Q1 2018 Trading Update

RNS Number : 5373L
Reckitt Benckiser Group PLC
20 April 2018
 

 

 

20 April 2018                        

 

SOLID START.  FULL YEAR TARGETS REITERATED

 

         Trading Update

 

Q1 2018

£'m

Proforma**

Like-for-like*

Reported






IFCN

700

+6%



Rest of Health

1,216

+1%

+1%

-5%

Total Health

1,916

+3%

+1%

+49%

Hygiene Home

1,195

+4%

+4%

-3%

Total

3,111

+3%

+2%

+23%






North America

787

+5%

+6%

+26%

Europe / ANZ

1,077

-1%

-1%

0%

DvM

1,247

+5%

+4%

+51%

Total

3,111

+3%

+2%

+23%

 

Highlights: Q1 (at constant rates)

·      Proforma growth of +3% (+2% LFL). Proforma and LFL growth were both volume-led (+3%).

·      RB 2.0: good progress in both business units.

·      Health performance +3% proforma (+1% LFL) against a backdrop of strong trends in IFCN growth and seasonal tailwinds in the US.   Strong performances in Gaviscon, Mucinex, Strepsils and VMS brands but significant underperformance in Scholl.  Middle East macro issues impacting Dettol.     

·      Mead Johnson Nutrition (MJN) performance continues to progress well with proforma growth +6% for Q1. Strong market growth in Greater China, and sell in of Enfamil Neuro Pro innovation in the US reinforces the strong fundamentals of this category. 

·      Hygiene Home had a strong start to the year at +4% LFL driven by a combination of improved in-market execution, seasonal benefit to Lysol in the US and sell in of our new innovations in Finish and Air Wick.

·      On track for our full year net revenue target of +13-14% (total constant), implying +2%-3% LFL*.

Commenting on these results, Rakesh Kapoor, Chief Executive Officer, said:

"A solid start overall in Q1, operating under our new organisational structure.  RB 2.0 is embedding well and we expect to see the benefits continue to materialise.

 

The Hygiene Home (HyHo) business has made a strong start to the year with +4% (LFL), aided by some seasonality on Lysol. The performance of the MJN business under RB's leadership is progressing well with strong proforma growth of +6%.  Results in the Rest of Health were mixed at +1% (LFL) with good growth in our Health Relief brands, offset by weakness in some of our Health Wellness and Health Hygiene brands.  Scholl is stabilising but significantly below the prior year and has reduced the rest of LFL Health performance by -200bps in the quarter.  We are addressing our performance in Scholl through acceleration of our pipeline, penetration improvement programmes and streamlining our range.    

 

On a geographic basis we saw a strong performance from North America, which grew +6% (LFL) in the quarter behind broad-based growth across our brand portfolio and a good flu season.  China and India continue to perform well.  Macro issues continue to persist in the Middle East and Russia.

 

Our priority remains organic growth under our new focussed organisation structure.  The integration of MJN is going well.  We have work to do in parts of our Health portfolio, particularly Scholl.  I am very pleased to see such energy, focus and a strong start by the Hygiene Home team.  I firmly believe RB 2.0 is the right platform for long-term growth and outperformance and we remain well on track to achieve our full year net revenue targets."

 

* Like-for-like ("LFL") growth excludes the impact of changes in exchange rates, acquisitions, and disposals.  Venezuela is excluded from LFL.  

** Proforma growth rates for IFCN (constant rate growth compared to Q1 2017 when under MJN ownership) and the resulting impact on the RB Group have been included for information purposes.  

Operating Segment Review

 

Health

+3% proforma / +1% LFL

(62% of net revenue)

 

·     Market growth in Health, including IFCN, is around the middle of our medium term expectation of +3-5%.

·     The +3% proforma growth comprised approximately one third volume and two thirds price/mix.

·     IFCN revenue saw strong growth of +6% (proforma) behind buoyant market growth in Greater China, operational improvements and the sell-in of the Enfamil Neuropro innovation, containing DHA and MFGM, in the US.  Further details on p3. 

