RECKITT BENCKISER
PREPARED BY: Name: Nazla Naim Subha Farzana Mir Tanzir Islam MD. Shaifur Rahman ID: 1020547030 1020730520 1110857030 1030708530
Table of Content
Executive summary, 1 Introduction, 2 Financial Performance Analysis:
Liquidity Ratio, 4 Asset Management Ratio, 6 Debt Management Ratio, 9 Profitability Ratio, 10 Stock Market Ratio, 13 Du-Pont Equation, 16 Modified Du-Pont Equation, 17
Executive summary
The project assigned to us was to study the financial health of Reckitt Benckiser Bangladesh. Through this thorough financial analysis, our aim to understand the financial factors is influencing the company and its decision making. Later, we try and evaluate the various ratios to appreciate their impact on companys performance over the last five years. The financial statements of last five years are identified, studied and interpreted in light of companys performance. Critical decisions are analyzed and their impact on the bottom line of the company is assessed. Finally, we study ratio analysis of the company to analyze the financial position of the company in last five years.
Introduction
For such a fast-paced, entrepreneurial business some are surprised to learn the companys history spans 150 years of innovation for consumers across the world. Reckitt Benckiser is a world leader in FMCG household, health and personal care. In Bangladesh it has started its journey in the year of 1987 by enlisting as a pharmaceutical and chemical company at DSE and CSE. Reckitt Benckiser (Bangladesh), Ltd. offers health and hygiene care products for consumers in Bangladesh. It provides products in the areas of surface and fabric care, dishwashing, homecare, health and personal care, and food. The companys surface care products include disinfectant and lavatory cleaners, general purposes and specialty cleaners, and polishes and waxes. Its fabric care products comprise fabric treatments, fine fabric, water softeners, fabric softeners, and ironing aids laundry detergents. The companys health and personal care products comprise antiseptics, depilatories, denture care, analgesics cold/flu, and gastro-intestinal. Reckitt Benckiser (Bangladesh), Ltd. was formerly known as Reckitt & Colman Bangladesh, Ltd. The company was founded in 1961 and is based in Dhaka, Bangladesh. Reckitt Benckiser (Bangladesh), Ltd. operates as a subsidiary of Reckitt Benckiser Plc. Reckitt Benckiser Group Plc. manufactures and markets household cleaning products. The company's brands include air fresheners, household cleaners, laundry products, furniture polishes, and dishwashing detergents. It also makes over-the-counter pharmaceuticals such as analgesics, antiseptics, flu remedies, and gastrointestinal medications and offers products for hair removal, denture cleaning, and pest control. The company was founded in December 1999 and is headquartered in Slough, the United Kingdom RBs health, home and hygiene brands are sold in over 180 countries around the world. RB's entrepreneurial and creative people drive its marketing, sales, research and development. RB's vision is a world where people are healthier and live better. RB's purpose is to make a difference by giving people innovative solutions for
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healthier lives and happier home. RB is a genuinely global force and a truly multinational company. In 2010, RB sold 20 million product units worldwide. Its a FTSE top 15 company and since 2000 net revenues have doubled and the market cap has quadrupled. Today it is the global No.1 in the majority of its fast-growing categories, driven by an exceptional rate of innovation over a third of revenue comes from innovations launched in the prior 3 years. In Bangladesh some strong branded products of its portfolio are in market including: DETTOL, HARPICK, LYSOL, VANISH, and VEET etc.
1.22 Times 1.25 Times 0.82 Times 0.69 Times 0.63 Times
Current Ratio:
Interpretation: In 2011, the companys current assets were 1.14 times of their current liabilities. It means that for one taka of current liabilities, the current assets are 1.14 taka is available to the company. The Current Ratio is more or less stable. Relative change in current assets was greater than the relative change of current liabilities. So, the ratio has deteriorated. Current Ratio is declining over the last 5 years. (Times Series)
Current Ratio
1.41
1.15
1.14
0
2007 2008 2009 2010 2011
Quick Ratio:
Interpretation: The quick ratio indicates the liquid financial position of an enterprise. In 2011, the companys current assets excluding inventory were 0.63 times of their current liabilities. The Quick Ratio is unsatisfactory. Current Assets excluding inventory has gone up, at the same time, Current Liabilities has gone up. So, the ratio has deteriorated. Quick Ratio is declining over the last 5 years. (Time Series)
Quick Ratio
1.4
1.2 1 0.8 0.6 1.22 1.25 0.82 0.69 0.63
0.4
0.2 0 2007 2008 2009 2010
2011
178.92 Days 187.74 Days 125.97 Days 176.04 Days 206.63 Days
6.2
4.4 2.92 4.7
0
2007 2008 2009 2010 2011
2.05
1.95
2.03
2010
2011
14
12 10 8 6 4 2 0 2007 2008 2009 2010 2011 5.65 10.98 11.3 9.86
2007
2008
2009
8
2010
2011
200
150 100 50 0 2007 2008 2009 2010 178.92
187.74 125.97
2011
Debt Ratio:
Interpretation: The debt equity ratio is important tool of financial analysis to appraise the financial structure of the company. It expresses the relation between the external equities & internal equities. This ratio is very important from the point of view of creditors& owners. In 2011, the companys 73.02% of Total Assets were financed by debt.
