News Column

Reckitt Benckiser Half-Year Pretax Profit Rises As Pharma Spin-Off Pursued

July 28, 2014

Alice Attwood

LONDON (Alliance News) - Reckitt Benckiser Group PLC jumped to lead the FTSE 100 at the market open Monday after it said that pretax profit in its first-half rose as the consumer goods company said it is pursuing a UK listed de-merger of its Reckitt Benckiser Pharmaceuticals business.

Shares in Reckitt Benckiser were trading 2.86% higher at 5,215 pence per share shortly after the market open.

The company said pretax profit for the half-year was GBP1.04 billion, up from the GBP898 million reported in the comparable period last year. Net revenue came in at GBP4.30 billion, up 4% on a like-for-like basis at constant currency rates, excluding contributions from its RBP business, said Reckitt, but down 6% from the GBP4.60 billion recorded in 2013 at actual exchange rates.

The company said its half-year results were boosted by its focus and investment in consumer health, and that its Hygiene category improved after a slow start. Reckitt also noted that performance in its Home business was weak amid challenging market conditions, but said that recently-acquired K-Y was integrating with the business well.

On a brands basis, growth has been driven by a 10% like-for-like increase in performance in consumer health with Scholl, Mucinex and MegaRed benefiting from innovation and roll-outs and Durex and Gaviscon demonstrating strong underlying growth, said Reckitt.

Looking ahead the consumer good giant said that it expects market conditions to remain challenging into its second-half, particularly in the USA and certain emerging markets. "Nonetheless we remain on track to achieve our full year total revenue growth target of 4-5% (ex RBP). Furthermore, we are gaining good traction from our planned efficiency programmes and we expect to have continuing margin expansion in the second half (ex RBP)," said the company.

The company also declared an interim dividend of 60 pence per share, flat on the 60 pence paid last year.

"We are renewing our focus on efficiency throughout the group and have seen efficiencies in media planning and buying benefitting the first half. We will make further structural efficiencies within our business in the second half and into next year. These and other programmes will continue to ensure an efficient platform to invest for future growth," said CEO Rakesh Kapoor.

The company also said that it is considering the sell-off of the RBP business due to its potential to deliver long-term value as a stand-alone business. "We have therefore decided to pursue a demerger of RB Pharmaceuticals with a separate UK listing. We expect this to take place over the next 12 months. This will also allow RB to focus on its core strategy to be a global leader in consumer health and hygiene," said Kapoor.

A stand-alone business will be best placed to create value for shareholders as it manages the challenges and seizes the opportunities within the field of addiction, said Reckitt in its half-year results. "We also believe that RBP will be a more attractive partner for business development opportunities as a stand-alone and separately managed entity. Similarly, we believe RB shareholders will benefit from the single minded focus of top management on its core business."

The RBP business delivered net revenue of GBP344 million, down 8% in the half-year. The underlying volume growth in prescriptions in the USA throughout the first six months continued to be strong with low double digit growth in this undertreated area of addiction, said Reckitt, which added that in non-USA markets, the business made progress in helping more patients but that this continues to be partially offset by government-imposed price reductions in a number of markets.

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Source: Alliance News

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