TIDMRKT
RNS Number : 1987Q
Reckitt Benckiser Group PLC
26 October 2021
26 October 2021
BROAD-BASED LFL GROWTH IN Q3; IMPROVED 2021 REVENUE OUTLOOK
Q3 2021 YTD 2021
---------------------- --------------- -------------------------------------
GBPm LFL(1) Reported GBPm LFL1 Reported
---------------------- ------ ------- --------- ------ ------- ---------
Hygiene 1,449 +2.9% -2.8% 4,476 +12.7% +5.9%
---------------------- ------ ------- --------- ------ ------- ---------
Health(2) 1,186 +3.6% -2.5% 3,330 -5.7% -10.5%
---------------------- ------ ------- --------- ------ ------- ---------
Nutrition(2) 640 +3.8% -20.6% 2,067 +0.7% -16.6%
---------------------- ------ ------- --------- ------ ------- ---------
Group net revenue(2) 3,275 +3.3% -6.8% 9,873 +3.6% -5.3%
---------------------- ------ ------- --------- ------ ------- ---------
1 LFL growth excludes IFCN China, Scholl and Biofreeze for the
entirety of the current and prior periods. Non-GAAP measures are
defined on page 9.
2 Net revenue includes IFCN China and Scholl for the period
under ownership (to 9 September and 1 June, respectively) and
Biofreeze (from 12 July). Additional financial information,
reflecting the disposal of IFCN China, is provided on page 6.
Q3 highlights:
* Group like-for-like ('LFL') net revenue growth of + 3.3%:
broad-based growth, balanced between volume and price/mix and an
encouraging start to the cold and flu season; two-year 'stacked'
net revenue growth up over 18%
* Group reported net revenue decline of -6.8%: LFL growth of
3.3% was offset by a negative net M&A impact of 5.0%, primarily
related to IFCN China, and adverse FX of 5.1%
* Hygiene LFL growth of +2.9%: continued growth in Finish and
Air Wick, offset by a slight decline in Lysol against a very strong
comparative period
* Health LFL growth of +3.6%: sharp improvement in cold and flu
sales trends; lower declines in Dettol; continued positive momentum
in Intimate Wellness; Biofreeze double-digit growth in Q3 (not
included in LFL)
* Nutrition LFL growth of +3.8%: growth in each of the three
IFCN regions, with VMS declining slightly; reported net revenue
declined 20.6% reflecting the lower revenue from IFCN China
* eCommerce LFL growth +23%: 2-year 'stacked' net revenue growth of 86%
Commenting on these results, Laxman Narasimhan, Chief Executive
Officer, said:
"In September, we reiterated the building blocks which will see
Reckitt return to mid-single digit revenue growth and mid 20's
margins. There is more to be done, but today's results are
testament to our progress, with 3.3% LFL revenue growth building on
the 15.3% growth of Q3 2020. We've delivered growth in each of our
three GBUs and in each of our three geographic regions, with a
balance of volume and price/mix across the portfolio. Nine of our
ten largest brands are up double-digits on a two-year basis.
Reflecting this strength, we now expect like-for-like net
revenue growth for FY 2021 in the range of 1-3%. Despite
significant cost pressures, the benefits of our pricing actions,
mix and productivity programme, mean our margin guidance is
unchanged, and we remain confident in our medium-term outlook."
GROUP REVIEW
GBPm Volume Price/ LFL(1) Net M&A FX Reported
Mix
---------- ------ ------- ------- ------- -------- ------ ---------
Q3 2021 3,275 +1.6% +1.7% +3.3% -5.0% -5.1% -6.8%
---------- ------ ------- ------- ------- -------- ------ ---------
YTD 2021 9,873 +0.8% +2.8% +3.6% -3.2% -5.7% -5.3%
---------- ------ ------- ------- ------- -------- ------ ---------
1 LFL growth excludes IFCN China, Scholl and Biofreeze for the
entirety of the current and prior periods. Non-GAAP measures are
defined on page 9.
