The company has a highly successful portfolio of well-known brands including Scholl, Nurofen, Strepsils, French’s Mustard, Finish and Dettol.
I last wrote about this company back in 2014 following an announcement that it would be spinning off its pharmaceutical division, now named Indivior, to put greater focus on its core consumer goods business.
Now, over a year down the line and despite a difficult year for markets, Reckitt has published an impressive set of full year results for 2015. Passing their forecasts with ease, the main driver of growth came from the Health segment with like-for-like sales up 14% and a strong performance from developing markets. The strategy outlined by management has historically been to use its ‘Powerbrands’ to drive growth through product innovation and their ability to adapt quickly to ever changing trends. The recent results demonstrate that they are succeeding in doing so whilst also replicating their current business model in other geographic markets.
Looking forward, Reckitt are working hard to cut down costs and streamline the business whilst continuing to invest in innovation and future growth. Its prospects look solid and the shares accordingly trade on a rather lofty 25x earnings (a significant premium to both the market and its own long term average). A key question for investors is therefore whether this premium is justified. A strong company is not always a good investment and investors should always be wary of overpaying for a company’s prospects.
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