Reckitt Benckiser Group reports 11.5% revenue growth in FY2016 and 0.96 pp EBITDA Margin decline from 27.2% to 26.2%

10 Feb 2017 • About Reckitt Benckiser Group ($RB.) • By InTwits

Reckitt Benckiser Group reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:

Reckitt Benckiser Group has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.8%. At the same time it's in pair with industry average of 2.3%.
CAPEX is quite volatile: 180 in 2016, 240 in 2015, 717 in 2014, 203 in 2013, 133 in 2012
The company has highly profitable business model: ROIC is at 20.3%
It operates with high leverage: Net Debt/EBITDA is 0.6x while industry average is -1.6x

Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Reckitt Benckiser Group ($RB.) key annual financial indicators

mln. £	2012	2013	2014	2015	2016	2016/2015
P&L
Revenue	9,567	9,266	8,836	8,874	9,891	11.5%
Gross Profit	5,538	5,258	5,096	5,246	6,026	14.9%
SG&A	2,828	4,173	3,858	3,867		-100.0%
EBITDA	2,590	2,042	2,325	2,412	2,593	7.5%
Net Income	1,821	1,739	3,223	1,743	1,832	5.1%
Balance Sheet
Cash	887	808	917	740	882	19.2%
Short Term Debt	3,271	2,169	1,936	1,749	1,585	-9.4%
Long Term Debt	3	598	636	671	804	19.8%
Cash flow
Capex	166	199	157	154	179	16.2%
Ratios
Revenue growth	0.9%	-3.1%	-4.6%	0.4%	11.5%
EBITDA growth	1.5%	-21.2%	13.9%	3.7%	7.5%
Gross Margin	57.9%	56.7%	57.7%	59.1%	60.9%	1.8%
EBITDA Margin	27.1%	22.0%	26.3%	27.2%	26.2%	-1.0%
Net Income Margin	19.0%	18.8%	36.5%	19.6%	18.5%	-1.1%
SG&A, % of revenue	29.6%	45.0%	43.7%	43.6%		-43.6%
CAPEX, % of revenue	1.7%	2.1%	1.8%	1.7%	1.8%	0.1%
ROIC	23.3%	17.3%	19.7%	20.3%	20.3%	0.1%
ROE	31.3%	28.4%	49.0%	25.4%	23.9%	-1.5%
Net Debt/EBITDA	0.9x	1.0x	0.7x	0.7x	0.6x	-0.1x

Revenue and profitability

The company's Revenue surged on 11.5% in FY2016. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin dropped on 17.2 pp from 29.1% to 11.9% in 2016.

Gross Margin increased slightly on 1.8 pp from 59.1% to 60.9% in FY2016.

Net Income marign decreased slightly on 1.1 pp from 19.6% to 18.5% in FY2016.

Capital expenditures (CAPEX) and working capital investments

Reckitt Benckiser Group's CAPEX/Revenue was 1.8% in FY2016. CAPEX/Revenue showed almost no change from FY2013 to FY2016. Average CAPEX/Revenue for the last three years was 1.8%.

Return on investment

The company operates at high and attractive ROIC (20.33%) and ROE (23.91%). ROIC showed almost no change in FY2016. ROE decreased slightly on 1.5 pp from 25.4% to 23.9% in FY2016.

Leverage (Debt)

Debt level is 0.6x Net Debt / EBITDA and 0.9x Debt / EBITDA. Net Debt / EBITDA dropped on 0.1x from 0.7x to 0.6x in FY2016. Debt decreased slightly on 1.3% in FY2016 while cash jumped on 19.2% in FY2016.

Valuation

The company's trades at EV/EBITDA 0.8x and P/E 0.3x while industy averages are 15.6x and 19.1x. Reckitt Benckiser Group's EV/(EBITDA-CAPEX) is 0.9x with the industry average at 19.0x.

Appendix 1: Peers in Household Goods & Home Construction

Below we provide Reckitt Benckiser Group benchmarking against other companies in Household Goods & Home Construction industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Abbey ($ABBY)		40.0%	15.9%	51.0%	27.9%
Taylor Wimpey ($TW.)	11.7%	13.7%	17.0%	16.9%
Airea ($AIEA)		-4.7%	-8.4%	11.3%	-3.8%
Colefax Group ($CFX)		0.3%	10.5%	-1.6%	0.1%
Teco Electric & Machinery Co Ltd ($TECD)	4.1%	16.2%	-5.1%	-9.6%
Median (7 companies)	7.9%	13.7%	-5.1%	-1.6%	0.1%
Reckitt Benckiser Group ($RB.)		-3.1%	-4.6%	0.4%	11.5%

Top companies by Gross margin, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Colefax Group ($CFX)	55.1%	55.4%	53.3%	54.7%	56.3%
Abbey ($ABBY)	23.6%	17.3%	25.8%	30.6%	33.1%
Teco Electric & Machinery Co Ltd ($TECD)	23.5%	23.8%	24.9%	25.5%
Taylor Wimpey ($TW.)	17.6%	21.6%	23.8%	25.1%
Havelock Europa ($HVE)	13.2%	12.5%	13.3%	11.0%
Median (6 companies)	20.6%	19.5%	24.4%	25.3%	44.7%
Reckitt Benckiser Group ($RB.)	57.9%	56.7%	57.7%	59.1%	60.9%

