Reckitt targets £ 150m savings
CONSUMER products giant Reckitt Benckiser has launched a £ 150million cost- cutting drive that includes its directors travelling economy class on short- haul fl ights as it seeks to combat slower growth in emerging markets.
The £ 40billion maker of Dettol, Durex and Harpic is targeting annual savings of £ 100- 150million under its new “Supercharge” project. It will look at everything from how employees travel and communicate to how they buy stationery. This will lead to costs of about £ 200million over the next three years.
The reorganisation of a business already known for its lean structure – the changes will see chief executive Rakesh Kapoor, right, and fellow directors taking a back seat on flights under six hours – was welcomed by investors as Reckitt shares gained 185p to 5775p. The company also increased its share buyback programme.
Last December, Reckitt spun out its pharmaceutical business specialising in heroin substitutes, renamed Indivior, in a London listing, increasing its focus on consumer health and hygiene products.
Reckitt made a 15 per cent higher annual operating profit of £ 2.16billion despite a 5 per cent drop in annual sales to £ 8.84billion, but Kapoor warned “tough market conditions” would persist through 2015. He said: “We have achieved a lot in the past three years but there is more to do. We need to sharpen our organisational agility and effi ciency.
“Supercharge will make Reckitt a leaner, faster and more coordinated business. It will also drive cost savings that will enable us to deliver sustainable earnings growth as we enter the second half of the decade.”
The company saw a slowdown in sales in Latin America and Asia Pacifi c, with Indonesia and Thailand particularly weak.
Reckitt expects to grow like- for- like revenue by 4 per cent this year, a similar rate to 2014 before the impact of currency movements.
Broker Jefferies said falling oil and petrochemical prices should provide a further significant boost to earnings. It added: “Investable companies in this climate are those who implicitly understand that, in a lowgrowth world, margin and cash have to do the heavy lifting. To deliver this requires both radical thinking and restless ambition. Reckitt seems to be getting this, in a way that others don’t.”