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Sunday share tips: Reckitt Benckiser, ITV

Sun 02 August 2020 20:04 | A A A

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(Sharecast News) - Despite the sag in Durex in sales during the first half at Reckitt Benckiser's, the Mail on Sunday's Rosie Murray-West told readers to 'hold' onto the shares.

Social distancing during the lockdown also weighed down on sales of Strepsils, Lemsip and Scholls products.

But until there is vaccine, we will likely continue to be elbow deep in Dettol and other cleaning products.

Indeed, the group's total sales jumped by 11% during the half.

And the company's new boss, Laxman Narasimhan, was quick to capitalise on the urgent need for sanitation services, setting up an entire division for that purpose, including for clients such as Delta Airlines and Hilton Hotels.

Laxman is also still pushing ahead with the firm's growth strategy announced in February and Reckitt's medium-term outlook remains for sustained mid-single digit organic revenue growth.

"The City found Narasimhan's words Strepsil-soothing this week, with all analysts covering the stock upping their target price," Murray-West said.

"However, as Ian Forrest at The Share Centre points out, the shares are on a chunky valuation at 25 times earnings, and are already up 27 per cent this year at £77.06, with a yield of just 2.2 per cent.

"That makes them more highly valued than rival Unilever. On the other hand, we'll be elbow deep in Dettol until a vaccine is found, so there's not a lot of downside to holding on to these stocks."

The Sunday Times's Sabah Meddings told readers of her 'Inside the City' column to avoid shares of ITV not least due to the threatened ban on junk food adverts on TV before the 9pm watershed.

Industry estimates pointed to a potential revenue loss for ITV of £100m and of £40m for Channerl 4.

That would come at a time when ITV was already reeling from the 42% reduction in ad revenues in April, versus the 10% fall it had originally been anticipating.

Covid-19 also forced it to halt all of its productions, forcing the firm to furlough 800 staff, suspend its dividend payout and slash capital expenditures.

Some analysts meanwhile were cautious ahead of ITV's results on Thursday and the appeal to customers of its Britbox streaming platform, which it had launched together with the BBC.

"For ITV, results this week are unlikely to be pretty," Meddings said.

"Bloomberg suggests revenue for the first half of the year of £1.2bn, compared with £1.5bn in the same period last year. It will take some early signs that advertising - and production - is returning to restore confidence. Avoid."

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