Apparently, Kris Licht wants to make Reckitt reliably boring. What, even more boring than it is already? Has the new boss seen the stuff it sells — the likes of Harpic, Air Wick and Cillit Bang? Do try to contain your excitement.
Still, there’s always Durex to pep things up. And look what his third-quarter address to investors had to say about that: “We are actively working on the next generation of condom polymers, which I look forward to sharing with you in due course.” Are chief executives really allowed to say that sort of thing to shareholders nowadays?
Anyway, you sort of get where Licht is coming from. The fellow plucked from the health wing to run the show is well aware of Reckitt’s “excellent” portfolio of household brands, including the delightful mish-mash of “disinfection, auto dishwash, intimate wellness and fabric treatment”. But he’s also the group’s fourth boss in as many years: a revolving door that’s left plenty of “room to sharpen and improve”.
There’s been too much flux for focus. First, the dog days of Rakesh Kapoor, a chap who bowed out with a $16.6 billion baby milk buy, Mead Nutrition, which proved an absolute howler. Then Laxman Narasimhan, who ran up an £8.5 billion bill, writing down or selling bits of that problem child, while doing a nuts and bolts revamp and lucking out on Covid. And all before he took the Finish and Vanish brands literally and abruptly quit for Starbucks.
Then came the fag-break tenure of stand-in boss Nicandro Durante, the ex-BAT chief and an awkward fit for Reckitt’s la-di-da purpose: “To protect, heal and nurture in the relentless pursuit of a cleaner and healthier world.” And now Licht.
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So what will he do? Well, his “strategy update” was impressively vague, with UBS analysts detecting “more of a continuation than a change in direction”. But there were some hints. Despite management turmoil, Reckitt still has industry-leading gross margins, while its 23.8 per cent operating margins are none too shabby, either. Even so, he’s clearly unhappy with the “difference between our gross and operating profit versus peers”, implying cost-cuts, including job losses, to come, plus a shake-up of underperforming brands. Not that he said which ones.
To give him more flexibility to invest, he’s also dropped the “mid-twenties by mid-20s” operating margin target, committing only to “grow adjusted operating profit ahead of net revenue”. But he was more explicit on “enhanced shareholder returns”, keeping net debt at twice ebitda and giving back excess capital. He badged a fresh £1 billion buyback “a clear indication of my confidence in Reckitt”, even if it can be a clear indication of a boss with no better plan for surplus cash.
What did the market make of it? The shares fell 4 per cent to £56.78, even if that was down to an 11.9 per cent like-for-like drop in baby milk sales — worse than expected, despite Reckitt last year benefiting from rival Abbott shutting a US factory after a bacteria outbreak.
The other figures were fine. But that’s Reckitt’s problem. Lately, there’s always something: a key reason the shares are no higher than in 2015. Bringing some boring efficiency to that is the main thing Licht needs to share with investors.
Calling it on CAB
Credibility impaired: it’s the view of the Liberum analysts Nick Anderson and James Allen on CAB Payments. And, no question, they have a point.
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The newly floated emerging markets money transfer outfit that sounds like a taxi service has taken less than four months to drive off a cliff: shares down 72 per cent on Tuesday, followed by another 18 per cent yesterday to just 50p, quite a drop from July’s 335p float price. So, with chief executive Bhairav Trivedi delivering a dive in market value from £851 million to £127 million, the Liberum duo are right that a profit warning “so soon after the IPO has raised question marks over management’s credibility”.
Just one question, though: do they work for the same Liberum that floated the business, one of a quintet of banks that shared in £14 million of listing fees? And are they by any chance related to the Nick Anderson and James Allen who issued a CAB “initiation note” on August 24 headed “High growth, cash generator at the wrong price”? True, they sort of got the last bit right, even if they’d actually suggested a target price of 480p.
Yes, they’re not alone. Banks have Chinese walls. And at least the pair showed some (misplaced) faith in the business. The asset management wing of one of the two lead float banks, JP Morgan Cazenove, built a short position in the stock, as The Times disclosed last month. Yet, while the prospectus risk factors did mention central banks potentially introducing “measures to protect their currency and economy”, which could have an “adverse effect”, it didn’t say that could deal a howitzer to two of CAB’s top three markets: the central and west African francs.
Impaired credibility equally applies to CAB’s float banks, spanning Barclays, Canaccord and Peel Hunt, plus STJ Advisors. In America, they’d be lucky to escape a class-action investor lawsuit.
Directory inquiries
Just what business needs: a “commission to develop a code of conduct for directors”, after “recent corporate scandals at Carillion, BHS, Patisserie Valerie, P&O Ferries and the Post Office”. And who’s launching it, you ask, with a 17-strong team big on lawyers but short on company directors? The Institute of Directors, of course: the crew that in 2018 bundled its ex-chairwoman, the late Lady Judge, out the door after 41 allegations of racism, sexism, bullying and harassment, all of which she denied; and last year saw a whistleblower question how senior officials were recruited. No outfit better qualified.
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alistair.osborne@thetimes.co.uk
