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Emerging-market malaise strikes Reckitt

RESULTS: Emerging-market weakness made for a mixed performance at the consumer-goods giant, and speculation about the future of the pharmaceuticals unit continues
February 12, 2014

Adjusting for a £225m provision for legal bills and other one-off charges, underlying operating profit at consumer-goods giant Reckitt Benckiser (RB.) rose 7 per cent in 2013 to £2.19bn. Group like-for-like sales (excluding pharmaceuticals) rose 4 per cent, boosted by £100m of investment in brands such as Strepsils, Nurofen and Durex.

IC TIP: Hold at 4860p

But emerging-market conditions - principally in Russia, Turkey and South Africa - became increasingly challenging as the year wore on; adjusted operating profit at the Russian, Middle East and North African operations fell 2 per cent. The Latin America and Asia Pacific business fared better, with underlying sales up 10 per cent - only marginally weaker than 2012’s 11 per cent growth. In any case, 57 per cent of Reckitt's revenues come from developed markets in North America and Europe, where economic recovery helped underlying sales and profit rise 3 and 12 per cent respectively.

Speculation that the pharmaceuticals division could be sold was fuelled by the appointment of pharma heavyweight Howard Pien as the unit’s chairman. Anlaysts value the division at about £1.5bn. It is struggling against generic competition for its heroin substitute product, Suboxone, and a strategic review was announced in October. Pharmaceutical net revenue fell 8 per cent in 2013.

Deutsche Bank expects EPS of 263p for 2014, down from 270p in 2013.

RECKITT BENCKISER (RB.)

ORD PRICE:4,860pMARKET VALUE:£35bn
TOUCH:4,856-4,861p12-MONTH HIGH:4,986pLOW: 4,225p
DIVIDEND YIELD:2.8%PE RATIO:20
NET ASSET VALUE:880p*NET DEBT:33%

Year to 31 DecTurnover (£bn)Pre-tax profit (£bn)Earnings per share (p)Dividend per share (p)
20097.751,89199100
20108.452.14217115
20119.492.38240125
20129.572.41251134
201310.02.31242137
% change+4-4-4+2

Ex-div: 19 Feb

Payment: 29 May

*Includes intangible assets of £11.1bn or 1,548p a share