The dominant theme in this sub-sector in 2018 seemed to be 'break up to make up' – one which could prevail into the early part of 2019. Many of the sector’s largest constituents have faced up to the reality that the shape of their respective businesses had to change to better face the future.
Last October, Greencore (GCN) offloaded its US business for a not insignificant $1.08bn (£840m) – a decision chief financial officer Eoin Tonge called “difficult”. But it’s good news for shareholders: Greencore will now return £509m-worth of disposal funds by giving investors the option to participate in a tender offer. Any remaining proceeds will be distributed via a special dividend.
Reckitt Benckiser (RB.) spent the past year transitioning from a consumer goods company into a health and hygiene business. After selling food business McCormick, it bought infant formula maker Mead Johnson last year, which left around 80 per cent of group sales coming from health and hygiene. A better-than-expected performance from the infant formula and child nutrition (IFCN) division at the time of half-year results suggests the group’s corporate makeover could continue to pay off this year. By contrast, PZ Cussons' (PZC) refusal to offload its African business could continue to work against it in 2019. Instead, chief financial officer Brandon Leigh says management is focused on removing divisional "layers" in the business, which could get new products to market more quickly.