Reckitt Benckiser raises guidance after strong half

By James Davey

LONDON (Reuters) - Consumer goods maker Reckitt Benckiser (RB.L) raised annual revenue and profit margin targets after a forecast-beating first-half performance on Monday led by consumer health and hygiene in most of its markets around the world.

Shares in the British manufacturer of Durex condoms, Dettol disinfectant and Nurofen painkillers rose by as much as 2.9 percent on Monday, close to their record high, after it also said it would hit the upper end of targeted cost savings ahead of schedule. Shares have risen 23 percent over the last year.

The firm is trying to boost its presence in consumer health. The sector has been growing fast amid increased demand for over-the-counter remedies and health products due to a greater awareness of health, aging populations in developed markets and rising incomes and urbanisation in emerging markets.

Chief Executive Rakesh Kapoor said second-half growth would be driven by innovation, with a host of new product launches, including from its Mucinex cold medicine, Scholl footcare, and Airwick air freshener brands.

Over the six months to June 30 RB's sales rose 5 percent on a like-for-like basis, which excludes the impact of currency, acquisitions, disposals and discontinued operations, mirroring first-quarter growth but ahead of analysts' average forecast of 4.6 percent.

Adjusted operating margin rose 160 basis points to 21.9 percent, driving an 11 percent increase in adjusted operating profit to 953 million pounds ($1.48 billion) at constant exchange rates. Free cash flow generation was 756 million pounds.

Kapoor said that while European and North American markets were more stable than a few years ago developing markets remained mixed.

"While we are seeing improved consumer sentiment in a number of countries, such as India, other geographies, such as Brazil and Indonesia, remain challenging," he told reporters.

RB is now targeting full-year like-for-like net revenue growth of 4-5 percent and second-half moderate to “nice” adjusted operating margin expansion. It previously forecast like-for-like sales growth of 4 percent.

Kapoor launched a major cost-savings programme six months ago, targeting annualised savings of 100-150 million pounds over three years.

He said on Monday the firm would achieve savings at the upper end of the target, ahead of the stated timeframe.

Shares in RB were up 138 pence at 6,051 pence at 0902 GMT, valuing the business at 43.3 billion pounds.

"Strong cash flow generation provides ample scope for healthy shareholder returns while providing sufficient firepower for M&A," said analysts at Liberum, who have a "buy" rating.

They estimate RB will generate 5 billion pounds in free cash flow over five years.

The firm is paying an interim dividend of 50.3 pence, in line with guidance.

(Reporting by James Davey; editing by Kate Holton and Susan Thomas)