Reckitt dampens bid speculation
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Your support makes all the difference.Reckitt & Colman poured cold water on recent speculation that the household products group might be the subject of a bid from Unilever and warned that the strength of sterling might hit 1997 profits to the tune of pounds 20m. The two comments were enough to knock 2p off the share price to 797p despite an 11 per cent rise in underlying pre-tax profits in the year to January.
Vernon Sankey, chief executive, cheered shareholders, however, with a pounds 45m annual saving from the integration of recent US purchase L&F, compared with initial hopes for pounds 40m of cost cuts. The 1994 deal brought Reckitt one of America's leading household products portfolios including the Lysol disinfectant brand. Since the acquisition five of 12 factories have been closed.
The success of the L&F cost-cutting program offset disappointing underlying sales growth which saw turnover rise by only 1.8 per cent to pounds 2.29bn. Operating profits were 9 per cent higher at pounds 372.7m, although the inclusion of a one-off disposal profit in 1995 saw pre-tax profits fall from pounds 417.8m to pounds 334.8m.
Mr Sankey said of the persistent Unilever bid speculation: "We get rumours all the time and this is another rumour." Reckitt's shares have risen 11 per cent so far this year, mainly on the back of gossip that the Anglo- Dutch consumer goods giant was running its slide rule over the Dettol, Lemsip and Harpic group.
He also dismissed concerns over Reckitt's relatively pedestrian growth rate, pointing out that 5 per cent underlying growth, excluding currency factors, was a lot better than the company had experienced for many years.
He expected growth to accelerate this year even without acquisitions.
The stronger pound cut profits last year by pounds 3m.
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