Active participants
Participants with deferred benefits
Participants receiving benefits
Present value of obligation
2021
2020
US
(Medical)
£m
(45)
(1)
(62)
UK
£m
(1)
(646)
(839)
UK
£m
–
(687)
(860)
(1,486)
(107)
(1,547)
US
(Medical)
£m
(50)
(2)
(73)
(125)
The movement in the Group’s net surplus/(deficit) is as follows:
Present value of obligation
Fair value of plan assets
At 1 January 2020
Current service cost
Interest expense/(income)
Remeasurements:
Return on plan assets, excluding
amounts included in interest income
Losses/(gains) 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 2020
Current service cost
Administrative costs
Interest expense/(income)
Remeasurements:
Return on plan assets, excluding
amounts included in interest income
Losses/(gains) from changes in
demographic assumptions
(Gains) from change in financial
assumptions
Experience (gains)/losses
Exchange differences
Contributions – employers
Payments from plans:
Benefit payments
As at 31 December 2021
US
(Medical)
£m
130
UK
£m
1,506
4
28
32
–
9
88
(9)
88
–
–
(79)
1,547
–
2
23
25
–
1
(27)
8
(18)
–
–
–
(68)
1,486
1
4
5
–
(1)
12
(10)
1
(4)
–
(7)
125
1
–
3
4
–
(6)
(5)
(3)
(14)
–
–
–
(8)
107
Other
£m
704
4
14
18
–
(2)
55
3
56
(15)
–
(44)
719
9
–
9
18
–
4
(33)
4
(25)
(5)
–
–
(57)
650
Total
£m
2,340
9
46
55
–
6
155
(16)
145
(19)
–
UK
£m
(1,741)
–
(32)
(32)
(54)
–
–
–
(54)
–
(6)
(130)
79
2,391
(1,754)
10
2
35
47
–
(1)
(65)
9
(57)
(5)
–
–
(133)
–
–
(26)
(26)
(76)
–
–
–
(76)
–
–
–
68
2,243
(1,788)
US
(Medical)
£m
–
–
–
–
–
–
–
–
–
–
(7)
7
–
–
–
–
–
–
–
–
–
–
–
(8)
–
8
–
Other
£m
Total
£m
(534)
(2,275)
–
(15)
(15)
–
(47)
(47)
(17)
(71)
–
–
–
(17)
20
(8)
–
–
–
(71)
20
(21)
44
130
(510)
(2,264)
–
–
(5)
(5)
–
–
(31)
(31)
(30)
(106)
–
(1)
–
(31)
4
(11)
–
57
–
(1)
–
(107)
4
(19)
–
133
(496)
(2,284)
Reckitt Annual Report and Accounts 2021
243
Financial StatementsGovernanceStrategic Report Notes to the Financial Statements (Continued)
23 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 losses/(gains) for2:
UK
US (Medical)
Other
2021
£m
48
2020
£m
45
2
1
9
60
–
60
94
14
56
164
4
1
4
54
–
54
34
1
39
74
1. The Income Statement charge recognised in operating profit includes current service cost, past service cost and administrative costs
2. Remeasurement (gains) excludes £15 million (2020: £1 million) 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:
2021
Discount rate
RPI increase
Life expectancy
2020
Discount rate
RPI increase
Life expectancy
Change in assumption
Change in defined
benefit obligation
Increase 0.1%
Decrease by 1.6%
Increase 0.1%
Increase by 0.9%
Members live 1 year longer
Increase by 4.0%
Change in assumption
Change in defined benefit
obligation
Increase 0.1%
Increase 0.1%
Decrease by 1.7%
Increase by 1.0%
Members live 1 year longer
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 1% change in the assumed healthcare 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. However, the Group believes that due to the
long-term nature of the plan liabilities and the strength of the supporting group, a level of continuing equity investment is an appropriate
element of the Group’s long-term strategy to manage the plans efficiently.
Changes in bond yields: A decrease in government and corporate bond yields will increase plan liabilities, although this will be partially offset
by an increase in the value of the plans’ bond holdings
Inflation risk: Some of the Group’s pension obligations are linked to inflation, and higher inflation will lead to higher liabilities (although, in most
cases, caps on the level of inflationary increases are in place to protect the plan against extreme inflation). The majority of the plans’ assets are
either unaffected by (fixed interest bonds) or loosely correlated with (equities) inflation, meaning that an increase in inflation will also increase
the deficit. In the US plans, the pensions in payment are not linked to inflation, so this is a less material risk.
244
23 Pension and Post-Retirement Commitments continued
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. In 2020 the principle UK scheme reduced its
exposure by purchasing an insurance product that will pay the pensions of some of the scheme’s pensioners. In 2021 two other UK pension
schemes purchased a similar insurance policy.
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 unit linked insurance policies with underlying investments in 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 majority of their assets to low cost investment funds in consultation
with the Group whilst maintaining a prudent diversification and appropriate interest and inflation hedging.
24 Share Capital
Issued and fully paid
At 31 December 2020
At 31 December 2021
Equity
ordinary
shares
number
736,535,179
736,535,179
Nominal
value £m
74
74
The holders of ordinary shares (par value 10 pence) 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 (2020: nil ordinary shares) were allotted and 1,677,112 ordinary shares were released from Treasury (2020:
2,988,443) 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
2021
2020
Number of
shares
Consideration
£m
Number of
shares
Consideration
£m
860,697
164,867
1,025,564
–
651,548
1,677,112
41
–
41
–
39
80
2,774,400
5,804
2,780,204
–
208,239
2,988,443
120
–
120
–
11
131
In 2021, 1,677,112 Treasury shares were released (2020: 2,988,443), leaving a balance held at 31 December 2021 of 22,122,980 (2020: 23,800,092).
Proceeds received from the reissuance of Treasury shares to exercise share options were £80 million (2020: £131 million).
25 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. All schemes are equity-settled. The total charge for share-based payments for the year was £30 million (2020: £15 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 and continued employment.
For awards granted before December 2012:
Adjusted earnings per share growth over three years (%)
Proportion of awards vesting (%)
<6%
Nil
6%
40%
7%
60%
8%
80%
≥9%
100%
For awards granted in December 2013 and thereafter:
Adjusted earnings per share growth over three years (%)
Proportion of awards vesting (%)
<6%
Nil
6%
Between 6% and 10%
20% Straight-line vesting between 20% and 100%
≥10%
100%
Reckitt Annual Report and Accounts 2021
245
Financial StatementsGovernanceStrategic Report Notes to the Financial Statements (Continued)
25 Share-Based Payments continued
For awards granted in May 2019:
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)
For awards granted in May 2020:
Adjusted EPS at actual FX rates (in final year)
Adjusted EPS at constant FX rates (in final year)
Net Revenue growth (three-year CAGR)
Return on capital employed (in final year)
For awards granted in May 2021 and thereafter:
Adjusted EPS at actual FX rates (in final year)
Adjusted EPS at constant FX rates (in final year)
Net Revenue growth (three-year CAGR)
Return on capital employed (in final year)
Threshold
(20%
vesting)
Maximum
(100%
vesting)
Weighting
25%
25%
25%
25%
4%
4%
2%
9%
9%
6%
10.8%
12.8%
Threshold
(20%
vesting)
Maximum
(100%
vesting)
302p
323p
2.0%
11.8%
337p
360p
5.0%
13.1%
Weighting
12.5%
12.5%
50.0%
25.0%
Threshold
(20%
vesting)
Maximum
(100%
vesting)
308p
327p
1%
12.3%
379p
401p
5%
14.0%
Weighting
12.5%
12.5%
50%
25%
The cost is spread over the three years of the performance period. For Group 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, for awards granted prior to 2021, 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. For awards granted in May 2021 and
thereafter, vesting conditions must be met over the three-year period and are not retested.
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.
Summary of shares outstanding
All outstanding Executive and Other share awards as at 31 December 2021 and 31 December 2020 are included in the tables following which
analyse the charge for 2021 and 2020. 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.
246
25 Share-Based Payments continued
Table 1: Fair value
The most significant awards are share options and restricted shares, details of which have been provided below.
Black-Scholes model assumptions
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
£
Award
Grant date
Share options
2013
2014
2015
2016
2017
2018
2019
2020
2021
Restricted shares
2018
2019
2020
2021
3 December 2012
39.14
38.06
2013–15
11 December 2013
1 December 2014
2 December 2015
1 December 2016
30 November 2017
10 May 2019
1 May 2020
28 May 2021
30 November 2017
10 May 2019
1 May 2020
28 May 2021
47.83
50.57
63.25
67.68
64.99
60.83
65.20
64.67
–
–
–
–
46.51
50.57
63.25
67.68
64.99
60.83
2014–16
2015–17
2016–18
2017–19
2018–20
2019–21
65.20
2020–22
64.67
2021–23
–
–
–
–
2018–20
2019–21
2020–22
2021-23
39.66
46.69
52.40
64.15
66.28
64.86
61.45
65.70
63.68
64.86
61.40
65.70
63.68
20
19
17
18
18
18
20
21
22
18
19
21
22
4.3
3.7
4.0
2.9
3.0
3.4
3.7
2.6
2.1
3.4
3.7
2.6
2.1
4
4
4
4
4
4
4
4
4
4
4
4
4
0.61
0.76
1.03
1.07
0.46
0.68
0.83
0.55
0.20
0.68
0.83
0.55
0.20
3.29
3.85
4.34
6.75
5.54
5.58
5.89
7.96
7.84
56.71
53.02
59.17
58.65
Table 2: Share awards movements 2021
Movement in number of options
Options outstanding
at 1 January 2021
number
Granted/
adjustments
number
Lapsed
number
Exercised/
vested
number
Options outstanding
at 31 December 2021
number
Award
Share options1
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Restricted shares1
2016
2017
2018
2019
2020
2021
Other share awards
UK SAYE
US SAYE
Overseas SAYE
SOPP
Weighted average exercise price (share options)
151,411
247,750
457,296
742,966
1,120,802
573,907
1,837,548
2,086,058
2,595,052
–
–
–
–
–
–
–
–
–
(2,057)
(149,354)
–
(79,343)
(13,350)
(159,136)
(15,000)
(295,000)
(383,399)
(169,850)
(82,376)
(839,095)
(261,796)
(378,529)
–
3,075,575
(205,846)
124,863
175
849,859
1,114,886
–
–
(124,863)
(175)
16,997
(389,368)
(13,884)
(177,664)
1,404,377
7,242
(195,882)
–
1,738,153
(126,265)
(850)
–
–
–
–
–
–
(30,033)
(57,737)
(84,995)
(22,836)
–
168,407
284,810
432,966
567,553
490,681
998,453
1,824,262
2,216,523
2,869,729
–
–
447,455
865,601
1,130,742
1,589,052
870,527
951,133
383,424
(148,654)
(102,653)
(95,794)
(65,747)
738,410
672,995
2,302,103
156,000
£60.97
439,679
930,727
92,800
£64.67
(673,300)
(482,826)
2,076,704
(33,403)
(14,597)
£64.05
£47.80
200,800
£62.58
1. Grant date and exercise price for each of the awards are shown in Table 1
Reckitt Annual Report and Accounts 2021
247
Financial StatementsGovernanceStrategic Report Notes to the Financial Statements (Continued)
25 Share-Based Payments continued
Table 3: Share awards movements 2020
Movement in number of options
Award
Share options1
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Restricted shares1
2016
2017
2018
2019
2020
Other share awards
UK SAYE
US SAYE
Overseas SAYE
SOPP
Exercised/
vested
number
Options outstanding
at 31 December 2020
number
Options outstanding
at 1 January 2020
number
Granted/
adjustments
number
71,509
367,374
646,593
924,419
1,298,544
1,904,977
1,841,056
2,171,480
2,385,439
–
–
–
–
–
–
–
–
–
–
2,626,735
144,288
824,061
1,067,280
1,364,136
–
–
–
–
–
1,448,758
746,570
622,765
1,889,663
103,200
£58.43
184,943
161,659
576,689
88,400
£65.20
Lapsed
number
(2,400)
(2,210)
(2,057)
(2,057)
(5,000)
(69,109)
(213,753)
(396,786)
(465,066)
(550,578)
(95,138)
(689,037)
(1,219,134)
(331,924)
(299,381)
(31,683)
(19,425)
(48,015)
(2,008)
–
–
–
(546,909)
(276,977)
(190,262)
(186,828)
(29,041)
(65,490)
(55,048)
(149,851)
(12,800)
£65.77
(27,159)
(62,422)
(15,340)
(127,613)
(56,381)
(14,398)
(22,800)
£49.51
–
151,411
247,750
457,296
742,966
1,120,802
573,907
1,837,548
2,086,058
2,595,052
124,863
175
849,859
1,114,886
1,404,377
738,410
672,995
2,302,103
156,000
£60.97
Weighted average exercise price (share options)
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 4.58 years (2020: 5.42 years). Options outstanding
at 31 December 2021 that could have been exercised at that date were 1,946,341 (2020: 3,427,971) with a weighted average exercise price of
£57.03 (2020: £53.38).
