Reckitt Benckiser looks to spin off its pharmaceuticals business

Excluding the pharmaceutical business, which sells a drug to treat heroin addiction, Reckitt posted a slightly better than expected four per cent rise in first-quarter like-for-like sales on a constant currency basis.

Reckitt, which was founded in Hull and has research and development and healthcare manufacturing operations in the city, said the increase came despite unusually weak sales of disinfectants.

The warmer weather over the winter resulted in a mild flu season, particularly in comparison with the severe season last year, as people bought less Lysol and Dettol disinfectants.

The group said its strategic review of Reckitt Benckiser Pharmaceuticals (RPB) is progressing well and it is leaning towards floating off the declining pharmaceuticals business.

Chief financial officer Adrian Hennah said: “We mean that RBP would be an independent, publicly listed company.”

However he said that the group is still considering all options including selling or keeping it.

Reckitt is keen to expand its consumer health brands, which include Mucinex allergy medicine and Airborne supplements, as it targets ageing populations in Western countries and rising incomes in emerging markets.

Sales in the health business rose 11 per cent in the first quarter of 2014 whereas the hygiene division saw growth of just two per cent and home cleaning products rose by one per cent.

Sales in the pharmaceuticals business fell 11 per cent as it faced competition from cheaper generic rivals.

Analyst Graham Jones at Panmure Gordon said: “Reckitt has delivered a solid start to 2014, with first quarter like-for-like sales growth of four per cent, including a hugely impressive 11 per cent growth in health, despite it lapping a very strong 13 per cent growth in the first quarter of 2013.

“RBP performed better than expected, with the like-for-like decline restricted to just 11 per cent.

“The RBP strategic review is likely to be concluded with the interim results in July, with a ‘capital markets solution emerging as a strong option’.”

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers added: “Reckitt is again underlining its reputation for reliability.

“A focus on health products continues to lead the way, enhanced by ongoing acquisitions, while the group’s focus on product innovation and investment is still playing its part.

“On the downside, currency headwinds have taken their toll, growth in emerging markets such as India and Thailand remains subdued, whilst not surprisingly, growth in the group’s Russian market has slowed.”

The health business was boosted by the roll-out of new products including MegaRed supplements in Europe. The company said that even without the roll-outs, its performance would have been “tremendous”.

Uncertainty about the outcome of the strategic review has preoccupied investors and weighed on Reckitt’s shares.

Reckitt is aiming for revenue growth of four to five per cent this year and an operating margin that is flat to moderately higher.