17th Feb 2022 10:19
(Alliance News) - Reckitt Benckiser Group PLC's full-year revenue beat was the perfect tonic for the FTSE 100 constituent, which has seen share price weakness in recent months as traders fret over its fortunes as virus tailwinds wane.
Shares in the company were 5.2% higher at 6,108.00 pence each in London on Thursday morning, the best large cap performer. The stock has fallen 2.8% over the past 12 months, however, contrasting with a 13% rise from the wider FTSE 100.
While sales of products such as Dettol disinfectants got a boost from hygiene awareness during the pandemic, Reckitt's cold and flu offering was left behind. Recent sales and commentary suggest the opposite is happening now.
The hygiene and household goods firm said revenue in 2021 fell 5.4% to GBP13.23 billion from GBP13.99 billion. The figure lapped a tough, Covid-19-boosted comparative. However, it topped company-compiled consensus of GBP13.18 billion.
The Nurofen painkiller maker swung to a pretax loss of GBP260 million for the year from a GBP1.87 million profit in 2020, due primarily to a chunky loss on disposals. The China IFCN business was one of three business Reckitt sold in 2021. The trio of disposals resulted in a pretax loss on disposal of GBP3.52 billion. No such costs were booked in 2020.
"Reckitt Benckiser's full year results reflect a resilient performance as the group has faced widespread inflationary pressures. The group delivered a steady financial performance with like-for-like net revenue growth of 3.5%, firmly ahead of expectations, and adjusted operating margin of 22.9%, in line with guidance," Edison analyst Neil Shah commented.
In the fourth quarter alone, like-for-like net revenue increased 3.3%.
Reckitt said its health business saw "strong growth" of 18% in the fourth quarter, helped by its over-the-counter arm advancing 40%. The 40% growth was in line with a prediction made by Swiss bank UBS.
Reckitt has made a "strong start" to the flu season, a far cry from a weak performance in the prior year due to pandemic curbs.
For 2022, the company expects adjusted operating margins to improve from 22.9%.
AJ Bell analyst Danni Hewson commented: "Part of the expected margin boost for Reckitt comes from a likely shift in the type of products being sold in its health arm. During the pandemic, people stuck at home haven't caught as many colds or flu-liked illness because they haven't been mixing in public as much. But now life is getting back to normal, Reckitt is likely to see stronger sales of higher-margins products to help fight colds and flu."
The health unit could also be boosted by a perception that branded goods are more effective than cheaper, supermarket branded alternatives, despite the contents of the product being largely similar.
"There is also the theory that many people think the big brand products in healthcare are more effective at fighting illnesses, despite them having the same active ingredients as supermarket own-brand versions. So, we could potentially see less trading down in the healthcare space compared to the food and drink categories sold by Unilever," Hewson added.
Reckitt said it will "apply appropriate pricing" in order to offset inflation pressures.
Hargreaves Lansdown analyst Matt Britzman commented: "As we've seen across the broader industry, inflation concerns are front and centre and prices will need to flex in the coming year to help offset that. The strong brand presence of much of Reckitt's range should help it navigate the inclement inflationary environment, with customers likely to stay loyal to tried and trusted products, even if they are forced to tighten their belts elsewhere. The disposal of lower margin areas will certainly help with weathering that storm, and with the underperforming Chinese Infant Child Nutrition business now behind them, the outlook is starting to look brighter."
Reckitt recommended a final payout of 101.6 pence per share, unchanged from 2020. Its annual dividend was also unchanged at 174.6p per share.
By Eric Cunha; [email protected]
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