Reckitt Benckiser Group PLC (LON:RB) have told the market that they have seen an annual loss across 2019.
The firm noted that it faced a massive impairment cost over £5 billion which dampened the firms profits and annual results.
The firm noted that they will be investing heavily over the next three years in a three phase program. The emphasis will be on the transformation of digital, and innovation.
The CEO of Reckitt commented:
“We have started a journey of three phases: first stabilise and perform, then perform and build, and finally, outperform. We will create a strong company which can consistently generate mid-single digit organic revenue growth, 7-9 percent EPS growth and strong cash conversion.
We have a clear plan to invest £2 billion in our business over the next 3 years to make this happen. Specifically, in 2020 we will increase investment behind our digital capability, in-market competitiveness and operational resilience, particularly in customer service, as well as innovations, as we align around our new organisation. While we are growing faster than last year – and in some areas, significantly faster – we are targeting a higher level of like-for-like net revenue growth than we achieved in 2019, reflecting some of the uncertainty around the impact of the COVID-19. Our recurring investment of around £200m, combined with a step up in productivity of £1.3 billion over 3 years, builds a more stable and sustainable growth business.”
Going back to results, the impairment was made on good will related to a deal with Mead Johnson Nutrition. MJN, a US baby formula maker – notably this deal was concluded in 2017 for an estimated $18 billion.
As a result of this massive impairment, Reckitt posed a pretax loss of $2.11 billion across 2019.
This will disappoint shareholders, as the firm reported a profit of £2.72 billion in 2018 – which shows the magnitude of the swing.
Net revenue rose 2% on a better note for the FTSE 100 listed firm, and totaled £12.85 billion. This slightly beat company consensus of £12.83 billion net revenue.
Like for like revenue growth at actual rates was 0.3% and at constant rate 0.8%.
Looking at divisional performance, the firm saw Health Revenue rise 0.7% at actual rates, but fell 0.9% at constant rate to £7.82 billion.
The Hygiene Home sector revenue jumped 4.1% on actual rates to £5.03 billion, however fell 3.6% at constant rate.
The firm declared a final dividend of 101.6 pence per share for the year, which gives a total dividend for 2019 of 174.6p. Notably, this sees a 2.3% rise on the 2018 figure of 170.7p.
Commenting on these results, Laxman Narasimhan, Chief Executive Officer, said:
“We ended 2019 broadly in line with our expectations for net revenue growth and adjusted operating profit from October, as our Hygiene business delivered another stable performance. Health remained weak from a net revenue perspective, but consumption and market share trends are encouraging.
We now look forward to a new decade.
I am inspired by our purpose-driven brands that consumers love and have seen in action the benefit they bring to our communities. I have met customers around the world, and terrific talent in various parts of the organisation, who act as owner entrepreneurs. While the recent years have been difficult, I believe strongly in our ability to restore performance credibility, and over time, outperform, while making a positive impact on the world. I know that my leadership team and the broader organisation is inspired and ready to take on the work to make this happen.
RB operates in strong, structural growth categories and has an outstanding collection of trusted, market leading brands. When combined with an organisation structure that leverages both its category focus with its investment in capabilities at scale, RB is positioned well for faster growth and significant value creation as we look towards the new decade.”
Reckitt Benckiser reduce full year outlook
In October, the rissued a warning to shareholders when they reduced their full year outlook.
The consumer goods company reduced its full year 2019 like-for-like sales growth target to 0-2% from the previous reduction issued in July.
The owner of Nurofen and Dettol added that it expects full year 2019 adjusted operating margins to experience a “modest” decline.
Shares in the Reckitt Benckiser trade at 6,245p (+2.39%). 27/2/20 11:29BST.