Wednesday, 11 February 2015

Reckitt & Benckiser - Final Results

RB is a global consumer goods leader in health, hygiene and home. Its 19 Powerbrands, in high growth categories, take a disproportionate share of RB's top end marketing investment. Powerbrands drive over 70% of growth. Innovations launched in the last 3 years generate around 30% net revenue.

Their range of Powerbrands include many familiar names - Cillit Bang, Durex, Dettol, Finish, Gaviscon, Strepsils & Nurofen - recession or no recession, people keep cleaning their kitchens, getting sore throats and suffering headaches.

Having been a stalwart of my sipp for several years during the build phase RB are now firmly entrenched as one of the cornerstones of my S&S ISA.

Reckitt have today reported full year results for 2014 (link via Investegate). Stripping out the pharmaceuticals arm RBP which was spun off as a separate company, Indivior at the end of last year, operating profits rose 11% (constant exchange) to £2.19bn on revenue of £8.8bn.

Reckitt chief executive Rakesh Kapoor said:
"We have achieved a lot in the past three years - but there is more to do. In true RB spirit of outperformance, we need to sharpen our organisational agility and efficiency.  

I am therefore announcing our new "Supercharge" project focused on:
-     Creating a simpler, more agile organisation
-     Reducing cost and driving efficiencies

This will make RB a leaner, faster and more coordinated business.  It will also drive cost savings that will enable us to deliver sustainable earnings growth as we enter the second half of the decade. Our strong margin expansion in 2014 provided a step up in operating margin, which our Supercharge project should make sustainable. In 2015, we continue to expect tough market conditions.  Therefore, we are targeting LFL net revenue growth of +4%, which is broadly similar to 2014 "

They are proposing a 2p uplift in the final dividend from 77p to 79p which is again a little disappointing but better than the 1p reduction last year. This will mean a full year dividend of 139p and yield now falling to just 2.4%.

The balance sheet remains robust with borrowing falling to just £1.5bn.

The results have been reasonably well received and at the time of posting the share price is up 3% at £57.70. Over the past year the share price has increased  by £9.00 or 18%.

There is no doubt that RB is a quality company which has provided a very good return for me over the past 4 years. However, I am just beginning to look at the falling yield and wonder whether there may be better income opportunities elsewhere. A nice problem to contemplate and currently in no hurry to make a decision.

I would be interested to hear the views of others on this one - leave a comment if you have a view on Reckitt.


  1. I started looking at RB as a potential stock to add to my dividend income portfolio. However, it member passes my selection criteria. PZ Cussons is the only similar brand to tick all my boxes and has been for some while.

    That being said, I expect RB to improve with the new plans to streamline the company a bit more.

  2. Hi M,

    Thanks for stopping by.

    I agree, if I was putting together a list of potential dividend shares now, RB may well not make it. The near doubling of its share price in recent years has reduced the yield from over 4% to 2.4%. Also, I am not quite clear on earnings for the next year post demerger of its pharma, Indivior.

    Digital Look are forecasting earnings of 241p which would suggest a dividend of around 120p assuming payout will be 50% of earnings as stated in the final results.

    PZ has not crossed my radar so far - maybe one to research?

  3. Yes, I'm not site of the earnings either, although RB do have a really powerful selection of brands.

    PZ Cussons only recently came into my screener I think because the share price had brought the PE down to just under 20, I've no holding in this sector as of yet, but PZ Cussons ticked my boxes for last month's watch list... So I'm investigating right now.