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Reckitt Benckiser reports jump in annual profits as it beds in US$17bn Mead Johnson acquisition

The first full-year contribution from Mead Johnson helped to push revenue up to the top end of guidance, while the bottom line benefitted, too
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The search for CEO Rakesh Kapoor’s replacement is under way

Reckitt Benckiser PLC (LON:RB.) has reported a surge in annual revenue and profits after enjoying “broad-based growth” across its portfolio of consumer goods brands.

Revenue for the year ended 31 December was up 10% to £12.60bn – the upper end of its forecast range – while net income, excluding a one-off tax credit in 2017, rose 7% to £2.41bn.

READ: US investment bank slams RB's 'weak' workplace culture

A first full-year contribution from Mead Johnson, the baby milk formula giant bought by Reckitt for US$17bn (£13bn) back in 2017, accounted for a large portion of that growth.

The FTSE 100 giant has already achieved £158mln of synergies from that acquisition and remains on track to deliver its increased synergy target of £230mln.

Reckitt also enjoyed solid organic growth in its two core divisions.

Both businesses perform well

Sales in its hygiene home business rose 4% on a like-for-like basis in 2018, driven by strong performances from a host of its major brands, including Harpic, Air Wick and Finish dishwasher detergents.

Growth was less impressive in the health business, although like-for-likes still edged 2% higher year-on-year as demand for its vitamins and supplements continued to rise in North America and China, while Durex and Dettol also put in solid performances.

Footcare brand Scholl was a “significant drag” though, particularly in the first half of the year, while Mucinex also struggled due to a relatively weak cold and flu season.

More growth in 2019

“2018 was a year of good financial progress, achieved in an environment of both significant change within the company, and challenging market conditions,” said chief executive Rakesh Kapoor, who is due to leave later this year.

“We delivered the upper end of our 2018 revenue growth target, and accelerated the delivery of MJN cost synergies versus our ingoing expectations.”

He added: “For 2019 we expect momentum to continue, and target +3-4% LFL net revenue growth. We expect to maintain the adjusted operating margin as we generate our usual RB cost and efficiency savings and deploy them into building two even stronger businesses.”

No headaches for investors

“Investors will not be rushing for the Nurofen this morning as there was a solid performance across the business from Reckitt Benckiser in its full year results this morning,” said Graham Spooner, investment research analyst at The Share Centre.

“Overall revenue came in towards the top end of analyst expectations [and] … the shares were up in early trading helped by improving sales growth over Q4.

“Emerging market growth has been important for Reckitt and there was a strong performance in India and Brazil, although China was mixed.”

He added: “After a difficult couple of years these results may help restore a measure of investor confidence in the group.”

Reckitt shares were up 5% to 6,320p on Monday morning.

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