REG - Reckitt Benckiser Gp - 1st Quarter Results

Reckitt BenckiserAnnouncement

29/04/2022 07:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220429:nRSc7828Ja&default-theme=true

RNS Number : 7828J  Reckitt Benckiser Group PLC  29 April 2022

29 April
2022

 

 

A Strong start - continued confidence in the Full year

                           Q1 2022
                    £m     LFL1    M&A(1)      FX(1)  Reported
 Hygiene            1,465  -9.0%   +0.0%       -1.7%  -10.7%
 Health(2)          1,402  +20.6%  -3.6%       -1.2%  +15.8%
 Nutrition(2)       557    +20.4%  -36.5%      +1.3%  -14.8%
 Total net revenue  3,424  +5.6%   -6.9%       -1.0%  -2.3%

1.     Adjusted measures are defined on page 6

2.     Our VMS portfolio is now reported within the Health Business Unit,
as previously indicated.  The re-presentation of historical financial
information reflecting this change is included in the Appendix to this
release.

Highlights:

·      Group like-for-like ('LFL') net revenue growth of 5.6%: Price/mix
was +5.3% and volume +0.3%.  Continued broad-based growth and market share
momentum across all Business Units and geographies, with 76% of our Core CMUs
gaining or holding market share.

·      70% of the portfolio less sensitive to Covid dynamics grew
high-single digits.    Excluding the positive impact from US IFCN, growth
was mid-single digits.

·      Hygiene LFL net revenue decline of 9.0% (3.9% growth ex-Lysol):
Growth in Finish, Air Wick, Harpic and Vanish led by innovation and
penetration building initiatives.  Lysol performed in line with expectations.

·      Health LFL net revenue growth of 20.6%: Strong growth in OTC, VMS
and our Intimate Wellness portfolio.  Dettol performed in line with
expectations and is on track for low single digit growth in the year.

·      Nutrition LFL net revenue growth of 20.4%: US IFCN grew over 30%
with innovation and strong execution amidst temporary competitor supply
issues.

·      Repositioning the portfolio towards higher growth: The sale of
Dermicool and E45 completed on 25 March and 1 April, respectively.

Outlook:

·      Following a strong start to the year, we now expect LFL net
revenue growth towards the upper end of our guidance of +1-4%.  Despite
significant cost inflation, we expect adjusted operating margins in-line with
prior year and current market expectations.

Commenting on these results, Laxman Narasimhan, Chief Executive Officer, said:

"We have made a strong start to the year across all our business units and
geographies despite a challenging operating environment.  Investments we have
made in brand building, innovation, and execution, have resulted in
broad-based market share gains.  These, coupled with pricing and revenue
management actions, stand us in good stead to maintain this positive
momentum.

As we look to the balance of the year, the operating environment remains
highly unpredictable.  We are well placed to address these market dynamics
through the strength of our brands, our favourable product mix, our
productivity program and the responsible pricing initiatives already
undertaken, with scope to take further actions.

Given our strong start, we expect to deliver LFL net revenue growth at the
upper end of our guidance for the year.   We expect adjusted operating
margins to be in-line with both the prior year and current market
expectations, whilst continuing to invest in the long-term growth of our
brands."

 

Conference Call Details

We will be hosting a live audiocast followed by a Q&A session for analysts
and investors at 08:30 (BST) on Friday 29 April 2022.

Please click on the link below to join the live audiocast on the day.

https://www.reckitt.com/investors/investor-news/

Alternatively, dial in details are as follows:

 UK:                   0800 640 6441
 UK (local):           020 3936 2999
 All other locations:  +44 20 3936 2999
 Conference ID:        860438

 

Further Information and Contacts

Richard
Joyce
+44 (0)7807 418516

Head of Investor Relations

Patty
O'Hayer
+44 (0)7825 755688

Director, External Relations and Government Affairs

Finsbury

Faeth
Birch
+44 (0)7768 943171

 

Cautionary note concerning forward-looking statements

This announcement contains statements with respect to the financial condition,
results of operations and business of the Reckitt Benckiser Group plc group of
companies (the Group) and certain of the plans and objectives of the Group
that are forward-looking statements. Words such as 'intends', 'targets', or
the negative of these terms and other similar expressions of future
performance or results, and their negatives, are intended to identify such
forward-looking statements. In particular, all statements that express
forecasts, expectations and projections with respect to future matters,
including targets for net revenue, operating margin and cost efficiency, are
forward-looking statements. Such statements are not historical facts, nor are
they guarantees of future performance.