The assumptions made in determining the share-based payments charge, in 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.
No material modifications have occurred requiring revision to the share-based payment charges for the outstanding awards.
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 £61.60 (2020: £68.19).
248
25 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 2022 and 2027 are
as follows:
Executive share option and restricted share schemes
Reckitt Benckiser Long-term Incentive Plan – share options
Reckitt Benckiser Long-term Incentive Plan – restricted shares
Reckitt Benckiser Group Senior Executive Share Ownership Policy Plan
Total
Savings-related share option schemes
UK Scheme
US Scheme
Overseas Scheme
Total
Price to
be paid
£
Number of
shares under
option
64.67
3,075,575
–
–
1,738,153
92,800
4,906,528
44.56
44.56
44.56
383,424
439,679
930,727
1,753,830
Options and restricted shares outstanding at 31 December 2021
Options and restricted shares which have vested or may vest at various dates between 2022 and 2027 are as follows:
Executive share option and restricted share schemes
Reckitt Benckiser Long-term Incentive Plan – Annual Grant – options
38.06
78.00
9,853,384
Reckitt Benckiser Long-term Incentive Plan – Annual Grant – restricted shares
Reckitt Benckiser Senior Executives Share Ownership Policy Plan
–
–
–
–
4,032,850
200,800
9,812,790
3,494,160
156,000
Price to be paid £
Number of shares under option
From
To
2021
2020
Total
Savings-related share option schemes
UK Scheme
US Scheme
Overseas Scheme
Total
26 Other Reserves
44.56
44.56
44.56
62.44
62.44
62.44
Balance at 1 January 2020
Other comprehensive income/(expense)
Losses on cash flow hedges, net of tax
Net exchange losses on foreign currency translation, net of tax
Losses on net investment hedges
Total other comprehensive expense for the year
Balance at 31 December 2020
Other comprehensive income/(expense)
Gains on cash flow hedges, net of tax
Net exchange losses on foreign currency translation, net of tax
Gains on net investment hedges, net of tax
Reclassification of foreign currency translation reserves on disposal or liquidation of foreign
operations, net of tax
Total other comprehensive income/(expense) for the year
Balance at 31 December 2021
Hedging
Reserve
£m
(2)
(17)
–
–
(17)
(19)
30
–
–
–
30
11
14,087,034
13,462,950
870,527
951,133
2,076,704
3,898,364
Foreign
currency
translation
reserve
£m
738,410
672,995
2,302,103
3,713,508
Total other
reserves
£m
(78)
(80)
–
(207)
(75)
(282)
(360)
–
(374)
84
(550)
(840)
(1,200)
(17)
(207)
(75)
(299)
(379)
30
(374)
84
(550)
(810)
(1,189)
Reckitt Annual Report and Accounts 2021
249
Financial StatementsGovernanceStrategic Report Notes to the Financial Statements (Continued)
26 Other Reserves continued
The hedging reserve comprises the effective portion of the cumulative net change in fair value of cash flow hedging instruments related to
hedge transactions that are extant at year end.
The foreign currency translation reserve contains the accumulated foreign exchange differences from the translation of the Financial
Statements of the Group’s foreign operations arising when the Group’s entities are consolidated. The reserve also contains the translation of
liabilities that hedge the Group’s net exposure in a foreign currency.
During the year ended 31 December 2021 a net gain of £550 million was reclassified to the income statement from foreign currency
reserves following the disposal or liquidation of foreign operations, of which a net gain of £766 million related to the liquidation of subsidiaries
(see Note 6 for further details) offset by a loss of £216 million, made up of a £284 million arising from the disposal of certain businesses
(see Note 29), less related tax credits of £68 million (see Note 7).
27 Related Party Transactions
The Group has symmetrical put and call options over the non-controlling shareholdings of RB & Manon Business Co. Ltd, RB & Manon Business
Limited, RB (China Trading) Limited, RB (Hygiene Home) HK Limited, RB & Manon Hygiene Home (HK) Limited and RB & Manon Hygiene Home
(Shanghai) Limited.
During the year ended 31 December 2021, the options were measured at fair value and as a result £14 million was credited to the income
statement during the year (see Note 6).
On 31 December 2021, notice to exercise the put and call options was not provided. As a result of the option notice not being received, this
option expired. As a result of the expiry of these options, the related liabilities of £135 million were de-recognised with their carrying value
credited to equity.
Other
The Group has related party relationships with its Directors and key management personnel (Note 5). Other related party relationships are
acknowledged in Note 11.
28 Dividends
Cash dividends on equity ordinary shares:
2020 Final paid: 101.6p (2019: Final 101.6p) per share
2021 Interim paid: 73p (2020: Interim 73p) per share
Total dividends for the year
2021
£m
2020
£m
725
521
1,246
721
520
1,241
The Directors are proposing a final dividend in respect of the financial year ended 31 December 2021 of 101.6p per share which will absorb
an estimated £726 million of Shareholders’ funds. If approved by Shareholders it will be paid on 9 June 2022 to Shareholders who are on the
register on 29 April 2022, with an ex-dividend date of 28 April 2022.
29 Acquisitions, Disposals and Held for Sale
During the year ended 31 December 2021, the Group completed several acquisitions, accounted for as business combinations, and disposals.
In each case, 100% of the businesses were acquired or disposed unless stated otherwise. The Group did not have business disposals or
acquisitions during the year ended 31 December 2020.
Acquisitions
Acquisition of Biofreeze
On 12 July 2021, the Group acquired 100% of the equity interests in Lanai Holdings, owner of the Biofreeze and TheraPearl brands, for cash
consideration of $1,060 million (£766 million). Biofreeze is a leader in over-the-counter topical pain relief, with a strong footprint in the North
America retail and clinical channels and a growing international presence. The acquisition of Biofreeze and TheraPearl has been accounted for
as a business combination.
Included within the identifiable assets acquired are brands of £596 million, comprising Biofreeze (£564 million) and TheraPearl (£32 million),
customer relationships of £24 million and inventories of £26 million.
Goodwill of £271 million has been recorded on the acquisition, of which £151 million is a consequence of the requirement to record deferred
tax liabilities for certain acquired assets. Goodwill represents the future value which the Group believes it will obtain from innovation arising
from combining the acquired business with the Group’s existing businesses, which has not been recognised as an intangible asset at the
acquisition date. None of the goodwill is deductible for income tax purposes.
The Biofreeze acquisitions contributed £55 million to Group net revenue and £9 million to Group operating profit since acquisition, with
transaction costs of £12 million. If the acquisition had taken place at the beginning of the year, Group net revenue would have been increased
by circa £50 million and the impact on Group net income would have been immaterial.
250
29 Acquisitions, Disposals and Held for Sale continued
Other acquisitions
The Group also completed the following acquisitions during 2021 for cash consideration, all of which have been accounted for as
business combinations:
•
1 April 2021, the Maple Island USA dry processing plant, previously a co-packer for Enfagrow stage 3 and Metabolics, as an asset purchase.
• 4 May 2021, through a trade and asset purchase, a business distributing Reckitt products in the United Arab Emirates.
• 31 May 2021, a Chinese PU condom business through an acquisition of an 80% equity interest in Lanzhou Keshi Xixili Healthcare Technologies
Co Ltd.
The results of other acquisitions have been included in the Group’s financial statements since the relevant acquisition dates. The effect of
these other acquisitions was immaterial to the Group.
The following table summarises the consideration paid and the fair values of assets acquired and liabilities assumed. The amount of
consideration transferred in excess of the value of total identifiable net assets is recorded as goodwill.
Brands and other intangible assets
Property, plant and equipment
Inventories
Deferred tax liabilities
Total identifiable net assets
Goodwill
Total
Cash consideration
Deferred consideration
Total consideration
Biofreeze
£m
Others
£m
620
–
26
(151)
495
271
766
766
–
766
52
20
–
–
72
99
171
149
22
171
Total
£m
672
20
26
(151)
567
370
937
915
22
937
Disposals
The Group completed three disposals in 2021, for a total consideration, net of disposal costs, of £1,704 million, resulting in a total pre-tax loss on
disposal of £3,518 million reported within total net operating expenses. None of the disposals meets the definition of a discontinued operation
under IFRS as each disposal does not represent the disposal of either a separate major line of business or a geographical area of operations
for Reckitt. As such, the results of the disposed businesses are included in the continuing operations up to their date of disposal.
IFCN China
On 9 September 2021, the Group completed the sale of IFCN China to Primavera Capital Group for total cash consideration, net of disposal
costs, of £1,436 million. The consideration was principally represented by cash of £1,513 million and an 8% shareholding in the purchaser’s
acquisition entity. The disposal followed a comprehensive strategic review of IFCN China announced by the Group in February 2021. The
transaction was structured as a sale of the entirety of IFCN China (China, Hong Kong and Taiwan), including the manufacturing plants in
Nijmegen, the Netherlands and Guangzhou, China. The disposal included a royalty-free perpetual and exclusive license of the Mead Johnson
and Enfa family of brands in China. Reckitt continues to own the Mead Johnson and Enfa family of brands globally and operates these brands
in the rest of the world. On completion of the disposal, the Group recognized a pre-tax loss on disposal of £3,284 million included within total
net operating expenses. IFCN China formed part of the Nutrition segment.
Reckitt Annual Report and Accounts 2021
251
Financial StatementsGovernanceStrategic Report Notes to the Financial Statements (Continued)
29 Acquisitions, Disposals and Held for Sale continued
Other disposals
In 2021 the Group completed two other transactions:
• On 1 June 2021 the Group completed the sale of Scholl and certain other brands to Yellow Wood Partners, for cash consideration of
£272 million. Scholl formed part of the Health operating segment.
• On 1 November 2021 the EnfaBebé brand was sold to the Roemmers Group. EnfaBebé formed part of the Nutrition operating segment.
The following table sets out the effect of the disposals completed in the year ended 31 December 2021:
Cash consideration
Non-cash consideration:
– Fair value of equity instrument
– Fair value of seller’s indemnities
Disposal costs
Total consideration, net of disposal costs
Goodwill and other intangible assets
Property, plant and equipment
Inventories
Cash and cash equivalents
Trade receivables and other assets
Trade payables and other liabilities
Net Assets disposed
Non-controlling interest
Cumulative foreign exchange reclassified to the Income Statement
IFCN China
£m
1,513
Others
£m
279
33
(48)
(62)
1,436
4,276
173
154
168
97
(408)
4,460
(9)
(251)
–
–
(11)
268
4421
–
24
2
8
(7)
469
–
(33)
Total
£m
1,792
33
(48)
(73)
1,704
4,718
173
178
170
105
(415)
4,929
(9)
(284)
Loss on disposal, before tax
(3,284)
(234)
(3,518)
1
The £442 million comprises of £374 million relating to Scholl, and £68 million relating to EnfaBebé
Assets held for sale
On 24 December 2021, the Group entered into an agreement for the sale of the E45 brand and related sub-brands to Karo Pharma AB
for £200 million and the sale completed on 1 April 2022. Associated intangible assets of £140 million (including £28 million of Goodwill) have
accordingly been presented within assets held for sale at the balance sheet date. The E45 brand and related sub-brands form part of the
Health operating segment.
Assets held for sale at 31 December 2021 also includes the carrying value of certain property assets which are being actively marketed for sale.
