Reckitt Benckiser Group Plc (RKT) ORD GBP0.1041666666666667

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Reckitt reported full-year net revenue of £14.2bn, reflecting underlying growth of 5%. All regions were in growth territory except Europe, down 1%.

Underlying operating profit also rose 5% to £3.5bn, ignoring exchange rates, as fixed cost reductions helped to offset the impact of tariffs.

Free cash flow fell by 23% to £1.7bn, largely due to higher restructuring costs. Net debt fell from £7.9bn to £6.6bn, helped by disposal proceeds of the Essential Home business, which have since been returned to shareholders.

In 2026, underlying net revenue growth in its core business is expected to be in line with its medium-term target range of 4-5%.

A final dividend of 127.8p per share was announced, bringing the full-year total to 212.2p, up 5%. £0.9bn of share buybacks were completed in the period.

The shares fell 3.7% in early trading.

Our view

Reckitt delivered a strong finish to the year, with headline numbers ahead of forecasts, driven by continued momentum in emerging markets. But weakness across Europe held back progress, and with no sign of a let-up in the early months of 2026, the shares moved lower on the day.

Restructuring and selling underperforming assets is something that’s becoming a trend in the consumer goods space these days. Mead Johnson Nutrition remains on the auction block, but with the sale of its Essential Home business completed, these non-core assets should become less of a drag on performance this year.

The sale should free up cash to invest in higher-returning parts of the business. And around $1.6bn of excess proceeds from the sale have been returned to shareholders since the year-end through a special dividend.

If the remaining exit from Mead Johnson is executed well, that’ll leave behind a concentrated collection of the group’s best brands, which have continued to drive top-line growth in 2025. These so-called Powerbrands are global names like Vanish, Durex and Dettol and have a relatively even split across Europe, the US and Emerging Markets.

We like the idea - the bigger-is-better approach of the past is gone, and focusing on areas where Reckitt has market leadership should help drive better sales growth going forward. This collection of core brands has a history of outperformance and should be able to attract higher margins.

Portfolio changes, along with cost cuts, have helped gross margins continue their upward trend, despite the negative impact of tariffs. While we’re happy to see progress, there’s a slight worry that a focus on costs and gross margins is a temporary fix. To sustain longer-term growth, we’d like to see more of a focus on finding new distribution and increasing market share.

Emerging markets will continue to be the main growth driver going forward. The opportunity is huge, so we see a long runway for further growth here if the group can execute well. Developed markets remain a tougher battleground, but Reckitt isn’t calling for caution in these markets like many of its peers.

The balance sheet's in reasonable health, and with a history of delivering healthy free cash flow, the 3.9% forward dividend yield looks well covered. Although, there are no guarantees.

We can see the vision, and the valuation doesn’t look too demanding to us, given its host of power brands. But investors will need patience. Reckitt’s transformation still has some major hurdles to overcome, including the remaining sale of one of its non-core assets, which adds risk.

Environmental, social and governance (ESG) risk

The retail industry is low/medium in terms of ESG risk but varies by subsector. Online retailers are the most exposed, as are companies based in the Asia-Pacific region. The growing demand for transparency and accountability means human rights and environmental risks within supply chains have become a key risk driver. The quality and safety of products as well as their impact on society and the environment are also important considerations.

According to Sustainalytics, Reckitt’s overall management of material ESG issues is strong.

Reckitt’s corporate responsibility committee oversees its ESG strategy, with progress reported in the annual Sustainability Insights Report, focusing on 19 areas like ethical business, product safety, and waste management. The company has strong anti-bribery policies and initiatives, including regular employee training and external audits, to ensure product safety. However, gaps in reporting persist, particularly around external quality management certification for Reckitt’s sites and suppliers.

This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.

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