RECKITT ANNOUNCES H1 RESULTS AND STRATEGIC UPDATE

Adjusted1			IFRS
£m	2024 H1	YoY2	£m	2024 H1	YoY2
First Half
Like-for-like (LFL) net revenue growth3		+0.8%	Net revenue	7,167	-3.7%
Hygiene		+4.5%	Hygiene	3,060	+0.1%
Health		+1.3%	Health	2,941	-4.3%
Nutrition		-9.0%	Nutrition	1,166	-11.4%
Gross profit margin	60.6%	+120bps	Gross profit margin	60.6%	+120bps
Operating profit	1,683	-4.9%	Operating profit	1,678	-4.3%
Operating profit (constant FX)3		+0.6%
Operating profit margin	23.5%	-30bps	Operating profit margin	23.4%	-20bps
Diluted EPS	161.3p	-6.8%	Diluted EPS	161.0p	-6.8%
Free cash flow	821	+8.3%	Cash generated from operating activities	982	+5.0%
Cash returns to shareholders4	1,583	+100%
Q2
LFL net revenue growth		0.0%	Net revenue	3,430	-2.8%

1.     Adjusted measures are defined on page 24.

2.     All growth rates are presented on an actual basis, except for LFL net revenue growth and where separately noted.

3.     LFL net revenue and adjusted operating profit growth is measured on a constant exchange rate basis (see page 24).

4.     Cash returns to shareholders represents dividends paid during the period plus cash returned to shareholders through share buybacks.

Commenting on the results, Kris Licht, Chief Executive Officer, said:

“Today I am pleased to announce a set of actions to significantly sharpen our portfolio and simplify our organisation for accelerated growth and value creation. This follows a thorough review of our portfolio against the three principles I set out in October 2023*.

We delivered H1 broadly in line with our expectations. Hygiene grew mid-single-digit LFL net revenue and delivered volume growth despite a more competitive market environment. Health delivered broad-based revenue and volume growth, reduced by softness in seasonal OTC brands.

The investments we have made in innovation are driving growth across our brands, and our industry-leading gross margins have funded both increased brand investment and an attractive adjusted operating margin. We grew free cashflow by 8% and increased cash returns to shareholders by 100%.

Short-term disruption to our Nutrition business, which performed above expectations in H1, due to the Mount Vernon tornado has caused us to reduce our net revenue growth outlook for the year to +1% to +3%. Notwithstanding this, our business remains resilient. We expect revenue growth to accelerate in H2 and continue to target operating profit growth ahead of net revenue growth.

We also announce that we will further increase returns to shareholders through an increase in our dividend and our next share buyback programme of £1bn over the next 12 months.”

*details set out in a separate RNS.

H1 Highlights:  

·      H1 growth and earnings delivery broadly in line with expectations. Group LFL net revenue growth of +0.8%. Mid-single-digit LFL net revenue growth across Hygiene, led by Finish and Lysol. Health delivered strong growth in Intimate Wellness, VMS and non-seasonal OTC brands, partially offset by declines in Mucinex and Strepsils due to a softer end to the cold & flu season and retailer inventory destocking. Nutrition saw stable US market share throughout the half while continuing to rebase from high comparatives.

·      Volume growth of 0.4% in our Hygiene and Health portfolios, despite high-single digit declines in seasonal OTC brands caused by retailer destocking following a weaker than expected season. The balance of Health and Hygiene Powerbrands delivered strong volume growth.

·      Group reported net revenue decline of -3.7%. LFL growth of +0.8% offset by FX headwinds of -4.2% and a net M&A impact of -0.3%.

·      Gross margin of 60.6% (+120bps), reflecting carry-over pricing, lower freight costs and a more benign commodity price environment.

·      Brand Equity Investment (BEI) (+100bps) as we continue to increase investment behind our brands.

·      Adjusted operating profit margin of 23.5% (-30bps). Gross margin expansion is offset by increased BEI and fixed costs.

·      100% increase in cash returns to shareholders, delivered through a first half dividend of 80.4p (+5%) and £0.8bn of shares repurchased under the share buyback programme. Cash returns are enabled by strong free cashflow generation of £0.8bn (+8% versus 2023 H1).

·      Next share buyback programme to commence imminently, with £1.0 billion of shares to be repurchased over the next twelve months.

Q2 Performance:

·      Like-for-like (LFL) net revenue was flat, with volume decline of -2.2% of and price/mix growth of 2.2%. Health and Hygiene net revenue growth was 1.8% with volume decline of -0.8% (volume growth of 0.3% excluding the unwind of a 2.0% net revenue and volume sell-in benefit ahead of a SAP implementation in Brazil during Q1).

·      Hygiene +1.9% LFL net revenue growth (+3.9% excluding Brazil SAP impact). Growth was led by Lysol and Finish.

·      Health +1.7% LFL net revenue growth. Broad-based revenue and volume growth offset by seasonal OTC weakness and continued retailer destocking. Growth in Intimate Wellness brands, VMS, Gaviscon and Dettol was partially offset by Mucinex and Strepsils.

·      Nutrition -8.1% LFL net revenue decline. Stable market shares and value share leadership in the US while volume is rebasing from temporary market share gains from the competitor supply issue in prior years continues.   

2024 OUTLOOK

Our 2024 outlook:

·      Due to the temporary supply disruption caused by the July 9 tornado in Mount Vernon, Indiana, and its impact on our Nutrition business, we are updating our Group full year LFL net revenue growth outlook to +1% to +3% (previously +2% to +4%).

o We now expect a low double-digit decline for Nutrition (previously mid- to high-single-digit decline), reflecting an assumed short-term impact to the business from the Mount Vernon tornado.

o We reiterate mid-single-digit growth for our Health and Hygiene portfolios, albeit at the low end of this range reflecting a more competitive environment in developed markets.

·      Adjusted operating profit to grow ahead of net revenue growth (no change).

Technical guidance:

·      Adjusted net finance expense is expected to be £300m to £320m. (No change).

·      The adjusted tax rate is expected to be 25-26%. (No change). 

·      Capital expenditure is expected to be 3-3.5% of net revenue. (No change).

·      If foreign exchange rates were to hold end-June 2024 closing rates for the remainder of 2024, the estimated negative impact on 2024 Sterling net revenue would be around -3.5%, and 2024 Sterling adjusted diluted EPS would be around -4.5% (as published on our website).