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Reckitt Benckiser is offloading its portfolio of homecare cleaning brands and the embattled baby formula business to focus on its stable of power brands in health and hygiene.
The simplification drive by the Durex to Dettol owner will see the group seek to sell the likes of Air Wick, Calgon and Cillit Bang by the end of 2025, with all options on the table.
The Mead Johnson Nutrition business, which has been beset by problems since Reckitt paid $17bn for it in 2017, is also on the chopping block.
Reckitt said the plan would allow the group to focus capital on brands in its hygiene and health arms that offered the best long-term opportunity for growth.
The core Reckitt portfolio would be “a uniquely attractive consumer health and hygiene business”, with premium, high-growth and high-margin powerbrands, including Strepsils, Gaviscon, Nurofen, Lysol, Dettol, Harpic, Finish, Vanish, Durex and Veet.
Reckitt also aims to make the group as a while a “simpler and more effective organisation”, with fewer management layers and reduced duplication to accelerate speed of decision making and improve efficiency.
It will lead to a unified category structure operated through three geographies - North America, Europe and emerging markets - and remove the current global business unit structure.
CEO Kris Licht said the plans were “an important step forward to firmly establish Reckitt as a world-class consumer health and hygiene company, with one of the strongest growth and margin profiles in the industry”.
“Our core portfolio of market-leading powerbrands and simpler, more effective organisation position us to better serve our consumers and customers,” he added. “This will deliver attractive long-term value creation for Reckitt’s shareholders through our earnings model and cash returns.
“I am pleased to announce the appointment of a number of talented, long-term Reckitt leaders to the group executive committee to deliver this growth and value creation opportunity.”
Reckitt’s homecare brands generated £1.9bn of the group’s £14.6bn in 2023, with the nutrition business contributing about 15% of sales.
Separately, the group reported 0.8% like-for-like revenue growth to £7.2bn in the first half, with the hygience division up 4.5%, health up 1.3% and nutrition down 9%.
Net revenues declined 3.7% as a result of currency headwinds.
Volumes in the hygience and health portfolios managed 0.4% growth despite high-single digit declines in seasonal over-the-counter medicine brands caused by retailer destocking following a weaker than expected season.
Operating profits fell 4.9% in the half to £1.7bn.
Reckitt also downgraded full-year like-for-like growth expectations from 2-4% to 1-3% because of the supply disruption caused to the US nutrition business by a tornado in Indiana earlier this month.
“Today I am pleased to announce a set of actions to significantly sharpen our portfolio and simplify our organisation for accelerated growth and value creation,” Licht added.
“This follows a thorough review of our portfolio against the three principles I set out in October 2023.
“We delivered H1 broadly in line with our expectations.”
Morning update
Supermarkets score till roll boost
England’s road to the final of Euro 2024 helped boost supermarket takings as shoppers stocked up for matches at home.
Total till sales at UK grocer grew by 3.6% in the four weeks ended 13 July, up from 1.1% in the previous month, according to new data released today by NIQ.
This faster rate of growth was also spurred on by a week of hot summer weather at the end of June.
Across the retailers, Ocado (+12.9%) and Mark & Spencer (+8.6%) enjoyed the fastest growth over the 12-week period, with Tesco, Sainsburys, Lidl and Waitrose also gaining market share.
Mike Watkins, NIQ’s UK head of retailer and business insight, said: “The three major things that influence how shoppers spend are the weather, events and increased promotional activity.
“In the last few weeks all of these have been in play. However, we’ve seen that strong branded promotions around Euro 2024 had the biggest impact at the start of the summer.”
Nichols rewards shareholders
Vimto owner Nichols has issued a special dividend for shareholders following a “strong” first-half profit performance and a full-year upgrade to forecasts.
Group revenues in the six months to June slipped by 1.8% to £84m as a decline in sales overseas and in the out-of-home division offset growth in the core business.
UK packaged sales jumped 5.3% to £45.4m as volumes rose 4.9% thanks to innovation, distribution gains and increased marketing investment.
International sales fell 6.9% to £20m as significant growth experienced in Africa reversed, while the restructured out-of-home business saw sales decline 11.3% to £18.6m.
Adjusted pre-tax profits jumped 18% to £14.5m as the group improved gross margins and reduced costs.
Nichols increased its interim dividend to 14.9p and also announced a special dividend of 54.8p a share, a £20m bonus on top of the first-half dividend.
CEO Andrew Milne said: “Whilst mindful of continued pressure on consumer spending, despite levels of inflation stabilising, our diversified business model and the enduring strength of the Vimto brand have enabled us to deliver a strong performance.
“As a result, we now expect full-year profitability to be slightly ahead of current market expectations and we remain confident that Nichols is well placed to deliver its strategic growth ambitions.”
Greencore lifts profits guidance
Greencore has upgraded profit expectations after “another excellent performance” in the third quarter.
Like-for-like revenues increaaed 1.4% to £465.2m year in year, but volumes were “more subdued” as it lapped strong figures from June 2023.
The group in the trading update that profit conversion continues to improve year on year through ongoing commercial and operational actions.
Greencore now expects adjusted operating profits to be in a range of £88m-90m, ahead of prior guidance of £86m-£88m and ahead of current market expectations.
CEO Dalton Philips said: “Q3 represents another excellent performance by the business against a tough comparative period. Our continued progress has been delivered through ongoing impactful operational and commercial initiatives, which we are continuing to implement at pace, supporting the improved profit conversion in the quarter.”
Morning share movements
The FTSE 100 opened down 0.4% to 8,134.43pts.
Shares in Reckitt shot up 4.2% to 4,593p in response to its new strategy.
Nichols jumped 7% to 1,067.5p thanks to a strong set of results, an upgrade and a good dividend for shareholders.
And Greencore also benefitted from its own upgrade to boost shares by 2% to 183.4p.
Yesterday in the City
The FTSE 100 slipped 0.4% to 8,167.37pts yesterday.
Compass Group led the risers, climbing 4.5% to as the catering giant upgraded profit expectations on strong Q3 trading.
Meanwhile, shares in Eagle Eye also jumped 2.5% to 485p after an upbeat full-year trading update.
McBride and PZ Cussons also increased 2.3% to 132.5p and 1.7% to 104.8p respectively.
Fallers included SSP Group, down 3.4% to 174.4p, and Naked Wines, down 2.7% to 58p.
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