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Reckitt scrubs up, but growth will slow

Demand for big-name cleaning products remained strong in the final quarter
Reckitt scrubs up, but growth will slow

 

  • Management described 2020 as a ‘turning point’
  • Growth will slow in 2021 after a year of stellar demand for hygiene and health products

Reckitt Benckiser (RB.) was buoyed in “unchartered waters” last year by mega sales of cleaning products and vitamins, as customers focused on hygiene and wellness during the coronavirus pandemic.

Fourth-quarter sales for the consumer goods giant’s hygiene business increased by more than a quarter on a like-for-like basis to £1.6bn, with strong demand for household names Lysol and Finish.

In turn, the group’s full-year like-for-like sales rose 11.8 per cent to £14bn. While Reckitt’s nutrition business saw little movement over the 12-month period, with revenues sitting at £3.3bn, this masked an uptick in mineral purchasing. Sales for the immunity supplement Airborne more than doubled.

Reckitt’s free cash flow was up by around two-fifths to a record £3.1bn, while net debt contracted by 17 per cent to £9bn. This underpinned a full-year dividend of 174.6p, in line with 2019. Admittedly, Reckitt expects like-for-like sales to rise 2 per cent at the most in 2021. But its big brand portfolio and cash generation keep us on side. Buy.

Last IC view: Buy, 6,402p, 20 Nov 2020

RECKITT BENCKISER (RB.)  
ORD PRICE:6,004pMARKET VALUE:£ 42.8bn
TOUCH:6,002-6,006p12-MONTH HIGH:8,020pLOW: 5,130p
DIVIDEND YIELD:2.9%PE RATIO:38
NET ASSET VALUE:1,279p*NET DEBT:97.3%
Year to 31 DecTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20169.52.25246153.2
201711.42.50481164.3
201812.62.72307170.7
201912.8-2.11-393174.6
202014.01.87160174.6
% change+9---
Ex-div:06 May   
Payment:14 Jun   
*Includes intangible assets of £23bn, or 3,223p a share.