Reckitt Benckiser plc

History

In 1814 Jeremiah Colman begins milling flour and mustard in Norwich, UK. Jeremiah then diversifies in the mid-century into starch, wheat flour and laundry blue. Johann A. Benckiser founded Benckiser in 1823 from industrial chemicals. Isaac Reckitt rented and then later bought a starch mill in hull in 1848. He diversified into other household products and became the owner of starch, washing blue and black lead for polishing. After his death his four sons took his place. Then in 1888 Reckitt & Sons was first launched on the London Stock Exchange.

Reckitt & Sons merged with J & J Colman to become Reckitt & Colman Ltd in 1938 and then finally in 1999 Reckitt & Colman plc and Benckiser N.V. merged to become Reckitt Benckiser plc – The world’s no. 1 in house hold cleaning.

Introduction

Reckitt Benckiser plc is a United Kingdom based company which was formed with the merger of Reckitt & Colman, plc. and Benckiser N.V. Reckitt Benckiser Inc. manufactures markets and sells household, cleaning and specialty food products in North America. These products include LYSOL® cleaners and disinfectants, RESOLVE® cleaners, SPRAY’NWASH® laundry stain removers and FRENCH’S® mustard.

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Reckitt Benckiser plc is one of the world’s leading manufacturers of cleaning products and a member of the FTSE 100 index of the largest companies traded on the London Stock Exchange. It is headquartered in the town of Slough just to the west of Greater London.

Reckitt Benckiser has operations in more than sixty countries and sells its products in more than 180 countries. Turnover for the year to 31 December 2004 was £ 3,871 million. Profits before tax were £770 million, and net profits were £586 million. The company focuses on high margin products and has shown strong growth in earnings per share in recent years. At 31 August 2005, it had a market capitalisation of £12.4 billion.

Vision and Future Strategy

According to Reckitt Benckiser, “We are a truly global company with a consumer- oriented vision, with operations in 60 countries, sales in 180 countries and et revenues in excess of £4 billion” The vision is to passionately deliver better solutions in household cleaning and health, personal care of the ultimate purpose of creating shareholders value. Reckitt Benckiser has an exciting future where the people and the company’s brands can continue to deliver profitable growth to the benefit of employees and shareholders. The main strategy is to focus on household cleaning, to maintain a clear strategy for profitable top line growth, plan and define the program for improved financial returns and to develop a strong focused team. The organisation’s vision is also to keep delivering better products to consumers that improve their lives at crucial moments and specially to drive sales growth through focus and constant innovation while optimising costs to expand margins and profits. Way of working in Reckitt Benckiser is open and direct. Nothing is sacred. That’s the way they have built market leading brands across the world. They challenge each other in an open and direct way, sharing ideas, solutions and best practice. They hire people who recognize the need to beat the competition every time but who understand that the competition doesn’t include their colleagues. They look for diverse characters that spark off each other, are creative and generate fresh thinking.

Environmental Analysis

Reckitt Benckiser is dedicated to running its business in a responsible, environmentally sound and sustainable manner. It is recognized that Reckitt’s processes and products have both direct and indirect environmental impacts.

v Political and Legal

Business decisions are also influenced by political and legal forces, which determine the rules by which business is conducted. Political forces play a major role in international markets, where decisions by government can often have profound implications for companies. [David Jobber 2nd Edition] Political action, then, in the form of legislation and less formal directives, can have a profound influence on business conduct. Reckitt and Benckiser perhaps more than any organisation reacts to the political and legal situations. Spread in 60 countries Reckitt and Benckiser has to take care of different policies and government laws in each of the different country. [Policy & Reports 2006] The household and health & personal care industry is heavily regulated by, inter alia, the European Union, the United States government and individual country governments elsewhere. Ingredients, manufacturing standards, labour standards, product safety, marketing and advertising claims are all subject to detailed and developing regulation.

Reckitt and Benckiser publish its annual financial statements in sterling but conducts business in many foreign currencies. As a result, it is subject to foreign currency exchange risk due to the effects that exchange rate movements have on the translation of the results and the underlying net assets of its foreign subsidiaries.

v Ecological

Reckitt and Benckiser has a real commitment of running their business in a responsible, environmentally sound and sustainable manner. The strategy is to realise the opportunities and manage the risks that arise from the environmental impacts of the business in order to achieve continuous improvement in our environmental performance and progress towards environmental sustainability.

Its is a new project of the business to plant more than two million trees in over 15 square kilometres of new forests and to make more than 8 billion products which will be produces globally from ‘carbon neutral’. [Simeon Goldstien 2007]

v Technological

Reckitt and Benckiser is increasingly building a business that they can be proud of. The products and the business are a force for good in the world. This includes powerful and developing track record on sustainability through initiatives such as the Trees for Change programme on carbon reduction, or the ‘reduce energy and water’ programme on automatic dishwashing.

