Reckitt & Benckiser - Half Year Results

Here’s a link to my first post in March following 2012 full year results. Along with several other stalwarts in my portfolio this month, Reckitt have today announced results for Q2 & half year to 30th June 2013 (link via Investegate).

CEO, Rakesh Kapoor said the company was confident it would achieve full-year total revenue growth at the upper end of its 5.0% to 6.0% range after a strong first half.

Half-year sales rose 5% to £5bn - up from £4.7bn last year. The focus on ‘power brands’ is paying off with strong returns from Mucinex, Sinus-Max, Detol and Durex. China has now become the largest Durex market worldwide.

"Power Brands"

Half-year profits fell to £914m affected by some one-off costs relating to restructuring and regulatory disputes. The adjusted figure was £1.16bn which excludes the one-off sum of £225m set aside as a contingency measure for future liability.

On the dividend side, the interim has been increased 7% to 60p - if this is repeated for the final, it will give a full year figure of 143p making the forward yield around 3.1% at the current share price of £45.80

In 2012, the company acquired Schiff Nutrition, a leading provider of vitamins and supplements in the USA. The company sees this as a platform to launch its entry into the large and growing global vitamins and supplements market. “The excellent early results from Schiff confirm that we have acquired very high quality brands in an exciting VMS category which we firmly believe will deliver sustainable shareholder returns.”

The US Food and Drug Administration (FDA) halted Reckitt’s patent on the anti-addiction product Suboxone tablets, a move that will herald the entry of cheaper, generic rivals to the Suboxone brand and harm sales over the medium to long term. Brokers consensus are for expected earnings per share (EPS) to nudge 1% lower in 2013 to 262p, before the effect of falling Suboxone revenues drive EPS 4% lower to 252p.

Commenting on this the CEO said "On Suboxone, we have always been aware of the challenges of operating in a post generic environment. However, we continue to see strong patient and doctor preference for film over tablets and we are very pleased that the film has maintained its volume market share of 69%".

Rakesh Kapoor is making progress with plans to refocus more towards the faster growing emerging markets like Brazil and India and has set a target of these EMs to become 50% of the core business by 2015.

As we all keep hearing, past performance is no guide to the future however its worth pointing out that RB has been one of the best-performing companies in the FTSE 100 index over the past decade having seen its sales double and market cap increase fourfold.

I concluded the previous report with “This is, in my opinion, a quality operation and one of my better investment decisions. I can imagine holding RB for quite a while - for me it would just about represent the epitome of a long term buy & hold share” - I have no reason to change this sentiment.

As ever please DYOR.