By their nature, forward-looking statements involve risk and uncertainty
because they relate to events and depend on circumstances that will occur in
the future. There are a number of factors that could cause actual results and
developments to differ materially from those expressed or implied by these
forward-looking statements, including many factors outside the Group's
control. Among other risks and uncertainties, the material or principal
factors which could cause actual results to differ materially are: the general
economic, business, political and social conditions in the key markets in
which the Group operates; the ability of the Group to manage regulatory, tax
and legal matters, including changes thereto; the reliability of the Group's
technological infrastructure or that of third parties on which the Group
relies; interruptions in the Group's supply chain and disruptions to its
production facilities; increases or volatility in the cost of raw materials
and commodities; the reputation of the Group's global brands; and the
recruitment and retention of key management.

These forward-looking statements speak only as of the date of this
announcement. Except as required by any applicable law or regulation, Reckitt
expressly disclaims any obligation or undertaking to release publicly any
updates or revisions to any forward-looking statements contained herein to
reflect any change in the Group's expectations with regard thereto or any
change in events, conditions or circumstances on which any such statement is
based.

LEI: 5493003JFSMOJG48V108

 

 

Outlook

Given the strong start to the year we now expect LFL net revenue growth
towards the upper end of our guidance of +1-4%.  This reflects good momentum
in OTC and IFCN, disinfection products in line with expectations, and the
remainder of the business growing mid-single digits as targeted.

The input environment remains highly volatile and unpredictable.  It has
become more adverse since our last market update in February due to the
ongoing war in Ukraine.  Inflation on our cost of goods sold has increased
from low teens to high teens based on current commodity pricing.

We entered the year as a stronger business.  We have a strong portfolio of
brands which has enabled us to take pricing responsibly, and we will take
further pricing actions as required. We will benefit from favourable product
mix this year, our productivity initiatives are delivering ahead of plan, and
we will see a reduction in finite-life transformation costs.

The benefits from favourable mix, productivity initiatives and pricing give us
the confidence to expect adjusted operating margins in-line with both the
prior year and current market expectations, whilst continuing to invest in the
long-term growth of our brands.

Guidance for interest and capital expenditure remains unchanged from that
indicated on 17 February 2022.  We now expect our effective tax rate to be
slightly lower than 2021 due to the anticipated favourable settlements of
certain historic tax matters.

We are on track to meet our medium-term goals of mid-single digit revenue
growth and adjusted operating profit margin of mid-20s by the mid-2020s.

 

Group Review

Group performance
          £m     Volume  Price/Mix  LFL(1)  M&A(1)      FX(1)  Reported
 Q1 2022  3,424  +0.3%   +5.3%      +5.6%   -6.9%       -1.0%  -2.3%

1.     Adjusted measures are defined on page 6

Group net revenue grew by 5.6% on a LFL basis in Q1 with volume growth of 0.3%
and price / mix improvements of 5.3%.  Volume was impacted by the decline in
Lysol and the temporary benefit in US IFCN. Excluding these, volumes remained
strong, growing by around 7%.   On a reported basis, net revenue declined
2.3%.

Growth has been broad-based across the business, with brands less sensitive to
Covid dynamics, representing around 70% of the portfolio, growing high-single
digits.  Excluding US IFCN, growth was mid-single digits. The supply chain
environment during the quarter continues to be challenging, both in terms of
logistical availability and certain raw material constraints.  While our
supply team works to find mitigations, we continue to monitor the situation
and look to continue to improve our customer service.

The net effect of M&A was a 6.9% reduction in net revenue in the quarter,
representing the disposal of IFCN China and Scholl, offset by the acquisition
of Biofreeze.