Broad-based and balanced growth against a strong comparative
period
Group net revenue grew by 3.3% on a LFL basis in Q3 with volume
growth of 1.6% and price/ mix improvements of 1.7%. Strong
price/mix growth in Nutrition and Developing Markets has been
offset to a degree by more normal levels of trade investment in our
disinfection brands. Revenue growth builds on 15.3% LFL growth in
the comparative period resulting in two-year 'stacked' growth of
18.6%.
Growth was broad-based, with each of the three GBUs and each of
the three geographic regions growing in the quarter. Brands less
sensitive to COVID dynamics, representing around 70% of our
portfolio, continued to grow, on average, by mid-single digits.
The net effect of M&A was a 5.0% reduction in revenue in the
quarter. This related primarily to lower net revenue from IFCN
China, and also included the disposal of Scholl and the acquisition
of Biofreeze.
FX headwinds reduced net revenue by 5.1% due primarily to a
general strengthening of Sterling against many currencies.
eCommerce LFL net revenue grew 23% in the quarter, with two-year
'stacked' growth of 86%, and now accounts for 12% of Group net
revenue (excluding IFCN China). Growth was broad-based and driven
across geographies, GBUs and channels.
Outlook
Following stronger than expected trading in Q3, we now expect
LFL net revenue growth for FY 2021 in the range of 1-3%. This
assumes a softer performance in Q4, reflecting primarily a likely
reduction in COVID prevalence in the US and the resulting impact on
Lysol. Additionally, whilst early season demand for our cold and
flu relief products has been encouraging, it is too early to
predict the extent to which trends will continue.
COGS inflation continues to be challenging, particularly in
areas such as surfactants, paper, tinplate and ocean freight, and
is currently running at around 10%. However, our 2021 Group
adjusted operating profit margin guidance, excluding IFCN China for
the entirety of the year, remains unchanged at 22.7-23.2%. As
previously guided, our total Group margins will be lower due to the
dilution related to IFCN China.
The trading backdrop is set to remain dynamic over the coming
months. In addition to cost pressures, COVID continues to influence
demand and buying patterns for our disinfection, and cold and flu
relief products. However, 70% of our portfolio is less sensitive to
COVID dynamics and growing at mid-single digits and we have pricing
actions and productivity plans firmly in place. We therefore remain
confident in delivering margin improvement in 2022 and we are on
track to exit 2022 with mid-single digit LFL net revenue
growth.
We expect the 2021 adjusted net finance expense to be
c.GBP240-260m, and the 2021 adjusted tax rate to be around 22%.
OPERATING SEGMENT REVIEW
-------------------------
Hygiene 44% of net revenue in Q3 2021
GBPm Volume Price/Mix LFL(1) FX Reported
---------- ------ ------- ---------- ------- ------ ---------
Q3 2021 1,449 +2.7% +0.2% +2.9% -5.7% -2.8%
---------- ------ ------- ---------- ------- ------ ---------
YTD 2021 4,476 +9.9% +2.8% +12.7% -6.8% +5.9%
---------- ------ ------- ---------- ------- ------ ---------
1 Non-GAAP measures are defined on page 9.
Hygiene net revenue grew 2.9% on a LFL basis to GBP1,449m in the
quarter. This reflected volume growth of 2.7% and price/mix
improvements of 0.2% which was driven by strong growth in Latam
offset by more normal levels of trade investment in Lysol.
Finish and Air Wick grew mid-single digits, with good growth
across most major markets. This is despite the strong performance
in the comparative period, where consumers were spending more time
at home.
During the quarter, the spread of the Delta variant in the US
resulted in a significant increase in COVID cases, peaking in late
August. As a result, Lysol revenue, following double-digit declines
in July, strengthened during the remainder of the quarter leading
to a low-single digit decline overall, better than original
expectations. Market share improvements for Lysol remain strong,
with further share gains in both wipes and disinfectant spray in
the US.
