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’s financing and financial risk management activities are centralised into Group Treasury to achieve benefits of scale and control.
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.
The Group’s 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.
The Group monitors net debt (total borrowings less cash and cash equivalents, short-term available for sale financial assets and financing derivative financial instruments) and at 31 December 2019 the Group had net debt of £10,749m (2018: £10,746m). The Group seeks to pay down net debt using cash generated by the business to maintain an appropriate level of financial flexibility.
Our liquidity needs are driven by our ability to generate cash from operations and the level of borrowings (and related levels of headroom), the level of acquisition, the level of share repurchases and dividends, dispositions, target ratings for our debt and options available to us in the equity and debt markets.
Bank: The Group has bilateral credit facilities with high-quality international banks. All of these facilities have similar or equivalent terms and conditions, and have a financial covenant, facilities and central cash and investments, are considered sufficient to meet the Group’s projected cash requirements.
Commercial paper: We obtain our funding primarily from the commercial paper market and have benefited from the low interest rate environment. We maintain committed back-up credit facilities, which have remained undrawn since FY 2009. At 31 December 2019, we had £5.5bn in undrawn committed bank facilities.
Bonds: As part of our strategy to maintain financial flexibility, as well as to procure additional funding for future acquisitions, including both bolt-on acquisitions as well as acquisitions that may be more material in size, we increased the level of medium-term funding in 2013 with the placement of a US$1bn bond in the US debt market, and issued a further US$7.75bn in bonds to part refinance the Mead Johnson acquisition in 2017.
Interest rates: The Group has both interest-bearing and non interest-bearing assets and liabilities. The Group monitors its interest expense rate exposure on a regular basis. The Group manages its interest rate exposure on its gross financial assets by using fixed rate term deposits.
Foreign exchange: The Group prepares its financial statements in Sterling but conducts business in many foreign currencies. 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. For transactions, it is the Group’s policy to monitor and, only where appropriate, hedge its foreign currency transaction exposures. These transaction exposures arise mainly from foreign currency receipts and payments for goods and services, and from the remittance of foreign currency dividends and loans. The local business units enter into forward foreign exchange contracts with Group Treasury to manage these exposures, where practical and allowed by local regulations. Group Treasury manages the Group exposures, and hedges the net position where possible, using spot and forward foreign currency exchange contracts.
Commodities: Due to the nature of its business the Group is exposed to commodity price risk related to the production or packaging of finished goods such as those that are oil-related, and a diverse range of other, raw materials. This risk is, however, managed primarily through medium-term contracts with certain key suppliers and is not viewed as being a material risk.
|Particulars||US commercial paper||Euro commercial paper|
|Issuer||Reckitt Benckiser Treasury Services PLC||Reckitt Benckiser Treasury Services PLC|
|Guarantor||Reckitt Benckiser Group PLC||Reckitt Benckiser Group PLC|
|Program size||USD 8.0 billion||EUR 3.0 billion|
J.P. Morgan Securities LLC
MUFG Securities Americas Inc.
RBC Capital Markets
Citigroup Global Markets Inc.
Mizuho Securities USA Inc.
Merrill Lynch, Pierce, Fenner & Smith Inc.
Bank of America Merrill Lynch
|Issuing and Paying Agent||Citibank, N.A.||Deutsche Bank|
Reckitt Benckiser Treasury Services PLC ("RBTS")
|Issuer||Issue date||Currency||Coupon (%)||Amount (mn)||Maturity|
|RBTS||Jun-17||USD||LIBOR + 56bps||750||Jun-22|
Reckitt Benckiser Treasury Services (Nederland) BV ("RBTS(N)")
|Issuer||Issue Date||Currency||Coupon (%)||Amount (mn)||Maturity|
Mead Johnson Nutrition Company ("MJN")
|Issuer||Issue date||Currency||Coupon (%)||Amount ($mn)||Maturity|
Note: All the above bonds are guaranteed by Reckitt Benckiser Group plc
|Agency||Short Term Rating||Long Term Rating||Long Term Outlook||Last Change Date|
|Moody's||P2||A3||Stable||12 March 2021|
|S&P||A2||A-||Stable||17 Dec 2020|