British consumer giant RB has posted "good" first quarter results despite warning of a "tough" macroeconomic environment in early 2016.
The FTSE 100 company, formerly known as Reckitt Benckiser, reported slightly better-than-expected quarterly sales growth. Like-for-like sales grew five per cent, marginally beating analyst expectations of 4.9 per cent, while sales grew four per cent on an actual basis to £2.3bn.
RB has said it is still on track for full-year growth of four to five per cent. The most robust revenue boost was in RB's health revenues, which reached 11 per cent, while hygiene revenues increased one per cent and home revenues were flat.
Regionally, Europe and North America (which includes Australia and New Zealand) posted growth of three per cent.
Revenue for Europe and North America, including Australia and New Zealand, revenues grew five per cent to £1.5bn, aided in the US by sales of Finish and Air Wick, while developing markets increased two per cent to £719m.
Why it's interesting
The company said it expected to have to fend off a "tough" macroeconomic environment in the first quarter of 2016 when it released its 2015 financial results in February. With on-track results this quarter, RB's "Powerbrands and Powermarkets" strategy of targeting areas of growth, namely within the home, hygiene and healthcare and emerging markets.
Other products reporting strong growth including Amop, which launched an electronic nail file earlier this year, while the company was held back by seasonal health and hygiene brands following a weaker flu season.
In early April, it emerged the pay of RB's chief executive had doubled over the past year to a whopping £23m, after the firm's share price boosted the value of his stock options.
Reckitt has seen its stock soar by 70 per cent since 2012 and is up 10 per cent over the last 12 months.
What RB said
Chief executive Rakesh Kapoor said:
We had a good start to the year despite continued challenging market conditions. We are pleased to see growth across both developed and developing markets as we pursue our strategy of focusing on the health and hygiene powerbrands in our key powermarkets, supported by continued investment in innovation. Our consumer health brands have again outperformed.
What others said
"Sales at the hygiene and home units rose 3 per cent while health rose 10 per cent. This shows the strength of Reckitt’s brands in this area, including Strepsils, Gaviscon and Nurofen, while management guidance for further "modest" operating margin expansion from last year’s 26.8 per cent is a good example of how strong brands can confer the sort of pricing power which translates into consistent profits, cash flow and dividends over time," Russ Mould, investment director at stockbroker AJ Bell, said.
The Nurofen, Vanish and Durex maker's Powerbrands strategy has paid off for the time being and laid a solid foundation for growth throughout the rest of the year.