Other key brands performed well in the quarter, most notably
Vanish, with broad-based, double-digit growth, reflecting increased
social activity.
Health 36% of net revenue in Q3 2021
GBPm(1) Volume Price/ LFL(2) Net M&A FX Reported
Mix
---------- -------- ------- ------- ------- -------- ------ ---------
Q3 2021 1,186 +2.2% +1.4% +3.6% -1.2% -4.9% -2.5%
---------- -------- ------- ------- ------- -------- ------ ---------
YTD 2021 3,330 -7.0% +1.3% -5.7% -0.2% -4.6% -10.5%
---------- -------- ------- ------- ------- -------- ------ ---------
1 Net revenue includes Scholl for the period under ownership (to
1 June) and Biofreeze (from 12 July).
2 LFL growth excludes Scholl and Biofreeze for the entirety of
the current and prior periods. Non-GAAP measures are defined on
page 9.
Health net revenue grew on a LFL basis by 3.6% in the quarter to
GBP1,186m. This reflected a volume growth of 2.2% and price/mix
improvements of 1.4% with strong pricing growth in Developing
Markets, offset by a normalisation of trade investment in Dettol.
The net impact of the disposal of Scholl and the acquisition of
Biofreeze reduced net revenue by 1.2% in the quarter primarily as a
result of the relative size of the businesses.
Dettol net revenue continues to show signs of stabilising
significantly above 2019 levels. Revenue declined in the quarter,
but at a lower rate than Q2. This improvement was due in part to a
return to growth in China, one of Dettol's largest markets and the
first to be impacted by COVID.
Strong growth in Intimate Wellness continued, up mid-single
digits, against a strong comparative which saw social restrictions
eased in a number of markets, as well as the launch of the PU
condom.
Overall, our OTC portfolio grew over 20% in the quarter, driven
primarily by Mucinex sales which benefited from a sharp improvement
in cold and flu sales trends which accelerated throughout the
quarter. Our portfolio of cold and flu relief products gained
significant share in the quarter, reversing the trends of the first
half of the year. Gaviscon continued to grow double-digits due to
innovation and supply chain improvements.
Within personal care Veet grew mid-single digits, as innovations
such as Veet Minima/Pure and Veet Men offset the difficult
comparatives.
The acquisition of Biofreeze completed on 12 July. Performance
of the business continues to be strong, with double-digit net
revenue growth in the quarter due to successful marketing execution
and innovation.
Nutrition 20% of net revenue in Q3 2021
GBPm(1) Volume Price/ LFL(2) Net M&A FX Reported
Mix
---------- -------- ------- ------- ------- -------- ------ ---------
Q3 2021 640 -2.5% +6.3% +3.8% -20.0% -4.4% -20.6%
---------- -------- ------- ------- ------- -------- ------ ---------
YTD 2021 2,067 -5.2% +5.9% +0.7% -11.7% -5.6% -16.6%
---------- -------- ------- ------- ------- -------- ------ ---------
1 Nutrition net revenue includes the revenue contribution from
IFCN China for the period under ownership (to 9 September).
2 LFL net revenue growth excludes the contribution from IFCN
China for the entirety of the respective periods. Non-GAAP measures
are defined on page 9.
Nutrition net revenue grew on a LFL basis by 3.8% in the quarter
to GBP640m. This reflected volume decline of 2.5% and price/mix
improvements of 6.3% due to pricing growth in IFCN North America
and VMS. Reported net revenue declined 20.6% primarily reflecting
the decline in IFCN China revenue.
IFCN net revenue grew 5% on a LFL basis. The US business, which
represents around half of IFCN revenue, grew high-single digits.
This has been driven primarily by Nutramigen - our Specialty brand
- and good share gains in the base Enfa business, along with an
increase in birth rates in recent months. Our business in ASEAN
returned to growth following the increased focus placed on the
business in recent months, whilst in Latam, trading continues to be
positive.
