Good morning: Shares in Reckitt will be in focus today after the consumer goods giant revealed that it would take a £2.5 billion hit on the sale of its struggling baby formula business in China.
Reckitt is selling the business to the private equity firm Primavera for $2.2 billion, well below the $16.6 billion it paid to buy the business from the US group Mead Johnson in 2017.
The sale will lead to Reckitt booking a £2.5 billion loss in its accounts, which relates to a hit from writing down the value of goodwill and intangible assets related to the business as well as cash tax costs of about £300 million and other costs of £200 million. The deal was initially announced by Reckitt late on Saturday and has been confirmed in a statement to the stock market this morning.
The Chinese business, in which Reckitt will retain an 8 per cent stake, has struggled amid tough competition, problems at a Dutch factory and disappointing profit margins. Reckitt had already written off billions of pounds from the value of the business.
Elsewhere this morning, IWG, the FTSE 250 provider of serviced offices, has given warning in a trading update that underlying profits for 2021 will be well below those of 2020. It said that its anticipated recovery had been slower than expected, with lockdown restrictions continuing in some markets and new coronavirus variants emerging. The company’s expectations for a strong recovery in 2022 are broadly unchanged.
A survey by the Centre for Economic and Business Research and YouGov suggests that easing lockdown restrictions has lifted consumer confidence to its highest level since before the EU referendum. Household sentiment hit a score of 113.6 last month, according to the report released overnight.