Reckitt to Focus on ‘Powerbrands’ in Wide-Ranging Shake-up

Reckitt
plans
to
focus
on
a
portfolio
of
‘powerbrands’,
which
it
defined
as
high-growth,
high-margin
businesses
that
it
thinks
have
the
potential
for
long-term
growth.

These
include
Mucinex,
Strepsils,
Gaviscon,
Nurofen,
Lysol,
Dettol,
Harpic,
Finish,
Vanish,
Durex
and
Veet.

These
brands
generated
7%
net
revenue
compound
annual
growth
between
2018
and
2023,
Reckitt
noted,
and
a
gross
margin
of
61%
in
2023.

The
portfolio
could
also
include
likely
future
Powerbrands
such
as
Move
Free
and
Biofreeze,
plus
Lemsip,
Airborne,
KY,
Veja,
Jik,
Tempra
and
Jontex,
Reckitt
added.

The
company
plans
to
sell
non-core
home
care
brands
including
Air
Wick,
Mortein,
Calgon
and
Cillit
Bang,
which
delivered
2023
net
revenue
of
£1.9
billion.
Reckitt
aims
to
complete
the
disposals
by
the
end
of
2025.

In
addition,
Reckiit
said
it
considers
Mead
Johnson
Nutrition,
the
business
behind
Enfamil
infant
nutrition,
and
currently
the
subject
of
ongoing
US
litigation,
to
be
non-core.

Reckitt
said
it
will
consider
“all
strategic
options”
for
that
division.

The
$17
billion
acquisition
of
Mead
Johnson
in
2017
has
been
an
unhappy
one
for
Reckitt.
Back
in
2020,
it
took
a
£5.04
billion
impairment
on
goodwill
in
the
business.
In
2021,
it
sold
its
infant
nutrition
business
in
China
for
$2.2
billion.
This
year,
in
March,
a
jury
in
the
US
awarded
$60
million
in
damages
to
a
mother
who
said
her
baby
died
after
consuming
Mead
Johnson’s
Enfamil
baby
formula.

“This
sharpened
portfolio
creates
the
opportunity
to
move
to
a
simpler,
faster
and
more
efficient
organisation,”
Reckitt
said
in
its
statement
on
Wednesday.

Reckitt
pledged
to
continue
to
pay
a
progressive
dividend
and
return
surplus
cash
to
shareholders,
including
excess
proceeds
from
future
business
disposals.
It
announced
a
new
share
buyback
programme
on
Wednesday.

As
part
of
the
strategic
revamp,
Reckitt
plans
further
cost
savings,
aiming
to
deliver
a
300
basis
points
reduction
in
fixed
costs
by
the
end
of
2027.

Reckitt
expects
to
incur
estimated
one-off
cash
restructuring
and
transformation
costs
during
this
period
of
around
£1.0
billion.

Savings
will
come
from
organisation
simplification,
greater
use
of
shared
services,
right-sizing
investments,
automation,
and
digital
and
generative
artificial
opportunities.

Chief
Executive
Kris
Licht
said:
“our
core
portfolio
of
market-leading
Powerbrands
and
simpler,
more
effective
organisation
position
us
to
better
serve
our
consumers
and
customers.
This
will
deliver
attractive
long-term
value
creation
for
Reckitt’s
shareholders
through
our
earnings
model
and
cash
returns.”

In
addition,
Reckitt
unveiled
first-half
results.

Revenue
in
six
months
to
June
30
declined
3.7%
to
£7.17
billion
from
£7.45
billion.
Pretax
profit
fell
7.3%
to
£1.52
billion
from
£1.64
billion.

Reckitt
raised
its
interim
dividend
by
5.0%
to
80.4
pence
from
76.6p.
It
also
announced
its
next
£1
billion
share
buyback
programme
will
“commence
imminently”.

Licht
said
the
results
were
“broadly
in
line
with
our
expectations”.

“Hygiene
grew
mid-single-digit
[like-for-like]
net
revenue
and
delivered
volume
growth
despite
a
more
competitive
market
environment.
Health
delivered
broad-based
revenue
and
volume
growth,
reduced
by
softness
in
seasonal
[over
the
counter]
brands,”
he
noted.

However,
Reckitt
said
short-term
disruption
to
its
Nutrition
business,
due
to
the
tornado
that
hit
its
Mount
Vernon,
Indiana
distribution
centre
last
week,
has
led
to
a
reduction
in
its
net
revenue
growth
outlook
for
the
year
to
1%
to
3%
from
2%
to
4%
before.

“Notwithstanding
this,
our
business
remains
resilient.
We
expect
revenue
growth
to
accelerate
in
[the
second
half]
and
continue
to
target
operating
profit
growth
ahead
of
net
revenue
growth,”
Licht
added.

The
market
gave
a
guarded
welcome
to
the
news.
Shares
in
Reckitt
rose
0.3%
to
4,422.00
pence
in
London
on
Wednesday.
The
wider
FTSE
100
index
was
down
0.3%.

By
Jeremy
Cutler,
Alliance
News
reporter

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