28th Jul 2014 11:47
LONDON (Alliance News) - British consumer goods giant Reckitt Benckiser Group PLC Monday said it plans to spin-off its US-based pharmaceutical business within the next 12 months in a bid to let that division deliver long-term value as a stand-alone business, leaving Reckitt focused on its health and hygiene divisions.
The maker of products including Dettol disinfectants, Durex condoms and Nurofen and Strepsils cold and flu remedies, posted a higher profit for the first half of the year. However, news of its plans to de-merge its pharmaceuticals business over the next 12 months in a listing on the London Stock Exchange helped push the group's shares to the top of the FTSE 100 Monday.
"We believe that RB Pharmaceuticals has the potential to deliver significant long term value creation as a stand-alone business," Chief Executive Rakesh Kapoor said in a statement.
The unit's main drug is heroin addiction treatment Suboxone, but it has started to see sales decline due to competition from generic rival treatments and pricing pressure.
Reckitt Benckiser investors have been calling for the company to look at options for the pharmaceuticals business for several years, arguing that it is a poor fit with its consumer and health brands. In October last year, the company bowed to investor pressure by launching a review of the business. At the time, the company said the business could be worth GBP3 billion if sold.
By spinning-off the business, Reckitt said Monday that it will be able to focus on the health and hygiene markets.
"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. We also believe that RBP will be a more attractive partner for business development opportunities as a stand-alone and separately managed entity," the company said in a statement Monday.
The company said pretax profit for the half-year ended June 30 was GBP1.04 billion, up from GBP898 million 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, but down 6% from the GBP4.60 billion recorded last year at actual exchange rates.
The company said that revenue growth in the period was held back by lower market growth in a number of countries, including weak consumer sentiment in the US. It was hit hard by currency fluctuations, as divisionally, revenue grew right across the board excluding its pharmaceutical business at constant exchange rates, but declined in each division at actual exchange rates.
Looking forward, the consumer goods giant said that it expects market conditions to remain challenging in the second-half, particularly in the US and certain emerging markets.
"Nonetheless we remain on track to achieve our full year total revenue growth target of 4-5% (excluding RB Pharmaceuticals). Furthermore, we are gaining good traction from our planned efficiency programmes and we expect to have continuing margin expansion in the second half, excluding RBP" said Kapoor.
The company maintained its interim dividend at 60 pence per share.
From a category perspective, Reckitt Benckiser said revenue growth on a constant currency basis was driven by a strong performance in its consumer health division, with Scholl, Mucinex and MegaRed benefitting from innovation and roll-outs and Durex and Gaviscon also posting strong underlying growth.
Its hygiene division has also seen growth at constant exchange rates, while its home division had a disappointing flat like-for-like performance in the period.
"Our focus and investment behind consumer health continues to deliver profitable growth, and our Hygiene category is improved after a slow start. Home performance was weak in challenging market conditions. It is early days but we have made good progress on integrating our recent K-Y acquisition," said Kapoor.
Shares in Reckitt Benckiser were trading 2.4% higher early Monday afternoon at 5,190.00 pence.
By Rowena Harris-Doughty and Alice Attwood; [email protected]; @rharrisdoughty; [email protected]; @AliceAtAlliance
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