July 27, 2021 8:25 a.m.
Reckitt Benckiser reported lower sales and adjusted earnings in the first half of its fiscal year, falling short of analysts’ expectations and warning that growth will slow in the third quarter before picking up again in the fourth quarter.
Net sales declined 8.2% to £ 3.09 billion in the second quarter, bringing interim sales down 4.5% year-over-year to £ 6.59 billion, below what analysts expected 6 . £ 73 billion.
Adjusted earnings per share plummeted over 14% to 142.6 pence in the first half of the year, just short of analysts’ 144.3 pence. On balance, Reckitt posted a reported loss of 245.8p per share after posting a profit of 144.6p the previous year. That was also far worse than expected, considering that analysts had expected Reckitt to be in the black.
The sale of the baby food business in China – IFCN China – added to the decline and caused the loss. Excluding the division, net sales were 2.7% lower, but 3.6% on a currency-neutral basis, while like-for-like growth was also strong at 3.7%. Elsewhere, Reckitt said slower sales growth in hygiene products was partially offset by “improving trends” in nutrition and over-the-counter products.
“In a challenging environment, I am encouraged by the progress we have made in the first half of the year. Around 70% of our sales, excluding IFCN China, come from brands that grew in the mid-single-digit range in line with our strategic vision during the reporting period. The remaining 30% includes our disinfection brands, which are structurally shifting, and our cold and flu brands, which are now showing positive momentum, ”said CEO Laxman Narasimhan.
Reckitt warned that third quarter growth will slow as it faces tougher comparisons from last year when the pandemic drove sales up. It said it expects to see increased performance in year four when the cold and flu season kicks off, with Reckitt expecting a “moderate season” this year.
The company also warned that cost inflation had accelerated and echoed similar concerns from Peer Unilever. The company said it would take time to get there, but said it is trying to make up for it with improved productivity and higher prices later this year and early next year.
“This will largely offset the margin growth in 2021 from the sale of IFCN China. As a result, our forecast, which now excludes IFCN China, is an adjusted operating margin of between 22.7% and 23.2%, 40 to 90 basis points lower than the 23.6% reported for full-year 2020, ”warned Reckitt.
Reckitt said it had decided to keep its dividend at 73.0p at last year’s level.
“We are encouraged by the progress we have made in strengthening the business foundation and repositioning for sustainable growth. We expect to exit 2022 with sales growth in the mid-single digits as we move closer to our mid-term adjusted operating profit margin target in the mid-20s to mid-20s, ”added Reckitt.
Croda International posted record adjusted earnings for the first half of the fiscal year as demand increased across all four businesses and the company benefited from new acquisitions, prompting it to raise its revenue target for the remainder of the year.
Sales rose in the six months to the end of June to £ 934.0 million from £ 672.9 million in the previous year. Adjusted pre-tax profit rose from £ 152.5m to a record high of £ 229.5m while reported profit rose over 40% from £ 144.9m to £ 204.1m.
Croda said sales are now “well above 2019 levels” and increased 10% on an underlying basis before taking into account the contribution of new acquisitions.
Croda shares rose 3.6% in early trading this morning to 8104.0p, marking a new all-time high for the stock.
Sales in Consumer Care increased 46% year over year, Life Sciences increased 62%, Performance Technologies increased 14.7% and the Industrial Chemicals unit increased sales 12.6%. Higher volumes and better prices were the main drivers across the board, though acquisitions were the biggest push for the two largest divisions.
“Our record results for the first half reflect the impact of our strategic acceleration and investments, which are supported by improving customer demand in all regions and sectors. This has been achieved through excellent growth in our existing businesses, the successful execution of our recent acquisitions, and continued success in building our life sciences platform. With the strategic review of our Performance Technologies business in full swing, we continue our transition to being a pure, consumer-centric ingredients company, ”said CEO Steve Foots.
Croda said it expects the strong underlying growth of the first growth to continue into the second. Additionally, the addition of lipid systems to the business prompted the company to raise its full-year revenue forecast by “at least” $ 200 million.
“We are now assuming that adjusted earnings before taxes for the full year 2021 will be well above current expectations. Unless the current market conditions change significantly, we expect a similar profit gradation between the first and second half of the year as in previous years, ”said Croda.
Adjusted free cash flow of £ 42.7m was 47% lower than last year. However, Croda said it increased its interim dividend 10% to 43.5p from the 39.5p paid out last year to maintain its nearly 30-year track record of consistently increasing the payout.
Firstgroup saw lower revenues and profits in the recent fiscal year after an extremely difficult period for tour operators and the sale of most of its US businesses, but said the company has been transformed and positioned for “sustainable, profitable growth” in the future ” to achieve .
Firstgroup also announced that its CEO, Matthew Gregory, has submitted his resignation. Chairman David Martin takes on a managerial role while a successor is found.
