According to one analyst, Reckitt Benckiser is “expensive defensive”. This is one of those consolidators among global consumer products groups that seems to grind out better revenues and margins year after year no matter what is happening in the wide range of markets it serves.
Indeed, Reckitt is among the better performers within that pack. It has been investing heavily in healthcare, which can only grow in emerging markets because one of the first things that people spend their money on when they get their hands on any is improving their health.
The company is focused on its 19 so-called “powerbrands”, market leaders such as Durex, Dettol and Lemsip, where investment is funnelled. Reckitt does not have the sprawl of second-tier products that have held back some other global consumer groups. These brands can be enhanced by the development of new products, such as a soft, chewable Nurofen for children.
Figures for 2015 were hit by a decline in growth from mergers and acquisitions, as the arrival of one business, the K-Y brand, was more than offset by the sale of two others. Some markets, such as Brazil and parts of southeastern Asia, were more difficult than others. The mild weather in the autumn held back sales of cold and flu remedies.
The figures still beat targets and even though many markets remain challenging, the company is able to forecast another year of progress on the revenue and margin front, with revenue growth of 4 per cent to 5 per cent. This is in part because some of the results of the grandly named Supercharge project, a proposed £150 million of cost savings, have come in ahead of time, with savings of £100 million achieved already.
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The dividend is held at 139p, but this is misleading because Indivior, the pharmaceuticals company spun off at the start of the year, is expected to hand investors another 8p for 2015.
There is not a lot not to like about Reckitt, then, with the prospect of further successful M&A if targets, such as Pfizer’s consumer business, become available. The only drawback is the rating. The shares, up 405p at £63.71 after the latest results, sell on 25 times’ earnings. Not an absolute steal, then, but in these markets that reliability is an asset.
Total dividends excl Indivior 139p
MY ADVICE Buy long term
WHY Shares are undeniably expensive, but Reckitt has shown the ability over a long period to grow revenues and margins against market trends
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The price of gold was off by a couple of percentage points yesterday, but it is still up by more than 10 per cent over the past month. People buy and hoard gold in times of uncertainty, economic and political. There is a link with interest rates, the policy of the US Federal Reserve and the dollar. This year’s rise mirrors one a year ago as expectations again fell that US rates would be increased.
We are told, though, that much of this year’s buying represents investors fleeing volatile stock markets and seeking a place where their funds will be safe. If so, I think there are reasons why those investors should think hard. As I said the other day, gold pays no dividends. Buying gold is actually a bet against the stock market recovering and a bet that could, if it goes wrong, be very expensive.
There are reasons why the gold price has been depressed since last January and they have not gone away. Physical demand for the metal, for jewellery and technology, has been depressed. A lot of the demand is from emerging markets such as China and India. Chinese investors, returning from their new year holiday break, were busy selling gold yesterday. Others could be tempted into profit-taking, given those recent rises. The FTSE 100 is actually up a bit on a month ago.
If the markets recover further and gold falls back again, that fall could be out of all proportion to any movements on the stock market recently. I do not think if you keep your money in equities, you will lose 10 per cent of it in short measure. You could if it is in gold.
Rise in price over past month 11%
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MY ADVICE Be cautious
WHY Losses from gold could dwarf those on stock market
Analysts’ views on Fidessa are mixed. Some believe that the provider of software for dealers and financial companies needs to show a greater degree of growth than it has in the past couple of years to justify the high premium at which the shares trade.
Others point to the strong cashflow that allows the company to pay out 100 per cent of profits in dividends, and the consequent 4.4 per cent yield. These come as an ordinary payment and a special one, but the latter is so reliable, and likely to disappear only if a big acquisition opportunity occurs, that it might as well be treated as a regular payment.
Yesterday the bulls were in the ascendant and Fidessa shares were up 214p at £19.85 on some slightly better-than-expected full-year profits. Those profits were flat at £38.8 million at the operating level because of the need to invest in new business, and there will be headwinds after two clients quit the markets.
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The present volatility is not helping, although in the longer term regulatory reform will be a benefit, as will the eventual decision to add a third leg of fixed-income trading. For now, on 23 times’ earnings, there does not seem to be a lot to go for.
Revenue £296m Dividends 83.5p
MY ADVICE Avoid for now
WHY Shares look highly rated until growth returns
And finally...
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Telford Homes, a builder focused on more affordable homes in London, has sold a development in Caledonian Road, north London, to one of Britain’s biggest housing associations for £66.75 million. It is the company’s first big development sale in the private rental sector and, as a note from Shore Capital, its broker, points out, it removes risks from the development by providing a buyer and liberates capital to be used elsewhere. Telford raised £50 million in October to spend on London’s booming housing market.
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