Reckitt Benckiser share price leads FTSE 100 as Mead Johnson acquisition pays off | City A.M.
Consumer goods firm Reckitt Beckiser raised sales guidance this morning, as it unveiled unexpectedly strong performance in its recently acquired nutrition business.
The firm received final approval for its acquisition of Mead Johnson, which makes infant formula brand Enfamil. But it has exceeded expectations in the year since then.
The group was leading the FTSE 100 risers this morning after shares rocketed eight per cent.
The figures
Revenue in the first half of the year was up 23 per cent to £6.1bn.
Earnings per share grew 12 per cent to £122.5m.
Like-for-like growth in the second quarter was four per cent, which did not include Mead Johnson until near the very end of the financial year.
The acquired business delivered nine per cent growth due to strong performance in China.
Thanks to the strong performance of the acquisition and in-line trading in the rest of the business, RB upped its revenue growth target to between 14 and 15 per cent, where it was previously in a range of 13 to 14 per cent.
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Why it’s interesting
The figures are the latest insight into RB’s big strategic shift which will see it split into two parts.
One focuses on health and includes Mead Johnson as well as Durex, Clearasil and Veet. The other division, called Hygiene Home, contains Finish, Cillit Bang and Vanish.
The verdict from investors and analysts this morning was that the new structure is delivering, with Connor Campbell of Spreadex calling it “the day’s real winner”.
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Meanwhile Steve Clayton, manager of Hargreaves Lansdown Select UK Shares funds, said: “RB had a wobble last year, with tougher consumer markets around the world, just as they suffered a damaging cyber-attack.
“The group now look to be recovering their poise. With earnings growth poised to accelerate and the stock offering a yield fast approaching three per cent the prospects for RB are improving.”
What Reckitt Benckiser said
Chief executive Rakesh Kapoor said: “MJN integration is well on track, with IFCN performance exceeding expectations and synergies being delivered. RB 2.0 is driving greater focus and energy as we operate under our new business units – Health and Hygiene Home. I am confident that as we fully realise the benefits of RB 2.0, we will deliver outperformance in both business units.”
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