Our Vitamins, Minerals and Supplements business declined
slightly, as Neuriva our brain support supplement continued to
perform strongly, offsetting declines in Airborne.
IFCN China
IFCN China contributed revenue of GBP51m in Q3 and GBP375m YTD.
As previously guided, the business is expected to be dilutive to
2021 Group margins reflecting difficult trading and certain costs
incurred prior to the transfer of the business.
Performance by Geography
Q3 2021 GBPm Volume Price/ LFL(1) Net M&A FX Reported
Mix
---------------------- ------ ------- ------- ------- -------- ------ ---------
North America 1,079 +4.1% +1.0% +5.1% +2.4% -6.5% +1.0%
---------------------- ------ ------- ------- ------- -------- ------ ---------
Europe/ANZ 1,055 +1.0% -0.4% +0.6% -3.2% -5.0% -7.6%
---------------------- ------ ------- ------- ------- -------- ------ ---------
Developing Markets 1,141 +0.3% +3.9% +4.2% -12.6% -4.0% -12.4%
---------------------- ------ ------- ------- ------- -------- ------ ---------
Group net revenue(2) 3,275 +1.6% +1.7% +3.3% -5.0% -5.1% -6.8%
---------------------- ------ ------- ------- ------- -------- ------ ---------
YTD 2021
---------------------- ------ ------- ------- ------- -------- ------ ---------
North America 3,088 +2.0% +3.9% +5.9% +0.7% -8.1% -1.5%
---------------------- ------ ------- ------- ------- -------- ------ ---------
Europe/ANZ 3,170 -1.3% +0.4% -0.9% -1.0% -3.1% -5.0%
---------------------- ------ ------- ------- ------- -------- ------ ---------
Developing Markets 3,615 +1.9% +3.9% +5.8% -8.3% -6.0% -8.5%
---------------------- ------ ------- ------- ------- -------- ------ ---------
Group net revenue(2) 9,873 +0.8% +2.8% +3.6% -3.2% -5.7% -5.3%
---------------------- ------ ------- ------- ------- -------- ------ ---------
1 LFL net revenue growth excludes the contribution from IFCN
China, Scholl and Biofreeze for the entirety of the respective
periods. Non-GAAP measures are defined on page 9.
2 Group net revenue includes the revenue contribution from IFCN
China (Developing markets) and Scholl (all geographies) for the
period under ownership (9 September and 1 June, respectively) and
Biofreeze (North America from 12 July).
North America Q3 net revenue grew +5.1% on a LFL basis, with
growth in Mucinex and IFCN more than offsetting declines in
Airborne.
Europe/ANZ Q3 net revenue grew by +0.6% on a LFL basis, as good
growth in Nurofen, Strepsils, Durex and most Hygiene brands was
offset by declines in Dettol.
Developing markets Q3 net revenue grew by +4.2% on a LFL basis
with good growth across Durex, OTC and VMS brands offsetting an
overall decline in Dettol.
ADDITIONAL FINANCIAL INFORMATION: HISTORICAL PERFORMANCE BY GBU, EXCLUDING IFCN CHINA
--------------------------------------------------------------------------------------
As IFCN China will remain presented within continuing operations
for 2021 and 2020, Reckitt has published the additional financial
information below to provide visibility of the Group's performance
excluding IFCN China for the current and prior period.
Quarterly LFL(1) net revenue growth
Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021
---------------------- -------- -------- -------- -------- -------- -------- --------
Hygiene +12.8% +19.4% +19.5% +25.7% +28.5% +7.8% +2.9%
---------------------- -------- -------- -------- -------- -------- -------- --------
Health(2) +22.8% +10.8% +12.6% +2.8% -14.1% -5.6% +3.6%
---------------------- -------- -------- -------- -------- -------- -------- --------
Nutrition +5.0% +3.5% +10.8% +1.9% -5.3% +3.8% +3.8%
---------------------- -------- -------- -------- -------- -------- -------- --------
Group +15.0% +12.9% +15.3% +12.3% +5.3% +2.2% +3.3%
---------------------- -------- -------- -------- -------- -------- -------- --------
Group (as published) +13.3% +10.5% +13.3% +10.2% +4.1% -1.0% +3.3%
---------------------- -------- -------- -------- -------- -------- -------- --------
