Valuation: Measuring and Managing the Value of Companies 5th Edition

Annual Report 2009 A global team winning together UnternehmenThe Company Henkel at a glance Highlights of 2009 Organic sales performance: 3.5 percent Laundry & Home Care: +2.9 percent Cosmetics/Toiletries: +3.5 percent Adhesive Technologies: 10.2 percent Share of sales accounted for by our growth regions: increase of 1 percentage point to 38

17 Annual Report 2009 The Company Shares and bonds stock exchanges in Germany. In the USA, investors are able to invest in Henkel preferred and ordinary shares by way of stock ownership certificates obtained through the Sponsored Level I ADR (American Depositary Receipt) Program. The number of ADRs representing ordinary and preferred

37 Annual Report 2009 Group management report Value-based management and control system Weighted average cost of capital (WACC) 2009 from 2010 Risk-free interest rate 4.8 % 4.3 % Market risk premium 4.5 % 4.5 % Beta factor 1.00 0.80 Cost of equity after tax 9.4 % 8.0 % Cost of debt capital before tax 5.3 % 5.0

57 Annual Report 2009 Group management report Sustainability / Corporate social responsibility corruption. Our understanding of socially responsible behav- ior has been specified and communicated to our employees throughout the entire Group through our Code of Corpo- rate Sustainability and our Code of Conduct. From these codes are derived our more detailed internal SHE

77 Annual Report 2009 Group management report Forecast offer our customers added value. And we have a well filled pipeline of innovative products that we intend to launch onto the markets of all three business sectors this year. Further opportunity lies in our strict focus on cost and our willingness to constantly scrutinize

97 Annual Report 2009 Notes to the consolidated financial statements Notes to the consolidated balance sheet Book value in million euros Dec. 31, 2008 Dec. 31, 2009 Cash-generating units Trademark rights and other rights with indefinite useful lives Goodwill Trademark rights and other rights with indefinite useful lives Goodwill Detergents 338 661 336 637 Household cleaners 240 732

117 Annual Report 2009 Notes to the consolidated financial statements Notes to the consolidated balance sheet Cash flows from financial liabilities in million euros Residual term Dec. 31, 2009 Book value Up to 1 year Between 1 and 5 years More than 5 years Dec. 31, 2009 Total cash flow Bonds1) 3,708 394 2,593 1,378 4,365 Commercial papers 2) 71 71

132 Annual Report 2009 We have audited the consolidated financial statements pre- pared by Henkel AG & Co. KGaA, comprising the consoli- dated balance sheet, the consolidated statement of income, the statement of comprehensive income, the statement of changes in equity, and the consolidated cash flow statement, and the notes to the consolidated

Powering ahead Annual Report and Financial Statements 2009 Contents 1 Chairmans Statement 2 Chief Executives Statement 4 Business Review 2009 11 Board of Directors and Executive Committee 12 Report of the Directors 19 Directors Remuneration Report 25 Independent auditors report to the members of Reckitt Benckiser Group plc 26 Group

Reckitt Benckiser 2009 19 Directors Remuneration Repo Remuneration Committee The Remuneration Committee of the Board (the Committee) is responsible for determining and reviewing the terms of employment and remuneration of the Executive Directors and Senior Executives. The remuneration principles established for this senior group of employees provide the framework for the remuneration packages

Reckitt Benckiser 2009 39 5 EMPLOYEES (CONTINUED) (c) Share based remuneration (continued) Table 3: Share awards expense 2008 Movement in number of options Total fair Options Options value of Fair value outstanding outstanding grant as at of one at 1 Jan Granted/ at 31 Dec 31 Dec Charge award

Reckitt Benckiser 2009 55 24 FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (CONTINUED) Effective 1 January 2009, the Group adopted the amendment to IFRS 7 for financial instruments that are measured in the balance sheet at fair value, this requires disclosure of fair value measurements by level of the following fair value measurement

Valuation Measuring and Managing the Value of Companies 5th Edition Chapter 10 Solutions Estimating Continuing Value Version 1.0 April 1, 2010 Chapter 10 Question 1 Continuing Today Year 1 Year 2 Year 3 Year 4 Year 5 value Continuing value Revenues 250.0 265.0 280.9 297.8 315.6 334.6 354.6 NOPLAT 26.6 Operating costs (225.0) (238.5) (252.8) (268.0) (284.1) (301.1) (319.2) Growth 6.0% Operating margin

