Reckitt Benckiser H1 profits up as sales target lifted

Pharma-to-consumer products group Reckitt Benckiser said first-half pretax profit rose 9.5% as it lifted its full year revenue target on the back of strong instant formula sales.

Shares in the stock welcomed the news, leaping 7% in morning trade. Pretax profits came at £1.11bn compared with £1.02bn in 2017 and the interim dividend was lifted 6% to of 70.5p per share.

Adjusted operating profit increased 29% at constant currencies to £1.29bn. The full-year revenue growth target forecast at constant currency rates was increased 14-15%, up from 13-14%.

Reckitt, which makes Nurofen pain tablets, Dettol and infant formula food, said net revenue grew 23% on a reported basis to £3bn, driven by its acquisition of infant formula group Mead Johnson for $17bn last year. The division reported 9% pro forma growth.

Chief executive Rakesh Kapoor said the Mead Johnson integration was "well on track, with infant formula and child nutrition (IFCN) performance exceeding expectations and synergies being delivered".

"IFCN is currently experiencing strong category growth above our medium-term expectations, led by China, the world's largest IFCN market."

"Within our IFCN business, we continue to make progress in accelerating innovation, improving in-market execution and developing new channels. H1 and Q2 also benefited from some channel stocking in the US from the Enfamil NeuroPro launch and some increases in channel inventory in China, as we expand our distribution in Mom and Baby stores."

Analysts at UBS said the quarter marked the "end of a long downgrade cycle for RB, in our view".

"The share price has been strong in recent weeks but we nevertheless expect it to stay solid in early trading today," the bank said in a note.

"At 18 times 2019 estimated price/earnings, RB trades at a -5% discount to EU Staples (5 year range: -15% discount to +20% premium). In light of improving (albeit still lacklustre) growth, we think this multiple looks fair."