Household products and toiletries group Reckitt Benckiser is proving itself to be a decent defensive play in these uncertain times. Notwithstanding tough conditions, the business reported like-for-like sales growth of 10 per cent with its third-quarter figures last October, and raised its full-year target for net revenue growth from 11-12 per cent to 13 per cent. Reckitt says it continues to expect net income growth of at least 11 per cent.
Chief executive Bart Becht shrugged off concerns that weak consumer spending would hit sales, saying the group continued to "provide consumers with a reason why they should buy our products". But some analysts fear that Reckitt will eventually prove that it's not immune to global recession. Still, the maker of Cillit Bang and Harpic is one company that is benefiting from the stronger euro versus the pound given that a significant portion of its sales come from the eurozone.
In December, Mr Becht cashed in some of his stock in the company, raising £2.85m, which followed another divestment in September when he reaped £1.4m from selling 50,000 Beckitt shares. Nothing much can be read into those divestments as Mr Becht owns another 1.2m Reckitt shares. Still, with Reckitt's shares having outperformed the market, the group's apparent ability to beat the downturn looks priced in.
Toiletries and soaps manufacturer PZ Cussons held up well through the stock market storm and are trading above our buy tip (160p, 11 July 2008). And rightly so. A combination of a cash-rich balance sheet, improving efficiency in the UK and strong sales growth in Nigeria means prospects remain good. So far, business in Nigeria has been relatively unscathed by the credit crunch. PZ Cussons has personal care, home care and electricals operations in the country. Trading on 13.5 times earnings, the shares continue to rate a buy.
Summary of Personal Goods sector:
| Company | Price p | Mkt. value £m | PE ratio | Yield % | 12M price chng % | Last IC view |
|---|---|---|---|---|---|---|
| PZ CUSSONS | 165 | 707 | 15.3 | 2.9 | -24.7 | Buy, 149p, 10 Dec 2008 |
| RECKITT BENCKISER GROUP | 2609 | 18491 | 17.3 | 2.4 | -9.6 | Fairly priced, 2513p, 30 Oct 2008 |