FX headwinds reduced net revenue by 1.0% due primarily to a general
strengthening of Sterling against many currencies.

eCommerce LFL net revenue grew 13% in the quarter, further building on the
strong growth of Q1 2021, and represents 12% of Group net revenue.

 

 

 

OPERATING SEGMENT REVIEW

Hygiene                                                                                            43% of net revenue in Q1 2022
          £m     Volume  Price/Mix  LFL(1)  FX(1)  Reported
 Q1 2022  1,465  -12.8%  +3.8%      -9.0%   -1.7%  -10.7%

1.     Adjusted measures are defined on page 6

Hygiene net revenue declined 9.0% on a LFL basis to £1,465m.  Volume
declined 12.8%, primarily reflecting the reduction in Lysol volumes. Price /
mix improved by 3.8%.

78% of Core Hygiene CMUs held or gained market share with broad-based gains
across our core categories.

Lysol net revenue declined in line with expectations, at around 30% in the
quarter, following around 70% growth in Q1 2021.  Overall net revenue remains
around 75% higher than 2019 levels driven by expansion into new markets and
adjacent categories over the past two years, and as consumers continue to
exhibit elevated hygiene behaviours as we learn to live with Covid.  Lysol
disinfecting spray shares continue to be strong and we see further penetration
growth potential in adjacent categories of laundry sanitisers and "on the go"
products.  With the continued rebasing of consumption, our plans reflect an
expectation that retailers will reduce their safety levels of inventory in
both disinfection sprays and wipes.

Finish net revenue grew mid-single-digits with particularly strong growth
across Europe and Developing markets accelerated by our latest Finish Quantum
innovation, leveraging thermoforming technology to deliver higher quality and
more sustainable auto-dish solutions.

Air Wick net revenue grew low-single-digits, further building on the strong
growth of Q1 2021, with particularly strong growth in the US driven by the
continued growth of the Essential Mist and Scented Oils natural range.

Vanish net revenue grew mid-single digits with growth driven by reduced
confinements of consumers versus the prior year.

Harpic grew high-single-digits, with particularly strong growth in India, its
largest market, driven by increased distribution and product upgrades. Latin
America also saw strong growth as a result of penetration gains across
Argentina and Mexico.

Our pest business delivered low-single-digits growth despite a weak season in
India and Latin America.

 

Health                                                                                              41% of net revenue in Q1 2022
          £m     Volume  Price/Mix  LFL(1)  M&A(1)      FX(1)  Reported
 Q1 2022  1,402  +15.5%  +5.1%      +20.6%  -3.6%       -1.2%  +15.8%

1.     Adjusted measures are defined on page 6

Health net revenue grew 20.6% on a LFL basis in the quarter to £1,402m.
This reflected volume growth of 15.5% and price / mix improvements of 5.1%.

73% of Core Health CMUs held or gained market share with gains across cold and
flu, intimate wellness and most disinfection markets.

OTC net revenue grew over 60% in the quarter due to the combination of
Omicron, a cold and flu season against a weak comparator for Mucinex and
Strepsils, plus significant market share gains across the portfolio.  Recent
launches including Mucinex Instasoothe, the brand's first entry into the sore
throat relief segment, has gained significant market share since its launch at
the end of 2021. Other launches, including the rollout of Nuromol, a unique
and exclusive formulation of Nurofen and Paracetamol in Brazil continue to
progress well.

Our Intimate Wellness portfolio grew high-single-digits in the quarter
resulting from a continued renewed focus on execution, innovation and
investment behind omnichannel growth.  We saw particularly strong growth in
China from the continued success of the polyurethane Durex condom launch.

Dettol net revenue declined in the quarter, as it laps tough comparators, but
continues to stabilise well above 2019 levels.  Dettol Tru Clean - our first
plant-based disinfectant - successfully launched in 2021, has quickly
established itself as one of the larger eco brands in the UK, with further
planned rollouts during the course of this year. We have a strong pipeline of
innovations launching this year, and we continue to expect our Dettol
franchise to grow low single digits in 2022.