30 Discontinued Operations
In the year ended 31 December 2021, the Group recorded income of £31 million (2020: £50 million income) in discontinued operations,
in relation to an agreement with Indivior plc to settle indemnity claims related to the Group’s previous settlement with the Department
of Justice (DoJ), and related matters. The income in 2020 relates to the partial release of a provision relating to the 2019 settlement with
the DoJ in relation to Indivior plc matters, following a review of outstanding items relating to the DoJ settlement.
31 Post Balance Sheet Events
On 13 April 2022, it was announced that Reckitt has begun a process aimed at transferring ownership of its Russian business, which may
include a transfer to a third party or to local employees. The net assets of the Russian business as at 13 April 2022 were c.£130 million and on
disposal foreign exchange losses of c.£140 million would be recycled to the income statement. Any loss on disposal would be primarily non
cash and the Russian business contributed 2% to the Group’s revenue in 2021.
252
FIVE YEAR SUMMARY
The five-year summary below is presented on an IFRS basis. The years ending 31 December 2017, 31 December 2018, 31 December 2019,
31 December 2020, and 31 December 2021 show the results for continuing operations and exclude the impact of RB Food and
RB Pharmaceuticals.
The balance sheet has not been restated for the impact of discontinued operations.
Income Statement
Net Revenue
Operating (loss)/profit
Net finance income/(expense)
Share of loss of equity-accounted investees, net of tax
(Loss)/profit before income tax
Income tax credit/(charge)
Attributable to non-controlling interests
2021
£m
2020
£m
2019
£m
13,234
13,993
12,846
(804)
547
(3)
(260)
208
(11)
2,160
(286)
(1)
1,873
(720)
(16)
Restated1
2018
£m
Restated2
2017
£m
12,597
3,058
11,449
2,737
(338)
(238)
–
–
(1,954)
(153)
–
(2,107)
2,720
2,499
(665)
(13)
(536)
(20)
894
(17)
Net (loss)/income attributable to owners of the parent company from
continuing operations
(63)
1,137
(2,785)
2,164
3,376
Balance Sheet
Net assets
Key Statistics – Reported basis
Operating margin
Diluted earnings per share, continuing
Declared total dividends per ordinary share
1. Restated for the adoption of IFRS 16. The 2017 balances have not been restated
2. Restated for the adoption of IFRS 15
7,453
9,159
9,407
14,771
13,557
(6.1%)
(8.8p)
174.6p
15.4%
159.3p
174.6p
(15.2%)
24.3%
(393.0p)
305.2p
174.6p
170.7p
23.9%
474.7p
164.3p
Reckitt Annual Report and Accounts 2021
253
Financial StatementsGovernanceStrategic Report PARENT COMPANY
BALANCE SHEET
As at 31 December
Fixed assets
Investments
Current assets
Debtors due within one year
Debtors due after more than one year
Current liabilities
Creditors due within one year
Net current liabilities
Total assets less current liabilities
Creditors due after more than one year
Provisions for liabilities and charges
Net assets
EQUITY
Share capital
Share premium
Retained earnings
Total equity
Note
2021
£m
2020
£m
2
3
4
5
5
6
7
15,001
14,975
45
25
70
(10,898)
(10,828)
4,173
(42)
(41)
56
3
59
(9,652)
(9,593)
5,382
(30)
(43)
4,090
5,309
74
253
3,763
4,090
74
252
4,983
5,309
The Financial Statements on pages 254 to 267 were approved by the Board of Directors on 13 April 2022 and signed on its behalf by:
Christopher Sinclair
Director
Reckitt Benckiser Group plc
Company Number: 06270876
Laxman Narasimhan
Director
Reckitt Benckiser Group plc
254
PARENT COMPANY STATEMENT
OF CHANGES IN EQUITY
Balance at 1 January 2020
Comprehensive income
Loss for the financial year
Total comprehensive loss
Transactions with owners
Treasury shares reissued
Share-based payments
Capital contribution in respect of share-based payments
Purchase of ordinary shares by employee share ownership trust
Cash dividends
Total transactions with owners
Balance at 31 December 2020
Comprehensive income
Loss for the financial year
Total comprehensive loss
Transactions with owners
Treasury shares reissued
Share-based payments
Capital contribution in respect of share-based payments
Purchase of ordinary shares by employee share ownership trust
Cash dividends
Total transactions with owners
Balance at 31 December 2021
Share
capital
£m
Share
premium
£m
Retained
earnings
£m
Total
equity
£m
74
245
6,168
6,487
–
–
–
–
–
–
–
–
–
–
7
–
–
–
–
7
(79)
(79)
124
3
12
(4)
(79)
(79)
131
3
12
(4)
(1,241)
(1,241)
(1,106)
(1,099)
74
252
4,983
5,309
–
–
–
–
–
–
–
–
–
–
1
–
–
–
–
1
74
253
(78)
(78)
79
4
26
(5)
(78)
(78)
80
4
26
(5)
(1,246)
(1,142)
3,763
(1,246)
(1,141)
4,090
Reckitt Benckiser Group plc has £3,102 million (2020: £4,347 million) of its retained earnings available for distribution. Details of Treasury shares
and other equity transactions are included in Note 24 of the Group Financial Statements.
Reckitt Annual Report and Accounts 2021
255
Financial StatementsGovernanceStrategic Report NOTES TO THE PARENT COMPANY
FINANCIAL STATEMENTS
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.
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.
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 269. The nature of the
Group’s operations and its principal activities are set out in the
Strategic Report on pages 2 to 103.
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.
Having assessed the principal risks and other matters discussed
in connection with the Group’s Viability Statement as set out on
page 103 of the Group Annual Report, the Directors considered it
appropriate to adopt the going concern basis of accounting in
preparing the Company Financial Statements. When reaching this
conclusion, the Directors took into account the Company’s overall
financial position and exposure to principal risks.
The Company has taken advantage of the following exemptions:
(i) from preparing a Statement of Cash Flows, on the basis that it
is a qualifying entity and the Group Cash Flow Statement,
included in these Financial Statements, includes the Company’s
cash flows;
(ii) from disclosing the Company key management personnel
compensation, as required by FRS 102 paragraph 33.7.
The Company’s results are included in the publicly available
consolidated Financial Statements of Reckitt Benckiser Group plc
and these Financial Statements may be obtained from 103-105 Bath
Road, Slough, Berkshire SL1 3UH or at www.reckitt.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.
256
1 Parent Company Accounting Policies continued
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.
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 debtors and creditors and
loans to and from related parties. These transactions are initially
recorded at transaction price, unless the arrangement constitutes
a financing transaction where the transaction is measured at the
present value of the future receipt discounted at a market rate of
interest, and subsequently recognised at amortised cost.
(i) Financial Assets
At the end of each reporting period financial assets measured at
amortised cost are assessed for objective evidence of impairment.
If an asset is impaired the impairment loss is the difference
between the carrying amount and the present value of the
estimated cash flows discounted at the asset’s original effective
interest rate. The impairment loss is recognised in comprehensive
income or expense.
Financial assets are derecognised when (a) the contractual rights
to the cash flows from the asset expire or are settled, or (b)
substantially all the risks and rewards of the ownership of the asset
are transferred to another party, or (c) control of the asset has
been transferred to another party who has the practical ability
to unilaterally sell the asset to an unrelated third party without
imposing additional restrictions.
(ii) Financial Liabilities
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.
Where a company enters into a financial guarantee contract to
guarantee the indebtedness of other companies within its Group,
the Company treats the guarantee contract as a contingent liability
until such a time as it becomes probable that the Company will be
required to make a payment under the guarantee.
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.
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 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.
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.
Reckitt Annual Report and Accounts 2021
257
Financial StatementsGovernanceStrategic Report Notes to the Parent Company Financial Statements (Continued)
1 Parent Company Accounting Policies continued
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 Company’s Directors are of the opinion that there are no
estimates and assumptions that have a significant risk of causing a
material adjustment to the carrying amount of assets and liabilities
within the next financial year.
Other estimates
Set out below are other estimates where there is a risk of
adjustment to the carrying amounts of assets and liabilities
within the next financial year, but the risk of a material adjustment
is not significant.
Legal provisions:
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 probable loss, considering all
available information, external advice and historical experience.
As at 31 December 2021, the Company recognised legal provisions
of £41 million (2020: £43 million) in relation to a number of historical
regulatory matters. Refer to Note 6 of the Company Financial
Statements for further information.
Tax:
Creditors due after more than one year include management
judgements and estimates of the amount of tax payable on uncertain
tax positions. The exposure recognised is calculated based on the
expected value method and the most likely amount method. The
accounting estimates and judgements considered include:
• Status of the unresolved matter;
The Directors believe that the carrying value of the investments is
supported by their underlying net assets.
The subsidiary undertakings as at 31 December 2021, 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 Limited, 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, Mead Johnson Nutrition (India) Private Limited,
RB Hygiene Home India Private Limited, Reckitt Piramal Private
Limited, and Reckitt & Colman Management Services (Ireland)
Limited (in liquidation) 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 2020, 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 debtors
2021
£m
36
9
45
2020
£m
54
2
56
Amounts owed by Group undertakings are unsecured, interest free
and are repayable on demand (2020: same).
• Clarity of relevant legislation and related guidance;
4 Debtors Due After More Than One Year
Deferred tax assets
Other receivables
2021
£m
1
24
25
2020
£m
3
–
3
Deferred tax assets consist of short-term timing differences.
5 Creditors
Creditors due within one year:
2021
£m
Amounts owed to Group undertakings
10,896
Taxation and social security
Other creditors
1
1
2020
£m
9,647
4
1
10,898
9,652
Included in the amounts owed to Group undertakings is an amount
of £10,889 million (2020: £9,548 million) which is unsecured, carries
interest at the 3M LIBOR equivalent fallback rate and is repayable
on demand (2020: 3M LIBOR). All other amounts owed to Group
undertakings are unsecured, non-interest bearing and are
repayable on demand (2020: same).
• Advice from related party specialists and unrelated third parties;
• Range of possible outcomes; and
• Statute of limitations.
The Company’s Directors are of the opinion that there are no other
judgements and no further key sources of estimation uncertainty in
applying the Company’s accounting policies.
2 Investments
Shares in
subsidiary
undertakings
£m
14,963
12
14,975
26
15,001
–
–
14,975
15,001
Cost
At 1 January 2020
Additions during the year
At 31 December 2020
Additions during the year
At 31 December 2021
Provision for impairment
At 1 January 2020
At 31 December 2021
Net book amounts
At 31 December 2020
At 31 December 2021
258
5 Creditors continued
Creditors due after more than one year:
Non-current tax liabilities
Other creditors
6 Provisions for Liabilities and Charges
At 1 January 2020
Charged to the Statement of
Comprehensive Income
Utilised during the year
Released to the Statement of
Comprehensive Income
At 31 December 2020
Charged to the Statement of
Comprehensive Income
Utilised during the year
At 31 December 2021
2021
£m
38
4
42
2020
£m
30
–
30
Legal
provisions
£m
Total
provisions
£m
99
4
(4)
(56)
43
6
(8)
41
99
4
(4)
(56)
43
6
(8)
41
Provisions have been analysed between current and non-current
as follows:
Current
Non-current
2021
£m
39
2
41
2020
£m
43
–
43
Provisions relate to legal provisions in relation to a number of
historical matters. Refer to Note 18 of the Group Financial
Statements.
7 Share Capital
Issued and fully paid
At 1 January 2021
At 31 December 2021
Equity
ordinary
shares
Nominal
value
£m
736,535,179
736,535,179
74
74
The holders of ordinary shares (par value 10 pence) 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.
The allotment of ordinary shares and release of Treasury shares are
disclosed in Note 24 of the Group Financial Statements.
8 Related Party Transactions
There were no transactions with related parties other than wholly
owned companies within the Group.
9 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 issued a guarantee on behalf of Reckitt Benckiser
Treasury Services plc in relation to the issuance of a $8,250 million
bond (2020: $8,250 million) (two tranches of $2,500 million, one
tranche of $2,000 million, one tranche of $750 million and one
tranche of $500 million) and in relation to the issuance of a £500
million bond (2020: £500 million). Details are included in Note 15
of the Group Financial Statements.
