FINANCIAL STATEMENT
REVLON
ANALYSIS
Issues 18, 17, 16
Released January 2020
AVON
Featured by: RingSa Yu – RA101704
Zainul Musthofa – RA6087112
Elio Nguyen – RA6087471
CONTENT
01
02
ZAIN
PLANET BEAUTY BRANDS – REVLON & AVON
ZAIN
THE INDUSTRY OF
BEAUTY
ELIO NGUYEN
FINANCIAL STATEMENT ANALYSIS
03
04
05
ELIO NGUYEN
THE REACTIONS OF REVLON AND
AVON
ELIO NGUYEN
2019 – IMPROVE OR EVEN WORSE?
06
REFERENCES
REVLON
PLANET BEAUTY BRANDS – REVLON &
1932 - 1975
Founded in New York
City on 1 March 1932.
First product is a new
type of nail enamel.
REVLON’
S History
Firstly, products were
sold in department
stores
and
pharmacies.
Became a multimilliondollar company, in six
years.
In November 1955,
Revlon’s IPO was $12
per share, but it
reached $30 per share
within 8 weeks.
1957-1973, conducted
many acquisitions.
1975 - 1985
The acquisition with
Lewis-Howe
Company
pushed
sales to reach over
$1 billion in 1979.
In the mid-1980s,
Estée Lauder took
Revlon
market
shares,
dropped
from 20 percent to
10
percent
of
department
store
cosmetics sales.
Conducted a lot of
acquisitions later to
recover the business.
In 1989, the first
companies said no
with animal tests.
1985 Present
On November 5, 1985,
Revlon was sold to
Pantry Pride.
In 2011, Revlon was
found to test their
cosmetics on rabbits
and other animals.
At the end of 2013,
Revlon announced that
it will exit the Chinese
market within Revlon
segment.
On June 16, 2016, the
acquisition
with
Elizabeth Arden was
announced
and
completed
on
September 7, 2016.
Spread messages of
self-love and
inclusivity
New Campaign,
Live Boldly
LIVE
BOLDLY
“I am bold, I am
brilliant, I am
Inspire women to
recognize their
brilliance and beauty
and to continue to be
a vessel for positive
change
AVON
PLANET BEAUTY BRANDS – REVLON & AVON
AVON’S
History
INCEPTION
Established in September
1886.
First
product
was
perfumes.
Initial
name
was
California
Perfume
Company.
Trademark application for
AVON
granted
on
August 30, 1932.
EXPANSIO
N business in over
Doing
ACQUISITION
Purchased
Silpada – a
S
100 countries.
direct seller of silver
jewelry, in 2010 for $650
millions.
Brazil is
market.
the
largest
Entered Chinese market
in 1990 and got license
for direct selling in 2006
88% of Avon revenue in
2013 came from oversea
market.
Avon’s
preferred
stocks were paid by
Cerberus
Capital
Management, in March
2016. Ceberus is having
an almost 17% in Avon
Products.
RECENT
In 2014, global
HISTORY
sales
had fallen.
In 2016, New Avon
LLC was established,
which
cover
U.S.,
Canada and Puerto
Rico Markets.
Moved headquarters to
London in the United
Kingdom.
Direct sell company
Empowering
Advertising
to
Recruit
Representatives and
Ignite
Brand
Passion
celebrate the
flexibility, freedom
and financial
chances of
becoming an Avon
Representative.
THIS IS A
BOSS LIFE
Earn up to
40% on the
product
you
sold.
COSMETIC INDUSTRY
ANALYSIS
Statistic Facts about
Cosmetic Industry FACT
7
01
FACT
02
FACT
03
FACT
04
FACT
05
FACT
06
FACT
07
The global beauty industry is worth over $500 billion.
Women in the USA spend around $3,000 on cosmetics annually.
88% of consumers say they would be more loyal to a
socially responsible company.
82% of women believe that social media drives trends.
4/5 American women say they regularly use fragrance
products
One of the 5 emerging trends in the cosmetics industry in
2017 was a shift towards natural products.
48% of Millennials say they would purchase products with
CBD oil for skin care.