Our Vitamins, Minerals and Supplements grew mid-teens, driven by strong growth
in Move Free in China, and continued penetration growth in our cognitive
health brand, Neuriva. The net effect of M&A was a 3.6% reduction in net
revenue in the quarter, representing the disposal of Scholl offset by the
acquisition of Biofreeze.

 

Nutrition                                                                                           16% of net revenue in Q1 2022
          £m   Volume  Price/Mix  LFL(1)  M&A(1)      FX(1)  Reported
 Q1 2022  557  +8.9%   +11.5%     +20.4%  -36.5%      +1.3%  -14.8%

1.     Adjusted measures are defined on page 6

Nutrition net revenue grew 20.4% on a LFL basis to £557m.  This reflected
volume growth of 8.9% and price / mix improvements of 11.5%.  Included within
the price / mix benefit is a short-term benefit in the US of additional 'WIC'
sales for which Reckitt will not incur rebate claims from the Government.
This is due to temporary competitor supply issues.

79% of Core Nutrition CMUs held or gained market share with particularly
strong share gains across the US.

IFCN US net revenue grew over 30% on a LFL basis, with strong growth in both
our core Enfa and specialty brands.  Significant market share growth was
driven by innovation and strong execution in response to increased demand.

We saw improving trends across Latin America and ASEAN, driven by an increased
investment in a more resilient supply chain, more focused in-market execution,
and a mix of growth in our core infant, specialty and adult portfolios.

The net effect of M&A was a 36.5% reduction in net revenue in the quarter,
representing the disposal of  IFCN China and EnfaBebé in Argentina.

 

Performance by geography
                     £m     Volume  Price/Mix  LFL(1)  M&A(1)      FX(1)  Reported
 North America       1,155  -4.7%   +7.7%      +3.0%   +1.5%       +2.8%  +7.3%
 Europe / ANZ        1,107  +6.2%   +2.1%      +8.3%   -4.3%       -6.6%  -2.6%
 Developing Markets  1,162  -0.6%   +6.3%      +5.7%   -16.4%      +0.5%  -10.2%
 Total net revenue   3,424  +0.3%   +5.3%      +5.6%   -6.9%       -1.0%  -2.3%

1.     Adjusted measures are defined on page 6

North America Q1 net revenue grew 3.0% on a LFL basis, with strong growth in
IFCN and OTC brands, offset by the expected declines in Lysol.

Europe / ANZ Q1 revenue grew 8.3% on a LFL basis, with broad-based growth
across most markets.  Lysol saw strong growth in the quarter, benefitting
from launches in new markets over the last two years.

Developing markets Q1 revenue grew 5.7% on a LFL basis, driven by Latin
America, India and Greater China.

 

portfolio management

The sale of Dermicool and E45 completed on 25 March and 1 April, respectively,
with combined net cash proceeds of around £240m.  The combined 2021 net
revenues and adjusted operating profits of these brands were £54m and £29m,
respectively.  Our latest outlook takes these disposals into account.

 

Russia / ukraine

Following a thorough internal review and our announcement on 13 April 2022,
Reckitt has begun a process aimed at transferring ownership of its Russian
business, which may include a transfer to a third party or to our local
employees.

We will work closely with our colleagues in Russia on the details of the
various options available to ensure an orderly process. We will do our utmost
to ensure those colleagues' ongoing employment in any new structure and we
commit to paying their monthly salaries and benefits throughout the transition
and until the end of 2022.

 

This action builds on our previously announced decision to freeze capital
investments, advertising, sponsorships and promotions in Russia.  We will
update on progress as soon as we have more information to share.

 

In 2021 Ukraine and Russia combined represented around 3% net revenue and
adjusted operating profit for the Group.

 

 

Financial Position

There has been no material change to the financial position of the Group since
the publication of the 2021 Annual Report and Accounts on 14 April 2022.

 

Other Matters

The Humidifier Sanitiser ('HS') issue in South Korea is a tragic event, with
many parties involved.  We continue to make both public and personal
apologies to victims. Details of existing provisions and contingent
liabilities relating to the HS issue can be found on page 239 of the 2021
Annual Report and Accounts.