The Company issued a guarantee on behalf of Reckitt Benckiser
Treasury Services plc in relation to committed borrowing facilities
totalling £4,500 million (2020: £5,500 million). Details of the facilities
are included in Note 15 of the Group Financial Statements.
The Company issued a guarantee on behalf of Mead Johnson
Nutrition Company in relation to outstanding senior notes of $1,550
million (2020: $1,550 million) issued by Mead Johnson Nutrition
Company prior to acquisition. The senior notes consist of one
tranche of $750 million, one tranche of $500 million and one
tranche of $300 million.
The Company has also issued a guarantee on behalf of Reckitt
Benckiser Treasury Services (Nederland) BV in relation to the
issuance of two €850 million bonds (2020: two €850 million
bonds). Details are included in Note 15 of the Group
Financial Statements.
Other contingent liabilities are disclosed in Note 20 of the Group
Financial Statements.
10 Post Balance Sheet Events
There are no events subsequent to the balance sheet date that
require disclosure.
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 2021, 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.
During the year ended 31 December 2021, 14 legal entities and
a partnership were placed into liquidation as part of the review
(2020: nine legal entities). 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.
Reckitt Annual Report and Accounts 2021
259
Financial StatementsGovernanceStrategic Report Notes to the Parent Company Financial Statements (Continued)
11 Subsidiary Undertakings continued
Name
Registered
office and
share class
Holding
Name
Registered
office and
share class
Holding
103-105 Bath Road Limited
100.00%
9, 23
Linden Germany A Limited
100.00%
9, 23
2309 Realty Corporation
59.00%
2, 143
Linden Germany B Limited
100.00%
9, 23
Access VC Limited
100.00%
9, 23
Lloyds Pharmaceuticals
100.00%
9, 23
Airwick Industrie SAS
100.00%
9, 81
London International Group Limited
100.00%
9, 23
Anhui Guilong Pharmaceutical Trading
Company Limited
100.00%
1, 45
Apenas Boa Nutrição Indústria de Alimentos Ltda.
100.00%
9, 29
Beleggingsmaatschappij Lemore B.V.
100.00%
9, 130
Benckiser
100.00%
9, 176
Biofreeze IP Holdings, LLC
100.00%
8, 132
Blisa, LLC
100.00%
8, 73
Brand Acquisition Limited
100.00%
9, 110
Canterbury Square Holdings S.à.r.l.
100.00%
9, 120
Central Square Holding B.V.
100.00%
9, 130
Crookes Healthcare Limited*
100.00%
9, 104
Crookes Healthcare Limited
100.00%
9, 23
London International Trading Asia Limited
100.00%
9, 88
LRC North America Inc.
LRC Products Limited
100.00%
5, 73
100.00%
9, 23
LRC Secretarial Services Limited
100.00%
9, 23
Maddison Square Holding B.V.
100.00%
9, 130
Manufactura MJN, S. de R.L. de C.V.
100.00%
9, 125
Mead Johnson & Company LLC
100.00%
8, 73
Mead Johnson do Brasil Comércio e Importação de
Produtos de Nutrição Ltda.
100.00%
9, 33
Mead Johnson do Brasil Comércio e Importação de
Produtos de Nutrição Ltda. – Itajaí Branch†
100.00%
1, 31
Mead Johnson Nutricionales de México,
S. de R.L. de C.V.
100.00%
9, 126
Cupal, Limited
100.00%
11, 23
Mead Johnson Nutrition (Asia Pacific) Pte. Ltd.
100.00%
9, 156
Dakin Brothers Limited
100.00%
9, 23
Mead Johnson Nutrition (Australia) Pty Ltd
100.00%
9, 20
Dorincourt Holdings (Ireland) Limited
100.00%
9, 104
Mead Johnson Nutrition (Canada) Co.
100.00%
4, 40
Durex Limited
100.00%
9, 23
Mead Johnson Nutrition (Dominicana), S.A.
100.00%
4, 73
eRB Trading Limited
100.00%
9, 23
Mead Johnson Nutrition (Dominicana), S.A.†
100.00%
1, 190
ERH Propack Limited*
100.00%
9, 96
Mead Johnson Nutrition (India) Private Limited
100.00%
9, 94
Eros NewCo Limited
100.00%
9, 23
Mead Johnson Nutrition (Malaysia) Sdn Bhd
100.00%
9, 122
Exponential Health LLC
100.00%
9, 73
Mead Johnson Nutrition (Panama), S. de R.L.
100.00%
9, 140
Fenla Indústria, Comércio e Administração Ltda
100.00%
9, 32
Mead Johnson Nutrition (Philippines), Inc.
99.99%
9, 143
FF Homecare & Hygiene Limited
64.29%
11, 186
Mead Johnson Nutrition (Poland) Sp. z o.o
100.00%
14, 145
Gainbridge Investments (Cyprus) Limited
100.00%
9, 70
Mead Johnson Nutrition (Puerto Rico) Inc.
100.00%
9, 73
Glasgow Square Limited
100.00%
9, 23
Mead Johnson Nutrition (Puerto Rico) Inc.†
100.00%
1, 150
Green, Young & Company Limited
100.00%
9, 23
Mead Johnson Nutrition (Singapore) Pte. Ltd.
100.00%
9, 156
Grosvenor Square Holding B.V.
100.00%
9, 130
Mead Johnson Nutrition (Thailand) Ltd.
100.00%
4, 169
Guilong Health Technology (Anhui) Co., Limited
100.00%
1, 45
Mead Johnson Nutrition (UK) Ltd*
100.00%
9, 177
Guilong Pharmaceutical (Anhui) Co. Ltd –
Xiamen branch†
100.00%
1, 47
Guilong Pharmaceutical (Anhui) Company Limited
100.00%
1, 46
Hamol Limited
Hamol NL B.V.
Helpcentral Limited
100.00%
9, 23
100.00%
9, 130
100.00%
9, 23
Howard Lloyd & Company, Limited
100.00%
9, 23
Kukident GmbH
Lanai Holdings 1.5, Inc.
100.00%
4, 83
100.00%
9, 73
Lanzhou Keshi Xixili Healthcare Technologies Co. Ltd
80.00%
13, 199
LI Pensions Trust Limited
100.00%
9, 23
Mead Johnson Nutrition (Venezuela) LLC
100.00%
8, 73
Mead Johnson Nutrition (Vietnam) Company Limited
100.00%
1, 189
Mead Johnson Nutrition Colombia Ltda
100.00%
9, 65
Mead Johnson Nutrition Company
100.00%
9, 73
Mead Johnson Nutrition Holdings (Singapore) Pte. Ltd. 100.00%
9, 156
Mead Johnson Nutrition Nominees LLC
100.00%
8, 73
Mead Johnson Nutrition Trading Poland Sp. z o.o
100.00%
14, 145
Mead Johnson Nutrition Venezuela, S.C.A.
100.00%
7, 187
Mead Johnson One C.V.^
100.00%
8, 192
Mead Johnson Two C.V.^
100.00%
8, 192
260
11 Subsidiary Undertakings continued
Name
Registered
office and
share class
Holding
Name
Registered
office and
share class
Holding
Medcom Marketing And Prodazha Ukraine LLC
100.00%
1, 89
RB (Hygiene Home) New Zealand Limited
100.00%
9, 134
MJ UK Holdings Limited
100.00%
9, 23
RB (Hygiene Home) Poland Sp. z o.o
100.00%
9, 146
MJ USA Holdings LLC
100.00%
8, 73
RB (Hygiene Home) Romania S.R.L.
100.00%
14, 151
MJN Asia Pacific Holdings LLC
100.00%
8, 73
RB (Hygiene Home) Slovakia spol. s.r.o
100.00%
9, 158
MJN Global Holdings B.V.
100.00%
9, 130
RB (Suzhou) Co. Ltd
MJN Holdings (Netherlands) B.V.
100.00%
9, 130
RB Asia Holding Limited
MJN Innovation Services B.V.
100.00%
9, 130
RB Health (Canada) Inc.
100.00%
1, 64
100.00%
9, 23
100.00%
4, 41
MJN International Holdings (UK), Ltd.
100.00%
9, 23
RB Health (US) LLC
100.00%
8, 185
MJN U.S. Holdings LLC
100.00%
8, 73
RB Health Ecuador Cía. Ltda
100.00%
9, 74
New Bridge Holdings B.V.
100.00%
9, 130
RB Health Manufacturing (US) LLC
100.00%
8, 185
Norwich Square Holding S.L.U.
100.00%
9, 161
RB Health México, S.A de C.V.
100.00%
2, 126
Nurofen Limited
Optrex Limited
100.00%
9, 23
RB Health Nordic A/S
100.00%
9, 72
100.00%
9, 23
RB Health Nordic A/S sivuliike Suomessa†
100.00%
1, 79
Oriental Medicine Company Limited
100.00%
9, 88
RB Health Nordic A/S, filial†
100.00%
1, 165
Oxy Reckitt Benckiser LLC
100.00%
1, 160
RB Health Nordic, NUF†
Performance Health, LLC
100.00%
8, 73
RB Health Peru S.R.L.
100.00%
1, 137
100.00%
9, 141
Pharmalab Limited
100.00%
9, 23
RB Health Services, S.A de C.V.
100.00%
9, 126
Propack Produkte für Haushalt und
Körperpflege GmbH
100.00%
9, 84
PT Mead Johnson Indonesia
90.10%
9, 99
PT Reckitt Benckiser Hygiene Home Indonesia
100.00%
9, 100
PT Reckitt Benckiser Hygiene Home Trading Indonesia 100.00%
9, 100
Pt Reckitt Benckiser Indonesia
100.00%
9, 101
PT Reckitt Benckiser Trading Indonesia
100.00%
9, 102
Qingdao London Durex Co., Limited
100.00%
9, 48
RB Holding Europe Du Sud SAS
100.00%
9, 81
RB Holdings (Luxembourg) S.à.r.l.
100.00%
12, 120
RB Holdings (Nottingham) Limited
100.00%
9, 23
RB Holdings Luxembourg (2018) S.à.r.l.
100.00%
9, 120
RB Hygiene Home (Thailand) Limited
100.00%
9, 170
RB Hygiene Home Arabia FZE
100.00%
9, 179
RB Hygiene Home Austria GmbH
100.00%
9, 22
RB Hygiene Home Belgium SA/NV
100.00%
9, 27
Qingdao New Bridge Corporate Management
Consulting Company Limited
100.00%
9, 48
RB Hygiene Home Deutschland GmbH
100.00%
1, 85
R & C Nominees Limited
100.00%
9, 23
RB Hygiene Home France SAS
100.00%
9, 81
R & C Nominees One Limited
100.00%
9, 23
RB Hygiene Home India Private Limited
100.00%
9, 95
R & C Nominees Two Limited
100.00%
9, 23
RB Hygiene Home Netherlands B.V.
100.00%
9, 130
RB & Manon Business Co., Limited
75.00%
1, 49
RB Hygiene Home Nordic A/S
100.00%
9, 72
RB & Manon Business Limited
75.00%
9, 90
RB Hygiene Home Nordic A/S, filial†
100.00%
1, 165
RB & Manon Hygiene Home (Shanghai) Limited*
100.00%
9, 50
RB Hygiene Home Nordic A/S, sivuliike Suomessa†
100.00%
1, 80
RB & Manon Hygiene Home Limited
80.00%
9, 90
RB Hygiene Home Nordic NUF†
100.00%
1, 137
RB (China Trading) Limited
80.00%
2, 9, 23
RB Hygiene Home Pakistan Limited
98.67%
9, 139
RB (China) Holding Co. Limited
100.00%
1, 51
RB Hygiene Home Switzerland AG
100.00%
9, 167
RB (Health) Colombia S.A.S
100.00%
9, 66
RB Investment Co Limited
0.05%
9, 182
RB (Health) Malaysia Sdn Bhd
100.00%
9, 123
RB Ireland Hygiene Home Commercial Limited
100.00%
9, 105
RB (Hygiene Home) Australia Pty Limited
100.00%
9, 21
RB LATAM Holding B.V.
100.00%
9, 130
RB (Hygiene Home) Czech Republic, spol s.r.o
100.00%
9, 71
RB Luxembourg (2016) Limited
100.00%
9, 23
RB (Hygiene Home) HK Limited
90.10%
2, 15, 38
RB Luxembourg (TFFC) S.à.rl.