Valuation Measuring and Managing the Value of Companies 5th Edition Chapter 11 Solutions Estimating the Cost of Capital Version 1.0 April 1, 2010 Chapter 11 Questions 1 & 2 Question 1 Market Cost of Tax After-tax Weighted Source of capital value capital rate cost cost Debt 100 7.5% 30.0% 5.3% 0.9% Equity 500 10.5% 10.5% 8.8% 600 9.6% Key inputs Market capitalization Risk-free rate 7.0% Share

Valuation Measuring and Managing the Value of Companies 5th Edition Chapter 12 Solutions Moving from Enterprise Value to Value per share Version 1.0 April 1, 2010 Chapter 12 Questions 1 & 2 Question 1 Question 2 Valuation Sale No sale Nonconsolidated subsidiary Contingent claim Value of operations 2,500.0 2,500.0 Nonconsolidated subsidiary 500 Contingent claim 100 Nonconsolidated subsidiary 100.0 79.0 Percent ownership

Valuation Measuring and Managing the Value of Companies 5th Edition Chapter 13 Solutions Calculating and Interpreting Results Version 1.0 April 1, 2010 Chapter 13 Question 1 Percent of sales Current Forecast Current Forecast year year year year Revenues 120.0 100.0 Cost of sales (90.0) (75.0) 75% 75% Deprecation (12.0) (10.0) 10% 10% Operating profit 18.0 15.0 15% 15% Working capital 36.0 30.0 30% 30% Property and

Valuation Measuring and Managing the Value of Companies 5th Edition Chapter 14 Solutions Using Multiples to Triangulate Results Version 1.0 April 1, 2010 Chapter 14 Questions 1 & 2 $ million Company 1 Company 2 Company 3 Share price ($) 25 16 30 Shares outstanding (millions) 5 8 15 Equity value 125 128 450 Short-term debt 25 15 30 Long-term debt 50 70 40 Total

17 Valuation: Measuring and Managing the Value of Companies, Fifth Edition Chapter 19 Solutions Corporate Portfolio Strategy 1. Different owners have different skills and goals. Thus, one owner may be able to innovate and to lead the company in a way to increase cash flows and growth. When a

Valuation Measuring and Managing the Value of Companies 5th Edition Chapter 20 Solutions Performance Management Chapter 20 Question 1 Commentary The value-driver approach establishes a set of short-term to long-term metrics, which is tailored to the industry and strategy. It should define how the inputs and initial targets eventually influence the financial inputs ROIC, growth and the cost

20 Valuation: Measuring and Managing the Value of Companies, Fifth Edition Chapter 21 Solutions Mergers and Acquisitions 1. This result would be a case where the acquiring firm pays a premium higher than the value created from the acquisition. The shareholders of the acquired firm would gain the premium,

Valuation Measuring and Managing the Value of Companies 5th Edition Chapter 27 Solutions Leases, Pensions, and Other Obligations Version 1.0 April 1, 2010 Chapter 27 Questions 1 & 2 PV (leased assets) Correct Misestimation Rental expenses 25.0 25.0 Cost of debt 7.0% 7.0% Average life 7.0 10.0 PV (leased assets) 117.4 147.1 Question 2 NOPLAT Operating Operating profit 25.0 tax rate Operating taxes (7.5) 30.0% NOPLAT 17.5 Adjusted profit Operating

Valuation Measuring and Managing the Value of Companies 5th Edition Chapter 28 Solutions Capitalized Expenses Version 1.0 April 1, 2010 Chapter 28 Question 1 $ million Forecast Year 1 Year 2 Year 3 Year 4 Year 5 Ratio Revenues 100.0 110.0 121.0 133.1 146.4 10% Operating costs (50.0) (55.0) (60.5) (66.6) (73.2) 50% R&D expense (15.0) (16.5) (18.2) (20.0) (22.0) 15% Operating profit 35.0

