Reckitt Benckiser shares underperformance has elicited a response from management who today announce a strategy to streamline the business by disposing of non-core brands and focusing on so-called ‘Powerbrands’.

In the face of margin pressure and shifts in consumer behaviour, Reckitt Benckiser is embarking on a major transformation with plans to sharpen its brand portfolio, focusing on high-growth, high-margin Powerbrands that dominate their categories. This strategic shift top acheive a ‘sharper, simpler Reckitt’ follows a comprehensive nine-month review.

The reshaping involves significant disposals. Reckitt will exit its ‘Essential Home’ portfolio by the end of 2025, which includes well-known brands like Air Wick, Mortein, Calgon, and Cillit Bang. These brands generated £1.9 billion in revenue for FY2023. Additionally, the Mead Johnson Nutrition business, featuring Enfamil and Nutramigen, is now considered non-core. Reckitt will explore all strategic options for these assets to maximise shareholder value.

The focus will now be on ‘Powerbrands’ – Reckitt’s core portfolio is thriving. Powerbrands such as Mucinex, Strepsils, Gaviscon, Nurofen, Lysol, Dettol, Harpic, Finish, Vanish, Durex, and Veet have demonstrated strong performance. This group has achieved a 7% net revenue CAGR between FY2018 and FY2023, with an impressive 61% gross margin in FY2023. Emerging brands like Move Free and Biofreeze, along with local heroes such as Lemsip and Airborne, will also be part of the future-focused portfolio.

Cost optimisation is a key component of the new strategy. Reckitt aims to streamline its organisation, reducing management layers and duplication. The company will transition to a unified category structure operated through three geographical regions: North America, Europe, and Emerging Markets. This restructuring is expected to yield significant savings, with a targeted 300 basis point reduction in fixed costs by 2027. The end goal is to reduce the fixed-cost base from 22% to approximately 19%. However, this transformation comes at a price, with estimated one-off cash restructuring and transformation costs of around £1.0 billion.

The new Reckitt will emerge on January 1, 2025, reporting financials in three segments: Reckitt, Essential Home, and Mead Johnson Nutrition. While the core Reckitt business focuses on health and hygiene, dedicated teams will manage the Essential Home and Mead Johnson Nutrition segments to maximize their potential value. Through these strategic moves, Reckitt aims to create a leaner, more agile company poised for long-term growth and shareholder value creation.

The FTSE 100 reversed early losses on Tuesday after traders bought into a sell-off in mining companies in the very early hours of the session. Strong results from Compass Group helped the index carve out gains.

Having touched lows of 8,152, the FTSE 100 rebounded to trade at 8,226, 0.3% higher on Monday.

“The FTSE 100 was dragged down by a poor showing from the mining sector off the back of a weak copper price,” said Dan Coatsworth, investment analyst at AJ Bell.

“Copper futures have fallen by nearly 7% over the past five days amid concerns about sluggish demand from China as it struggles with a slowdown in economic growth. The market has taken the view that China isn’t digging deep enough with stimulus measures to fire up the economy and therefore commodities demand is at risk.”

However, concerns about China took a back seat as the session progressed, and investors shifted their attention to Compass Group’s strong earnings and a reassuring statement from Beazley.

Compass Group was the FTSE 100’s top riser after delivering a very respectable 10.3% increase in organic revenue in its third quarter, helped by strength in North America and Europe. The food services company upgraded its profit outlook, saying it expected operating profit growth for the year would be above 15%, and shares reacted accordingly with a 4% increase.

“Food service giant Compass continues to attract new business at pace, helping to support a second upgrade to annual forecasts this year,” Coatsworth said.

“This suggests the company’s decision to ease prices in line with inflation is a good one as it helps drive loyalty among existing customers and attract new ones, bolstering an already strong market position. It also suggests a return to the office – as hybrid working policies are adjusted – is proving beneficial.

“The company and its management team see plenty more business to go after, with a large chunk of catering still done in-house.”

Beazley was the second-highest riser after issuing a statement to calm any fears about the impact of last week’s tech outage. The cyber security insurer’s shares were hit heavily by concerns it would have to fork out for claims but today said its guidance for the year remained unchanged by the events.

The bottom of the leaderboard was littered with miners such as Anglo American, Glencore and Rio Tinto as the impact of commodities selloff lingered.

Insurer Beazley has confirmed there is no change to its guidance after a global IT outage caused by Crowdstrike raised fears about potential claims.

As a leading cyber security insurer, Beazley was the FTSE 100’s biggest faller on Friday as an update fault rendered millions of Microsoft devices useless and brought airports, banks, and businesses across the globe to standstill.

Beazely investors breathed a sigh of relief on Tuesday as the cyber security insured said the outage would not impact guidance for earnings.

In a statement released on Tuesday, Beazley said:

“Given the unprecedented nature of this event and Beazley’s position as a leading cyber insurer, the Company has elected to provide an update on its position in relation to the outage.  Based on what is known at this point, the event will not change the current undiscounted combined ratio guidance of low-80s for the full year.

“Beazley will update the market on its first half performance on 8 August and will provide any further relevant updates in relation to this event at that time.”

Beazley shares were 1.9% higher at the time of writing as investors digested the update and considered the longer term implications for the company.

“Beazley calmed market fears by saying there is no change to its full-year guidance as it currently stands. Whether that situation changes over the coming days is another thing. A lot of companies will still be getting their head around the full impact of the global IT outage and Beazley might simply be facing the calm before the storm,” said Dan Coatsworth, investment analyst at AJ Bell.

“The flipside is that more companies might feel compelled to buy cyber insurance to give them protection against any future incidents, which could benefit Beazley.”

Petro Matad has announced the commencement of completion operations on its Heron-1 oil discovery. The work, which began on 22 July, involves PetroChina’s well completion subsidiary DQE and Petro Matad’s team.

The update follows a recent fund raise which the company says will see them through to first production from their Block XX field.

The planned operations include a reservoir stimulation process to enhance near wellbore drainage and the installation of downhole production equipment. These activities are expected to conclude by mid-August.

Following the completion operations, the company will prepare the wellsite for surface production equipment installation, slated to begin in August. Once the surface equipment is connected and commissioned, the Heron-1 well will be ready for production start-up.

Petro Matad has scheduled meetings with the Mineral Resources and Petroleum Authority of Mongolia (MRPAM) and PetroChina’s in-country management team before the end of July. These discussions aim to finalise cooperation agreements, allowing Petro Matad access to PetroChina’s oil processing facilities, transport, and oil sales infrastructure.

Investors will eagerly await further updates, and the company has committed to providing further updates as its 2024 work programme progresses.