Strong healthcare brands boost Reckitt sales

Reckitt Benckiser reported forecast-beating quarterly sales thanks to a strong performance from its high-margin healthcare and hygiene brands, and growth across all geographical regions.

The FTSE-100 consumer goods group, whose growth has decelerated as supermarkets have muscled in by selling cheaper versions of many of its household goods brands, said like-for-like sales increased by 5 per cent in the first quarter, excluding acquisitions, disposal and currency shifts. Total first-quarter revenue rose 1 per cent to £2.2bn.

Analysts surveyed by Bloomberg had expected a 3.9 per cent rise.

Like-for-like sales rose 3 per cent in North America, helped by a strong flu season. Sales rose 6 per cent in developing markets, helped by improvements in India, partially offset by weakness in Brazil and Latin America.

The health unit, which includes Nurofen painkillers and Mucinex cold remedies, boosted sales 13 per cent, exceeding estimates from analysts. Sales generated by its home division declined by 1 per cent.

Reckitt said it was on track to meet its full-year goals for 4 per cent like-for-like sales growth and "moderate to nice" operating margin expansion. In February it announced a £150m cost-cutting plan and organisational shake-up, as the maker of Dettol disinfectant and Durex condoms sought to counter expected pressures from slowing emerging market growth and slack recovery in developed economies.

Operations will be restructured where Russia and the former Soviet countries will be combined with its Europe and North America business, and Latin America and Asia will merge with the Middle East and Africa.

Measures also included a temporary hiring freeze, more teleconferencing and less spent on travel. Chief executive Rakesh Kapoor, whose pay packet in 2013 totalled £6.7m, said he was now flying economy class on trips lasting less than six hours.

Mr Kapoor has been moving Reckitt from a company focused on household products to one centred on higher-margin consumer healthcare brands such as Nurofen, Gaviscon indigestion relief and Schiff vitamins, which he bought in 2012.

The results come a month after Reckitt Benckiser's house broker called for the company to be broken up, sending shares to record highs. Morgan Stanley said the group should sell its home division, which includes brands such as Airwick air fresheners and Vanish soap and accounts for around a fifth of sales, to recycle the cash into health acquisitions.

Shares have gained 15 per cent this year, and rose 1 per cent to 6,055p during early trading in London on Friday.

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