The business is planning to get more of the recent available technologies in order to improve production methods of the company that will later result into higher sale and our brand will be able to compete other brands available in the market. In 2006 our factory commissioned the Company’s first solar panel which is working alongside the highly efficient Combined Heat and Power energy plant. Another plant was setup in South Korea at Reckitt and Benckiser factory iksan. Renewable energy is helping the organization to meet and exceed their target of a 20 % reduction in greenhouse gas emissions from out manufacturing energy use by 2010. [Accounts : 2006]

v Social

Reckitt Benckiser recognises its accountability to the community in which it operates and seeks to actively support and enrich these communities. Our community involvement policy sets out the broad principles through which we support community work throughout our operations. Our annual newsletter on our community involvement demonstrates how we are turning these principles into action and making

There should be a positive contribution to the societies in which we live and work. Reckitt Benckiser continues to invest over £1 million per year towards projects that really make a difference to people in the communities in which we operate around the world. As well as the company providing much needed financial support, our people also give unselfishly of their time on a range of projects that assist those who can benefit from some help and support.

v Economical

The un-audited financial information is prepared in accordance with the Listing Rules of the Financial Services Authority and on the basis of the IFRS accounting policies that the Directors intend to use in the 2006 annual report. This basis is subject to amendment by the International Accounting Standards Board (IASB). The Directors have chosen not to early adopt International Accounting Standard 34: Interim Financial Reporting (IAS 34). Consequently the financial information in this interim report is not presented in accordance with IAS 34.

This consolidated financial information has been prepared under the historical cost convention, as modified by the revaluation of financial assets and liabilities at fair value through the Group income statement subject to the Group’s hedge accounting policies.

The results and net assets of the Group’s subsidiary in Zimbabwe have been excluded from the consolidated Group results. This is on the basis that the Group does not consider the Zimbabwean business to be a subsidiary due to the loss of power to govern the financial and operating policies of the Zimbabwean business and to the restrictions on remitting funds out of the country. Results for 2005 (half and full year) and 2006 half year, and the balance sheets as at 30 June 2005, 31 December 2005 and 30 June 2006, were insignificant.

Risks

The Company’s new product pipeline may not generate consumer- relevant innovation and improvement to fuel growth and build market shares. There are possibilities that management turnover might significantly increase. Another possibility that information technology systems may be disrupted or may fail, despite the company’s disaster recovery processes, interfering with the Company’s ability to conduct its business. Customers, mainly large retailers, may decide to de-list the Company’s brands, or not participate in the active promotion of the brands through in-store programmes.

Product Quality & Safety is very essential and failures in product quality controls could potentially lead to damage to the reputation of and trust in the Company’s brands. Most product and raw material supply chains present a number of potential reputation risks relating to labour standards, raw material sourcing, and the social, ethical and environmental performance of the third party manufacturers and suppliers.

There should be effective recruitment process in order to attract the best from the market. They should introduce compensation program to retain the valued employees by market competitive salary, incentives, bonuses and protective programs. Training programs are very essential in all type of business; they should carry out training to the employees for continuous development of employee skills.

Recommendations

The following recommendations have been recommended after a thorough analysis of the Environment:

Decision making at Reckitt Benckiser should be decentralized. On company platform each department is involved in decisions related to products. For example in case of new product launch, cost department determines the cost of new product, marketing department decides if it can sell the product at the given price. Suppliers are involved if they can provide the raw materials for the new product and distributors are involved to effectively distribute the product. Thus each department is involved but participation of the finance department is fundamental because if the cost calculated for the new product is too high accounting department would give the critical decision of not launching the product no matter how innovative the initial idea was.

Conclusion

Based on the strength of the business they expect net revenue growth for the full year of around 15% at constant exchange (base £4,179m) and are upgrading their targeted adjusted net income growth (base £653m) to 14%, at actual exchange.

Net revenues grew 18% (15% constant) to £2,386m.

The underlying business (excluding BHI) grew 8% (6% constant).

• BHI contributed net revenues of £204m. Restructuring costs for the BHI acquisition were £57m.

• Operating profit as reported increased 6% to £367m. Operating profit before restructuring charges increased 23% to £424m.

• Net income as reported was 3% lower at £261m. Earnings per share for the period were 1% lower at 35.5 pence. Net income before restructuring increased 13% to £303m. EPS diluted, before restructuring grew 15% to 41.2p.

• Cash generated from operations increased 30% to £616m. Net borrowings at the half year were £795m.

• The interim dividend will be increased 14% to 20.5 pence per share and the Company is committed to its £300m share buyback program this year. [Annual Report 2006]

List of References

Accounts 2006

http://www.reckittbenckiser.com/Sites/annual_report_2006/site/alternate/rb_txt_changeit.html

Policy & Reports 2006

http://www.reckittbenckiser.com/RBTemplates/CorporateResponsibilityReports.aspx?pageid=262

David Jobber, Principles of Marketing, Second Edition.

Business and Human rights

http://www.business-humanrights.org/Categories/Individualcompanies/R/ReckittBenckiser

Simeon Goldstien 2007

http://www.packagingnews.co.uk/news/764320/Reckitt-Benckiser-combat-consumer-carbon-use/

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