Stocks in Focus: Reckitt Benckiser

Wednesday 13 March 2019

This week NW Brown look at the UK-listed international consumer goods company, Reckitt Benckiser following the announcement that Rakesh Kapoor would be stepping down as CEO at the end of the year.

Mr Kapoor has been with the company for over 30 years and worked in a variety of roles before taking over as CEO in 2011.

Over the last eight years Reckitt has enjoyed consistently strong growth. The share price has reflected this, almost doubling since Mr Kapoor took over the helm. Part of this growth has been driven by a series of acquisitions in order to enhance Reckitt's portfolio of brands - most notably the acquisition of the infant formula manufacturer Mead Johnson in 2016 which significantly increased the group's position in consumer health and hygiene.

However, the last two years have been challenging for the company following a series of one-off issues including a failed product launch within the well-known Scholl foot-care brand and a cyberattack which negatively impacted distribution. In response, management announced last year that the business would be restructured into two distinct focussed divisions: Health and Hygiene Home. In doing so, the enhanced focus on these areas should aid organic growth and strategic flexibilities going forward.

Reassuringly, the recent full year results announced in February were encouraging with both net revenues and operating profit up by 10 per cent and 11 per cent respectively for the year. With Mead Johnson now fully integrated within the business, the cost synergies continue to enhance performance adding to growth within the health division.

Despite his impending departure, Mr Kapoor appears committed to ensuring the restructuring of the business continues unimpeded. Investors will be keen to see this momentum continue whilst we await news on who will take over the business going forward.

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