Financial Performance Analysis Of Reckitt Benckiser

Financial Performance Analysis of

RECKITT BENCKISER

PREPARED BY:

Name: ID:

Nazla Naim Subha 1020547030

Farzana Mir 1020730520

Tanzir Islam 1110857030

MD. Shaifur Rahman 1030708530

PREPARED FOR:

Riyashad Ahmed (RyA)

MBA in Finance

University of Wales Institute

Cardiff, UK.

BBA in Finance

St. Francis Xavier University

Nova Scotia, Canada

School of Business

North South University

1

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

Conclusion and Recommendations, 18

Appendices, 19

2

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 company’s performance over the last five years. The financial

statements of last five years are identified, studied and interpreted in light of

company’s 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.

3

Introduction

For such a fast-paced, entrepreneurial business some are surprised to

learn the company’s 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 company’s

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 company’s 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 RB’s 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

4

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.

It’s 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.

5

1.52 1.5 1.41

1.15 1.14

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

2007 2008 2009 2010 2011

Current Ratio

Financial Performance Analysis

Liquidity Ratio

2007 2008 2009 2010 2011 Current Ratio

1.52 Times 1.5 Times 1.41 Times 1.15 Times 1.14 Times

Quick Ratio


Current Ratio:

Interpretation: In 2011, the company’s 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)

6

1.22 1.25

0.82 0.69 0.63

0

0.2

0.4

0.6

0.8

1

1.2

1.4

2007 2008 2009 2010 2011

Quick Ratio

Quick Ratio:

Interpretation: The quick ratio indicates the liquid financial position

of an enterprise. In 2011, the company’s 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)

Asset Management Ratio

2007 2008 2009 2010 2011 Inventory Turnover Ratio


Total Asset Turnover Ratio


Fixed Asset Turnover Ration


Average Collection Period

3.83 Days 8.15 Days 5.80 Days 5.27 Days 1.09 Days

Average Payment Period

178.92 Days 187.74 Days 125.97 Days 176.04 Days 206.63 Days

7

6.2 7.03

4.4

2.92

4.7

0

2

4

6

8

2007 2008 2009 2010 2011

Inventory Turnover Ratio

2.05 1.95

2.58 2.48

2.03

0

0.5

1

1.5

2

2.5

3

2007 2008 2009 2010 2011

Total Asset Turnover Ratio

Inventory Turnover Ratio:

Interpretation: In 2011, the company sold out and restocked their

inventory 4.70 times. Relativity change in COGS was more than the relative

change in inventory. Company improved form the last year. It shows that the

solvency position of the company is sound. (Time series)

Total Asset Management Ratio:

Interpretation: In 2011, the company’s every 1 dollar worth of total

asset has generated 2.03 dollar worth of sales. Relativity change in total

asset is more than the relative change in sales Not improved from the last

year. (Times series)

8

10.98

5.65

12.21 11.3

9.86

0

2

4

6

8

10

12

14

2007 2008 2009 2010 2011

Fixed Asset Turnover Ratio

3.83

8.15

5.8 5.27

1.09 0

1

2

3

4

5

6

7

8

9

2007 2008 2009 2010 2011

Average collection Period

Fixed Asset Turnover Ratio:

Interpretation: In 2011, the company’s every 1 dollar worth of fix

asset has generated 9.86 dollar worth of sales. Relative change in fixed asset

is more than relative change in sales. Company not improved form the last

year. (Times series)

Average Collection Period:

Interpretation: In 2011, the company in an average it took 1.09 days to

make the collection from the customers. The relative change in account was

less than the relative changes in average per day sale. Improved

performance compared to last year. (Time series)

9

178.92 187.74

125.97

176.04

206.63

0

50

100

150

200

250

2007 2008 2009 2010 2011


57.50% 58.70% 60.30%

72.50% 73.20%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

2007 2008 2009 2010 2011

Debt Ratio

Average Payment Period:

Interpretation: This is a managerial decision.

Debt Management Ratio

2007 2008 2009 2010 2011 Debt Ratio 57.5% 58.7% 60.3% 72.5% 73.02% TIE Ratio 243 Times 332 Times 356 Times 272 Times 260 Times

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 company’s 73.02% of Total Assets were financed by debt.