1 Non-GAAP measures are defined on page 9.
2 Health Q1 2021 LFL net revenue growth restated for the disposal of Scholl.
Quarterly net revenue
GBPm Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021
---------------------- -------- -------- -------- -------- -------- -------- --------
Hygiene 1,355 1,382 1,490 1,589 1,641 1,386 1,449
---------------------- -------- -------- -------- -------- -------- -------- --------
Health 1,343 1,159 1,217 1,171 1,123 1,021 1,186
---------------------- -------- -------- -------- -------- -------- -------- --------
Nutrition 624 586 602 614 550 553 589
---------------------- -------- -------- -------- -------- -------- -------- --------
Group 3,322 3,127 3,309 3,374 3,314 2,960 3,224
---------------------- -------- -------- -------- -------- -------- -------- --------
Group (as published) 3,544 3,367 3,513 3,569 3,506 3,092 3,275
---------------------- -------- -------- -------- -------- -------- -------- --------
Half yearly net revenue
LFL(1)
---------------------- ------------------ -------- -------- ----------------------------
GBPm H1 2020 H2 2020 FY 2020 H1 2021 H1 2020 FY 2020 H1 2021
---------------------- -------- -------- -------- -------- -------- -------- --------
Hygiene 2,737 3,079 5,816 3,027 +16.1% +19.5% +18.0%
---------------------- -------- -------- -------- -------- -------- -------- --------
Health 2,502 2,388 4,890 2,144 +17.0% +12.1% -10.2%
---------------------- -------- -------- -------- -------- -------- -------- --------
Nutrition 1,210 1,216 2,426 1,103 +4.3% +5.4% -0.9%
---------------------- -------- -------- -------- -------- -------- -------- --------
Group 6,449 6,683 13,132 6,274 +13.9% +13.9% +3.7%
---------------------- -------- -------- -------- -------- -------- -------- --------
Group (as published) 6,911 7,082 13,993 6,598 +11.9% +11.8% +1.5%
---------------------- -------- -------- -------- -------- -------- -------- --------
1 Non-GAAP measures are defined on page 9.
Adjusted operating profit(1)
GBPm H1 2020 H2 2020 FY 2020 H1 2021
---------------------- -------- -------- -------- --------
Hygiene 687 818 1,505 774
---------------------- -------- -------- -------- --------
Health 716 618 1,334 468
---------------------- -------- -------- -------- --------
Nutrition 213 164 377 183
---------------------- -------- -------- -------- --------
Group 1,616 1,600 3,216 1,425
---------------------- -------- -------- -------- --------
Group (as published) 1,696 1,605 3,301 1,424
---------------------- -------- -------- -------- --------
1 Non-GAAP measures are defined on page 9.
Adjusted operating profit margin(1)
H1 2020 H2 2020 FY 2020 H1 2021
---------------------- -------- -------- -------- --------
Hygiene 25.1% 26.6% 25.9% 25.6%
---------------------- -------- -------- -------- --------
Health 28.6% 25.9% 27.3% 21.8%
---------------------- -------- -------- -------- --------
Nutrition 17.6% 13.5% 15.5% 16.6%
---------------------- -------- -------- -------- --------
Group 25.1% 23.9% 24.5% 22.7%
---------------------- -------- -------- -------- --------
Group (as published) 24.5% 22.7% 23.6% 21.6%
---------------------- -------- -------- -------- --------
1 Non-GAAP measures are defined on page 9.
OTHER MATTERS
--------------
The Humidifier Sanitiser ('HS') issue in South Korea is a tragic
event, with many parties involved. We continue to make both public
and personal apologies to victims. Details of provisions and
contingent liabilities relating to the HS issue can be found on
page 207 of the 2020 Annual Report and Accounts.
