Reckitt Benckiser expects 'nice' margins in 2015 after beating sales targets
In the first results after offloading its drugs business, Reckitt Benckiser delivered fourth quarter net revenue growth comfortably ahead of forecasts and said it expected "moderate to nice" margins for 2015 despite its new Supercharge cost-saving project.
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Net sales excluding Reckitt Benckiser Pharmaceuticals (RBP) were up 5% to £2.3bn in the final three months of the year, beating expectations of a 4% rise from the consumer goods group, leading to a full year rise of 4% at constant currencies to £8.84bn, ahead of the 3.7% consensus analyst estimate.
With like-for-like growth ex-RBP up 5% in the fourth quarter, this also translated to a 4% increase for the full year, which management said it expected to be repeated this year.
"In 2015, we continue to expect tough market conditions," said chief executive Rakesh Kapoor. "Therefore, we are targeting LFL net revenue growth of +4%, which is broadly similar to 20141 and moderate to "nice" operating margin expansion in 2015."
Kapoor, who has in the past described the 2014 performance as “nice”, said Supercharge will make the FTSE 100 group a "leaner, faster and more coordinated business", driving cost savings to enable the group to deliver sustainable earnings growth in the rest of the decade.
Reckitt delivered a strong, 100-basis points (bps) of gross margin expansion in the full year to 57.7%, driven by a better product mix, pricing, and cost initiatives.
This helped drive a very strong rise in operating profit margins of 160% bps, lifting adjusted operating profits 11% at constant currencies to £2.19bn, reported profit before tax up 14% to £2.12bn and diluted adjusted earnings up 4% to 230.5p per share.
A final dividend of 79p per share was recommending, lifting the total dividend 1% on the previous year to 139p.
In setting out some longer-term targets, Kapoor reiterated management's target for 200bps market outperformance and moderate operating profit margin expansion.
He said the company aimed to be above average growth in health and hygiene, taking it to 80% of company sales by 2020 from the current 72%, and for above average growth in developing markets, taking it to 40% of company sales by 2020 from the current 30%.