TOP
FACTORS
FACT
01
CHANGING LIFESTYLE
RISING GDP OF ALL REGIONS
People have now become more and
After recession in 2007-2009, there
IMPACTING
GLOBAL
COSMETICS
more conscious regarding their daily
are an increasing overall GDP and
INDUSTRY
style to step up their overall
economies in whole regions. This
personality. It is considered as a very
condition leads to the increasing of
crucial role in order to enhance one’s
the awareness of the tertiary needs,
physical features. Men are also
including buying luxury goods such as
fascinated in cosmetics more than in
premium cosmetics.
the past by using daily cosmetics
products mainly fragrances and
THE
USE
OF
NATURAL
deodorants.
INGREDIENTS
The rising trend of the use of natural
ingredients in cosmetics is recently
considered as one of the main factors
of the increasing cosmetics market.
More and more people aware with the
environment issues nowadays. And
using herbal cosmetics products will
minimize the chances of any possible
negative side effects.
FACT
02
FACT
03
FINANCIAL STATEMENT
ANALYSIS
REVLO
N
CoGS
2018
2017
2016
43.56%
42.74%
39.29%
The percentage of CoGS kept increasing year by year.
Company might be in struggle of production cost control.
Negative Effect
SG&A Exp
Gross
Profit
Positive Effect
2018
2017
2016
50.04%
48.70%
44.46%
The percentage of SG&A kept increasing.
Launched new product named Flesh it 2018, more
money must be spent.
2017
2017
2016
56.44%
57.26%
60.71%
Result
As this is the third year of M&A with Elizabeth Arden (7
September 2016), the percentage of this account was
decreasing noticeable from 2017 to 2018
M&A Costs
2018
2018
2016
6.89%
5.56%
4.51%
Interest
Exp
The percentage of Interest expenses kept increasing.
VERTICAL ANALYSIS
2018
2017
2016
0.54%
1.96%
1.85%
Net Loss
2018
2017
2016
(11.47%)
(6.80%)
(0.94)
Negative income.
It leaded to negative profit margin.
Company is running loss.
The losses kept increasing from 2016 to 2018
HORIZONTAL
ANALYSIS
Revenue
Interest
Exp
M&A
Costs
2017
2016
112.00%
79.83%
26.29%
Interest Expenses kept increasing as company owned more
debts.
2018
2017
2016
33.97%
40.71%
21.92%
Revenue decreased in 2018.
The losses in revenue is related to the re-acquisition
of some rights connected to the brand Elizabeth
Arden.
SG&A
Exp
2018
2018
2017
2016
42.70%
45.87%
15.40%
Net Loss
2018
2017
2016
(624.42%)
(426.56%)
(139.04%)
From 2016 to 2017, the rising in loss was due to the
increases of SG&A Expenses, M&A Costs and Interest
Expenses.
From 2017 to 2018, the main reason was the decrease of
Revenue and the increase of Interest Expenses.
SG&A suddenly increased in 2017 due to
the launching of new product – Flesh.
2018
2017
2016
73.75%
561.25%
440.00%
M&A expenses increased dramatically in 2016 and 2017
as the first two year of acquihiring Elizabeth Arden.
This account decreased in 2018
REVLO
Financial Leverage Ratio
Industr
y
2018
2017
2016
Debt Ratio
0.48
1.35
1.25
1.20
D/E Ratio
0.37
-3.85
-4.97
-5.92
Equity Multiplier
1.37
-2.85
-3.97
-4.92
Interest Coverage Ratio
-8.91
-0.48
-0.15
1.48
0.52
0.89
2.65
FINANCIAL RATIOS
Liquidity
Ratio
Industr
y
2018
2017
Current
Ratio
2.93
1.07
1.23
1.59
Quick Ratio
1.87
0.60
0.69
0.99
Cash Ratio
1.76
0.08
0.09
0.26
The
decrease of those ratios73.40
was due 210.90
to the
NWC
increase of Current Liabilities.
Current portion
of Long-term
debt
348.10
2017
170.20
REVLON
33.43
21.15
9.63
Interest
The main reasons
forBearing
these problems:
Debt/EBITDA
Company owned
too much debts, this leaded to the increase of interest.
Revlon was running losses; they didn’t have enough money to cover their increasing
debt.
CCC+
415.00
The main reason for the increase of current liabilities
was the increase of current portion of long-term debt.