DEFINITIONS
------------
Other non-GAAP measures
Like-for-Like ('LFL'): Net revenue growth or decline at constant
exchange rates (see below) excluding the impact of acquisitions,
disposals and discontinued operations. Completed disposals are
excluded from LFL revenue growth for the entirety of the current
and prior years. Acquisitions are included in LFL revenue growth
twelve months after the completion of the relevant acquisition. LFL
growth also excludes Venezuela.
Stacked net revenue growth: The summation of the net revenue
growth for the relevant period in 2021 and 2020, to provide
visibility of growth versus periods prior to the start of the
COVID-19 pandemic.
Constant exchange rate ('CER') : Net revenue growth or decline
adjusting the actual consolidated results such that the foreign
currency conversion uses the same exchange rates as were applied in
the prior period.
Adjusted Operating Profit and Adjusted Operating Profit margin :
Adjusted operating profit reflects the IFRS operating profit
excluding items in line with the group's adjusted items policy
(refer to the Group H1 2021 results). The adjusted operating profit
margin is the adjusted operating profit expressed as a percentage
of net revenue.
Other definitions and terms
eCommerce: eCommerce channel net revenue is defined as direct
sales from Reckitt to online platforms or directly to consumers.
Estimates of total eCommerce sales as a percentage of group
revenues includes direct sales and an estimate of sales achieved by
our brands corresponding to sales through our omnichannel
distributors and retailer' websites.
CONFERENCE CALL DETAILS
------------------------
We will be hosting a live audiocast followed by a Q&A
session for analysts and investors at 8:30am (BST) on Tuesday 26
October 2021.
Please click on the link below to join the live audiocast on the
day.
https://www.reckitt.com/investors/investor-news/
Alternatively, dial in details are as follows:
International Dial In: +44 (0) 2071 928338
UK: Participants Freephone 08002796619
USA: Participants Freephone 18778709135
Conference ID: 8227328
FURTHER INFORMATION AND CONTACTS
Reckitt
Simon Whittington +44 (0)7408 812062
Deputy Head of Investor Relations
Patty O'Hayer +44 (0)7825 755688
Director, External Relations and Government Affairs
Finsbury
Faeth Birch +44 (0)7768 943171
Cautionary note concerning forward-looking statements
This announcement contains statements with respect to the
financial condition, results of operations and business of Reckitt
(the Group) and certain of the plans and objectives of the Group
that are forward-looking statements. Words such as 'intends',
'targets', or the negative of these terms and other similar
expressions of future performance or results, and their negatives,
are intended to identify such forward-looking statements. In
particular, all statements that express forecasts, expectations and
projections with respect to future matters, including targets for
net revenue, operating margin and cost efficiency, are
forward-looking statements. Such statements are not historical
facts, nor are they guarantees of future performance.
By their nature, forward-looking statements involve risk and
uncertainty because they relate to events and depend on
circumstances that will occur in the future. There are a number of
factors that could cause actual results and developments to differ
materially from those expressed or implied by these forward-looking
statements, including many factors outside the Group's control.
Among other risks and uncertainties, the material or principal
factors which could cause actual results to differ materially are:
the general economic, business, political and social conditions in
the key markets in which the Group operates; the ability of the
Group to manage regulatory, tax and legal matters, including
changes thereto; the reliability of the Group's technological
infrastructure or that of third parties on which the Group relies;
interruptions in the Group's supply chain and disruptions to its
production facilities; increases or volatility in the cost of raw
materials and commodities ; the reputation of the Group's global
brands and Reckitt's ability to innovate and remain competitive ;
and the recruitment and retention of key management.
These forward-looking statements speak only as of the date of
this announcement. Except as required by any applicable law or
regulation, Reckitt expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change
in the Group's expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is
based.
LEI: 5493003JFSMOJG48V108
Reckitt Benckiser Group plc (Reckitt)
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