100.00%
9, 120
RB (Hygiene Home) Hungary Kft
100.00%
9, 92
RB Luxembourg Holdings (TFFC) Limited
100.00%
9, 23
Reckitt Annual Report and Accounts 2021
261
Financial StatementsGovernanceStrategic Report Notes to the Parent Company Financial Statements (Continued)
11 Subsidiary Undertakings continued
Name
Registered
office and
share class
Holding
Name
Registered
office and
share class
Holding
RB Luxembourg Holdings (TFFC) Limited†
100.00%
1, 120
Reckitt Benckiser (BVI) No. 2 Limited*
100.00%
9, 37
RB Manufacturing LLC
100.00%
8, 73
Reckitt Benckiser (BVI) No. 3 Limited*
100.00%
9, 37
RB Mexico Investments Limited
100.00%
9, 23
Reckitt Benckiser (Canada) Inc.
100.00%
4, 42
RB NL Brands B.V.
100.00%
9, 130
Reckitt Benckiser (Cayman Islands) Limited
100.00%
9, 43
RB Reigate (2019) Ltd
100.00%
9, 23
Reckitt Benckiser (Centroamérica) S.A.
100.00%
9, 67
RB Reigate (Ireland) Unlimited Company*
100.00%
2, 104
Reckitt Benckiser (Channel Islands) Limited*
100.00%
9, 87
RB Reigate (UK) Limited
100.00%
9, 23
Reckitt Benckiser (Czech Republic), spol. s r.o.
100.00%
14, 71
RB Salute Mexico S.A de C.V.
100.00%
9, 127
Reckitt Benckiser (ENA) B.V.
100.00%
9, 133
RB Square Holdings Spain S.L.
100.00%
2, 161
Reckitt Benckiser (Granollers) SL
100.00%
9, 161
RB UK Commercial Limited
100.00%
9, 23
Reckitt Benckiser (Grosvenor) Holdings Limited
100.00%
9, 23
RB UK Hygiene Home Commercial Limited
100.00%
9, 23
Reckitt Benckiser (Health) Holdings Limited
100.00%
9, 23
RB USA (2019) Ltd
100.00%
9, 23
Reckitt Benckiser (Hygiene Home) Holdings Limited
100.00%
9, 23
RB USA Holdings LLC
100.00%
8, 73
Reckitt Benckiser (India) Private Limited
100.00%
9, 95
RB Winchester (Ireland) Unlimited Company*
100.00%
9, 104
Reckitt Benckiser (Lanka) Limited
99.99%
9, 164
RBHCR Health Reckitt Costa Rica Sociedad Anónima
100.00%
4, 67
Reckitt Benckiser (Latvia) SIA
100.00%
9, 118
Reckitt & Colman (Jersey) Limited
100.00%
9, 111
Reckitt Benckiser (Latvia) SIA Eesti filial†
100.00%
1, 78
Reckitt & Colman (Overseas) Health Limited
100.00%
9, 23
Reckitt Benckiser (Latvia) SIA LT filialas†
100.00%
1, 119
Reckitt & Colman (Overseas) Hygiene Home Limited
100.00%
9, 23
Reckitt Benckiser (Malaysia) Sdn Bhd
100.00%
9, 124
Reckitt & Colman (Overseas) Limited
100.00%
9, 23
Reckitt Benckiser (Near East) Limited
100.00%
9, 106
Reckitt & Colman (UK) Limited
100.00%
11, 23
Reckitt Benckiser (New Zealand) Limited
100.00%
9, 135
Reckitt & Colman Capital Finance Limited
100.00%
12, 111
Reckitt Benckiser (Pars) PJSC
100.00%
9, 103
Reckitt & Colman (Guangzhou) Limited
100.00%
9, 52
Reckitt Benckiser (Poland) S.A.
100.00%
9, 147
Reckitt & Colman Holdings Limited
100.00%
9, 23
Reckitt Benckiser (Portugal) S.A.
100.00%
9, 148
Reckitt & Colman Management Services (Ireland)
Limited*
100.00%
9, 104
Reckitt & Colman Pension Trustee Limited
100.00%
9, 23
Reckitt Benckiser (Romania) S.R.L.
100.00%
13, 151
Reckitt Benckiser (RUMEA) Limited
100.00%
9, 23
Reckitt Benckiser (RUMEA) Limited – Dubai Branch†
100.00%
1, 180
Reckitt & Colman Sagrotan
Verwaltungsgesellschaft GmbH
100.00%
4, 85
Reckitt Benckiser (Singapore) Pte. Limited
100.00%
9, 157
Reckitt & Sons Limited
100.00%
9, 23
Reckitt Benckiser (Slovak Republic), spol. s r.o.
100.00%
13, 158
Reckitt Benckiser (Australia) Pty Limited
100.00%
11, 21
Reckitt Benckiser (South America) Holding B.V.
100.00%
9, 130
Reckitt Benckiser (Bangladesh) PLC
82.96%
9, 25
Reckitt Benckiser (Spain) B.V.
100.00%
9, 130
Reckitt Benckiser (Belgium) SA/NV
100.00%
9, 27
Reckitt Benckiser (Switzerland) AG
100.00%
9, 167
Reckitt Benckiser (Brands) Limited
100.00%
9, 23
Reckitt Benckiser (Thailand) Limited
45.00%
9, 171
Reckitt Benckiser (Brasil) Comercial de Produtos de
Hygiene, Limpeza e Cosméticos Ltda.
100.00%
9, 34
Reckitt Benckiser (UK) Limited
100.00%
9, 23
Reckitt Benckiser (USA) Limited
100.00%
9, 23
Reckitt Benckiser (Brasil) Comercial de Produtos de
Hygiene, Limpeza e Cosméticos Ltda.†
100.00%
1, 194
Reckitt Benckiser AG
100.00%
9, 167
Reckitt Benckiser (Brasil) Comercial de Produtos de
Hygiene, Limpeza e Cosméticos Ltda.†
100.00%
1, 196
Reckitt Benckiser (Brasil) Comercial de Produtos de
Hygiene, Limpeza e Cosméticos Ltda.†
100.00%
1, 197
Reckitt Benckiser Arabia FZE
100.00%
9, 179
Reckitt Benckiser Arabia FZE†
100.00%
1, 181
Reckitt Benckiser Arabia Trading LLC
48.70%
9, 183
Reckitt Benckiser (Brasil) Ltda
100.00%
9, 35
Reckitt Benckiser Argentina S.A.
100.00%
9, 18
Reckitt Benckiser (Brasil) Ltda†
100.00%
1, 199
Reckitt Benckiser Asia Pacific Limited†
100.00%
1, 23
Reckitt Benckiser (BVI) No. 1 Limited*
100.00%
9, 37
Reckitt Benckiser Asia Pacific Limited
100.00%
9, 109
262
11 Subsidiary Undertakings continued
Name
Registered
office and
share class
Holding
Name
Registered
office and
share class
Holding
Reckitt Benckiser Austria GmbH
100.00%
9, 22
Reckitt Benckiser Healthcare (MEMA) Limited
100.00%
9, 23
Reckitt Benckiser Bahrain W.L.L
100.00%
9, 24
Reckitt Benckiser Healthcare (Philippines), Inc.
100.00%
5, 144
Reckitt Benckiser Brands Investments B.V.
100.00%
9, 130
Reckitt Benckiser Healthcare (UK) Limited
100.00%
9, 23
Reckitt Benckiser BY LLC
100.00%
1, 26
Reckitt Benckiser Healthcare Australia Pty Limited
100.00%
9, 21
Reckitt Benckiser Calgon B.V.
100.00%
9, 130
Reckitt Benckiser Healthcare B.V.
100.00%
9, 130
Reckitt Benckiser Chartres SAS
100.00%
9, 82
Reckitt Benckiser Healthcare France SAS
100.00%
9, 81
Reckitt Benckiser Chile S.A.
100.00%
9, 44
Reckitt Benckiser Healthcare India Private Limited
100.00%
9, 95
Reckitt Benckiser Colombia S.A.
100.00%
9, 68
Reckitt Benckiser Healthcare International Limited
100.00%
9, 23
Reckitt Benckiser Commercial (Italia) S.r.l.
100.00%
16, 107
Reckitt Benckiser Healthcare LLC
100.00%
1, 153
Reckitt Benckiser Corporate Services Limited
100.00%
9, 23
Reckitt Benckiser d.o.o
100.00%
9, 69
Reckitt Benckiser Detergents GmbH
100.00%
9, 85
Reckitt Benckiser Deutschland GmbH
100.00%
4, 85
Reckitt Benckiser East Africa Limited
99.99%
9, 115
Reckitt Benckiser Ecuador S.A.
100.00%
9, 75
Reckitt Benckiser Egypt Limited
100.00%
9, 76
Reckitt Benckiser España S.L.
100.00%
9, 161
Reckitt Benckiser Ev ve Hjyen Ürünleri A.Ş.
100.00%
1, 174
Reckitt Benckiser Expatriate Services Limited
100.00%
9, 23
Reckitt Benckiser Fabric Treatment B.V.
100.00%
9, 130
Reckitt Benckiser Finance (2005) Limited
100.00%
3, 9, 23
Reckitt Benckiser Finance (2007)
100.00%
9, 23
Reckitt Benckiser Finance (2010) Limited
100.00%
9, 23
Reckitt Benckiser Healthcare Manufacturing
(Thailand) Limited
45.00%
11, 172
Reckitt Benckiser Healthcare, Ltda
100.00%
16, 148
Reckitt Benckiser Healthcare S.A.U.
100.00%
2, 161
Reckitt Benckiser Hellas Healthcare S.A.
100.00%
9, 86
Reckitt Benckiser Hellas Hygiene Home S.A.
100.00%
9, 86
Reckitt Benckiser HK Limited Taiwan Branch†
100.00%
1, 168
Reckitt Benckiser Holding (Thailand) Limited
45.00%
5, 169
Reckitt Benckiser Holding GmbH & Co KG
100.00%
1, 85
Reckitt Benckiser Holdings (Channel Islands) Limited
100.00%
9, 87
Reckitt Benckiser Holdings (Channel Islands) Limited† 100.00%
1, 23
Reckitt Benckiser Holdings (Italia) S.r.l.
100.00%
16, 107
Reckitt Benckiser Holdings (Luxembourg) Limited
100.00%
11, 23
Reckitt Benckiser Holdings (Overseas) Limited
100.00%
9, 23
Reckitt Benckiser Holdings (TFFC) Limited
100.00%
9, 23
Reckitt Benckiser Finance (Ireland) Unlimited
Company*
100.00%
9, 104
Reckitt Benckiser Holdings (USA) Limited
100.00%
9, 23
Reckitt Benckiser Finance Company Limited
100.00%
9, 23
Reckitt Benckiser Holdings (USA) Limited†
100.00%
1, 120
Reckitt Benckiser Finish B.V.
100.00%
9, 130
Reckitt Benckiser France SAS
100.00%
9, 81
Reckitt Benckiser FSIA B.V.
100.00%
9, 130
Reckitt Benckiser Global R&D GmbH
100.00%
4, 84
Reckitt Benckiser Health Argentina S.A.
100.00%
9, 18
Reckitt Benckiser Health Comercial Ltda
100.00%
9, 36
Reckitt Benckiser Home Chemical Products Trading
(Shanghai) Co. Limited
100.00%
9, 53
Reckitt Benckiser Hong Kong Limited
100.00%
9, 88
Reckitt Benckiser Hong Kong Limited Taiwan Branch† 100.00%
1, 198
Reckitt Benckiser Household and Health Care
Ukraine LLC
100.00%
1, 178
Reckitt Benckiser Household Products (China)
Company Limited
100.00%
1, 54
Reckitt Benckiser Health Comercial Ltda. – Itapevi
Branch†
100.00%
1, 30
Reckitt Benckiser Hygiene Home Brands B.V.
100.00%
9, 130
Reckitt Benckiser Health Kazakhstan LLP
100.00%
1, 113
Reckitt Benckiser Hygiene Home Egypt Limited*
100.00%
9, 77
Reckitt Benckiser Health Kenya Limited
100.00%
9, 116
Reckitt Benckiser Hygiene Home Ukraine LLC
100.00%
1, 178
Reckitt Benckiser Health Limited
100.00%
9, 23
Reckitt Benckiser Investments (No. 1) S.à.r.l.
