REG - Reckitt Benckiser Gp - Q1 Trading Statement
26/04/2023 07:00
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RNS Number : 4444X Reckitt Benckiser Group PLC 26 April 2023
26 April 2023
A Strong start to the year. New ceo announced
Q1 2023
£m LFL1 M&A FX Actual
Hygiene 1,591 +2.0% - +6.6% +8.6%
Health 1,643 +12.5% -1.2% +5.9% +17.2%
Nutrition 683 +11.9% - +10.7% +22.6%
Total net revenue 3,917 +7.9% -0.5% +7.0% +14.4%
1. Adjusted measures are defined on page 6.
Highlights:
· Group like-for-like ('LFL') net revenue growth of
+7.9%: Broad-based growth across all Business Units and geographies. Price
/ mix was +12.4% benefitting from strong carry over pricing from H2 2022.
Volumes declined by -4.5% with improving trends.
· Hygiene LFL net revenue growth of +2.0%: Strong growth
in Finish, Harpic and Vanish led by innovation and penetration building
initiatives. Lysol performed in line with expectations, with sequential
improvement through the quarter, as it lapped the final quarter of tough
Covid-related comparatives.
· Health LFL net revenue growth of +12.5%: Excellent
performance across our OTC portfolio with +30% growth in the quarter.
Intimate Wellness delivered mid-single digit growth. Dettol remains on track
for growth in the year, despite a slight decline in the quarter.
· Nutrition LFL net revenue growth of +11.9%: Broad-based
delivery with continued mid-single digit growth in developing markets and
mid-teens growth in the US, due to restocking of retailer inventories and
maintaining our market leading share position.
· Outlook: We now expect Group LFL net revenue growth
of +3% to +5% for the year (including the lapping of the US Nutrition impact
in 2022).
· Kris Licht to become CEO. Kris will become
CEO-designate effective 1 May 2023 and will take over as CEO by the end of
2023.
Commenting on these results, Nicandro Durante, Chief Executive Officer, said:
"We have made a strong start to the year across each of our business units and
geographies reflecting further delivery from the investments we have made.
In particular, our innovation programme has seen good early success across
multiple launches, including Air Wick Active Fresh and Air Wick Vibrant,
Finish Ultimate Plus All-In-One, our Dettol long-lasting germ protection
platform, and Durex Invisible. Further innovations are planned for the
upcoming quarters.
I am encouraged to see improving volume and share trends across our Hygiene
GBU. Lysol performed in line with expectations, and we continue to expect
Lysol to return to growth from Q2 underpinned by improved distribution and
innovation. Our OTC brands continue to perform well in a strong growth
category, and our Enfa brands are maintaining their leading market share
positions in the US. Europe delivered a strong quarter across Health and
Hygiene and China is yet to show the full benefit of reopening.
Considering the strong start to the year, we are now targeting +3% to +5%
Group LFL net revenue growth for the year, underpinned by our well supported
and exciting innovation programme, a resilient supply chain and ongoing
executional improvements.
We have announced today that Kris Licht, current President of our Health GBU,
has been appointed as CEO designate and will succeed me as CEO. Having
played a pivotal role in both the transformation strategy and the significant
turnaround of our Health GBU over the last three years, Kris is the right
leader to take Reckitt on the next stage of its exciting journey. I look
forward to working with Kris to deliver a seamless and uninterrupted
transition."
CONFERENCE CALL DETAILS
We will be hosting a live audiocast followed by a Q&A session for analysts
and investors at 08:30 (BST) on Wednesday 26 April 2023.