2018
Cash Coverage Ratio
2016
Operating Efficiency
Ratios
Industr
y
2018
2017
2016
Days’ Sales In Inventory
95
170.97
157.85
168.99
108.52
106.81
118.16
61.39
60.27
66.29
2016
Days Payable Turnover
18.10
Days’ Sales in
Receivables
52
2018 Turnover
2017
20161113
Days Assets
2018 414.21
2017 472.83
2016
429.37
CoGS
1117.0
1151.3
917.1
Sales
2564.5
2693.7
2334.0
Inventor
y
523.2
497.9
424.6
AR
431.3
444.8
423.9
Assets
3016.8
3056.9
3023.5
AP
332.1
336.9
296.9
2018
(170.8)
2016
(139.3)
120.1
2016 - 2018, Net Cash used in Operating Activities
dropped dramatically. The main reason for this problem:
Net Loss
2018
2017
2016
(294.2)
(183.2)
(21.9)
2018
2017
Net Cash used
(57.2) (108.3)
in Investing
Activities
2018
2017
2016
CASH
FLOW
REVLON
Net Cash
used in
Operating
Activities
2017
Net Cash used in
Financing
Activities
2017
2016
233.1
136.9
829.9
2018
2017
2016
Net Long – Term
248.9
139
899.9
Debt
In 2016, Revlon borrowing much debts. It passed burden
to upcoming years to payback the debt. This year has an
event of acquihiring Elizabeth Arden.
Dividend
2018
2017
2016
0
0
0
This company didn't pay any dividend in three years.
(1087.5)
2016
Acquisitio
0
0
(1028.7)
n
Revlon started
acquihiring Elizabeth Arden in the end of
November 2016, they spent a lot of money in this kind of cash
outflows.
Capital
Expenditures
2018
2018
2017
2016
(57.2)
(108.3)
(59.3)
In 2017, as Revlon targeted to open total 100 stores in India, they
had to spend a lot of money in capital expenditures for plant,
property, or equipment.
FCF per
Share
2018
2017
2016
(4.32)
(4.71)
1.16
(0.07) is a (0.05)
0.05
FCF OCF/Net
per share, if it is negative,
bad sign for company.
It won'tSales
have enough money to pay dividend for investors.
The decreasing and turning into negative of this ratio is
not a good sign. It showed that the company didn't
create any money from sales, even lose the money.
ROA
Industry
2018
2017
2016
(42.40%)
(9.75%)
(5.99%)
(0.72%)
Negative ROA was because of net loss.
The rising in losses made ROA decreasing year by year.
Main reasons:
Revlon was going through M&A term.
The competitions came from Estee Lauder and some small
online companies which made the losses in revenue in
2018
Industry
2018
2017
2016
Profit Margin
(11.47%)
(6.80%)
(0.94%)
Total Assets
Turnover
REVLON
0.85
0.88
0.77
Equity Multiplier
(2.85)
(3.97)
(4.92)
RATE OF RETURN & DUPONT
ANALYSIS
ROE
(80.00%
27.84%
23.78%
3.56%
The dramatical change of ROE
) was due to the strong decrease of Profit
margin. The positive ROE is from negative Profit Margin and negative
Multiplier.
Company was running losses on their borrowings.
CoGS
2018
2017
2016
42.43%
38.55%
39.47%
The increase of CoGS in 2018 was due to high material and logistics
cost.
2018
2017
Income
Tax
2018
2017
2016
2.33%
1.76%
2.18%
High income tax was due to the “bring money back” program.
2016
51.41%
54.53%
52.87%
SG&A
Exp
SG&A Expenses
dropped in 2018. Avon started launching their cut back
campaign. Avon was closing offices and cutting jobs, all to "fuel growth".
Especially, they will focus less on U.S and open worldwide.
AVON
VERTICAL
ANALYSIS
Operating
Profit
2018
2017
2016
4.22%
4.92%
5.66%
2018
2017
(0.39%) 0.35%
Net loss
2016 (Income)
– 2017, Net income increased.
2017 – 2018, Net income dropped.
2016
(1.88%
)
AVON
HORIONTA
L
Sales
ANALYSI
S
2018
2017
2016
(9.56%)
(7.22%)
(7.19%)
Income
Tax
2018
2017
2016
(84.14%
)
(87.71%)
(84.79%)
Why Avon had high income taxes?
It is because they bring back oversea money to cover their slum in U.S.
In 2013, Avon started bringing back their oversea money to (625 million
USD).
This account decreased in recent years.