100.00%
9, 120
Reckitt Benckiser Healthcare (Central & Eastern
Europe) Limited
100.00%
9, 23
Reckitt Benckiser Healthcare (CIS) Limited
100.00%
9, 23
Reckitt Benckiser Healthcare (Ireland) Limited*
100.00%
9, 104
Reckitt Benckiser Healthcare (Italia) S.p.A
100.00%
9, 107
Reckitt Benckiser Investments (No. 2) S.à.r.l.
100.00%
9, 120
Reckitt Benckiser Investments (No. 4) S.à.r.l.
100.00%
9, 120
Reckitt Benckiser Investments (No. 5) S.à.r.l.
100.00%
9, 120
Reckitt Benckiser Investments (No. 7) S.à.r.l.
100.00%
9, 120
Reckitt Benckiser Investments (No. 8) S.à.r.l.
100.00%
9, 120
Reckitt Annual Report and Accounts 2021
263
Financial StatementsGovernanceStrategic Report Notes to the Parent Company Financial Statements (Continued)
11 Subsidiary Undertakings continued
Name
Registered
office and
share class
Holding
Name
Registered
office and
share class
Holding
Reckitt Benckiser Investments Limited
100.00%
3, 9, 23
Reckitt Benckiser Porto Alto Lda
100.00%
16, 149
Reckitt Benckiser IP LLC
100.00%
1, 154
Reckitt Benckiser Power Cleaners B.V.
100.00%
9, 130
Reckitt Benckiser Ireland Limited
100.00%
9, 104
Reckitt Benckiser Production (Poland) Sp. z.o.o.
100.00%
9, 147
Reckitt Benckiser Italia S.p.A
100.00%
9, 107
Reckitt Benckiser S.à.r.l.
100.00%
12, 120
Reckitt Benckiser Japan Limited
100.00%
9, 109
Reckitt Benckiser Scholl India Private Limited
100.00%
9, 97
Reckitt Benckiser Jersey (No.1) Limited*
100.00%
9, 111
Reckitt Benckiser Service Bureau Limited
100.00%
9, 23
Reckitt Benckiser Jersey (No.1) Limited†*
100.00%
1, 23
Reckitt Benckiser Services S.A. de C.V.
100.00%
9, 128
Reckitt Benckiser Jersey (No.2) Limited*
100.00%
9, 111
Reckitt Benckiser Services (Kenya) Limited
100.00%
9, 117
Reckitt Benckiser Jersey (No.2) Limited†*
100.00%
1, 23
Reckitt Benckiser Jersey (No.3) Limited
100.00%
9, 111
Reckitt Benckiser Jersey (No.3) Limited†
100.00%
1, 23
Reckitt Benckiser Jersey (No.5) Limited
100.00%
9, 111
Reckitt Benckiser Jersey (No.5) Limited†
100.00%
1, 23
Reckitt Benckiser Jersey (No.7) Limited
100.00%
12, 111
Reckitt Benckiser Kazakhstan LLP
100.00%
1, 114
Reckitt Benckiser Kereskedelmi Kft
100.00%
14, 92
Reckitt Benckiser Laundry Detergents (No. 1) B.V.
100.00%
9, 130
Reckitt Benckiser Laundry Detergents (No. 2) B.V.
100.00%
9, 130
Reckitt Benckiser Lime-A-Way B.V.
100.00%
9, 130
Reckitt Benckiser Limited˚
100.00%
9, 23
Reckitt Benckiser LLC
Reckitt Benckiser LLC
Reckitt Benckiser LLC in city Klin,
Moscow region, Russia†
100.00%
8, 155
100.00%
8, 73
Reckitt Benckiser South Africa Health Holdings
(Pty) Limited
100.00%
9, 159
Reckitt Benckiser South Africa (Proprietary) Limited
100.00%
9, 159
Reckitt Benckiser Tatabanya Kft
100.00%
9, 92
Reckitt Benckiser Temizlik Malzemesi San. ve Tic. A.Ş.
100.00%
1, 175
Reckitt Benckiser Tiret B.V.
100.00%
9, 130
Reckitt Benckiser Treasury (2007) Limited
100.00%
11, 23
Reckitt Benckiser Treasury Services (Nederland) B.V.
100.00%
9, 133
Reckitt Benckiser Treasury Services plc
100.00%
9, 23
Reckitt Benckiser USA (2010) LLC
100.00%
8, 73
Reckitt Benckiser USA (2010) LLC†
100.00%
1, 23
Reckitt Benckiser USA (2012) LLC
100.00%
8, 73
Reckitt Benckiser USA (2013) LLC
100.00%
8, 73
Reckitt Benckiser USA (2013) LLC†
100.00%
1, 23
Reckitt Benckiser USA Finance (No.1) Limited
100.00%
9, 23
100.00%
8, 89
Reckitt Benckiser USA Finance (No.2) Limited
100.00%
9, 23
Reckitt Benckiser Luxembourg (2010) Limited
100.00%
9, 23
Reckitt Benckiser USA Finance (No.3) Limited
100.00%
9, 23
Reckitt Benckiser Luxembourg (No. 1) Limited
100.00%
9, 23
Reckitt Benckiser Vanish B.V.
100.00%
9, 130
Reckitt Benckiser Luxembourg (No. 2) Limited
100.00%
9, 23
Reckitt Benckiser Venezuela S.A.
100.00%
9, 188
Reckitt Benckiser Luxembourg (No. 3) Limited
100.00%
9, 23
Reckitt Colman Chiswick (OTC) Limited
100.00%
9, 23
Reckitt Benckiser Luxembourg (No. 4) Limited
100.00%
9, 23
Reckitt Piramal Private Limited
100.00%
9, 98
Reckitt Benckiser Management Services Unlimited
Company
100.00%
3, 104
Reckitt Benckiser Marc B.V.
100.00%
9, 130
Reckitt Benckiser Mexico, S.A. de C.V.
100.00%
9, 126
Reckitt Benckiser Morocco Sarl AU
100.00%
9, 129
Reckitt Benckiser N.V.
Reckitt Benckiser N.V.†
100.00%
9, 130
100.00%
1, 120
Reckitt Benckiser Nigeria Limited
99.53%
9, 138
Reckitt Sanabil for Trading Co LLC
51.00%
13, 193
Reckitt Seton Limited
100.00%
11, 23
Reckitt Sonet (UK) Limited
100.00%
9, 23
Reigate Square Holdings S.à.r.l.
100.00%
9, 120
Relcamp Aie*
100.00%
9, 162
Scholl Latin America Limited*^
100.00%
9, 191
Servicios Nutricionales Mead Johnson,
S. de R.L. de C.V.
100.00%
9, 126
Reckitt Benckiser Oven Cleaners B.V.
100.00%
9, 130
Scholl Consumer Produdts Limited
100.00%
9, 23
Reckitt Benckiser Pakistan Limited
98.68%
9, 139
Sonet Investments Limited
100.00%
9, 23
Reckitt Benckiser Peru S.A.
100.00%
9, 142
Sonet Overseas Investments Limited
100.00%
3, 9, 23
Reckitt Benckiser Pharmaceuticals
(Proprietary) Limited
100.00%
9, 159
Sonet Prebbles Limited
Sonet Products Limited
100.00%
9, 23
100.00%
9, 23
264
11 Subsidiary Undertakings continued
Registered Offices
Name
Registered
office and
share class
Holding
Sonet Seton UK Limited
100.00%
9, 23
Sphinx Holdings Company, Inc.
38.00%
5, 143
SSL (MG) Polymers Limited
100.00%
9, 23
SSL (RB) Products Limited
100.00%
9, 23
SSL Australia Pty Ltd
SSL Capital Ltd
100.00%
6, 21
100.00%
9, 112
SSL Healthcare (Shanghai) Ltd
100.00%
9, 55
SSL Healthcare Ireland Limited*
100.00%
9, 104
SSL Healthcare Manufacturing S.A.U.*
100.00%
9, 163
SSL Healthcare Sverige AB
100.00%
9, 166
SSL Holdings (USA) Inc.
SSL International plc
100.00%
9, 73
100.00%
9, 23
SSL Manufacturing (Thailand) Limited
45.00%
12, 173
SSL New Zealand Limited
100.00%
1, 135
SSL Products Limited
100.00%
3, 9, 23
Suffolk Finance Company Limited
100.00%
10, 23
Suffolk Insurance Limited
100.00%
4, 28
Tai He Tai Lai Culture Communication Co Ltd
100.00%
9, 56
TheraPearl LLC
Tubifoam Limited
UpSpring LLC
W.Woodward, Limited
† Branch
*
In liquidation
100.00%
8, 184
100.00%
3, 9, 23
100.00%
8, 93
100.00%
9, 23
˚
Interest held directly by Reckitt Benckiser Group plc
^ Country of incorporation different to registered address
Footnotes for Note 11
Share Class
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
Capital Contribution/Charter Capital
A/B/C/D/E/F/G/H/I/K/J
Bonus
Common
Common/Preference
Cumulative Redeemable Preference/Ordinary
General Partner
Membership
Ordinary
Ordinary/Deferred
Ordinary/Preference
Ordinary A/B/C/D/E/F/G/H/I/K/J
Partnership
Partnership/Membership Interest
Preference
Quota
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
Teniente General Richieri 15, Ciudad de Sunchales, Santa Fe, Argentina
Bucarelli 2609 PB A, Ciudad Autonoma de Buenos Aires, Argentina
Av Hipólito Alferez Bouchard, 4191 3°, 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, Vienna, 1110, Austria
103-105 Bath Road, Slough, SL1 3UH, Berkshire, United Kingdom
Building 330, Road 1506, Block 115, Bahrain International Investment Park,
Hidd. Kingdom of Bahrain, Bahrain
58-59 Nasirabad Industrial Area, Chittagong 4209, Bangladesh
Of. 166, 66, K Liebknekhta st., Minsk, 220036, Belarus
20 Allée de la Recherche, Anderlecht, 1070 Brussels, Belgium
Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda
Estrada Fukutaro Yida, n. 930, Bairro Cooperativa, Sao Bernardo Do Campo,
Sao Paulo, 09852-060, Brazil
Av. Portugal, nº 1.100, Setor Rua 6 Parte A12, Bairro Itaqui, Itapevi, São Paulo,
06696-060, Brazil
Rodovia Antonio Heil, SC 486, Km 4, Bairro Itaipava, Armazém 1B, Itajaí, São
Paolo, CEP 88316-003, Brazil
Rodovia Raposo Tavares, 8015 Km 18, 1º andar, Sala 2, Jardim Arpoador, Sao
Paolo, CEP 05577-900, Brazil
Avenida Presidente Juscelino Kubitschek, n° 1909, 24° andar, Parte B, Torre
Norte, Condomínio São Paulo Corporate Towers, Vila Nova Conceição, Sao
Paolo – SP, CEP 04.543-907, Brazil
Avenida Presidente Juscelino Kubitschek, 1909 cj 24 e 25, Vila Nova
Conceição, São Paolo/SP, Brazil
Rodovia Raposo Tavares, 8015 km 18, Jardim Arpoador, Sao Paolo, CEP
05577-900, Brazil
Avenida Presidente Juscelino Kubitschek, n° 1909, 24° andar, Parte C, Torre
Norte, Condomínio São Paulo Corporate Towers, Vila Nova Conceição, Sao
Paolo, CEP 04.543-907, Brazil
Palm Grove House, PO Box 438, Road Town, Tortola, British Virgin Islands
22/F W Square, 314-324 Hennessy Road, Wanchai, Hong Kong
Sofia City – 1407, Lozenets Region, 22, Zlaten rog Str, 3rd Floor, Office 4,
Bulgaria
Suite 600, 1741 Lower Water Street, Halifax, NS B3J 0J2, Canada
Suite 2300, 550 Burard Street, Vancouver, BC V6C 2B5, Canada
1680 Tech Avenue, Unit 2, Mississauga, ON L4W 5S9, Canada
PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands
Avenida Presidente Kennedy, Lateral 5454, Oficina 1602, Vitacura, Región
Metropolitana, Chile
Intersection of Hongqi Road and Mingzhu Road, Dangtu Economic
Development Zone, Maanshan City, Anhui Province, China
Intersection of Hongqi Road and Mingzhu Road, Dangtu Economic
Development Zone, Maanshan City, Anhui Province, China
Unit 02, 11/F, Tower A Hedonic Center, 6 Songyue Road, Siming District,
Xiamen, China
No.1-13 Shangma, Aodong Road, High-tech Industrial Development Zone,
Qingdao City, Shandong Province, China
Room 1701, No. 1033, Zhao Jia Bang Road, Zuhui District, Shanghai, 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
No. 3, Canglian 1 Road, ETDZ, Guangzhou, China
C6-8 Site 6F, No.333 Futexi Road, Waigaoqiao Free Trade Zone,
Shanghai City, China
54
No. 34 East Beijing Road, Jingzhou, Hubei, 434001, China
Reckitt Annual Report and Accounts 2021
265
Financial StatementsGovernanceStrategic Report Notes to the Parent Company Financial Statements (Continued)
11 Subsidiary Undertakings continued
55
Room 1605, No.660, Shangcheng Road, Shanghai, China
Room 2109, Floor 2, No.10 Chaoyangmenwai Street, Chaoyang District,
Beijing City, China
Unit B02-B04, Room 401, Unit 2, Building 9, Dongdaqiao Road, Chaoyang
District, Beijing, China
Room 2202, Yanheng Land Plaza, No.1, Section 2, Renmin South Road,
Jinjiang District, Chengdu, Sichuan Province, China
Room 11-13, 8/F, Global Plaza, 158 Wusi Road, Fuzhou City, Gulou District,
China
707, Hisense Venture Center, 17 Shandong Road, Shinan District, Qingdao,
Shandong Province, China
15/F, 755 Huaihai Middle Road, Huangpu District, Shanghai, China
Rooms 1408 and 1409, 14/F, Gaoxin No.9 Office Building, Gaoxin 4th Road, Hi
Tech Zone, Xi’an City, Shanxi Province, China
#2, Xiayuan Road, Dongji Industry Zone of Economic and Technology District,
Guangzhou, Guangdong, China
No. 99, Changjiang Da Road, Fuqiao Town, Taicang City, China
Calle 76, No. 11-17, Edificio Torre, Los Nogales Piso 2, Bogota, CO, Colombia
Calle 76 No 11-17, Oficina 301, Bogota, CO, Colombia
San Jose-Escazu En Escazu Corporate Center, Setimo Piso, Costado Sur De
Multiplaza Escazu, Costa Rica
Calle 46, 5-76, Cali, Colombia
Ulica Grada Vukovara 269d, 10 000 Zagreb, Hrvatska, Croatia
1 Lampousas Street, P.C. 1095, Nicosia, Cyprus
95
96
97
98
99
100
101
102
103
Plot No. 48, Industrial Area, Sector 32, Gurgaon – 122001, Haryana, India
30 Finsbury Square London EC2A 1AG
F73 and 74, Sipcot Industrial Park, Irungattukottai, Sriperumbudur TK,
Kancheepuram District, Tamilnadu, 602 117, India
Unit No. 54, 5th Floor, Kalpataru Square Andheri-Kurla Road, Andheri (East)
Mumbai, Maharashtra, 400059, India
Treasury Tower, District 8, Lantai 58, SCBD Lot 28, Jl. Jend. Sudirman Kav.