Please click on the link below to join the audiocast on the day.
https://www.reckitt.com/investors/results-and-presentations/
(https://www.reckitt.com/investors/results-and-presentations/)
Alternatively, dial in details are as follows:
UK:
+44 20 3936 2999
All other locations: +44 808 189 0158
Participant access code 716347
FURTHER INFORMATION AND CONTACTS
Richard Joyce & Hazel
Chung
+44 (0)7807 418516 / +44 (0)7408 850537
Investor Relations
Patty
O'Hayer
+44 (0)7825 755688
External Relations and Government Affairs
FGS
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 Benckiser Group plc and the
Reckitt group of companies (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, geopolitical and social conditions in the key
markets in which the Group operates; the Group's ability to innovate and
remain competitive; the Group's investment choices in its portfolio
management; the ability of the Group to address existing and emerging
environmental and social risks and opportunities; 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 including the risk of cyber-attack;
interruptions in the Group's supply chain and disruptions to its production
facilities; economic volatility including increases in the cost of labour, raw
materials and commodities; the execution of acquisitions, divestitures and
business transformation projects; product safety and quality, and the
reputation of the Group's global brands; 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, the
Group 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
OUTLOOK
· We have made a strong start across all our GBUs. We
continue to expect more challenging competitive dynamics in our US Nutrition
business in future quarters. We therefore target Group LFL net revenue
growth of +3% to +5% in 2023 (including the lapping of the US Nutrition impact
in 2022).
· We continue to expect adjusted operating margins to be
in line with or slightly above 2022 levels when excluding the one-off benefit
of circa 80bps in 2022 related to US Nutrition. Within our guidance we expect
to significantly increase BEI to support an exciting innovation programme in
2023.
· In the medium-term, as previously guided, we expect
adjusted operating profit to grow ahead of net revenue growth, achieving
mid-20s margins by the mid-2020s.
Other technical guidance
· Adjusted net finance expense is expected to be in the
range of £270m to £300m (previously £270m to £310m).
· The adjusted tax rate is expected to increase to around
24% (no change).
· Capital expenditure is expected to be around 3% of net
revenue (no change).
GROUP OVERVIEW
Net Revenue £m Volume Price / Mix LFL(1) Net M&A FX Actual
Q1 2023 3,917 -4.5% +12.4% +7.9% -0.5% +7.0% +14.4%
1. Adjusted measures are defined on page 6.
Group net revenue of £3,917m grew by +7.9% on a LFL basis in the quarter,
reflecting price / mix improvements of +12.4% and improving volume trends,
with a decline of -4.5%. The volume decline in the quarter was led by Lysol,
lapping tough comparatives.
Growth continued to be broad-based across the business. Our Hygiene GBU grew
+2.0% in the quarter with double digit growth across most of the portfolio,
reduced by high teens decline in Lysol. Health grew +12.5% with excellent
growth in our OTC brands and a solid performance across our Intimate Wellness
portfolio. China is yet to show the full benefit of re-opening. Nutrition
delivered growth of +11.9% reflecting both a restocking of retailer
inventories and sustained strong demand for our market leading brands in the
US, and continued momentum in Developing Markets.
Total net revenue on an IFRS basis was up +14.4% reflecting foreign exchange
tailwinds of +7.0%.
56% of our Core Category Market Units (CMUs), weighted by net revenue, held or
gained share, on a three-month rolling basis (Dec 22 - Feb 23).
E-commerce LFL net revenue grew +9% in the quarter, further building on the
growth of Q1 2022, and represents 13% of Group net revenue.
OPERATING SEGMENT REVIEW
Hygiene 41% of net revenue in Q1 2023
Net Revenue £m Volume Price / Mix LFL(1) Net M&A FX Actual
Q1 2023 1,591 -10.4% +12.4% +2.0% - +6.6% +8.6%
1. Adjusted measures are defined on page 6.
Hygiene net revenue grew +2.0% on a LFL basis to £1,591m in the quarter.
Volume declined -10.4% primarily driven by the decline in Lysol volumes as it
lapped the final quarter of tough Covid-related comparatives. Price / mix
improved by +12.4% reflecting strong carry over pricing taken during the
second half of 2022.
49% of Core Hygiene CMUs, weighted by net revenue, gained or held share on a
three-month rolling basis (Dec 22 - Feb 23), with improving sequential trends.
