Purpose of the report
Reckitt Benckiser Group plc (RB group plc) is a multinational company, headquartered in Slough, the United
Kingdom. It was founded in 1823 and formed in 1999 by combining English Reckitt & Colman plc with the Netherlands Benckiser
NV. RB Group plc, consumer goods Company,
specialises in production and distribution of health, hygiene and home
The purposes of this report are to:
Conduct a financial analysis for Reckitt Benckiser Group plc.Provide a recommendation for a bank investor.
Methods: Ratio Analysis,
Cash Flow Analysis and Financial Statement Analysis. Additionally to provide
financial analysis for RB Group Plc. A Chief Executive
Report as well as a Director’s Report has been used.
Findings and conclusions
Recommendation for investor
A Financial statement analysis for RB Group Plc has
been created by utilizing essential
techniques of financial analysis. They are as follows:
Ratio Analysis.Cash Flow Analysis.Financial Statement Analysis.
To further assist in
the financial analysis process for
RB Group Plc, the Director’s Report has also been utilised.
Ratio Analysis is an analytical tool, which is used to measure a
business’s performance and is highly recommended by
business analysts (ref where is the evidence for this?). The method requires the calculation of a number of financial ratios, which conveys the connection between main financial variables which are included in the financial statement of a company. The sum for individual
ratio analysis is compared either to the previous year ratio, competitor’s ratio, or the average of industry. In addition any difference between two figures
provide analysts with crucial information, which can have
a significant impact on the performance of a company and future decisions to be made.
analysis has limitations. The main concern is quality
and accuracy of data included in a financial statement
report. This is down to inadequate disclosure and
absence of comparability.
Furthermore, in many cases accountants use their
position to manipulate data by reclassification of items by producing an Asset Replacement
Reserve of inconsiderable numbers. As a result, existing net profit numbers decrease and current liability increases. Thereby, a business presents itself as inefficient. Additionally a financial statement report is based on past performance and
events, which can be questionable in a situation where the objective of a company’s analyst is to evaluate future
investment possibility. More over Interpretation of ratio analysis in many
cases is based on individual’s instinct or knowledge rather than academic
Cash Flow Analysis it is an essential tool, which provides businesses with crucial information concerning changing
in inflows and outflows of cash in a period of time.
Even though a Cash
Flow Analysis is important, it nevertheless does not present an actual liquid position of a business, as some payments for purchases
are delayed. Furthermore Cash Flow Analysis is likely to be precise or truthful as a
cash flow statement and is seen as being distinct
from a Founds Flow Statement because both perform differently. In addition, a Cash flow statement is treated separately to a Found Flow income statement. An income statement considers cash and non – cash items, thereby net cash flow is not a net income. Moreover Founds Flow
Statement provides complete information about financial changes rather than just the cash flow statement of a business.
Statement Analysis is a functional tool, which requires
understanding of a business’s financial situation through examination of
its financial statements. This tool also has limitations. Firstly a financial
statement Analysis displays the outcome of value
creation (business creates and delivers value in a way that is efficient to generate
profit) rather than process. The number
of profit gained is presented as a final result in a financial
statement, and does not provide users with
complete information about company activity. It does
not reflect the tendency from which forthcoming
prospect of a business can be identified.
Furthermore in a present day
financial statement, revenue and profit figures mainly report information about
tangible and financial assets, while information about intangible assets, under
a New Economy are not completely reflected in them. Moreover
in financial statement should meet recognition criteria as follow: definition,
measurability, reliability and relevance. Intangible assets in
their nature are difficult to measure and in many cases difficult to define if they are controlled
by a business. Consequently, intangible assets are eliminated
from financial statements.
purpose of this report is to establish performance, financial position and
future potential of Reckitt Benckiser Group plc. To carry out a financial
analysis, I have utilised Group Income Statement and a Balance Sheet for 2015 and 2016. Ratio analysis calculations featuring a two year comparison are presented in Appendix 1. To present a full picture of the
company, I have taken into consideration the Chairman’s and Director’s Reports, which contain their view about RB Group plc’s performance and future prospects.
Analysis of the Financial Statement of Reckitt Benckiser Group plc.
The data contained in the Income Statement presents that the performance of RB Group
plc has increased. The net revenue has risen by 11.46 % from 2015. The gross profit has increased by
14.86% from 2015 with profit from operations raised by 7.54%. Additionally, exceptional items have increased significantly by 175.93%. Furthermore an increase has
been recorded in finance expenses by 7.40%. The net income has increased to £1,836,000
a rise of 5.21% from 2015.
