gamesinvestor
19 Feb 2018
Re: FY Results "The picture is one of a business which was in very poor shape at takeover and will take time to recover, that became clear at H1. So did RB overpay?"If the CEO is anything like the guy running Diageo and the desperately back peddling one at Unilever, he'll overpay for everything as it's not his money, it's investors.I was a tad early on this one and I'm not sure if the whole scene is changing anyway.Looking at most people's shopping habits over the last 5 years, I'm not sure they give a monkey's about the brands anymore.My daughter buy's Mamia Nappies from Aldi, alongside the formula milk, the wipes and everything else that the own brand suppliers provide. Cillit Bang is just bleach at the end of the day and the over the counter medicines are copied at one tenth of the price.Perhaps there isn't a lot of money to be made here anymore -- which isn't good for the what was once over 1% of my wad (now a little less it seems).Games
Hydrogen Economy
19 Feb 2018
Re: FY Results BillHE - success with MJN?? What success? Good question, in RK's words "2017 was a significant year in RB's journey to become a global leader in consumer health. We returned to growth after a solid finish to the year, our acquisition of MJN is firmly on track" That sounds a bit like like claiming success, justified or not MJ lost 7% yoy revenue in 2016, in 2017 it was flat. Arresting that kind of fall is always likely to hit margins in the short term, hopefully recovered once returned to growth. Margins get hit even more if the volumes decline due to fixed cost effects. "MJN adjusted operating margin declined on a pro-forma basis by -390bps to 20.7%, driven by declining gross margin from mix and input costs, increased BEI, and higher fixed costs. The margin decline in H2 was -270bps (versus -500bps in H1) as progress was made on cost synergies, operational improvements, and the lapping of reinvestment in the business in H2 2016."BEI (Marketing support) is likely to have some longer term benefit. Change in mix likely reflects the higher China sales. Their aim is may be add customers, then switch them to premium products. Fixed cost changes are a worry, they were supposed to be going the other way.The picture is one of a business which was in very poor shape at takeover and will take time to recover, that became clear at H1. So did RB overpay? On current view, yes. H2
EssentialInvestor
19 Feb 2018
Pricy and overhyped ? 17-18x forward may be interesting.Mentioned last year to be careful of some mean reversion on PE for RB.As always best to DYOR.
Bill1703
19 Feb 2018
Re: Added some more "Ouch! Still, not bothered ... doubled up @6150. Long term these brands will be OK. "Yes, probably into genuinely interesting buying territory - finally. Two outstanding concerns: (1) the potential Pfizer deal... the balance sheet is already stretched enough (ND/EBITDA over 3x), so another £10bn deal would probably require significant new equity, without big accompanying disposals (and coming at a time when the FY figures lay bare the charge of way over-paying for declining profits at MJN).(2) consensus forecasts seem to suggest c.350p EPS for this year (ie. FY18) - and I think this will have to come down, given the effective "warning" today on margins.But both of these could now be in the price (always hard to say!) Now trading on 17.5x prospective P/E on this consensus FY18 forecast... even assuming downgrades, will likely still be c.18x, a bit below the long-run historic mean. And the FCF yield (actual FY17) is now nudging up close to 5%, can't remember when RB last offered that?Could remain volatile for a while yet and visibility is necessarily low today - but as Uncle D suggests, this could well be a pretty decent entry point for a patient long-term investor...
Uncle Doug
19 Feb 2018
Re: Added some more Ouch! Still, not bothered ... doubled up @6150. Long term these brands will be OK.
Bill1703
19 Feb 2018
Re: FY Results "I think these results would normally get a positive market reaction, although recently that does not seem to always follow. I expect the market is focusing more on whether RB will buy Novartis CH and whether they overpay, claiming success with MJN might be seen as laying groundwork for another acquisition..."HE - success with MJN?? What success? FY operating profit down 16% (pro-forma, constant currency), with margins down nearly 400bps, dragging the overall RB group margins down... and raising the charge that they seriously overpaid for MJN.Granted, this itself shouldn't hit the SP too hard today, we knew all about the MJN profits collapse at the H1 stage, and they have managed to improve things (a bit) in H2. But in this context, the increase in the synergies target smacks of expediency - it was all they could do, to avoid conceding the paid the wrong price for the business.But equally, a possible deal for the Pfizer biz shouldn't be hitting the SP either, as we know all about that too and nothing, as yet, has changed. I am still going through the numbers, but it is possible that, notwithstanding fairly punchy revenue guidance for the current year, the (somewhat vague) commentary on margins is being interpreted negatively for current year profits.