Sales declined to £ 6.84 billion in the year ended March, down from £ 7.75 billion a year earlier. Sales of First Student and First Transit in the US contributed to this decline, but so did the decline in travel over the year due to lockdowns.
Adjusted earnings before tax declined to £ 39.4 million from £ 109.9 million last year, while Adjusted earnings per share declined from 6.8p to 2.4p. Results were better on a reported basis as earnings before tax were £ 115.8m compared to a loss of £ 299.6m last year with earnings per share of 6.5p compared to a loss of £ 27 .0 pence from income from asset sales during the year.
The sale of First Transit and First Student prompted Firtgroup earlier this year to announce that it is returning £ 500 million to shareholders with a payout of 41.0p per share. Investors are hoping more is to come as Firstgroup said it could return more money based on how much of the revenue it received from First Transit, a trust fund release for its retirement plan, and its ability to leverage more debt, though market conditions improve.
Although the year was a difficult one for the travel industry, Firstgroup said it is a “transformed company” with strong growth prospects.
The economic and regulatory support for bus travel has not been so strong for decades, which paves the way for a significant improvement in margins in the future. British bus passengers are said to be currently operating at around 60% of pre-pandemic levels. In the meantime, the rail division has changed its “risk / reward ratio” through the new contract structure introduced by the government in response to the pandemic.
Firstgroup expects its cash-generative operating model to support regular dividends from 2022.
Games Workshop performed excellently in a difficult year as demand for the company’s niche products continued to grow around the world.
Revenue rose from £ 269.7 million a year ago to £ 353.2 million in the year ended May, beating the company’s forecasts and exceeding analysts’ expectations. Pre-tax profits rose from £ 89.4 million to £ 150.9 million, which is also better than forecast.
The performance is very impressive considering that the 500+ retail stores have been closed most of the time due to the lockdown, but the demand for Warhammer miniatures has not diminished. Sales to other stores looking to sell their products around the world more than offset the decline in sales in their own retail stores, while the online channel also helped. Around 25% of all sales were made online during the year, compared to 19% last year.
In fact, the company is increasing its plastics production capacity by building five new lines by August this year and another eight lines by January 2022, followed by the installation of new paint filling lines. It has also bought new land alongside existing sites to ensure it has the space it needs to expand.
Games Workshop had already increased its dividend ahead of today’s results, with investors expected to receive 235p for the year, compared to just 145p the year before. It also released a separate statement today announcing another 40p per share dividend that will be paid out in early August.
The Greencore Group raised its expectations for the full year this morning after revealing a steadily improving picture that resulted in June sales surpassing pre-pandemic levels.
The company, which makes a variety of ready-to-eat meals in the UK, said third-quarter pro forma sales rose 53.1% to 360.2 million pandemic levels through June 25. The situation changed in June, however, and sales rose 1% above pre-pandemic levels.
Food-to-go sales in the third quarter rose over 91% year-over-year to £ 236.5 million but remained 9.3% below pre-pandemic levels. The other ready-to-eat meals saw a milder 5.9% increase in sales to £ 123.7 million and remained well above pre-pandemic levels.
Greencore said sales momentum was “still encouraging” in the first three weeks of trading in July.
More importantly, Greencore returned to an adjusted operating profit in line with its expectations for the quarter.
“Regardless of the supply chain and labor challenges that are currently affecting the UK food industry as a whole, the group is confident of achieving strong annual earnings and cash flow progression in the second half of the year,” said Greencore.
The company is now aiming for an adjusted annual profit of between £ 36 million and £ 40 million. It had previously said profits would be above the £ 32.5 million delivered in the past fiscal year.
It also said net debt excluding lease liabilities should be below £ 240m by the end of the fiscal year, which would comfortably bring net debt to Ebitda below three times that.
“The improvement in sales, profitability and cash flow dynamics in the third quarter and the first few weeks of the fourth quarter are encouraging. Against the background of the complete reopening of the British economy, we are effectively and sustainably rebuilding our economic model with all stakeholders, supported by our longstanding customer relationships and further strengthened by the new business gains we have achieved this year, “said Chief Executive Patrick Coveney / p> City Index allows you to trade a wide variety of UK stocks in just four easy steps: StoneX Financial Ltd (trading as the “City Index”) is an execution-only service provider. This material, whether or not it contains opinions or does not contain opinions, is for general informational purposes only and does not take into account your personal circumstances or objectives. This material has been prepared with the thoughts and opinions of the author in mind and is subject to change. City Index does not plan to provide further updates of material after its publication and is not required to this ma keep material up to date. This material is short-term in nature and can only relate to facts and circumstances that existed at a specific time or day. Nothing in this material is (or should be viewed as such) financial, investment, legal, tax, or other advice and no reliance should be placed on it.
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