·     Health Relief brands delivered broad-based growth across the portfolio with mid single-digit LFL growth.  Gaviscon and Strepsils had strong performances, and Mucinex, while in growth, was impacted by the return of some private label competition and mixed seasonal impact with softness in February and March, offsetting a strong January.  We expect to see further impact from private label entry in some of our Mucinex products as we progress through the year.

·     Health Wellness brands saw growth in both Durex and our VMS brands, which combined grew mid single-digit LFL in the quarter.  However this was more than offset by further significant declines in Scholl. 

·     Absolute revenue from the Scholl / Amopé franchise has stabilised for the last three quarters with a more balanced portfolio mix, as the contribution from "gadget" sales is now reduced to around a quarter of the total revenue in this category.  We are still lapping higher gadget device sales and some parts of the range are impacted by lower display slots.  We are addressing this underperformance with a number of initiatives, including acceleration of our pipeline, and streamlining our range to make on-pack education stronger.  We will, however see further weakness in the near term.

·     Health Hygiene brands had a slow quarter.  Dettol, which represents a significant portion of this segment was impacted by continued weakness in the Middle East and ASEAN.  We expect the climate to improve as we progress throughout the year.    



  

Hygiene Home

+4% proforma / +4% LFL

(38% of net revenue)

 

·     Market growth remains at the lower end of our medium-term expectations of +2-3% due in particular to a current difficult competitive environment in developed markets.

·     Revenue growth comprised strong volume growth offset by negative pricing.  

·     Strong growth in Lysol behind distribution gains, our recently launched daily cleanser and daily cleansing wipes, and positive seasonal impacts.

·     Harpic grew well behind early success of our Colour Power 6 innovation, recently launched in a number markets and continued penetration building programmes in emerging markets.

·     Finish had a strong quarter following the sell-in of our new Quantum Ultimate Clean & Shine innovation.  There is some stocking benefit from the launch of this innovation.

·     Air Wick had a good quarter in the US and Western European markets behind the sell-in of our new Essential Mist innovation.  Again, while there is some stocking benefit in the quarter from this launch, this innovation has been well received.  Vanish, while weak, saw improving trends, aided by our latest innovation, which removes over 100 stains.    

 

Pro-forma Performance of Mead Johnson Nutrition ("MJN")

 

Q1 2018

£'m

Constant*

FX

Reported**






North America

198

+4%

-11%

-7%

Europe / ANZ

23

-5%

+3%

-2%

DvM

479

+8%

-8%

0%

Total

700

+6%

-8%

-2%

 

Constant represents growth compared to Q1 2017 when under MJN ownership (proforma), excluding the impact of changes in exchange rates 

** Reported represents proforma growth at actual exchange rates

 

North America                       (28% of MJN Net Revenue)

·      +4% growth at constant rates in Q1.

·     Strong growth in Canada, and some channel stocking benefit in both the US and Canada from the launch of Enfamil NeuroPro.  This was offset by negative mix from the California WIC contract, which commenced under its new terms in August 2017.

 

DvM                                        (68% of MJN Net Revenue)

·     Mid-teens growth in Greater China, driven by both strong volume market growth and premiumisation in mainland China.

·     Channel and mix shifts continue as expected with growth in imported Enfinitas and Enfamil and new e-commerce channels, outweighing the decline in locally manufactured Enfamil and offline cross-border sales between Hong Kong and China.

·     Strong growth in Mexico, offset by mixed results in other Latam markets.



 

Geographic Review

 

North America 

+5% proforma / +6% LFL

(25% of net revenue)

 

·     Strong growth in North America of +6%.  Health brands of Mucinex, Durex / KY and VMS brands were all in growth. 

·     Lysol had a strong quarter, benefitting from both a seasonal uplift and innovations.  Finish and Air Wick also saw growth including some pipeline filling from innovations.

·     We do not expect such strong growth in the US to continue as Mucinex will be impacted by further private label entry and a normalization of growth in Hygiene Home brands following the stock benefit of innovations in Q1.

 

Europe / ANZ 

-1% proforma / -1% LFL

(35% of net revenue)

 

·     Russia had a weak Q1 due to a combination of lower incidences of cold and flu and some pharmacy destocking.