Lupo di mare
19 Feb 2018
Re: FY Results According to Alliance news."LONDON (Alliance News) - Consumer goods firm Reckitt Benckiser PLC on Monday said revenue and profit rose in 2017, though like-for-like sales were flat, as it upgraded its synergy targets after delivering cost savings earlier than expected.Shares in Reckitt were down 3.8% at 6,320.00 pence early Monday, the worst performer in the FTSE 100.Reckitt said net revenue rose 21%, or 15% at constant exchange rates, to GBP11.51 billion in 2017. Pretax profit rose to GBP2.50 billion from GBP2.25 billion the year before, while like-for-like net revenue was flat.Like-for-like net revenue in the fourth quarter was 2.0%, slightly below consensus expectations of 2.1% but the full-year outturn still above the expected 0.1% decline.Growth returned in the fourth quarter of the year, Reckitt said, with performance for the base business approximately in-line with underlying market growth of around 2%. Acquired baby nutrition firm Mead Johnson had a "stronger finish to the year".Reckitt agreed to buy US baby formula maker Mead Johnson in a USD17.9 billion deal in February last year, receiving final regulatory approval in June 2017."Our base business ended the year in line with our expectations, in what was a challenging, volatile environment," said Reckitt.The fourth-quarter growth rate reflected an "important step", the company said, underpinned by broad-based growth of 5% in consumer health and 2% in hygiene, aided by a strong start to the flu season.Reckitt proposed a final dividend of 97.7 pence per share, up from 95.0p in 2016, bringing its total payout for the year to 164.30p, up 7% year-on-year.For 2018, Reckitt said it is targeting 13% to 14% total revenue growth, implying between 2% to 3% like-for-like growth."Whilst 2018 will see some specific factors impacting margin, we reiterate our medium-term target of moderate operating margin expansion," Reckitt said.Reckitt said the new structure, people and operating model of the company's proposed two separate divisions - RB Health and RB Hygiene Home - have been in place since January 2018.Additionally, Reckitt said it delivered earlier-than-planned synergies of USD25 million in 2017, and now expects to achieve synergies in the region of USD300 million in annual cost savings by the end of the third full year of ownership of Mead Johnson, an increase on its original target of USD250 million.
valuemanbuyer
19 Feb 2018
Re: FY Results Agreed. I expect the market is anticipating dilution if this happens
Hydrogen Economy
19 Feb 2018
FY Results These numbers look very solid. The news on return of MJN growth (especially in China) and increased savings should steady the nerves.I think these results would normally get a positive market reaction, although recently that does not seem to always follow. I expect the market is focusing more on whether RB will buy Novartis CH and whether they overpay, claiming success with MJN might be seen as laying groundwork for another acquisition. Revenue and adjusted earnings numbers right in line with forecasts. Adj EPS +7%Final dividend of 97.7p per share (2016: 95.0p). FCF 2,129 Vs 1,919 (303 Vs 272 pps)MJN integration is firmly on track. Growth has returned after nine quarters without growth, $25m of synergies have been delivered earlier than planned, and today we are raising our synergy expectations to around $300m, up from $250m announced at the time of the acquisitionMJN Net Revenue growth of -1% (pro-forma, constant). Q4 (+3%), led by double digit Net Revenue growth in greater ChinaTotal reported net income increased by +237% (+230% constant); reported diluted EPS of 867.9p (+238%), significantly impacted by a net tax credit of £1,421m following US Tax Reform, and the profit on sale of the RB Food business For 2018 we are targeting +13-14% total revenue growth1 (implying +2-3% LFL revenue growth).The Tax Cuts and Jobs Act (“the Act”
in the US “One-off” impacts: • A non-cash credit of £1,595m -deferred tax liabilities for US held intangible assets. • A transitional tax charge, for Mead Johnson overseas earnings, £174m, payable over eight years“Ongoing” impacts: “working the detail” but expect Reduced adjusted tax rate of 23%H2
sage in the hills
15 Feb 2018
Re: Pfizer's consumer health division .... at 6282 RB. should walk away ....SAGE
sage in the hills
15 Feb 2018
6282 !!! ??? ..... what is going on here ??? ........SAGE
Uncle Doug
09 Feb 2018
Added some more Added some more @6347
picstloup
26 Jan 2018
Pfizer's consumer health division Apparently Johnson & Johnson has pulled out of bidding for Pfizer's consumer health business (Chapsticks, omega3 etc). According to Reuters, that only leaves RB and GSK preparing bids for the $15b business (bids due by next Thursday). Surely RB should concentrate on absorbing MJ into its core?
