Should you buy into Reckitt Benckiser?

By Annunziata Rees-Mogg Feb 21, 2006

Share with
friends:

Comments (0) Print this article

Neither “easing” growth in Western Europe nor “oil-related cost-input pressures” appear capable of slowing the “juggernaut” that is Reckitt Benckiser (RB/, £19.59), says Dominic Walsh in The Times.

At its annual results meeting last week, the firm reported net revenues up 8%, net margins up 0.8% to 20.1% (thereby achieving a target a year early), and net profits up 16%. And this kind of growth looks set to continue.

The acquisition of Boots Healthcare International (bringing with it such brands as Strepsils, Nurofen and Clearasil) means a possible £75m in cost savings, as well as increased sales (due to focused marketing techniques) and margins. The firm now expects revenues from its 18 “power brands” to make up 60% of its total by the end of the year (up from 57% currently) and margins to expand further, to 22%, by 2008.

Reckitt is also likely to see a good degree of organic growth, says Caroline Muspratt in The Daily Telegraph, thanks to the “increasing trend for self-medication and an ageing population”, as well as Reckitt’s exemplary track record of launching products into the high-growth areas of the household cleaning and personal-care markets.

And there’s potential for further acquisitions. While declining to comment specifically, the firm’s CEO, Bart Becht, has said that, “clearly, if something makes sense, we will take a look”.

Reckitt has “repeatedly defied” its critics and is now poised to grow robustly, says Walsh. Earnings are forecast to expand 13.5% in 2006 (according to Yahoo), putting it on a 20 times prospective p/e multiple with a 2% yield. That’s a “punchy” rating, but it is more than justified by the firm’s growth prospects. The Independent’s Michael Jikov expects the p/e to fall to 17 times in 2007 and also rates the shares a buy.

Comments (0)

Published in Tips & advice | More articles by Annunziata Rees-Mogg

Share with
friends:

Related articles

Leave a comment

This will be the name displayed with your comment.

This helps us verify comments are genuine. It will not be displayed anywhere on the site and is stored confidentially.

Please keep your comment within 1,000 characters and relevant to the main topic. We encourage healthy debate, but we don't allow insults or bad language. Anything off topic or unpleasant, we'll remove. Enjoy the conversation! Thank you.

captcha To prevent spam-related comments please enter the characters shown in the 'Captcha' box to the left.

By leaving a comment you accept our terms and conditions.


FREE - MoneyWeek's daily investment emailJohn Stepek

Our free daily email, Money Morning, is an informative and enjoyable analysis of what's going on in the markets. Written by our Editor, John Stepek, and guest contributors.
Sign up FREE to Money Morning here.

>