Dettol empire looks squeaky-clean

4

All chief executives need a bit of luck. But even Laxman Narasimhan couldn’t have dreamt of this. The new Reckitt Benckiser boss has got himself a
pandemic. What better for his “relentless pursuit of a cleaner and healthier world”?

Yes, of course, it’s not really what he wanted. But who’d have thought when he took charge of the Lysol-to-Lemsip outfit last September that his
Reckitt revamp would soon be enjoying such a “strong tailwind”? Even at the full-year figures in February, his strategic review findings came with
all kinds of health warnings. He spoke of a “journey of three phrases: first stabilise and perform, then perform and build and, finally, outperform”.

Outperformance wasn’t meant to arrive until 2023. But look at Reckitt now. A business typically shooting for 3 per cent to 4 per cent underlying
sales growth has just delivered a half-year jump of 11.9 per cent — easily topping the 10.6 per cent consensus. And it’s not as if it’s giving stuff away.
Operating margins of 24.5 per cent also beat forecasts, with adjusted operating profits up 15 per cent to £1.7 billion.

No surprise that Covid-19 has seen brands like Dettol and Lysol clean up, even without any help from Donald Trump’s disinfectant-injecting routine.
Lockdown also did its bit for Finish, Harpic and Air Wick as people spent more time at home. And the medicine cabinet’s been stocked with the likes
of Nurofen and Mucinex. The only corona trend that didn’t help was social distancing, leaving Durex a bit floppy.

It’s given Mr Narasimhan a nicer problem than those he inherited at a group renowned for earnings misses: expectations management. He points to
the £69million of first-half corona costs. And he is warning of the “uncertainties of pantry-unloading”, as stockpiling unwinds, not least on the painkiller
and cold remedy front: one reason he’s expecting a “weaker” flu season, whatever the ravages of coronavirus.

He’s also got the headache of a baby milk buy: Mead Johnson Nutrition, bought by Rakesh Kapoor in 2017 for $16.6 billion. Yes, it’s making baby
steps progress. But Mr Narasimhan has already signalled how much he likes the business by writing it down by £5 billion.

Still, the virus has brought “growth opportunities”, too, not least online. Consumer behaviour is changing, with Mr Narasimhan noticing that if people
“behave in the same way for more than 60 days” it’s likely to stick. Reckitt’s also got into some overdue brand extension, setting up a “professional
service” wing, aimed at bringing its hygiene skills to the likes of Hilton, Avis and Delta Airlines — leisure outfits now big in bleach. Such new
ventures are one reason he’s upping the three-year investment budget by £200 million to £2.2 billion. The interim dividend was also held at 73p: a
rare event lately.

Read the full article here

Share this article

Close Menu