Finish net revenue grew double digits in the quarter with broad-based growth
across developed and developing markets. The recent launch of "Finish
Ultimate Plus All-in-One" in Europe, with 'Cyclesync' technology delivering
our best clean, has made a strong start and is performing ahead of
expectations. We have also made a good start in the US and are seeing
improving market share trends.
Air Wick net revenue grew low-single digits, amidst some market softness in
the air care category. During the quarter we launched multiple innovations
including "Active Fresh", our first non-aerosol based auto-spray combined with
new natural and light fragrances, and Air Wick "Vibrant", our most luxurious
fragrance experience with 2x more essential oils and anti-fade
technology.
In Lysol, our laundry sanitiser continues to drive category penetration, and
disinfection wipes grew behind increased distribution in the US. Net revenue
declined by high teens in the quarter, lapping the last of Covid-related
comparatives in the first two months of the year. We expect to return to
growth from the second quarter.
Vanish and Harpic delivered strong double-digit growth benefitting from new
innovation launches, including Vanish Oxi Action Pink, "amazing stain removal
even at 20 degrees Celsius".
Health 42% of net revenue in Q1 2023
Net Revenue £m Volume Price / Mix LFL1 Net M&A FX Actual
Q1 2023 1,643 +1.2% +11.3% +12.5% -1.2% +5.9% +17.2%
1. Adjusted measures are defined on page 6.
Health net revenue grew +12.5% on a LFL basis to £1,643m in the quarter with
+1.2% growth in volume and price / mix improvements of +11.3%
45% of Core Health CMUs (weighted by net revenue) gained or held share on a
three-month rolling basis (Dec 22 - Feb 23) with continuing momentum but
lapping high market shares in the comparative period.
Our OTC portfolio of brands delivered growth of +30% driven by a combination
of higher incidences of cold and flu, and some retailer inventory rebuilding
in Europe. Growth was broad-based across our key brands of Mucinex, Strepsils,
Nurofen, Gaviscon and Biofreeze.
In Dettol we launched our Botanicals plant-based innovation and continued to
roll out our new long-lasting germ protection platform. We continue to
expect Dettol to be in growth for the year, more than mitigating the slight
decline in Q1.
Intimate Wellness delivered mid-single digit growth in the quarter, with
strong growth across Europe and most developing markets, aided by the launch
of our latest "Invisible" innovation across multiple markets. Whilst we
expect China to be a growth driver this year, it is yet to show the full
benefit of re-opening post Covid-related lockdowns.
Our Vitamins, Minerals and Supplements portfolio declined high-single digits
reflecting the overall category weakness in the US and China. We launched
our new Airborne Immune Essential innovation, which delivers year-round immune
support at great economic value, as well as Neuriva Ultra, a brain health
supplement.
Nutrition 17% of net revenue in Q1 2023
Net Revenue £m Volume Price / Mix LFL(1) Net M&A FX Actual
Q1 2023 683 -3.4% +15.3% +11.9% - +10.7% +22.6%
1. Adjusted measures are defined on page 6.
Nutrition net revenue grew +11.9% on a LFL basis to £683m in the quarter.
Price / mix improvements reflects mix benefit from residual WIC sales in
states where Reckitt does not hold the government contract and the
implementation of delayed pricing actions from 2022, taken at the start of
February in the US market. Volume declined -3.4%.
93% of Core Nutrition CMUs (weighted by net revenue) gained or held share on a
three-month rolling basis (Dec 22 - Feb 23).
US net revenue grew by mid-teens in the quarter, with strong growth across
both our core Infant Formula and Speciality segments. We benefited from
restocking of retailer inventories due to the competitor supply disruption
last year, and have maintained our market leading share position of non-WIC
formula with our Enfamil brand remaining the Number One Recommended Infant
Formula by Paediatricians and the Number One Trusted by Consumers in the US.
Our Developing Markets business grew net revenue mid-single digits as we
continue to drive momentum through improved in-market execution across our key
markets of Mexico, Thailand and the Philippines.
