Household names help group power to soaring profits from their core brands

The group, which makes brands including Nurofen, Lemsip and Strepsils, said annual profits lifted 12 per cent to 1.89bn last year.

Its decision to maintain a strong focus on media spending – 11.1 per cent of all revenues – helped drive strong growth of

its Powerbrands – 17 core brands.

However, this was down on 12.4 per cent of revenue in 2008.

Easing input prices, cheaper advertising and cost reduction programmes also helped group profits during a "very good year", according to chief executive Bart Becht.

The group, which employs about 1,300 in Hull at its manufacturing and research and development sites, traces its roots back to 1814.

Reckitt expects sales to rise to five per cent this year and operating profit 10 per cent, excluding its pharmaceuticals arm which faces increased competition.

"Our five per cent target is still challenging given the level

of consumer confidence, but we believe this is achievable," said Mr Becht.

"Based on the current market outlook, we are confident of achieving continued good growth in 2010."

Excluding pharmaceuticals, core sales rose six per cent

in 2009, driven by growth in developing markets, North America and New Zealand, compared to a tougher Europe.

The group benefited from strong sales of Dettol in 2009

as swine flu fears caused a surge in demand for anti-bacterial and virus products.

Revenues across its health and personal care division increased 14 per cent to 2.08bn.

Reckitt hopes for further growth though product launches this year, including the introduction of Strepsils in tube packaging and the launch of its Lysol no-touch hand soap system.

But Reckitt is steeling itself for the launch of competition to rival its Suboxone heroin substitute drug.

The drug, which accounts for a significant proportion of its pharmaceuticals division's earnings, is likely to see the emergence of a rival product soon.

The group has warned this will cut 80 per cent of Suboxone's US profits.

Full-year revenues for its prescription drug business

grew 50 per cent to 588m, helped by strong sales of Suboxone.

The group's strong cash performance helped it end the year with net cash of 200m, compared to 1.1bn debt a year earlier.

But Mr Becht said he will stick to small bolt-on acquisitions and the chance of a big takeover deal is "extremely remote".

"M&A (mergers and acquisitions) is clearly in Reckitt's

mind, but there can be no guarantee that this will be forthcoming," said analyst James Edwardes Jones at brokers Execution.

"The fact that the underlying business is performing well makes it less vital."

Analyst Keith Bowman at Hargreaves Lansdown Stockbrokers said: "Reckitt has again delivered profits at the high end of analyst forecasts, although uncertainties going forward continue to build.

"Profit margins have been aided over the year by falling commodity prices, while management's continued attack on costs is also playing its part.

"While a trusted formula of product innovation and heavy advertising is driving sales, the loss of a key patent and likely generic competition for the company's pharmaceutical offering is providing some caution."

'Powerbrands' strategy is at heart of group's success

Reckitt Benckiser's focus on its 17 "Powerbrands" kept the profits rolling in in 2009.

This core of products includes household names such as Finish, Vanish, Air Wick, Dettol, Cillit Bang, Veet, Clearasil, Nurofen, Strepsils and Gaviscon.

The group, which was formed in 1999 from the takeover of the Dutch company Benckiser by the UK-owned Reckitt and Colman, unveiled the Powerbrands strategy in 2002. It borrowed the idea from rival Unilever, which also focuses on core brands.

Supporting this strategy is a strong focus on media spending.

In 2009, 11.1 per cent of all Reckitt's revenues went on this, which the company said far outstripped rivals.

In 2008 Powerbrands made up more than three fifths of its turnover, up on a year earlier. Chief executive Bart Becht said the "disproportionate focus" on these products ensures "consumers know about our products and the reasons to buy them".