52-53, Kel. Senayan, Kec. Kebayoran Baru, Kota, Adm Jakarta Selatan, Prop,
DKI Jakarta, Indonesia
Treasury Tower 59th Floor, District 8, SCBD, Jalan Jendral Sudirman Kav
52-53, Jakarta, 12190, Indonesia
Gedung Treasury Tower, District 8, Level 58, SCBD Lot 28, Jalan Jend.
Sudirman Kav. 52-53, Kel. Senayan, Kec. Kebayoran Baru, Kota, Adm Jakarta
Selatan, Prov, DKI Jakarta, Indonesia
Jl. Raya Narogong, Chamber A.I, Kel. Pasirangin, Kec Cileungsi, Kab. Bogor.
Prop. Jawa Barat, Indonesia
1st Floor, Unit 11, No. 88 Baran Building, Sayed Road, Opposite Mellat Park,
Vali-e-Asr Avenue, Tehran, Islamic Republic of Iran
104
3rd Floor, Kilmore House, Park Lane, Spencer Dock, Dublin 1, Ireland
105
6th Floor, 2 Grand Canal Square, Dublin 2, Ireland
106
6 Hangar Street, PO Box 6440, I.Z. Neve Nee’man B Hod Hasharon,
4527703, Israel
107
Via Spadolini 7, 20141, Milano, Italy
108
3-20-14 Higashi-Gotanda, Shinagawa-ku, Tokyo, 141-0022, Japan
109
Sumitomo Fudosan Takanawa Park Tower 14F, 3-20-14 Higashi-Gotanda,
Shinagawa-ku, Tokyo, 141-0022, Japan
Vinohradská 2828/151, 130 00 Praha 3-Žižkov, Czech Republic
110
22 Grenville Street, St Helier, Jersey
Vandtårnsvej 83A, DK-2860 Søborg, Denmark
111
IFC 5, St. Helier, JE1 1ST, Jersey
251 Little Falls Drive, Wilmington DE 19808, United States
112
44 Esplanade, St Helier, JE4 9WG, Jersey
Av. Coruña 27-88 y Av. Orellana, Edificio Coruña Plaza, Piso 7,
Quito 170150, Ecuador
113
Bld. 15/A, Koktem-1, Almaty, 050040, Kazakhstan
114
Office 302, Building 15a, Koktem-1, Micro District, Almaty City, Kazakhstan
Oficina 4C, Av. 12 de Octubre, #26-48 y Orellana, Edificio Mirage, Piso 4,
Quito, 170525, Ecuador
115
Plot 209/2462, Likoni Road, Nairobi, Kenya
Polyium Building 22, Off Road 90, First District, 5th Settlement,
New Cairo, Egypt
116
14 Riverside Drive, Arlington Building, 3rd Floor, Nairobi, 209/19, Kenya
117
LR.NO.1870/1/569, 2nd Floor, Apollo Centre, Ring Road Westlands, Kenya
Building A1, Second Floor, Plot #A14b01, Cairo Festival City, First District, Fifth
Settlement, New Cairo, Cairo, Egypt
Harju maakond, Rae vald, Rae küla, Raeküla tee 5, 75310, Estonia
118
Strēlnieku iela 1A – 2, Rīga, LV-1010, Latvia
119
Vilniaus m. Olimpiečių g. 1A, Lithuania
Itsehallintokuja 6, 02600 Espoo, Finland
Självstyrelsevägen 6, Esbo, 02600, Finland
38 rue Victor Basch, 91300 Massy, France
102 rue de Sours, 28000 Chartres, France
Heinestrasse 9, 69469, Weinheim, Germany
Robert-Koch-Straße 1, 69115 Heidelberg, Germany
Darwinstrasse 2-4, 69115, Heidelberg, Germany
7 Taki Kavalieratou Street, Kifissia, 145 64, Greece
1st & 2nd Floors, Elizabeth House, Les Ruettes Brayes, St Peter Port,
GY1 1EW, Guernsey
Rooms 2206-11, 22 Floor, Chubb Tower, Windsor House, 311 Gloucester Road,
Causeway Bay, Hong Kong
Klin City, Tereshkovoy Street, 1, 14160052/1, Moscow Region,
Russian Federation
Room 2001, 20/F, Greenfield Tower, Concordia Plaza, No.1 Science Museum
Road, Tsim Sha Tsui, Kowloon, Hong Kong
120
1 rue de la Poudrerie, Leudelange, L-3364, Luxembourg
121
Avenida Son On, No.1040, Centre Indusrial Brilliant 2 Andar, Taipa, Macau
122
123
124
125
126
127
128
129
Suite 1005, 10th Floor, Wisma Hamzag Kwong Hing, No. 1 Leboh Ampang,
50100 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, 50490,
Damansara Heights, Wilayah Persekutuan, Kuala Lumpur, Malaysia
Av de las Granjas 972, Col. Santa Barbara, Azcapotzalco, CDMX,
02230, Mexico
Av. Ejército Nacional Mexicano 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
Circuito Dr Gustavo Baz, 7, No. 7, Fracc Industrial El Pedregal, Atizapan de
Zaragoza, Edomex, Mexico
59 Boulevard Zerktouni, Residence Les Fleurs 6eme étage,
Casablanca, Morocco
40-Richchia Zhovtnia avenue, 120, 1 Block, Kyiv, 03127, Ukraine
130
Siriusdreef 14, 2132 WT, Hoofddorp, The Netherlands
Bocskai út 134-146, H-1113, Budapest, Hungary
131
225 North Canal Street, Floor 25, Chicago IL 60606, United States
4209 S. Industrial Drive, Suite 200, Austin TX 78744, United States
132
112 North Curry Street, Carson City, NV, 89703, United States
Unit No. 54, 5th Floor, Kalpataru Square, Andheri-Kurla Road, Maharashtra,
Mumbai, 400059, India
133
Schiphol Boulevard 267, 1118 BH, Schiphol, The Netherlands
134
Level 1, 2 Fred Thomas Drive, Takapuna, Auckland, 0622, New Zealand
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
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81
82
83
84
85
86
87
88
89
90
91
92
93
94
266
11 Subsidiary Undertakings continued
135
2 Fred Thomas Drive, Takapuna, Auckland, 0622, New Zealand
136
12 Montgomery Road, Yaba, Lagos, Nigeria
137
Henrik Ibsens gate 60A, 0255 Oslo, Norway
138
12, 11th Floor Heritage Place, 21 Lugard Avenue Ikoyi, Nigeria
139
140
Tenancy 04 & 05, 3rd Floor, Corporate Office Block, Dolmen City, HC, Block
4, Scheme 5, Clifton, Karachi, 75600, Pakistan
Apartment 6G, 6th Floor, Edificio Bladex, Calle Avenida La Rotonda. Business
Park, Corregimiento de Juan Diaz, Urbanización Costa Del Este, Provincia de
Panamá, Distrito de Panama, Panama
141
Calle Dean Valdivia No.148, Torre 1, Ofic. 501, Urb. Jardín, San Isidro,
Lima, Peru
142
Av. Republica de Panama #2577, Urb. Santa Catalina, La Victoria, Lima, Peru
143
2309 Don Chino Roces Avenue Extension, Makati City, Philippines
144
3rd Floor Mead Johnson Nutrition Inc, 2309 Don Chino Roces Extension,
Makati City, Philippines
145
Ul. Wołoska 22, 02-675, Warsaw, Poland
146
Nowy Dwór Mazowiecki, Ul. Okunin 1, 05-100, Poland
147
ul. Okunin 1, 05-100, Nowy Dwor, Mazowiecki, Poland
148
Rua D. Cristóvão da Gama, n.º 1, 1º, C/D, 1400-116, Lisboa, Portugal
149
150
151
152
Estrada Malhada dos Carrascos, 12, Porto Alto, 2135-061, Samora Correia,
Portugal
Los Frailes Industrial Park, Ave. Esmeralda, Calle C # 475, Guaynabo, 00969,
Puerto Rico
89-97 Grigore Alexandrescu street, Building A, 5th floor, Sector 1, Bucharest,
Romania
Iancu de Hunedoara Boulevard, Nr. 48, 11th Floor, Crystal Tower Building,
1st District, Bucharest, 011745, Romania
175
Esentepe Mahallesi Büyükdere Caddesi Tekfen, Tower No: 209 A Blok D:2
34394 4., Levent, Şişli, İstanbul, Turkey
176
4th Floor, 115 George Street, Edinburgh, EH2 4JN, Scotland, United Kingdom
177
1020 Eskdale Road, Winnersh, Wokingham, RG41 5TS, United Kingdom
178
28A Stepana Bandery, Bld.G, Office 80, 04073, Kyiv, Ukraine
179
Level 27, Tower B, JAFZA One, Jebel Ali Free Zone, Dubai, PO Box 16834,
United Arab Emirates
180 Office 1801, 1803, 1804, Emaar Real Estate Burj Khalifa, Dubai,
United Arab Emirates
181
182
183
309, Floor 3, Dubai Science Park Labrotory Complex, Dubai,
United Arab Emirates
Unit 05, Level 3, Gate Village Building 04, Dubai Investment Financial Centre,
PO Box 677, Dubai, United Arab Emirates
Al Seer Corporate Office, Behind Al Tayer Motors, Sheikh Zayed Road, Al
Quoz Industrial Area 3, Dubai, 31587, United Arab Emirates
184
4209 S. Industrial Drive, Suite 200, Austin TX 78744, United States
185
Corporation Service Company, 251 Little Falls Drive, Wilmington, New Castle
County DE 19808, United States
186
Northcliffe House, Young Street, London, W8 5EH, United Kingdom
187
188
189
190
Urb. Las Mercedes, Av. Orinoco cruce con Mucuchies Torre Nordic, Piso 1,
Oficina 1 y 2, Municipio Baruta Caracas, Bolivarian Republic of Venezuela
Avenida Mara con Calle San José, Centro Comercial Macaracuay Plaza, Nivel
C3, Locales 5 y 12. Urb. Colinas de la California, Caracas, Bolivarian Republic
of Venezuela
Unit 401, 4th Floor, Metropolitan Building, No.235 Dong Khoi Street, Ben Nghe
Ward, District 1, Ho Chi Minh City, Vietnam
Av. Winston Churchill No. 1099 Torre Acrópolis, Piso 12, Santo Domingo,
Republic of Dominica
191
Incorporated: The Bahamas Registered office: 23
153
4, Shluzovaya emb, 3rd Floor, 115114, Moscow, Russian Federation
192
Incorporated: The Netherlands Registered office: 131
193 Office number 51, Fifth Floor, Mukmal Plaza Center, Al Hamra District
Palestine Street, Jeddah City, Saudi Arabia, United Arab Emirates
194
195
Est Dona Maria Jose Ferraz Prado, 1481, Cond Dist. Park Embu II Modulo 06,
Chacaras Bartira, CEP – 06.845-070, Embu/SP, Brazil
Estm Maria Margarida Pinto Dona Belinha, 742, GalpaoO3 Bloco I/A, Extrema/
MG, Brazil
196
Rod Governador Mario Covas, 7270, KM 264 Parte RB, Serra/ES, Brazil
197
Rod Dom Gabriel Paulino Bueno Couto, 1606, Itupeva/SP, Brazil
198
6/F, No. 136, Sec. 3, Ren-ai Rd., Da-an Dist, Taipei 106, R.O.C., Taiwan
199
Ketian Aquatic Science and Technology Industrial Park, No. 3949 Kunlunshan
Avenue, Lanzhou New Area, Lanzhou City, Gansu Province, China
154
14 Kozhevnicheskaya Str, 115114, Moscow, Russian Federation
155
52/1, Kosmodamianskaya emb, 115054, Moscow, Russian Federation
156
80 Robinson Road, #02-00, 068898, Singapore
157
12 Marina Boulevard, #19-01 Marina Bay Financial Centre, 018982, Singapore
158
Drieňová 3, 821 08 Bratislava, Slovakia
159
8 Jet Park Road, Gauteng, Elandsfontein, 1406, South Africa
160
24th Floor, Two IFC, 10 Gukjegeumyung-ro, Youngdeungpo-gu, Seoul, 07326,
Republic of Korea
161
Carrer de Mataró, 28, 08403, Granollers, Barcelona, Spain
162
Fray Carbo, 24, 08400, Granollers, Spain
163
No.151, Avda. Can Fatjó, 08191, Rubí, Barcelona, Spain
164
No.25, Shrubbery Garden, Colombo-04, Sri Lanka
165
Vretenvägen 2, 4th Floor, 171 54 Solna, Sweden
166
Box 190, 101 23 Stockholm, Sweden
167
Richtistrasse 5, 8304, Wallisellen, Switzerland
168
6F., No. 136, Sec. 3, Ren’ai Road, Da’an Dist, Taipei City 1, R.O.C., 10657, Taiwan
169
170
171
172
173
No.388 Exchange Tower, 14th Floor, Sukhumvit Road, Klongtoey, Bangkok, TH
