Reckitt Benckiser shares a "cautious buy" after results help boost FTSE 100

Net revenue in the full year 2009 increased 18 per cent to £7.75 billion, while adjusted operating profit increased 23 per cent to nearly £1.9 billion.

In the final quarter of the year net revenue rose 13 per cent to over two billion pounds and adjusted operating profit increased 15 per cent to £605 million.

The company said that it had wiped away its net debt of more than a billion pounds from 2008 and had replaced it with net cash of £220 million.

The final dividend is to be increased by 19 per cent to 57.0 pence per share, taking the total dividend for 2009 to 100.0 pence per share, up by a quarter from 2008.

Bart Becht, Chief Executive Officer of Reckitt Benckiser, said, “Reckitt Benckiser had a very good year in 2009 with net income growth of +13%, behind strong revenue growth of +8% (both at constant exchange). This performance was supported by the Group’s 17 Powerbrands, behind significant investment in media and marketing and successful new product initiatives.

“Based on the current market outlook, we are confident of achieving continued good growth in 2010. Due to the uncertain timing of generic competition to Suboxone in the U.S., it is not considered appropriate to communicate targets for the total Group. For the business excluding RBP, our targets in 2010 are for net revenue growth of +5% (base: £7,144m) and for operating profit growth of +10% (base: £1,512m), both at constant exchange.”

Keith Bowman, Equity Analyst at Hargreaves Lansdown Stockbrokers, commented,

“Reckitt has again delivered profits at the high end of analyst forecasts, although uncertainties going forward continue to build. Profit margins have been aided over the year by falling commodity prices, while management’s continued attack on costs is also playing its part. Whilst a trusted formula of product innovation and heavy advertising is driving sales, the loss of a key patent and likely generic competition for the company’s pharmaceutical offering is providing some caution.

“In all, Reckitt’s reputation for reliable growth remains intact, but the challenges going forward continue to increase. Alongside uncertainties for the group’s Suboxone drug, rivals such as Unilever continue to up their game, while volatile commodity and currency markets also provide room for concern. On balance, market consensus opinion remains positive, although rising doubts have already reduced opinion from a buy to a cautious buy.”

By 09:55 shares in Reckitt Benckiser were up 2.14 per cent to 3,201.00 pence per share. The FTSE 100 overall was also up 0.60 per cent to 5,142.09.