• Jonathan Jackson

Reckitt Benckiser - Looking to Clean Up...

Updated: Sep 9, 2020

Reckitt Benckiser is a global leader in health, nutrition, and hygiene – spot on for the current climate. Many of the company’s trusted brands were well placed to grow long before the emergence of COVID-19, but now as we all shift to healthier and more hygienic lifestyles, sales have risen sharply, and we believe there’s no going back.

Although living in a city hasn’t been much fun in recent months, we believe the long-term trend of urbanisation will continue once social distancing is fully relaxed. However, to help prevent the spread of future pandemics, hygiene standards will need to remain very high, leaving cleaning products such as Dettol and Lysol as big winners.

The unprecedented levels of government support to help stabilise the global economy has left many countries with a massive debt burden. To help ease the deficit and the pressure on state-funded healthcare systems, we expect to see a growing transition to self-care and an increase in the use of over-the-counter brands such as Mucinex, Nurofen, and Gaviscon, all of which are owned by Reckitt Benckiser.

Another big societal issue is sexual health and well-being which is driving demand for effective protection and related products, such as those supplied by the company’s Durex brand. Finally, the group’s Enfamil brand is well placed to meet the nutritional needs of both a growing and ageing global population.

Before the coronavirus pandemic struck, the group’s new boss looked to draw a line under a series of historical operating disappointments with the launch of a three-phase plan to rejuvenate the business. The aim is to generate sustained mid-single-digit sales growth and high-single-digit profit growth, driven by increased investment in digital capability, in-market competitiveness, and operational resilience. Although the group took on an increased level of borrowing when it acquired a large new business, its financial position is robust and, so far, the dividend has been maintained. All in all, a company in rude health that we believe will clean up.

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