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Reckitt Benckiser lowers sales growth target

Driven by a weaker-than-anticipated performance in the health segment, sales growth missed expectations during the first-half
Reckitt Benckiser lowers sales growth target

On the back of an anaemic second quarter, Reckitt Benckiser's (RB.) like-for-like sales were broadly flat during the first half of 2019 as volumes declined 3 per cent. In light of this slow start, guidance for full-year like-for-like sales growth has been revised downwards to 2-3 per cent, from the 3-4 per cent range previously expected. 

IC TIP: Buy at 6,415p

The health segment - which accounted for almost two-thirds of revenue - suffered a 1 per cent decline in like-for-like sales. A decline in the Chinese birth rate over the past two years caused momentum in infant formula and child nutrition (IFCN) to falter, restricting sales growth to just 2 per cent. Meanwhile lower incidences of cold and flu, and related inventory destocking by retailers at the start of the year, caused over-the-counter (OTC) revenue to decline by 5 per cent.

By contrast, the hygiene home division pushed like-for-like sales 3 per cent higher, to the upper-end of medium-term expectations, although this was measured against a strong volume and weak price mix comparator. Broad-based growth was enjoyed across Europe, North America and developing markets.

Bloomberg consensus forecasts give adjusted pre-tax profit of £3.19bn and EPS of 346p for the full year, rising to £3.35bn and 364p in 2020.

RECKITT BENCKISER (RB.)  
ORD PRICE:6,415pMARKET VALUE:£ 45.5bn
TOUCH:6,413-6,416p12-MONTH HIGH:7,174pLOW: 5,559p
DIVIDEND YIELD:2.7%PE RATIO:20
NET ASSET VALUE:2,035p*NET DEBT:73%
Half-year to 30 JunTurnover (£bn)Pre-tax profit (£bn)Earnings per share (p)Dividend per share (p)
20186.141.1112370.5
20196.241.2613873.0
% change+2+14+12+4
Ex-div:22 Aug   
Payment:26 Sep   
*Includes intangible assets of £30.6bn or 4,313p a share