10

242.8

331.7 355.5

271.8 259.7

0

100

200

300

400

2007 2008 2009 2010 2011

TIE Ratio

Times Interest Earned (TIE) Ratio:

Interpretation: In 2011, the company has covered their interest

expense 260 times. It has improved, the particular ratio is favorable. EBIT

compared to interest expenses has increased significantly. TIE ratio has been

relatively constant over the last 5 years. (Time Series)

Profitability Ratio

2007 2008 2009 2010 2011

Gross Profit Margin

40.66% 40.60% 43.89% 46.73% 42.99%

Net Profit Margin

9.14% 9.50% 10.50% 6.16% 6.32%

Return on asset

15.81% 15.66% 27.10% 15.26% 12.84%

Return on equity

37.1% 37.9% 68.3% 55.5% 47.6%

11

40.66% 40.60%

43.89%

46.73%

42.99%

36.00%

38.00%

40.00%

42.00%

44.00%

46.00%

48.00%

2007 2008 2009 2010 2011

Gross Profit Margin

Gross Profit Margin

Interpretation: The gross profit is the profit made on sale of goods. It

is the profit on turnover. In 2011, the company made a gross profit of tk.

42.99 for every tk. 100 sales. Therefore the Cost of Goods Sold is Tk. 57.01

for every tk. 100 sales. In 2010, the company had a gross profit margin of

46.73%. Thus the company had a poor performance this year. The gross

profit declined by tk. 45349327 and sales has risen by tk. 72983971.

Net Profit Margin

Interpretation: In 2011, the company made a net profit of tk. 6.32 for

every tk. 100 sales. The company had an improved performance in case of

net profit since the net profit margin has risen from 6.16% to 6.32%. Both

net profit and sales have increased significantly, but the relative change in

net profit was less than relative change in sales. Company’s sales have

increased in 5 years and decreased in the last year. At the same time

company has been successful in controlling the expenses i.e. manufacturing

& other expenses. It is a clear index of cost control.

12

9.14 9.5 10.5

6.16 6.32

0

2

4

6

8

10

12

2007 2008 2009 2010 2011

Net Profit Margin

15.81 15.66

27.1

15.26 12.84

0

5

10

15

20

25

30

2007 2008 2009 2010 2011

Return on Assets

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.

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.

13

37.1 37.9

68.3

55.5 47.6

0

20

40

60

80

2007 2008 2009 2010 2011

Return on Equity

Stock Market Ratio

2007 2008 2009 2010 2011 Earnings per share

29.50/ share

35.05/ share

41.90/ share

26.71/ share

28.37/ share

Dividend per share

19.81/ share

22.00/ share

73.00/ share

40.08/ share

16.91/ share

Market to book value ratio

4.70 Times

4.90 Times

25.66 Times

25.22 Times

13.15 Times

Price to earnings ratio

12.64 12.92 37.59 45.45 27.63

Earnings per Share

Interpretation: The common shareholders have earned $29.05 per

share in 2007, $35.05 per share in 2008, $41.90 per share in 2009, $26.71

per share in 2010 and $28.37 per share in 2011. The EPS ratio of the

company has been increasing at an increasing rate from 2007 to 2009.

However, the ratio fell to $26.71 per share in 2010, which is a huge decline.

The ratio again slightly increased in 2011. Thus the ratio has been

fluctuating. In 2010, the ratio decreased because the net income available to

common shareholders decreased greatly. In 2011, the ratio increased

because the net income available to common shareholders increased. During

14

29.05

35.05

41.9

26.71 28.37

0

5

10

15

20

25

30

35

40

45

2007 2008 2009 2010 2011

Earnings per Share

19.81 22.00

73.00

40.08

16.91

0

10

20

30

40

50

60

70

80

2007 2008 2009 2010 2011

Dividend per Share

the five year of study the total number of common share outstanding has

been constant.

