11th Feb 2015 09:32
LONDON (Alliance News) - Shares in Dettol and Nurofen maker Reckitt Benckiser Group PLC rose Wednesday after its fourth-quarter net revenue growth beat market expectations, and the group announced further cost-cutting initiatives and plans to bolster its share-buyback programme in 2015.
The British consumer goods giant reported higher pretax profit for 2014 of GBP2.13 billion for 2014, compared with GBP1.86 billion in 2013. Its operating profit rose 15% to GBP2.16 billion. The figures exclude RB's pharmaceuticals business, which it spun off into new FTSE 250 constituent Indivior PLC at the end of last year. The move left Reckitt solely focused on its consumer health and hygiene products.
While profits benefited from price increases and cost optimisation initiatives, net revenue for the year came in at GBP8.84 billion, compared with a restated revenue figure of GBP9.27 billion in 2013. The decline of 4.6% at actual currency rates resulted from the strength of sterling. Reckitt said growth would have been 4% if currency rates had stayed unchanged.
Like-for-like revenue rose 5% in the fourth quarter, betting than the 3.6% growth analysts had been expecting. The group said its popular brands Scholl, Durex, Dettol, Lysol and Vanish, all performed particularly well in 2014.
Reckitt shares were trading 3.7% higher at 5,795.00 pence Wednesday morning, one of the best performing stocks on the FTSE 100.
Reckitt faced a tough 2014, with economic and political troubles in key growth markets such as China, Thailand, Indonesia and Brazil. Two of its biggest but slowing emerging markets, Latin America and South East Asia, held back better sales in markets such as Russia, the Middle East and Turkey. Reckitt's now de-merged pharmaceuticals division had also been holding back growth.
Reckitt said Wednesday that it expects tough market conditions to remain in 2015.
"Therefore, we are targeting like-for-like net revenue growth of 4%, which is broadly similar to 2014 and moderate to 'nice' operating margin expansion in 2015," said Chief Executive Rakesh Kapoor in a statement.
The group said it implemented a number of short-term cost containment initiatives in the second half of the year, aimed at mitigating the hit from adverse exchange rates. However, it also commenced a longer-term cost containment project which it calls "Supercharge", a project it said will focus on reducing cost and driving efficiencies, as well as making the business more flexible.
Reckitt said the initiatives will drive sustainable operating margin expansion off its 2014 base, and hopefully deliver between GBP100 million and GBP150 million in savings a year.
"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," said Kapoor.
Reckitt recommended a final dividend of 79 pence per share, giving a total dividend for 2014 of 129 pence, up 1% on 2013. It also announced that it will boost its existing GBP300 million share buyback programme by adding a further GBP500 million in 2015.
The Indivior business posted Wednesday lower pretax profit for 2014 due to generic competition in the US and price cuts in Europe hitting its revenue in the US and exceptional costs relating to the de-merger. It said that its outlook for 2015 is "very uncertain as to the timing, extent and impact of tablet price erosion". Indivior posted a pretax profit of USD561 million, down from USD695 million a year before, as revenue fell to USD1.12 billion from USD1.22 billion, and it posted USD24 million in restructuring costs relating to its spin-off.
Indivior shares were down 7.0% at 159.40 pence Wednesday morning, the worst performing stock on the FTSE 250.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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