Mr Hacked off
24 Jan 2018
Re: Mid 50's to low 60's? On the whole we are not impressed when a company announces new margin targets, share buybacks and acquisitions and/or disposals in response to activists or takeover approaches. The question which always springs to our mind is ‘If these things are possible and desirable, why weren’t you already doing them?’ In the case of Nestlé, """"Not a fan of Nestle especially their in-sustainable water business which will come to bite them big one day.In Unilever's view this was already happening but 3g Friday made it visible. Hopefully will be happening at R&B too.
gamesinvestor
23 Jan 2018
Re: Mid 50's to low 60's? Yes that might explain it. Any short term attempts by RB to buy anything else of size would surely hammer the share price down.Here is an interesting extract from Terry Smith's annual letter re Nestle -- I assume the activism mentioned in the article has something to do with Nestle going shopping :-"""""Nestlé / Third Point Hedge fund Third Point, run by Dan Loeb, purchased a $3.5bn stake in Nestlé and in his June letter to investors Mr. Loeb talked of Nestlé’s ‘unrealized potential for margin improvement and innovation in its core businesses, an un-optimized balance sheet, a number of non-core assets’. Third Point’s approach to Nestlé strikes us as close to the activist playbook which I described earlier in that it calls for ‘improving productivity’; ‘returning capital to shareholders’; ‘re-shaping the portfolio’; and ‘monetizing its L’Oréal stake’. In respect of productivity, Mr. Loeb said Nestlé should ‘adopt a formal margin target’. He went on to specify the margin level he believes Nestlé should formally target as ‘18–20%’ by 2020. There is more to attaining an improvement in profitability than committing to a target. The approach reminds me of the G20 meeting in 2014 at which the countries committed to attaining GDP growth of more than 2%. If it’s that simple, why not commit 3% or even 4%? Some people seem to believe that GDP growth or profit margins can be conjured up by a commitment. Sadly it may take rather more than that. In respect of returning capital, Mr. Loeb says that ‘capital return in conjunction with a formal leverage target makes sense as well’. He goes on to say that raised leverage would provide share buyback capacity, which would probably be a better use of cash than acquisitions given high valuations (remember that bit please). Mr. Loeb mentions ‘Re-shaping the portfolio’ and invokes the fact that the company has over 2,000 brands, some of which he believes could fetch ‘above-market multiples’ given ‘large synergies to potential acquirers’. He also thinks Nestlé should consider ‘accretive, bolt-on acquisitions in high growth and advantaged categories’ (presumably despite the ‘high multiples in Nestlé’s sector’ he already mentioned). His proposal for ‘Monetizing the L’Oréal stake’ is based on his belief that the stake is ‘not strategic and shareholders should be free to choose whether they want to invest in Nestlé or some combination of Nestlé and L’Oréal’. He ended by saying that divestiture ‘via an exchange offer for Nestlé shares…would accelerate efforts to optimize its capital return policies, immediately enhance the company’s return on equity (‘ROE’ and meaningfully increase its share value in the long run as earnings improve over a reduced share count’. Fairly obviously the enhancement of ROE from disposal of a stake which is equity accounted is purely cosmetic but then again some people are impressed by cosmetic changes. We are not amongst them and if I had managed to acquire a 23% stake in the world’s leading cosmetic company, as Nestlé has, I would need some more compelling arguments to persuade me to dispose of it. Nestlé’s first response to Third Point came only two days after Mr. Loeb’s letter. This talked about ‘value creation’. However it did include one specific, namely the announcement of a CHF 20bn share buyback program. A more detailed response came when Nestlé CEO Mark Schneider and other executives presented at the Nestlé investor day on 26th September. The company set a new formal margin target—up 150–250bps from the underlying 16% in 2016 to 17.5–18.5% by 2020; and said that it would accelerate share buyback activity. It also said that as well as the already announced decision to ‘explore strategic options’ for the US confectionery business, it was ‘actively adjusting its product portfolio...as shown by the recent investments in Blue Bottle Coffee, Sweet Earth and Freshly’. However the company defended the L’Oréal stake. On the wh
