Reckitt Benckiser Group Plc (RB) is a consumer health and hygiene company that manufactures and markets household, toiletry and health care products. These consist of air fresheners, laundry products, dishwashing detergents, disinfectant sprays, water softeners, household cleaners, and personal care products. It also sells over-the-counter (OTC) drugs, cough and congestion tablets, sinus relief products, gastric liquids, hair removal and pest control products. The company markets these products under various Powerbrands including Nurofen, Strepsils, Mucinex, Dettol, Lysol, Veet, Harpic, Mortein, Finish and Vanish.

Financial Highlights (FY2018, £million)

(Source: Annual Report, Company Website)

In 2018, the company reported net sales of £12,597 million, up by 3.0% on both pro-forma and LFL basis, including consideration of their MJN business for a full 12 months. At constant currency basis, the company reported a sales growth of 15 per cent. Net Finance cost stood at £325 million in FY18 as compared with £238 million in FY17, mainly due to the acquisition of MJN business in mid-2017. In the financial year 2018, reported net income (including discontinued operations) attributable to shareholders stood at £2,161 million and declined by 65 per cent (actual exchange rate basis) as compared with FY17 data, as a result of exceptional items in 2017 with respect to £3,024 million in relation to the gain on sale of the Reckitt food business, US tax reform credit of £1,421 million and an investigation charge by US Department of Justice of £296 million. On an adjusted basis, net income (including discontinued operations) surged by 4% (AER basis) at £2,410 million. Adjusted diluted earnings per share (including discontinued operations) stood at 339.9 pence for FY18 and surged by 5 per cent (AER basis) as compared to the last year. The Board of Reckitt Benckiser announced a final dividend of 100.2 pence and full-year dividend stood at 170.7 pence per share (subject to shareholders approval), reflecting a surge of 3.9 per cent against the FY17 full-year dividend of 164.3 pence per share.Free cash flow for FY18 stood at £2,029 million as compared with £2,129 million in FY17.

Share Price Performance

Daily price chart as on April-11-2019, before the market close. (Source: Thomson Reuters)

On 11th April 2019, at the time of writing (before the market close, GMT 8:47 AM), shares of RB were quoting at GBX 5,962 and was down by 30 points or 0.5% against its previous day close. During the last one-year, shares have reached to a 52w high of GBX 7,174 and a 52w low of GBX 5,255 and at the current price level (as indicated in the price chart), shares were trading 16.89% lower than its 52w high level and 13.45% higher against its 52w low level. The company’s stock beta was 0.95, reflecting the same directional movement of the stock with the benchmark index.

Recent News
As per board announcement on 16th Jan’19, Rakesh Kapoor had shown his intention to retire as Chief Executive Officer of the company by the end of 2019. He is been with the company from the last 32 years and active as CEO for more than 8 years. In November 2018, the Reckitt group exercised a direct-to-consumer deal with SCI regarding the Enfamil formula.

Growth Perspective
The major factors driving the growth includeexpanding speciality drug innovation, increasing access to medicines in developing countries. The global pharmaceutical market is projected to be strongly influenced by global GDP growth, innovations, introduction of new products, wider access to healthcare services and increasing funding. The global household care market witnessed a considerable growth trend during the last few years. RB intends to transform itself as a major consumer health and hygiene company in the market as compared to its peers.

Risk Assessments
RB must constantly develop, produce and market new products in order to maintain and enhance the recognition of its brands, and should strive to achieve a favorable mix of products. RB’s performance will be affected by the increasing influx of counterfeited products in the market, especially in emerging countries. The growing market for counterfeit goods has been on the rise across industries and is affecting the sales as well as the image of the established brands.

Valuation Methodology

* All forecasted figures and Peers selection have been taken from the Thomson Reuters.

Conclusion
The company has a strong business model and strong brand positioning in Asia, Europe and American market, with significantly higher EBITDA and Net Margins ascompared with the peers operating in the same sector. RB is one of the leading consumer goods companies offering health, hygiene and home care products. Sustained revenue growth, research and development (R&D) activities and market position are the major strengths of the company, even as low liquidity remains a cause for concern. Acquisition of Mead Johnson Company, growing demand for global household care products and the positive outlook for the global pharmaceutical industry could provide growth opportunities to the company. However, Competition, Counterfeit products and consumer preferences could affect its business operations. Based on decent fundamental performance and the valuation done using the above method, we have given a “HOLD” recommendation at the closing price of GBX 5,992 (as on 10^th April 2019).

Disclaimer
PLEASE BE ADVISED THAT YOUR CONTINUED USE OF THIS SITE OR THE INFORMATION PROVIDED HEREIN SHALL INDICATE YOUR CONSENT AND AGREEMENT TO THESE TERMS.
References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.
This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332.
The website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine is not responsible for material posted on this website and does not guarantee the content, accuracy, or use of the content in this site. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated.
Kalkine do not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not in any way endorse or recommend individuals, products or services that may be discussed on this site. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional licensed financial planner and adviser. Our publications are NOT a solicitation or recommendation to buy, sell or hold.