Top companies by EBITDA margin, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Abbey ($ABBY)	19.4%	13.3%	22.6%	31.2%	31.7%
Taylor Wimpey ($TW.)	11.2%	15.6%	18.6%	20.2%
Teco Electric & Machinery Co Ltd ($TECD)	10.8%	10.7%	10.7%	10.5%
Colefax Group ($CFX)	6.6%	7.6%	9.1%	8.7%	9.4%
Airea ($AIEA)	5.9%	7.4%	7.0%	8.0%	11.7%
Median (7 companies)	6.6%	7.6%	9.1%	8.7%	11.7%
Reckitt Benckiser Group ($RB.)	27.1%	22.0%	26.3%	27.2%	26.2%

Top companies by CAPEX/Revenue, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Abbey ($ABBY)	12.2%	6.5%	8.0%	8.0%	5.3%
Teco Electric & Machinery Co Ltd ($TECD)	1.4%	1.4%	3.6%	3.5%
Colefax Group ($CFX)	4.9%	3.1%	2.0%	2.9%	3.0%
Airea ($AIEA)	2.7%	1.0%	0.7%	1.8%	2.9%
Havelock Europa ($HVE)	0.1%	1.3%	0.2%	1.0%
Median (7 companies)	2.4%	1.3%	1.1%	1.8%	3.0%
Reckitt Benckiser Group ($RB.)	1.7%	2.1%	1.8%	1.7%	1.8%

Top companies by ROIC, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Taylor Wimpey ($TW.)	12.2%	17.7%	21.7%	24.1%
Abbey ($ABBY)	5.4%	4.7%	11.2%	21.1%	22.9%
Colefax Group ($CFX)	10.7%	13.5%	22.0%	20.6%	20.2%
Airea ($AIEA)	3.3%	7.2%	6.4%	11.7%	18.2%
Teco Electric & Machinery Co Ltd ($TECD)	7.1%	8.3%	7.3%	5.8%
Median (7 companies)	5.4%	7.2%	7.3%	11.7%	20.2%
Reckitt Benckiser Group ($RB.)	23.3%	17.3%	19.7%	20.3%	20.3%

Top companies by Net Debt / EBITDA


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Teco Electric & Machinery Co Ltd ($TECD)	0.1x	-0.9x	-1.3x	-0.3x
Taylor Wimpey ($TW.)	0.3x	-0.0x	-0.2x	-0.4x
Airea ($AIEA)	-0.9x	-1.5x	-1.2x	-0.9x	-1.1x
Colefax Group ($CFX)	-1.8x	-1.4x	-0.6x	-1.0x	-1.4x
Abbey ($ABBY)	-1.5x	-2.6x	-1.2x	-1.3x	-1.3x
Median (6 companies)	-0.4x	-1.2x	-1.2x	-1.0x	-1.3x
Reckitt Benckiser Group ($RB.)	0.9x	1.0x	0.7x	0.7x	0.6x

Reckitt Benckiser Group stock price chart

Reckitt Benckiser Group financials

mln.	FY2010	FY2011	FY2012

Revenue	8,453	9,485	9,567
EBITDA	2,274	2,552	2,590
Net income	1,568	1,745	1,821
CAPEX	170.0	164.0	166.0
Debt	2,644	2,508	3,274
Cash	588.0	639.0	887.0

About Reckitt Benckiser Group

Reckitt Benckiser Group plc manufactures, markets, and sells health, hygiene, and home care products. The company offers over the counter solutions for common ailments, such as pain, fever, cold, flu, sore throat, and heartburn, as well as footcare products, condoms, lubricants, and other aids under the Airborne, Durex, Gaviscon, MegaRed, Move Free, Mucinex, Nurofen, Scholl, Strepsils, Bonjela, Cepacol, Delsym, Disprin, Dobendan, E45, Lutsine, Optrex, Lemsip, Moov, and Senokot brands. It also offers hygienic products, including disinfectant cleaners, multipurpose and specialty cleaners, lavatory care, automatic dishwashing detergents, pest control, and depilatory products under the Cillit, Bang, Clearasil, Dettol, Finish, Harpic, Lysol, Mortein, Veet, Brasso, d-Con, Destop, Easy Off, Pif Paf, Pine O Clean, Rid-X, Sagrotan, Sbp, Steradent, St Marc, and Veja brands. In addition, the company offers home care products, such as fabric treatment products under the Vanish name; water softeners under the Calgon; garment care products under the Woolite brand; and air care products under the Air Wick brand, as well as home care products under the local and multi country brands, such as Bom Ar, Cherry Blossom, Cobra, Hippo, Jik, Mr Sheen, Mr Min, Napisan, Nugget, O'Cedar, Old English, Oxyclean, Poliflor, Resolve, Robin, and Sole brands. Further, it provides food products, such as mustard, barbecue sauce, hot sauce, and fried onions under the NoSalt, French