·     The rest of Europe and ANZ was mixed with broad-based weakness in Scholl significantly impacting performance.

 

DvM

+5% proforma / +4% LFL

(40% of net revenue)

 

·     Double-digit LFL growth in Greater China, led by Durex, Move Free, Dettol and our recently launched Finish tablets. 

·     Our performance in IFCN Greater China was also strong with a combination of buoyant market growth and our own operational improvements contributing to double-digit proforma growth for the quarter.

·     We saw continued challenging conditions in both the Middle East and ASEAN markets. 



 

·     Brazil and India were growth accretive to DvM region in the quarter. 

Financial Position

Bridge - LFL to Reported Growth

Q1 2018

£'m

Like-for-like*

GST**

Net M&A

Exchange

Reported***








IFCN

700






Rest of Health

1,216

+1%

-1%

-

-6%

-5%

Total Health

1,916

+1%

-1%

+58%

-10%

+49%

Hygiene Home

1,195

+4%

-

-

-6%

-3%

Total

3,111

+2%

-1%

+30%

-8%

+23%








North America

787

+6%

-

+35%

-15%

+26%

Europe / ANZ1

1,077

-1%

-

+2%

-1%

0%

DvM2

1,247

+4%

-2%

+63%

-14%

+51%

Total

3,111

+2%

-1%

+30%

-8%

+23%

* Like-for-like ("LFL") growth excludes the impact of changes in exchange rates, acquisitions, and disposals.  Venezuela is excluded from LFL.

** Impact of the Goods and Service Tax ("GST") implemented by the Indian Government from 1 July 2017

***On 1 January 2018, the Group adopted IFRS 15: Revenue from Contracts with Customers and has restated FY17 comparatives accordingly. The impact of adopting the new standard is to reduce reported Q1 2017 net revenue by £18m

1   Europe/ANZ comprises Europe, Russia/CIS, Israel, Turkey and Australia/New Zealand

2 DVM comprises Africa, Middle East (excluding Israel), Asia (excluding Russia/CIS) and Latin America

 

 

Other Matters

 

Korea HS Issue

The HS issue in South Korea is a tragic event, with many parties involved. We continue to make both public and personal apologies to victims.  Since our FY 2017 results publication, no material updates have occurred apart from further categorization of applicants.  The current status is highlighted in the table below. Thirty asthma victims have been announced by the Ministry of Environment. 

 

The status of the four rounds of applications established to date is as follows:

 

Round

Total applicants

Applicants Assessed

Category I & II

Cat I&II percentage

RB Oxy users - Category I & II**

Assessment completion (expected)

 

1

361

361

172

48%

139

Completed

2

169

169

51

30%

44

Completed

3

669

669

80

12%

72

Completed

4

4,728*

2,796

113

4%

103

December 18

 

*    Round 4 remains open to applicants.  The number of applicants shown in the table are the applicants set out on the KEITI website as at 13 April 2018.

**  Both sole Oxy RB users and users of multiple manufacturers' products, including Oxy RB.

 

 

 

Indivior / RB Pharma related matters:

The Group remains involved in ongoing investigations by the US Department of Justice ("DoJ") and the US Federal Trade commission and related litigation proceedings in the US arising from certain matters relating to the RB Pharmaceuticals ("RBP") business prior to its demerger in December 2014 to form Indivior PLC, and may incur liabilities in relation to such matters.

There have been no material changes since the publication of our 2017 Annual Report.

 

Details of existing provisions and contingent liabilities relating to the both the HS issue and Indivior / RB Pharma related matters can be found in our 2017 Annual Report. 

2018 Net Revenue Target

 

The Group is on track to achieve its FY 2018 Net Revenue target of +13%-14% total revenue growth at constant rates (which implies a LFL growth in the range of +2-3%).

 

 

For further information, please contact:

Reckitt Benckiser

Richard Joyce

SVP, Investor Relations

Patty O'Hayer

Director, External Relations and Government Affairs

               +44 (0)1753 217800

Finsbury (Financial PR)

Faeth Birch / Adam Atashzai

 

 

              +44 (0) 20 7251 3801

 

Cautionary note concerning forward-looking statements

 


This information is provided by RNS
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