From the Group Balance Sheet it is clearly evident that the company invested in property, plant and equipment by 20.27%. There
is an increase in inventory level of 13.07% as well as trade receivables of
21.93% and trade payables by 18.55% from 2015. There is an increase in long –
term borrowings by 19.82%. A decrease in short – term borrowings of 9.37% has been recorded from 2015. The total liabilities of RB Group plc has risen by 14.72%.
Financial Statement and Ratio analysis of Reckitt Benckiser Group
plc. – two years comparison 2016 – 2015.
Reckitt Benckiser Group plc is performing well according to a Financial Statement of the company and a ratio analysis. The Net Revenue has increased to £9.891 million in 2016 from 8.874 million in 2015 due to positive foreign exchange impact. It was also
apparent that a great number of profits were earned from overseas transactions. According to a ratio analysis, the gross margin increased by
3.04% as a result of “positive cost contribution, pricing mix Project Fuel
initiative and supply related Supercharge savings programme, aiming to save £150 million within three years”. Operating profit has increased from
£2.241million in 2015 to £2.410 million in 2016 due to exceptional items of £367 million as a result of the Humidifier
Sanitiser matter, which had a place in South Korea and affected hundreds of
According to a Financial statement and ratio analysis, ROCE
declined by 16.59% from 2015 due to an increase in Pound value of RB Group’s net assets as a result of noteworthy reduction of value of Pounds in the middle of 2016. According to the Financial Statement, the net finance expense has decreased by
51.51% and benefited from deposit investments in countries with higher interest rate. Net operating expenses have risen by 20.33 %
perhaps due to new projects, which has resulted in higher costs and has different profit margins to the
group’s activities which is production of health, hygiene and home
In regards to net working capital of RB Group, inventories increased from
£681 million in 2015 to £770 million. Trade receivables increased from £1.331m in 2015 to £1.623 m in 2016 as well as trade payables from £2.948m to £3.495m in 2016. Additionally, RB
Group recorded a decrease in sales revenue to capital employed by 10.34% and an
increase in trade receivables days by 9.09% and trade payables days by 19.19% from 2015, resulting in a decrease of working capital shortfall days from 25 days in 2015 to
15 days in 2016. RB group to minimise working capital shortfall should extend
for e.g. payables days but this could have a negative impact on relations with
suppliers or increase short – term
liabilities overdraft, but
this can be an additional expense for a company as they need to consider an interest. Moreover, in regards to gearing
ratio reliance on borrowed funds has decreased by
14.87%, and the interest cover raised by
0.12% from 2015, which can be a good indicator for shareholders.
According to RB Group’s Cash Flow Statement, net cash generated from operations
increased by 35.8% from 2015. Net cash generated from investing activities
increased from £134 million in 2015 to £583 million in 2016 due to investment
mainly in PPE of £179 m, intangible assets of £214 m and acquisition of £583 million
in 2016. Net cash used in financing activities decrease by 1.8 % from 2015.
According to the Chairman’s Report the company’s position is
According to The Chairman’s Statement report, Reckitt Benckiser
Group PLC record weak performance for year 2016 due to withdrawal highly toxic
humidifier disinfectant from South Korean market as According to ratio analysis
include in Appendix 1 –Table 1, ROCE has decline by 16.59% in comparison to
2015. As a consequence financial performance of the company has decrease,
efficiency of RB Group has worsen. This is down to the decrease of An increase
in non – current assets by 17.62%, which at first can reduced ROCE ratio but in
the future this should benefits company as the revenue from investment will
increase. The operating profit margin is down by 3.49% from 2015, due to
problems with cost control. The operating profit margin of RB Group recorded in
2016 is significantly higher – 24.37% in comparison to their main competitor
operating profit margin of Unilever – 14.80%.
The gross profit margin is at 60.92% in 2016 showing an increase of
3.04%, due to be relatively higher in comparison to gross profit margin of
Unilever – 42.2% in the same year. Higher gross profit margin could benefit RB
Group over its rivals, by charging more for their e.g. products or
Based on data include in Group Income Statement, a company
generated more sale revenue resulted in increased by 11.46% but at the same
time increased cost of sale by 6.53% from 2015. Additionally Gr