32 Valuation: Measuring and Managing the Value of Companies, Fifth Edition Chapter 32 Solutions Valuing Flexibility 1. Standard NPV analysis considers one possible set of cash flows. Contingent NPV incorporates possible cash flows changing either from exogenous factors or from the choices made by the managers. There are two

37 Valuation: Measuring and Managing the Value of Companies, Fifth Edition Chapter 34 Solutions Valuing High-Growth Companies 1. The DCF method is still preferred and the basic inputs are the same for a high-growth company as for an established company. In the mature markets, the analysis begins with historical

6 Valuation: Measuring and Managing the Value of Companies, Fifth Edition Chapter 5 Solutions Growth 1. The three sources of growth are: (1) portfolio momentum (expanding the market), (2) market share performance, and (3) mergers and acquisitions. Based on a study over the years 1999 to 2006, their relative

Valuation Measuring and Managing the Value of Companies 5th Edition Chapter 6 Solutions Frameworks for Valuation Version 1.0 April 1, 2010 Chapter 6 Question 1 Income Statement Reorganized balance sheet Free cash flow Today Year 1 Today Year 1 Year 1 Revenues 800.0 840.0 Operating working capital 70.1 73.6 Operating profits 126.0 Operating costs (640.0) (672.0) Property and equipment 438.4 460.3 Operating

Valuation Measuring and Managing the Value of Companies 5th Edition Chapter 7 Solutions Reorganizing the Financial Statements Version 1.0 April 1, 2010 Chapter 7 Questions 1-3 Ratio Company A Company B Company C Return on assets 14.3% 13.0% 11.4% Return on equity 15.8% 14.3% 21.8% Return on invested capital 15.8% 15.8% 15.8% Question 1 Return on invested capital best measures operating performance. All three

0.0 Exhibit 7.16 HealthCo: Income Statement and Balance Sheet $ million Prior Current Prior Current Income statement year year Balance sheet year year Revenues 605 665 Working cash 5 5 Cost of sales (200) (210) Accounts receivable 45 55 Selling costs (300) (320) Inventories 15 20 Depreciation (40) (45) Current assets 65 80 Operating income 65 90 Property, plant &

Valuation Measuring and Managing the Value of Companies 5th Edition Chapter 8 Solutions Analyzing Performance and Competitive Position Version 1.0 April 1, 2010 Chapter 8 Questions 13 JetCo Gulf Question 1 Revenues 600.0 800.0 The ROIC of Gulf Aviation is 12.5 percent versus only 9.4 percent for JetCo. Since both companies have a cost of capital of 8 percent, Gulf

Valuation Measuring and Managing the Value of Companies 5th Edition Chapter 9 Solutions Forecasting Performance Version 1.0 April 1, 2010 Chapter 9 Question 1 Procter & Gamble Annual report, 2009 Note 3 Supplemental financial information Selected components of current and noncurrent liabilities were as follows: Accrued and other liabilitiescurrent 2009 2008 Marketing and promotion 2,378.0 2,760.0 Compensation expenses 1,464.0 1,527.0 Based on a Web search: Accrued Gillette exit

Valuation Competitive Benchmarking: Henkel versus Reckitt Benckiser Support Documents Competitive Benchmarking: Henkel AG and Reckitt Benckiser plc Revenue growth 20052009 Henkel AG 2005 2006 2007 2008 2009 Organic growth 3.0% 4.6% 5.8% 3.0% 3.5% Currency fluctuation 1.0% 0.1% 2.7% 3.5% 2.4% Portfolio change 8.5% 0.5% 0.5% 8.6% 2.0% Reported revenue growth 12.5% 5.0% 2.6% 8.1% 3.9% Reckitt Benckiser plc 2005

Integrative Case: Henkel AG Competitive Benchmarking of Henkel AG Valuation Henkel AG versus Reckitt Benckiser plc Professor David Wessels 2010 The Wharton School of the University of Pennsylvania 3620 Locust Walk, Philadelphia, PA 19104 Integrative Case: Henkel AG Competitive Benchmarking of Henkel AG Presentation Overview Understanding a companys past is essential to forecasting its future. For that

