Reckitt Benckiser set to return £270m to investors

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The Independent Online

Reckitt Benckiser, the Anglo-Dutch consumer goods giant, yesterday unveiled plans to return about £270m to investors over the next 12 months as it nudged its earnings targets higher.

The group, which counts Vanish soap, Dettol antiseptic and Lemsip flu powder among its top 15 brands, will hand back £250m via a share buy-back programme and a further £20m after deciding to raise the dividend for the first time since it was formed through the merger of Britain's Reckitt & Colman and Benckiser of the Netherlands in 1999.

Bart Becht, the chief executive, said the plans would not preclude the company from eyeing acquisition opportunities. "We can spend up to £1bn on small and medium-sized deals," he said, which would leave it in the running for SSL International, the Durex condom maker which is on the market for about £600m. Reckitt is understood to be interested in acquiring SSL's consumer health business, which also includes its Dr Scholl footcare unit, although Mr Becht declined to comment further.

He denied the company was under pressure to complete a deal, highlighting its track record in growing organically. "We don't have to do acquisitions to be successful," he added. The group has a reputation as a shrewd predator and recently opted not to press ahead with a bid for Pfizer's Schick-Wilkinson Sword razors business.

The company said it would fund the share buy-back programme out of the £250m-plus of free cash it throws off each year after making its dividend payments. The move was part of a "package of measures", including the adoption of a progressive dividend policy, aimed at placating all of the group's investors, and not just those who hold the stock for income, Mr Becht said.

Reckitt, which has generated more than £1bn of cash since the group was formed, raised its interim dividend by 10 per cent to 14p per share. It had net funds of £95m at the end of June. Analysts said the share buy-back programme would boost earnings per share by about 2 per cent each year. Reckitt's shares rose 32p to end at 1,162p, leading the FTSE 100 risers.

The group brushed aside the negative effects of a weakened US consumer to report a strong start to its financial year, in stark contrast with its main UK rival Unilever. Reckitt's net revenues in its second quarter leapt 7 per cent to £960m, helped by a "marked improvement" across North America. The region saw sales growth of just 3 per cent for the first half, after growth slowed to zero in April, Colin Day, the finance director, said. Group profits before tax jumped 14 per cent to £269m, helped by a succession of new product launches, such as a Dettol Easy Mop, a floor cleaner with a built-in disinfectant dispenser. "My wife swears by it [the mop] now. Not swears at it, swears by it," Mr Day added.

Mr Becht said the group was confident enough to raise its full-year targets. It now expects to hit the top end of its 4 to 6 per cent net revenue growth target when measured at constant exchange rates. The company also raised its net profit goal to 14 per cent at actual exchange rates from its previous "low teens" aim at constant exchange rates.

Mr Becht said the outbreak of the Sars virus had added "a couple of extra million pounds" to Dettol sales, particularly in Hong Kong, Taiwan and China. The antiseptic helped to stamp out the Sars virus, he added.

Although he declined to be drawn on specific acquisition targets, Mr Becht said the group was particularly interested in acquiring brands to expand its health and personal care portfolio "because we are already in every single interesting household area".