18th Feb 2019 12:46
LONDON (Alliance News) - Reckitt Benckiser Group PLC on Monday reported 18% rise in annual revenue for its core health division following the USD18 billion acquisition of US baby formula maker Mead Johnson Nutrition
In June 2017, Reckitt paid USD90 per share for Mead Johnson, which owns infant formula brand Enfamil, valuing the company at USD17.9 billion including debt. 2018 saw the first full year revenue contribution from the acquisition.
Reckitt's health segment - which includes infant formula & child nutrition products, heartburn medicine Gaviscon and Strepsils lozenges - recorded total revenue of GBP7.76 billion in 2018, up from GBP6.56 billion a year ago. Consensus was for GBP7.74 billion.
Annual revenue from infant formula & child nutrition products hit GBP2.84 billion versus GBP1.56 billion in 2017, in line with company-compiled consensus.
Reckitt, in its third-quarter results statement released October, announced that there had been some disruption at its European manufacturing plant where its infant formula and child nutrition products were produced and that this was likely to spill over into the fourth quarter as well.
Infant formula & child nutrition revenue was flat in China in the fourth quarter of 2018 due to "constrained capacity". There was also reduced demand in the second half due to "on-shelf availability shortages" with only modest re-stocking possible after the manufacturing disruption.
The FTSE 100 listed company warned that first and second quarter of 2019 are both expected to "see some weakness" on infant formula production disruptions and flat China sales.
Hygeine home, Reckitt's second division, had a more subdued performance with annual revenue down 1.0% year-on-year at GBP4.84 billion, slightly behind GBP4.85 billion consensus estimate. The division produces Cillit Bang stain remover and Air Wick air fresheners.
In 2017, Reckitt announced plans to combine infant formula & child nutrition with its exiting health and some health hygiene brands to create a health business unit. It also combined its home and other home hygiene brands to make a hygiene home business unit.
These units were effective from the start of 2018 and constitute the company's RB2.0 re-organisation. This reorganisation incurred exceptional costs of GBP185 million in 2018 from GBP90 million in 2017 and is expected to cost GBP450 million overall.
Group revenue for 2018 totaled GBP12.60 billion, up 10% from GBP11.45 billion. This compares to a consensus of GBP12.59 billion. Pretax profit for the year increased 8.8% to GBP2.72 billion.
The company's 2018 like-for-like net revenue growth totalled 3%, equalling growth last year and ahead of the 2.7% market consensus. Reckitt is guiding for like-for-like net revenue growth of between 3% and 4% in 2019.
Reckitt's adjusted operating profit was GBP3.36 billion, equalling consensus, and up 7.7% from GBP3.12 billion in 2017. The adjusted figures exclude non-recurring items such as restructuring expense and business disposals, and also exclude some recurring items such as amortization of acquired brands.
The company's adjusted operating margin in 2018 was 26.7%, an increase of 20 percentage points on a pro-forma basis, but a decline of 60 base points on a reported basis.
"We expect to maintain the adjusted operating margin as we generate our usual RB cost and efficiency savings, and deploy them into building two even stronger businesses," said outgoing Chief Executive Rakesh Kapoor.
In January, the company said that Kapoor intends to step down before the end of 2019 having spent 8 years as CEO and 32 years with the company.
Reckitt's earnings per share, on a diluted and adjusted basis, totalled 339.9 pence, up from 324.6p. This was a significant improvement over earnings per share consensus of 327.9p.
The company declared a final dividend of 100.2 pence per share, up 2.6% from 97.7p the year before. This bought its total dividends paid for the year to 170.7p from 164.3p, an increase of 3.9%.
"[Reckitt] has been on a well-established journey with a focussed, strategic evolution from a household cleaning company to a world leader in consumer health. Our most recent acquisition, [Mead Johnson], has been a catalyst for RB2.0 - the creation of two end-to-end accountable business units. RB2.0 provides a platform for future growth and outperformance in each business unit. We remain committed to executing on this important project and will continue to evaluate opportunities to maximise shareholder value from RB2.0," said Reckitt Chair Chris Sinclair.
"We are also under way in the search for a successor to Rakesh, whether internal or external, who will be a fit with the distinctive culture of RB and consistent with execution of RB2.0," Sinclair added.
Shares in Reckitt were up 5.0% at 6,319.00 pence on Monday.
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