80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00%
Debt Ratio
72.50% 57.50% 58.70% 60.30% 73.20%
2007
2008
9
2009
2010
2011
TIE Ratio
400 300 200 100 0 242.8 331.7 355.5 271.8 259.7
2007
2008
2009
2010
2011
Profitability Ratio
2007 Gross Profit Margin Net Profit Margin Return on asset Return on equity 40.66% 9.14% 15.81% 37.1% 2008 40.60% 9.50% 15.66% 37.9% 2009 43.89% 10.50% 27.10% 68.3% 2010 46.73% 6.16% 15.26% 55.5% 2011 42.99% 6.32% 12.84% 47.6%
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38.00%
36.00%
2007 2008 2009 2010 2011
11
6.16
6.32
0
2007 2008 2009 2010 2011
Return on Investment:
Interpretation: In 2011, every tk. 100 worth of asset generated tk. 12.84 worth of net profit. The company had a declining performance this year. In 2010, return on assets was 15.26%. Both net profit and total asset have risen but the relative change in total assets was significantly higher than the relative change in net profit.
30
25 20 15 10 5 0 15.81 15.66
Return on Assets
27.1
15.26
12.84
2007
2008
2009
2010
2011
Return on Equity:
Interpretation: In 2011, the shareholders of this company earned tk. 47.6 for every tk. 100 investment in the company. In this case also company had a demonstrated a declining performance. Both net profit and total common equity have risen, but the relative change in net profit in much lower than the relative change in the total common equity.
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80 60 40 37.1 20 0
Return on Equity
68.3 55.5 47.6 37.9
2007
2008
2009
2010
2011
the five year of study the total number of common share outstanding has been constant. Earnings per Share
45 40 35 30 25 20 15 29.05 35.05 26.71 28.37
41.9
10
5 0 2007 2008 2009 2010 2011
73.00
40.08
19.81
22.00
13.15
4.7 0
2007
45.45 to 27.63 because relative change in market price was higher than relative change in EPS although market price fell and EPS increased.
45.45
37.59
27.63
12.64
12.92
2007
2008
2009
2010
2011
Du-Pont Equation
Return on Assets = Total Asset Turnover Net Profit Margin 2007 2008 2009 2010 2011 15.81 15.66 27.10 15.26 12.84 = = = = = 1.73 1.65 2.58 2.48 2.03 9.14 9.50 10.50 6.16 6.32
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= = = = =
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Recommendation
Liquidity refers to the ability of the concern to meet its current obligations as and when these become due. The company should improve its liquidity position. The company should make the balance between liquidity and solvency position of the company. The profit ratio is decreased in current year so the company should pay attention to this because profit making is the prime objective of every business. The cost of goods sold is high in every year so the company should do efforts to control it. The long term financial position of the company is very good but it should pay a little attention to short term solvency of the company.
Comments
Reckitt Benckisers overall position is at a very good position. RB has been a great growth story over much of the past 5 years. The company achieves sufficient profit in past five years. The long term solvency position of the company is very good. The company maintains low liquidity to achieve the high profitability. The company distributes dividends every year to its shareholders. The profit of the company increased in the last year and maintained comparatively high liquidity.
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Appendix
Liquidity Ratio
Current Ratio Quick Ratio Formula Current Assets / Current Liabilities Current Assets Inventory / Current Liabilities 2007 2008 2009 2010 2011 742972417/ 896844350/ 576011025/ 646005672/ 828984916/ 488675848 597593108 408783401 563607559 727330259 742972417 146059045/ 488675848 896844350 147441749/ 597593108 576011025 240509838/ 408783401 646005672 828984916 373847987/ 257136739/ 727330259 563607559
2008
1037206570/ 147441749 1746267981/ 1057921288 1746267981/ 308935838 5191584/ (1746267981 /365) 539187939/ (1037206570 /365)
2009
1057516657/ 240509838 1884621742/ 730409848 1884621742/ 154398823 3988633/ (1884621742 /365) 364981036/ (1057516657 /365)
2010
1090914090/ 373847987 2047993742/ 827318554 2047993742/ 181312882 3937948/ (2047993742 /365) 526143104/ (1090914090/ 365)
2011
1209247388/ 257136739 2120977713/ 1044053282 2120977713/ 215068366 8400148/ (2120977713 /365) 684558592/ (1209247388 /365)
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Profitability Ratio
Gross Profit Margin Net Profit Margin Return on Assets Return on Equity Formula Gross Profit/Sales Net Profit/Sales Net Profit/Total Assets Net Profit/Total Common Equity 2007
620281526/ 1525487547 139398899/ 1525487547 139398899/ 881909055 139398899/ 375148000
2008
709061411/ 1746267981 165622010/ 1746267981 165622010/ 1057921288 165622010/ 436894000
2009
827105085/ 1884621742 197972944/ 1884621742 197972944/ 730409848 197972944/ 290042000
2010
957079652/ 2047993742 126216280/ 2047993742 126216280/ 827318554 126216280/ 227398000
2011
911730325/ 2120977713 134061961/ 2120977713 134061961/ 1044053282 134061961/ 281678000
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DPS
Market to book value ratio Price to earnings ratio Book Value Per Share
Total dividend paid/ Total no. of common shares outstanding Market value per share/book value per share Price per share/EPS
93616749/ 4725000
373/79.40
453/92.46
1575.01/ 61.39
1214/ 48.13
784/ 59.61
373/29.50
453/35.05
436894000/
1575.01/ 41.90
290042000/
1214/ 26.71
227398000/
784/ 28.37
281678000/
4725000
4725000
4725000
4725000
Stock price
Market price per share 2007 373.00 2008 453.00 2009 1575.01 2010 1214 2011 784
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Du-Pont Equation
Du-Pont Equation 2007 2008 2009 2010 2011 Return on Assets = Net Profit/ Total Assets
139398899/ 881909055 165622010/ 1057921288 197972944/ 730409848 126216280/ 827318554 134061961/ 1044053282
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