10110, Thailand
No. 388, Room No. 1903, Floor 19th Floor, Exchange Tower, Sukhumvit Road,
Sub-District Klongtoey, District Klongtoey, Bangkok, 10110, Thailand
No.388 Exchange Tower, 14th Floor, Sukhumvit Road, Klongtoey, Bangkok,
10110, Thailand
65 Moo 12 Lardkrabang-Bangplee Road, Bangplee Samutprakarn, 10540,
Thailand
100 Moo 5, Bangsamak Sub-District, Bangpakong District, Chachoengsao
Province 24180, Thailand
174 Orta Mahallesi Demokrasi, Caddesi Benckiser Sitesi No.92, Tuzla,
Istanbul, Turkey
Reckitt Annual Report and Accounts 2021
267
Financial StatementsGovernanceStrategic Report SHAREHOLDER INFORMATION
Annual General Meeting
Our Annual General Meeting (AGM) will be held on Friday 20 May
2022 at 2.00pm at London Heathrow Marriott Hotel, Bath Road,
Hayes, Middlesex, UB3 5AN.
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 join our DRIP. This is also available via Investor Centre.
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.reckitt.com/investors/annual-general-meetings.
2022 Financial calendar and key dates
Announcement of Quarter 1 trading
statement
Annual General Meeting
Record date for 2021 final dividend
Payment of 2021 final ordinary dividend
Announcement of 2022 interim results
29 April 2022
20 May 2022
29 April 2022
9 June 2022
27 July 2022
Record date for 2022 interim dividend
5 August 2022
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 on +44 (0)370 703 0118.
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;
Payment of 2022 interim ordinary dividend
14 September 2022
• allow for quicker and more effective communications with
Announcement of Quarter 3 trading
statement
26 October 2022
• support Reckitt’s corporate responsibility profile.
shareholders; and
Dividend
The Directors have recommended a final dividend of 101.6 pence
per share, for the year ended 31 December 2021. Subject to
shareholder approval at the 2021 AGM, payment of the final
dividend will be made on 9 June 2022 to all shareholders on the
register as at 29 April 2022. The latest date for receipt of new
applications to participate in the Dividend Reinvestment Plan
(DRIP) in respect of the 2021 final dividend is 17 May 2022.
Details on how to join the DRIP can be found in the DRIP section
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
• We reduce the administration costs of issuing or
banking cheques
To have your dividends paid directly into your bank account,
please log on 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.
Shareholders can register for electronic communications by
registering at www.investorcentre.co.uk. For each new shareholder
that does so, Computershare will donate £1 to the Woodland Trust.
For more information on the Woodland Trust and all of their
campaigns please visit their website at www.woodlandtrust.org.uk.
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 to receive electronic communications at any time by
contacting Computershare.
The company’s 2021 Annual Report and Notice of the 2022 AGM are
available to view at www.reckitt.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
• Share capital information
268
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 Reckitt shares using a share dealing
facility made available by Reckitt’s Registrar, Computershare; these
include internet and postal share dealing.
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. ADRs facilitate the purchase, holding and sale of non-US
shares by US investors. Dividends are paid to investors in US dollars.
Internet share dealing
Internet share dealing is available to shareholders residing in the
UK. This service offers shareholders a straightforward way to buy
or sell Reckitt’s shares on the London Stock Exchange. The
commission is 1.4%, subject to a minimum charge of £40. In
addition, stamp duty, currently 0.5%, is payable on purchases.
Real-time dealing is available during UK market hours (08:00 to
16:30). In addition, you can place a sale instruction outside of
market hours.
To access the service, log on to www.computershare.com/
dealing/uk. 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.com/dealing/uk; select ‘Share Dealing’
and scroll down to access the ‘Permitted Jurisdictions’ form.
Postal share dealing service
The Postal Share Dealing Service offers a way to sell or purchase
shares (subject to availability). In order to use the service, you
must be a resident in the UK or one of the permitted jurisdictions
(see Permitted Jurisdiction form). If you wish to use the service,
download a postal dealing form and the Terms & Conditions at
www.computershare.com/dealing/uk. The fee for this service is 1.4%
of the value of each sale or purchase, and is subject to a minimum
charge of £40. Stamp duty of 0.5% may be payable on purchases.
As a consequence of the UK leaving the European Union on
31 December 2020, the share dealing service offered through
Reckitt’s Registrar is unfortunately no longer available to
customers with certificated shareholdings based in the European
Economic Area.
Reckitt Benckiser Group plc ADRs are traded on the
over-the-counter market (OTC) under the symbol RBGLY. Five
ADRs represent one ordinary Reckitt share. J.P. Morgan Chase Bank
N.A. is the Depositary. The table below provides details of the
identification of Reckitt 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
RKT.L. Ordinary share
London Stock
Exchange
GB00B24CGK77
ADR Depositary Bank
J.P. Morgan Chase Bank N.A. sponsors and administers the Reckitt
ADR facility. J.P. Morgan ADR shareholder services can be
contacted as follows:
J.P. Morgan Chase Bank N.A.
383 Madison Avenue, Floor 11, New York, NY 10179
Online via: www.shareowneronline.com
Telephone number for general queries: +1 800 990 1135
Telephone number from outside the US: +1 651 453 2128
Company Secretary
Catheryn O’Rourke
Registered office
103-105 Bath Road, Slough
Berkshire SL1 3UH
Telephone: +44 (0)1753 217800
Registered and domiciled in England and Wales No. 6270876
Company status
Public Limited Company
Detailed terms and conditions for both internet and postal dealing
are available upon request by calling +44 (0)370 702 0000.
Auditor
KPMG LLP
Analysis of shareholders as at 31 December 2021
Distribution of shares by type of
shareholder
No. of
holdings
Shares
Nominees and institutional investors
4,890
727,462,979
Individuals
Total
Size of shareholding
1 – 500
501 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 50,000
50,001 – 100,000
100,001 – 1,000,000
1,000,001 and above
Total
10,865
9,072,200
15,755
736,535,179
No. of
holdings
9,480
2,359
2,307
330
598
201
372
108
Shares
1,778,023
1,710,462
4,750,203
2,328,862
14,449,794
14,200,830
123,350,995
573,966,010
15, 755
736, 535, 179
Solicitors
Slaughter and May/Linklaters LLP
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 Shareholder helpline
Telephone: +44 (0)370 703 0118
Website: www.computershare.com/uk
Reckitt Annual Report and Accounts 2021
269
Financial StatementsGovernanceStrategic Report Cautionary note concerning forward-looking statements
This Annual Report and Financial Statements contains statements
with respect to the financial condition, results of operations and
business of Reckitt (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, Reckitt 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 2021 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.
Shareholder Information (Continued)
Charity donation
ShareGift is a UK registered charity (No.1052686) which specialises
in realising the value locked up in small shareholdings for charitable
purposes. The resulting proceeds are donated to a wide range of
charities, reflecting suggestions received from donors. If you have
only a small number of Reckitt 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.
Reckitt 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 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
• 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.
270
Notes
Reckitt Annual Report and Accounts 2021
271
Financial StatementsGovernanceStrategic Report Notes
272
Printed by Park Communications on FSC® certified paper.
Park works to the EMAS standard and its Environmental
Management System is certified to ISO 14001.
This publication has been manufactured using 100% offshore wind
electricity sourced from UK wind.
100% of the inks used are vegetable oil based, 95% of press
chemicals are recycled for further use and, on average 99% of any
waste associated with this production will be recycled and the
remaining 1% used to generate energy.
This document is printed on InasetPlus Offset paper made of
material from well-managed, FSC®-certified forests and other
controlled sources.
This is a certified climate neutral print product for which carbon
emissions have been calculated and offset by supporting
recognised carbon offset projects. The carbon offset projects are
audited and certified according to international standards and
demonstrably reduce emissions. The climate neutral label includes
a unique ID number specific to this product which can be tracked
at www.climatepartner.com, giving details of the carbon offsetting
process including information on the emissions volume and the
carbon offset project being supported.
Reckitt Benckiser Group plc
Registered office
103-105 Bath Road,
Slough, Berkshire, SL1 3UH
UK
Registered in England and Wales
No 6270876
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