 

Alternative Performance Measures

Like-for-like ('LFL'): Net revenue growth or decline at constant exchange
rates (see below) excluding the impact of acquisitions, disposals and
discontinued operations. Completed disposals are excluded from LFL revenue
growth for the entirety of the current and prior years. Acquisitions are
included in LFL revenue growth twelve months after the completion of the
relevant acquisition.  LFL growth also excludes countries with annual
inflation greater than 100% (Venezuela).

Constant exchange rate ('CER'): Net revenue growth or decline adjusting the
actual consolidated results such that the foreign currency conversion uses the
same exchange rates as were applied in the prior financial year.

Adjusted Operating Profit and Adjusted Operating Profit margin: Adjusted
operating profit reflects the IFRS operating profit excluding items in line
with the Group's adjusted items policy, which can be found on page 81 of the
2021 Annual Report and Accounts. The adjusted operating profit margin is the
adjusted operating profit expressed as a percentage of net revenue.

Other definitions and terms

eCommerce: eCommerce channel net revenue is defined as direct sales from
Reckitt to online platforms or directly to consumers. Estimates of total
eCommerce sales as a percentage of group revenues includes direct sales and an
estimate of sales achieved by our brands corresponding to sales through our
omnichannel distributors and retailer' websites.

Category Market Unit (CMU): Reckitt analyses its market share by CMUs, which
represent country and either brand or category, e.g. US Lysol. This allows us
to analyse the components of market share growth taking into account both
geography and brand / category. Management has identified those Core CMUs that
are the most strategically important. The list of Core CMUs is kept under
continual review and will change over time based on strategic decisions.
Currently, Core CMUs cover c.65% of Group net revenue and between c.60% to
c.80% of each GBU's net revenue. As a measure of competitiveness, management
tracks the percentage of Core CMUs holding or gaining market share, weighted
by net revenue.

 

Upcoming Events

As part of our Investor Seminar Series, we will be holding an ESG deep-dive on
Friday 6 May 2022.

 

 

 

 

IFRS to LFL reconciliation

 

                             Hygiene  Health  Nutrition  Group

                             £m       £m      £m         £m
 2021 Represented(1)         1,641    1,211   654        3,506
 Disposals                   0        (68)    (197)      (265)
 Exchange                    (13)     (8)     (2)        (23)
 2021 LFL                    1,628    1,135   455        3,218
 2022 Reported               1,465    1,402   557        3,424
 Acquisitions and disposals  0        (38)    0          (38)
 Exchange                    17       5       (9)        13
 2022 LFL                    1,482    1,369   548        3,399
 LFL growth                  -9.0%    +20.6%  +20.4%     +5.6%

1.     Our VMS portfolio is now reported within the Health Business Unit,
as previously indicated.  The re-presentation of historical financial
information reflecting this change is included in the Appendix to this
release.

                             North America  Europe /   ANZ    Developing Markets  Group

                             £m             £m                £m                                       £m
 2021 Reported               1,076          1,136             1,294               3,506
 Disposals                   (3)            (54)              (208)               (265)
 Exchange                    4              (19)              (8)                 (23)
 2021 LFL                    1,077          1,063             1,078               3,218
 2022 Reported               1,155          1,107             1,162               3,424
 Acquisitions and disposals  (20)           (9)               (9)                 (38)
 Exchange                    (26)           53                (14)                13
 2022 LFL                    1,109          1,151             1,139               3,399
 LFL growth                  +3.0%          +8.3%             +5.7%               +5.6%

APPENDIX A: PRESENTATION ON OLD BASIS

To aid comparison between the new and old basis of reporting, the following
table presents Q1 2022 as though presented on the old basis, with VMS under
the Nutrition Business Unit.

Numbers will not be provided on this basis in future periods.