Dividend per Share

Interpretation: During the five year of study the common

shareholders have earned $19.81 per share, $22.00 per share, $73 per share,

$40.08per share and $16.91 per share respectively. The DPS ratio has been

increasing from 2007 to 2009. However, the ratio started to fall in 2010. The

ratio fell to $16.91 per share in 2011, which is a huge decline. Thus the ratio

has been fluctuating. The reason behind the decline of DPS ratio is that the

total dividend amount paid to shareholders decreased in 2010. In 2011 the

amount decreased even more.

15

4.7 4.9

25.66 25.22

13.15

0

5

10

15

20

25

30

2007 2008 2009 2010 2011

Market to Book Value Ratio

Market to Book Value Ratio

Interpretation: During the five years of study the market value per

share has been 4.70 times, 4.90 times, 25.66 times, 25.22 times and 13.15

times respectively. The ratio has continuously increased from 2007 to 2009.

However the ratio started to decline in 2010. Thus the ratio has not been

stable. In 2010 the decline of the ratio was because both market price and

book value per share decreased but the relative change in market price was

higher than relative change in book value of shares. In 2011 the decline of

the ratio was because market price decreased from $1214 per share to $784

per share and book value per share increased from $48.13 per share to

$59.61 per share.

Price to Earnings Ratio

Interpretation: According to the price to earnings ratio the

shareholders of this company were willing to pay 12.64, 12.92, 37.59, 45.45

and 27.63 for every taka of reported earnings during the five years study.

The ratio has been increasing from 2007 to 2010. However, the ratio largely

declined in 2011. In 2010 the ratio increased from 37.59 to 45.45 because

market price per share and EPS declined but relative change in market price

was higher than relative change in EPS. In 2011 the ratio decreased from

16

12.64 12.92

37.59

45.45

27.63

0

5

10

15

20

25

30

35

40

45

50

2007 2008 2009 2010 2011

Price to Earnings Ratio

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.

Du-Pont Equation

Return on Assets = Total Asset Turnover Net Profit Margin

2007 15.81 = 1.73 9.14

2008 15.66 = 1.65 9.50

2009 27.10 = 2.58 10.50

2010 15.26 = 2.48 6.16

2011 12.84 = 2.03 6.32

17

Modified Du-Pont Equation

Return on Equity = Total Asset Net Profit Equity

Turnover Margin Multiplier

2007 37.16 = 1.73 9.14 2.35

2008 37.93 = 1.65 9.50 2.42

2009 68.27 = 2.58 10.50 2.52

2010 55.61 = 2.48 6.16 3.64

2011 47.60 = 2.03 6.32 3.71

18

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 Benckiser’s 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.

19

Appendix

Liquidity Ratio

Formula 2007 2008 2009 2010 2011 Current Ratio

Current Assets / Current Liabilities

742972417/ 488675848

896844350/ 597593108

576011025/ 408783401

646005672/ 563607559

828984916/ 727330259

Quick Ratio

Current Assets – Inventory / Current Liabilities

742972417 - 146059045/ 488675848

896844350 - 147441749/ 597593108

576011025 - 240509838/ 408783401

646005672 - 257136739/ 563607559

828984916 - 373847987/ 727330259

Asset Management Ratio

Formula 2007 2008 2009 2010 2011 Inventory Turnover Ratio

Cost of goods sold/ Inventory

905206021/ 146059045

1037206570/ 147441749

1057516657/ 240509838

1090914090/ 373847987

1209247388/ 257136739

Total Asset turnover Ratio

Sales/ Total Assets

1525487547/ 881909055

1746267981/ 1057921288

1884621742/ 730409848

2047993742/ 827318554

2120977713/ 1044053282

Fixed Asset Turnover Ration

Sales/ Fixed Assets

1525487547/138936638

1746267981/ 308935838

1884621742/ 154398823

2047993742/ 181312882

2120977713/215068366

Average Collection Period

Account Receivable/ (Sales/365)

21336849/ (1525487547

/365)

5191584/ (1746267981

/365)

3988633/ (1884621742

/365)

3937948/ (2047993742

/365)

8400148/ (2120977713

/365)


Accounts Payable/ (Sales/365)

443722560/ (905206021

/365)

