Reckitt gains from rising medicine sales as Covid-19 beds in

Reckitt Benckiser expects a long-term increase in sales of cold and flu products as a result of Covid-19 becoming part of everyday life, the Strepsils maker said as it increased its sales guidance for the year.

Sales growth of 24.2 per cent in the Slough-based group’s health portfolio, which also includes Mucinex cold medicine and Nurofen painkillers, helped it to exceed expectations with first-half like-for-like net revenue growth of 8.6 per cent.

That growth was partly propelled by the return of colds and flu, which were suppressed by pandemic-induced restrictions, but also by the spread of Covid-19 through populations as it moves from a “pandemic to an endemic” phase, said chief executive Laxman Narasimhan.

Scientists refer to a disease becoming “endemic” when its presence is steady or predictable in a particular region, as with flu. They say Covid-19 is in the process of moving to this stage, with researchers at the Yale School of Medicine in the US saying it could be reached as soon as two years’ time.

Narasimhan said he expected a “baseline change in the business as [Covid-19] becomes endemic — a step change in the way we think about this business”. “We are seeing . . . that consumers are resorting to self-care more. What we see is a fundamental step change,” he added.

The trend also benefited rival Haleon, the consumer health group spun out from GSK last week, which reported like-for-like net revenue growth of 11.6 per cent in the first half. Growth of 4 per cent was down to the rebound in sales of over-the-counter cold and flu medicines, it said.

Haleon, which makes Panadol painkillers and Theraflu and Contac cold medicines, said the boost was “supported by the Covid-19 Omicron wave underpinning results across all regions”.

Revenues from Theraflu more than doubled, while those of Otrivin nasal sprays were up by almost half, it said.

Reckitt said it expected like-for-like net revenue growth — a key metric for the sector — of 5 to 8 per cent for the full year, up from previous guidance of 1 to 4 per cent, as it benefits from higher medicine sales along with a productivity programme and higher pricing.

Narasimhan said the productivity programme, which involves measures such as bringing some advertising creation in-house, was delivering faster than expected, with £370mn of savings in the first half.

Reckitt also gained from pushing up prices for its products by 6 per cent to help pass on steep rises in commodity and transport costs. Operating profit rose 20 per cent to £1.8bn, while pre-tax profit was £1.7bn, swinging from a £1.9bn loss a year earlier.

The positive numbers prompted Narasimhan to declare victory in a bid to turn around the company, which had suffered execution problems and slow growth ahead of his appointment in 2019.

He said he had met a target of reaching “sustainable mid-single digit net revenue growth” and would reach another goal of mid-20s adjusted operating margins by the mid-2020s. “Reckitt is a much stronger business today than it was in 2020,” he said.

The company has also benefited from competitor Abbott Laboratories halting production of infant formula as a result of problems at its US plant.