Henkel Integrative Case Year European Household and Personal Care, 2009 2009 Ticker Company FYE Currency Revenues (in euros) Revenues Cost of sales SG&A Amortization Operating profit (EBITA) Inventory Accounts receivable Accrued payroll Accounts payable PP&E BEI-FF Beiersdorf 12/31/09 EUR 5,748.0 5,748.0 1,892.0 3,250.0 24.0 630.0 561.0 947.0 699.0 725.0 GIVN-VX Givaudan SA 12/31/09 CHF 2,669.4 3,959.0 2,355.0 1,084.0 176.0 696.0 633.0 831.0 92.0 322.0

Integrative Case: Henkel AG Cost of Capital Valuation The Cost of Capital at Henkel AG Professor David Wessels 2010 The Wharton School of the University of Pennsylvania 3620 Locust Walk, Philadelphia, PA 19104 Integrative Case: Henkel AG Cost of Capital The Cost of Capital at Henkel To value Henkel using discounted cash flow (DCF) and to evaluate Henkels

Henkel Integrative Case By Professor David Wessels, the Wharton School of the University of Pennsylvania This is a comprehensive case that analyzes and values Henkel AG, a $13 billion German consumer products company. The case builds upon material in Chapters 5 to 14 of Valuation: Measuring and Managing the Value

Henkel Integrative Case: Part I Who Is Henkel? Company Introduction Founded in 1876, Henkel AG & Co. KgaA is a 13.6 billion German-based consumer products company. The company is comprised of three primary businesses. The Laundry and Home Care segment (maker of Persil, Purex, Pril) is active in the

Henkel AG FInancial Statements Henkel AG Henkel AG Income statement Balance sheet EUR million 2005 2006 2007 2008 2009 Assets 2005 2006 2007 2008 2009 Net revenues 11,974 12,740 13,074 14,131 13,573 Liquid funds/marketable securities 1,212 929 1,440 338 1,110 Cost of sales (6,533) (6,963) (7,013) (8,190) (7,411) Inventories 1,232 1,325 1,283 1,482 1,218 Gross profit 5,441

Henkel AG Henkel AG Income statement Balance sheet EUR million 2005 2006 2007 2008 2009 Assets 2005 2006 2007 2008 2009 Net revenues 11,974 12,740 13,074 14,131 13,573 Liquid funds/marketable securities 1,212 929 1,440 338 1,110 Cost of sales (6,533) (6,963) (7,013) (8,190) (7,411) Inventories 1,232 1,325 1,283 1,482 1,218 Gross profit 5,441 5,777 6,061

Henkel Integrative Case Who is Henkel? Axis Value Axis Value 2005 11,974 2005 1,162 2006 12,740 2006 1,296 2007 13,074 2007 1,344 2008 14,131 2008 779 2009 13,573 2009 1,080 CAGR 3.2% CAGR 1.8% Sales Operating profit 11,974 12,740 13,074 14,131 13,573 0 4,000 8,000 12,000 16,000 2005 2006 2007 2008 2009 Revenues EUR million, 20052009 CAGR 3.2% 1,162 1,296 1,344 779 1,080 0 400 800 1,200 1,600 2005 2006 2007 2008 2009 Operating Profit (EBIT) EUR million, 20052009 CAGR 1.8% Henkel Integrative Case Who is Henkel? Performance

Integrative Case: Henkel AG Corporate Overview of Henkel AG Valuation Corporate Overview of Henkel AG Professor David Wessels 2010 The Wharton School of the University of Pennsylvania 3620 Locust Walk, Philadelphia, PA 19104 Integrative Case: Henkel AG Corporate Overview of Henkel AG Henkel AG Overview Henkel AG is an international consumer products firm headquartered in Dsseldorf, Germany, and

Reckitt Benckiser Reckitt Benckiser Income statement Balance sheet GBP million 2005 2006 2007 2008 2009 Assets 2005 2006 2007 2008 2009 Net revenues 4,179 4,922 5,269 6,563 7,753 Inventories 270 322 382 556 486 Cost of sales (1,886) (2,133) (2,197) (2,673) (3,089) Trade and other receivables 545 670 693 906 928 Gross profit 2,293 2,789