Performance by Geography
Net revenue £m Volume Price / Mix LFL(1) Net M&A FX Actual
Q1 2023
North America(2) 1,326 -5.6% +10.8% +5.2% - +10.4% +15.6%
Europe / ANZ(2) 1,322 -0.7% +14.7% +14.0% -0.7% +5.3% +18.6%
Developing Markets 1,269 -7.1% +11.9% +4.8% -0.7% +5.1% +9.2%
Total 3,917 -4.5% +12.4% +7.9% -0.5% +7.0% +14.4%
1. Adjusted measures are defined on page 6.
2. 2022 comparatives restated by £8m (between North America, and
Europe) to reflect from 2023 a UK legal entity now operating an export
business, which had historically been transacted by a US legal entity.
North America Q1 net revenue grew +5.2% on a LFL basis, with strong growth in
our Nutrition, OTC and auto-dish washing brands, offset by declines in Lysol
due to tough Covid-related comparatives.
Europe / ANZ Q1 revenue grew +14.0% on a LFL basis, with broad-based growth
across all of our larger markets. On a category basis growth was led by our
OTC portfolio, Durex, Finish and Vanish. The significant improvement in
volume versus Q4 2022 was driven by strong OTC-led volume growth in our Health
GBU and improving trends in Hygiene.
Developing Markets Q1 revenue grew +4.8% on a LFL basis, driven by Latin
America, Africa Middle East and South Asia, offset by a slower start in ASEAN
given tough Covid-related comparatives for Dettol. Whilst we expect China to
be a growth driver this year it is yet to show the full benefit of reopening
for Dettol and Durex.
OTHER MATTERS
Russia
Reckitt is continuing the process aimed at transferring ownership of its
Russian business, which may include a transfer to a third party or to local
employees.
ALTERNATIVE PERFORMANCE 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 countries with annual inflation greater than 100%
(Venezuela and Argentina).
Constant exchange rate (CER): Net revenue and profit 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.
Brand Equity Investment (BEI): BEI is the marketing support designed to
capture the voice, mind and heart of our consumers.
Other definitions and terms
Category Market Unit (CMU): Reckitt analyses its market share by CMUs, which
represent country and either brand or category, e.g., US Lysol. This allows us
to analyse the components of market share growth taking into account both
geography and brand/category. Management has identified those Core CMUs that
are the most strategically important. The list of Core CMUs is kept under
continual review and will change over time based on strategic decisions.
Currently, Core CMUs cover c.65% of Group net revenue and between c.55% to
c.80% of each Global Business Unit's (GBU) net revenue. As a measure of
competitiveness, management tracks the percentage of Core CMUs holding or
gaining market share, weighted by net revenue.
E-commerce: E-commerce channel net revenue is direct sales from Reckitt to
online platforms or directly to consumers. Estimates of total e-commerce sales
as a percentage of Group net revenues are calculated by adding e-commerce
channel net revenue to an estimate of e-commerce sales achieved by our brands
through omnichannel distributors and retailer websites.
IFRS to LFL reconciliation
Hygiene Health Nutrition Group
£m £m £m £m
2022 Reported 1,465 1,402 557 3,424
M&A - (17) - (17)
Exchange 73 66 39 178
2022 LFL 1,538 1,451 596 3,585
2023 Reported 1,591 1,643 683 3,917
M&A - (4) - (4)
Exchange (22) (7) (16) (45)
2023 LFL 1,569 1,632 667 3,868
LFL growth +2.0% +12.5% +11.9% +7.9%
North America Europe / ANZ Developing Markets Group
£m £m £m £m
2022 Reported(1) 1,147 1,115 1,162 3,424
M&A - (8) (9) (17)
Exchange 95 37 46 178
2022 LFL 1,242 1,144 1,199 3,585
2023 Reported 1,326 1,322 1,269 3,917
M&A - (3) (1) (4)
Exchange (19) (15) (11) (45)
2023 LFL 1,307 1,304 1,257 3,868
LFL growth +5.2% +14.0% +4.8% +7.9%
1. 2022 comparatives restated by £8m (between North America, and
Europe) to reflect from 2023 a UK legal entity now operating an export
business, which had historically been transacted by a US legal entity.
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