Reckitt Benckiser Group Plc-ADR (OTCMKTS:RBGLY) reported that its net revenue surged by 4%, in line with the given forecast. The net income increased by 14%, well ahead of target set at the beginning of FY2014. The cash conversion was a strong feature of company’s financial performance as it announced a final dividend of £0.79 per share, an increase of 3% on last year
Virtuous earning model
Rakesh Kapoor, the CEO of Reckitt Benckiser Group Plc-ADR (OTCMKTS:RBGLY), said that the company’s operates on virtuous earnings model that begins with gross margin expansion. If it is neglected, there is no space to make an investment in the brands and implementing other measures required for growth. The operations start from there and are supported by fixed cost. It can be leveraged and used for business expansion, ultimately helping to achieve gross operating margin expansion. In Fy2014, the gross margins surged by 100 basis points, driven by product mix, pricing and cost optimization programs.
Mr. Kapoor further stated that the company kept ‘fixed cost’ leverage of 50 basis points. It worked on an effective media planning and buying program in FY2014. A major part of savings was reinvested back into media. The strong investment in brands helped the revenue to surge by 200 basis points.
The demerger of Indivior was an important step taken by Reckitt Benckiser in FY2014. It will enable the company to develop its independent platform. The next strategic decision taken in the year was to license out the footwear division. Also, it separated Medcom hospital business from its core unit. In the year ahead, focus will be on foreign exchange rates as the net impact of currency translations in FY2014 revenue was 9% reduction. For 4Q, the negative impact of currency translations on revenue was 5%. Looking forward into FY2015, Reckitt expects the translational impact on full year revenue to be a negative 1%.