ii view: why Reckitt’s strategy overhaul offers grounds for optimism

Second-quarter (Q2) and first half (H1) results to 30 June

• Q2 core adjusted revenues up 4.2% to £2.51 billion
• H1 operating profit margin down 1% to 23.6%
• H1 operating profit down 14.3% to £1.47 billion
• Interim dividend up 5% to 88.6p per share
• New £500 share buyback programme
• Net debt up 43% from late December to £9.38 billion

Guidance:

• Continues to expect full-year core revenues to grow by 4% to 5%
• Expects second-half adjusted profit margin to be stronger than H1’s 23.6%, driven by more 
  favourable mix across categories and regions, as well as actions to offset commodity price inflation

Chief executive Kris Licht said:

“We accelerated like-for-like net revenue growth in the second quarter to drive a good first half performance. The strategic choices we have made are strengthening our execution, with all of our Areas and Categories accelerating in Q2 and a balanced contribution from volume and price / mix.

“The strength of our Powerbrands and strong consumer response to our recent innovations underpin these results. Our Fuel for Growth programme is reducing fixed costs, driving efficiency and providing us with greater capacity to invest. We are focused on delivering our plan for the second half of the year and reiterate our full year 2026 expectations.”

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ii round-up:

Reckitt Benckiser Group (LSE:RKT) is a maker of branded hygiene and health products. Sales are made across four subcategories: Germ Protection brands feature Dettol, Lysol and Harpic and generated 34% of second-quarter sales; Household Care including Finish and Vanish made 20% of sales; Self-care featuring Nurofen, Gaviscon, Strepsils and Mucinex accounted for 30% of sales; while Intimate Wellness brands Durex and Veet generated the balance of 16%.

Reckitt’s Mead Johnson Nutrition business is now considered non-core, with all strategic options being considered. A sale of its Essential Home business including brands such as Airwick and Cillit Bang was previously made.

For a round-up of these latest results announced on 29 July, please click here.

ii view:

Reckitt Benckiser was formed in 1999 via the merger of Reckitt Coleman and Dutch company Benckiser. Geographically, emerging markets including China, India and Brazil generated most core sales during the first half of 2026 at 44%. That was followed by Europe at 33% and North America the balance of 23%. 

For investors, elevated energy costs in the wake of the Middle East conflict could potentially see consumers seeking cheaper alternative products such as supermarket own brands. Higher energy costs continue to elevate Reckitt’s own production costs. Exposure to cold and flu remedies leaves sales open to fluctuations, while a forecast price/earnings (PE) ratio above the three-year average may suggest the shares are not obviously cheap.

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More favourably, product innovation has been highlighted as a factor in aiding Q2 core sales growth of 4.2%, up from 1.3% in Q1, as well as improved cold and flu sales. A rejuvenated strategy now leaves a more focused and simplified business. Cost savings are still being pursued under its ‘Fuel for Growth’ improvement plan, while £6.4 billion of shareholder returns have been made since July 2024.

In all, and despite ongoing risks, a consensus analyst fair value estimate above £62 per share and forecast dividend yield of more than 4% offer grounds for longer-term optimism.

Positives:

• Diversity of product type and geographical location
• Sizeable exposure to Emerging Markets

Negatives:

• Uncertain economic outlook
• Subject to currency fluctuations

The average rating of stock market analysts:

Buy