539187939/ (1037206570

/365)

364981036/ (1057516657

/365)

526143104/ (1090914090/

365)

684558592/ (1209247388

/365)

20

Debt Management Ratio

Formula 2007 2008 2009 2010 2011 Debt Ratio Total

Debt / Total Asset

506760773/ 881909055

621027097/ 1057921288

440367416/ 730409848

599920369/ 827318554

762375086/ 1044053282

Times Interest Earned (TIE) Ratio

EBIT / Interest charges

218812248/ 901349

257242903/ 775520

279637616/ 786672

203075401/ 747121

216163745/ 832360

Profitability Ratio

Formula 2007 2008 2009 2010 2011 Gross Profit Margin

Gross Profit/Sales

620281526/ 1525487547

709061411/ 1746267981

827105085/ 1884621742

957079652/ 2047993742

911730325/ 2120977713

Net Profit Margin

Net Profit/Sales

139398899/ 1525487547

165622010/ 1746267981

197972944/ 1884621742

126216280/ 2047993742

134061961/ 2120977713

Return on Assets

Net Profit/Total Assets

139398899/ 881909055

165622010/ 1057921288

197972944/ 730409848

126216280/ 827318554

134061961/ 1044053282

Return on Equity

Net Profit/Total Common Equity

139398899/ 375148000

165622010/ 436894000

197972944/ 290042000

126216280/ 227398000

134061961/ 281678000

Stock Market Ratio:

Formula 2007 2008 2009 2010 2011 EPS

Net income available to common shareholder/ Total no. of common shares outstanding

139398899/4725000

165622010/4725000

197972944/ 4725000

126216280/4725000

134061961/4725000

21

DPS Total dividend paid/ Total no. of common shares outstanding

93616749/ 4725000

104004471/ 4725000

344924872/ 4725000

189359047/ 4725000

79883965/ 4725000

Market to book value ratio

Market value per share/book value per share

373/79.40 453/92.46 1575.01/ 61.39

1214/ 48.13

784/ 59.61

Price to earnings ratio

Price per share/EPS

373/29.50 453/35.05 1575.01/ 41.90

1214/ 26.71

784/ 28.37

Book Value Per Share

Total common equity/Total number of common share outstanding

375148000/

4725000 436894000/

4725000 290042000/

4725000 227398000/

4725000 281678000/

4725000

Stock price

2007 2008 2009 2010 2011

Market price per

share

373.00 453.00 1575.01 1214 784

22

Du-Pont Equation

Du-Pont Equation

Return on Assets =

Total Assets Turnover

Net Profit Margin

Net Profit/ Total Assets

Sales/ Total Assets

Net Profit/ Sales

2007 139398899/ 881909055

1525487547/ 881909055

139398899/ 1525487547

2008 165622010/ 1057921288

1746267981/ 1057921288

165622010/ 1746267981

2009 197972944/ 730409848

1884621742/ 730409848

197972944/ 1884621742

2010 126216280/ 827318554

2047993742/ 827318554

126216280/ 2047993742

2011 134061961/ 1044053282

2120977713/ 1044053282

134061961/ 2120977713



Return on Equity =

Total Assets Turnover

Net Profit Margin

Equity Multiplier

Net Profit/ Total

Common Equity

Sales/ Total Assets

Net Profit/ Sales

Total Assets/Total Common Equity

2007 139398899/ 375148000

1525487547/ 881909055

139398899/ 1525487547

881909055/ 375148000

2008 165622010/ 436894000

1746267981/ 1057921288

165622010/ 1746267981

1057921288/ 436894000

2009 197972944/ 290042000

1884621742/ 730409848

197972944/ 1884621742

730409848/ 290042000

2010 126216280/ 227398000

2047993742/ 827318554

126216280/ 2047993742

827318554/ 227398000

2011 134061961/ 281678000

2120977713/ 1044053282

134061961/ 2120977713

1044053282/ 281678000

Financial Performance Analysis Of Reckitt Benckiser

Documents

common share outstanding

total common equity

times interest earned

gross profit

reckitt benckiser

pont equation

total asset

common shareholders