- Reckitt said a small number of employees had acted ‘inappropriately’
Dettol maker Reckitt saw revenue in the past year come in around £55million lower than expected due to a discrepancy in financial reporting in the Middle East.
It said compliance procedures found ‘an understatement’ of trade expenses for the fourth quarter and previous quarters of 2023. These have hit the firm’s adjusted profits to the tune of around £35million.
The company told investors an investigation had found ‘a small group of employees had acted inappropriately’ and Reckitt is ‘taking necessary disciplinary action’.
Woes: Reckitt’s bottom line struggled amid a discrepancy in financial reporting in the Middle East
It added: ‘We are confident this is an isolated incident specific to these two markets and does not impact our 2024 outlook and medium-term goals.’
Reckitt shares were down 11.68 per cent or 682.00p to 5,156.00p on Wednesday, having fallen over 10 per cent in the last year.
The group revealed an ‘unsatisfactory’ drop in sales over the latest quarter and pointed towards more modest growth last year.
Reckitt said like-for-like net revenue fell by 1.2 per cent over the final quarter of 2023, with overall net revenue down 7 per cent to £3.56billion.
This included a 2 per cent fall in its health division, which was hit by the ‘phasing and shape of cold and flu season’, while like-for-like nutrition volumes dropped by 14.8 per cent.
Russ Mould, investment director at AJ Bell: ‘So much for the idea that big brand owners are bulletproof during periods of higher inflation. It’s clear from industry trends that cash-strapped consumers have shifted to cheaper alternatives including supermarket own-brand items.
‘As the owner of a large portfolio of well-known brands, Reckitt has found life a lot tougher and its latest results suggest its pricing power isn’t as strong as some people thought.
‘The idea that it can keep pushing up prices without damaging demand has gone out the window as its fourth quarter numbers are truly miserable. It looks like people are voting with their feet and going for the cheaper option.
Reckitt said like-for-like revenues for the full year were up, on a like-for-like basis, 3.5 per cent to £14.6billion in 2023, driven by rises across its hygiene and health arms.
Full-year operating profits fell 22 per cent to £2.5billion.
The group said it now expects to deliver like-for-like revenue growth of 2 to 4 per cent next year.
Kris Licht, chief executive of Reckitt, said: ‘While our performance in Q4 was unsatisfactory, we look to 2024 and beyond with confidence.
‘We target another year of mid-single-digit growth in Health and Hygiene, driven by a more balanced contribution from price, mix and volume.’
AJ Bell’s Mr Mould, added: ‘For a company that was once seen as an industry leader, Reckitt has been a big disappointment in recent years and the latest results keep that theme going.’
