RECKITT (RKT.L)
BUILDING A BETTER HOUSE: ON TRACK TO DELIVER SUSTAINABLE GROWTH
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Q2 2021 |
H1 2021 |
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Change2 |
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Change2 |
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£m |
Actual |
Constant |
£m |
Actual |
Constant |
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Net Revenue |
3,092 |
(8.2%) |
(1.3%) |
6,598 |
(4.5%) |
1.5% |
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Like-for-like (LFL) |
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(1.0%) |
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1.5% |
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Adjusted1 |
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Operating Profit |
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1,424 |
(16.0%) |
(9.6%) |
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Operating Profit Margin |
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21.6% |
(290bps) |
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Continuing EPS (diluted) |
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142.6p |
(14.4%) |
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Adjusted1 ex IFCN China |
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Net Revenue |
2,960 |
(5.4%) |
1.9% |
6,274 |
(2.7%) |
3.6% |
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LFL |
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2.2% |
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3.7% |
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Operating Profit |
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1,425 |
(11.9%) |
(5.0%) |
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Operating Profit Margin |
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22.7% |
(240bps) |
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GAAP |
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Operating Loss |
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(1,828) |
nm |
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Operating Profit Margin |
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(27.7%) |
nm |
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Continuing EPS (diluted) |
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(245.8p) |
nm |
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1 Adjusted measures are defined on page 15. GAAP represents measures as reported under IFRS, previously termed Reported.
2 Change vs prior year presented. Constant measured on a constant exchange rate basis (see page 16)
All amounts £m, unless otherwise state
Performance in H1 2021
· Excluding IFCN China, H1 LFL net revenue was up 3.7%, and the two-year stacked LFL net revenue growth vs H1 2019 was 17.6%. Including IFCN China the two-year stacked LFL net revenue growth vs H1 2019 was 13.4%.
· Q2 2021 LFL net revenue (ex IFCN China) was up 2.2%, as slower growth in Hygiene was partly offset by improving trends in Nutrition and our OTC brands.
· H1 2021 adjusted operating margin (ex IFCN China) was 22.7% (H1 2020: 25.1%). Margin including IFCN China was 21.6%, down 290bps, as a result of planned investment, cost inflation and adverse margin mix.
· Net loss on a GAAP basis of £2.4bn from agreement to sell IFCN China; operating loss of £3.0bn offset by a net tax credit of £0.6bn (£0.9bn deferred tax credit offset by a tax charge £0.3bn).
· Free cash flow was £520m in H1 2021, down 72.7% due to the partial unwind of the working capital benefit in 2020; net debt of £9,084m at 30 June 2021;
· H1 2021 dividend recommended to be 73.0p, in line with H1 2020, reflecting our policy of sustaining 2019 levels to rebuild cover to two times.
Commenting on the results, Laxman Narasimhan, Chief Executive Officer, said:
“Against a challenging environment, I am encouraged by the progress we have made in the first half of the year. Around 70% of our revenue, excluding IFCN China, is from brands growing by mid-single digits in the period, in line with our strategic vision. The remaining 30% includes our disinfection brands, which are structurally rebasing, as well as our cold and flu brands, which are now starting to show positive momentum. Overall demand in the disinfectant category remains significantly higher than pre-COVID levels and the two-year stacked growth of our hygiene portfolio is up 34.1%, compared to a normal growth rate, pre-COVID, of around 4%.
“The markets are dynamic, reflecting several factors which we are closely monitoring, including the prevalence of COVID strains and government guidelines such as new lockdowns and social distancing. Although the third quarter will be slower due to strong prior year comparators, as the world gradually opens up and socialisation returns, cold and flu trends indicate a moderate season which should strengthen performance in the fourth quarter. Based on the current situation, we therefore continue to expect like-for-like net revenue growth to be within the 0-2% range set out in February 2021.
“Cost inflation accelerated in the second quarter and it will take time to offset this headwind with productivity and pricing actions being implemented in the back half of the year and early next year. This will largely offset the margin accretion in 2021 from the disposal of IFCN China. As a result, our guidance, which now excludes IFCN China, is for the adjusted operating margin to be between 22.7% to 23.2% which is 40 to 90bps lower than the 23.6% reported for the full year 2020.
“The benefits of the investments that we have made in the business in innovation, service, quality and supply are starting to come through and we have grown revenues, with 60% of revenue from our Core CMUs gaining or holding share vs H1 2019, despite a very dynamic trading environment. eCommerce net revenue (ex IFCN China) now accounts for 12% of Group net revenue and increased by over 95% on a two-year stacked basis. Our innovation pipeline for 2022 is over 50% larger than this year and we are actively managing the portfolio for growth with the acquisition of Biofreeze, the sale of Scholl and agreement to sell IFCN China.
“We are encouraged by the progress we have made to strengthen the foundations of the business and reposition ourselves for sustainable growth. We expect to exit 2022 with a revenue growth run rate in the mid-single digits as we make our way towards our medium-term adjusted operating profit margin target in the mid-20s by the mid-20s.”