                           Q1 2022
                    £m     LFL1    M&A(1)      FX(1)  Reported
 Hygiene            1,465  -9.0%   +0.0%       -1.7%  -10.7%
 Health             1,296  +20.8%  -3.8%       -1.6%  +15.4%
 Nutrition          663    +19.9%  -32.0%      +1.5%  -10.6%
 Total net revenue  3,424  +5.6%   -6.9%       -1.0%  -2.3%

1.     Adjusted measures are defined on page 6

APPENDIX B: RE-PRESENTATION OF SEGMENTAL FINANCIAL INFORMATION

Our VMS portfolio is now reported within the Health Business Unit, as
previously indicated.  Reckitt has published the additional information below
to provide visibility of the historical GBU performance under the new basis.

Quarterly LFL(1) net revenue growth

            Q1 2020  Q2 2020  Q3 2020  Q4 2020  Q1 2021  Q2 2021  Q3 2021  Q4 2021
 Hygiene    +12.8%   +19.4%   +19.5%   +25.7%   +28.5%   +7.8%    +2.9%    -6.1%
 Health     +24.0%   +13.7%   +14.7%   +3.9%    -13.3%   -7.7%    +3.4%    +15.1%
 Nutrition  -0.2%    -4.3%    +5.5%    -1.2%    -6.1%    +12.2%   +4.2%    +3.2%
 Group(2)   +15.0%   +12.9%   +15.3%   +12.3%   +5.3%    +2.2%    +3.3%    +3.3%

1.     Adjusted measures are defined on page 6

2.     Excluding IFCN China

 

Quarterly net revenue

                          Q1 2020  Q2 2020  Q3 2020  Q4 2020  Q1 2021  Q2 2021  Q3 2021  Q4 2021
 Hygiene                  1,355    1,382    1,490    1,589    1,641    1,386    1,449    1,435
 Health                   1,439    1,290    1,325    1,306    1,211    1,108    1,290    1,443
 Nutrition                528      455      494      479      462      466      485      475
 Group (excl IFCN China)  3,322    3,127    3,309    3,374    3,314    2,960    3,224    3,353
 IFCN China               222      240      204      195      192      132      51       8
 Group                    3,544    3,367    3,513    3,569    3,506    3,092    3,275    3,361

 

APPENDIX B: RE-PRESENTATION OF SEGMENTAL FINANCIAL INFORMATION

Half yearly net revenue

                                                                  LFL(1)
            H1 2020  H2 2020  FY 2020  H1 2021  H2 2021  FY 2021  H1 2020  FY 2020  H1 2021  FY 2021
 Hygiene    2,737    3,079    5,816    3,027    2,884    5,911    +16.1%   +19.5%   +18.0%   +7.5%
 Health     2,729    2,631    5,360    2,320    2,733    5,053    +19.0%   +13.9%   -10.6%   -0.8%
 Nutrition  983      973      1,956    927      960      1,887    -2.1%    +0.1%    +2.5%    +2.7%
 Group(2)   6,449    6,683    13,132   6,274    6,577    12,851   +13.9%   +13.9%   +3.7%    +3.5%

1.     Adjusted measures are defined on page 6

2.     Excluding IFCN China

 

Adjusted operating profit(1)

            H1 2020  H2 2020  FY 2020  H1 2021  H2 2021  FY 2021
 Hygiene    687      818      1,505    774      627      1,401
 Health     765      641      1,406    480      762      1,242
 Nutrition  164      141      305      171      130      301
 Group(2)   1,616    1,600    3,216    1,425    1,519    2,944

1.     Adjusted measures are defined on page 6

2.     Excluding IFCN China

 

Adjusted operating profit margin(1)

            H1 2020  H2 2020  FY 2020  H1 2021  H2 2021  FY 2021
 Hygiene    25.1%    26.6%    25.9%    25.6%    21.7%    23.7%
 Health     28.0%    24.4%    26.2%    20.7%    27.9%    24.6%
 Nutrition  16.7%    14.5%    15.6%    18.4%    13.5%    16.0%
 Group(2)   25.1%    23.9%    24.5%    22.7%    23.1%    22.9%

1.     Adjusted measures are defined on page 6

2.     Excluding IFCN China

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  QRFEAPLPAAAAEFA