The gradually dip in sales was due to the fewer
representatives to sell its products in some of its main
markets, with Europe, Middle East and Africa.
CoGS
2018
2017
2016
(3.33%)
(9.90%)
(7.70%)
Overall, in comparison with 2015, CoGS dropped.
There was an increase from 2017 to 2018
2018
(16.17%)
SG&A
SG&AExp
dropped.
2017
2016
(8.78%)
(11.53%)
Avon was running 3 years cutting cost campaign.
Losses from discontinued
operations
2018
2017
2016
(100%)
(100%)
(95.99%
)
In 2015, Avon sold 80.1% of that unit to turnaround expert and private
equity firm Cerberus for $170 million. This caused a huge loss in this part
in 2015.
2018
2017
(98.10%) (101.75%)
Net Income
(losses)with 2015, Avon income was better.
In comparison
2016
(90.63%)
2017 – 2018, Income decreased.
The main reasons were the dropping of sales and relative high
CoGS. Another main factor affected Avon's net income was
Income Tax.
Liquidity
Ratio
Industr
y
2018
2017
2016
Current
Ratio
2.93
1.18
1.43
1.34
Quick Ratio
1.87
0.82
1.05
0.95
Cash Ratio
1.76
0.36
0.57
0.44
Industr
y
2018
2017
2016
Debt Ratio
0.48
1.13
1.07
1.11
D/E Ratio
0.37
-8.44
-15.98
-9.73
Equity Multiplier
1.37
-7.44
-14.98
-8.73
Interest Coverage Ratio
-8.91
1.75
2.00
2.37
2.55
2.81
3.20
Cash Coverage Ratio
The decrease of those ratios was due to the decrease of Current
265.50 673.70 506.60
Assets. NWC
The main reason for the decrease of current
assets was the decrease of cash and cash
equivalent.
2018
Cash and Cash
equivalent
Held for sale assets
532.7
2017
881.5
FINANCIAL RATIOS
Bearing
Avon wasInterest
owning more
debt than assets.
4.65
Their operating
profit
kept
Debt/EBITDAdecreasing year after
year.
Liabilities has shown a noticeable decrease in 2018. 2018
BB-
4.80Total4.33
Liabilities
3414.7
2017
3944.8
2016
3810.4
2016
Operating Efficiency
Ratios
Industr
y
2018
2017
2016
Days’ Sales In Inventory
95
83.68
99.10
94.83
126.07
137.86
124.22
22.91
29.20
29.29
654.4
2018
2017
2016
65.6
0
1.3
Avon was planning to restructure their organization.
Stop some operations made this account to increase a lot in 2018.
ANALYSI
Financial Leverage Ratio
Days Payable Turnover
Days’ Sales in
Receivables
52
2018
2017
20161113
Days Assets
Turnover
CoGS
2364
2203.3
2257
Inventor
y
542
598.2
586.4
AP
816.5
832.2
768.1
2018 236.15
2017 218.25
2016
197.20
Sales
5571.3
5715.6
5717.7
AR
349.7
457.2
458.9
Assets
3010
3697.9
3418.9
Net Cash used in
Operating
Activities
2018
2017
2016
92.7
271.2
128
2017 - 2018, Net Cash used in Operating Activities dropped
dramatically.
Net Losses
2018
2017
2016
-21.8
20
-107.4
Provision for
obsolescence
2018
2017
2016
113.5
36.7
36.5
The structural reset of inventory processes includes a 15% reduction in inventory
levels. The structural reset resulted in an incremental one-off inventory
obsolescence expense of $88 million recognized at December 31, 2018.
2018
2017
2016
Net Cash used in
Investing
-93.4
-69.6
-82.7
Activities
The main
reason for the noticeable difference in 2017 is
Distribution from New Avon
LLC
CASH FLOW
FCF per Share
2018
2017
2016
0
22
0
Capital Expenditures
2017
2016
-94.9
-97.3
-93
2017
2016
(0.005)
0.395
0.080
AVON
FCF per share of Avon was low as it was in restructuring.
In 2016, they started moving headquarter to UK.
In 2017, the operating cash flow is increased as the revenue started increasing.
In 2018, Sales dropped because of cutting jobs and closing some operations
Avon has 22% shares in New Avon LLC. In 2017, New Avon performed
well, that's why there was a distribution from New Avon account in 2017.
2018
2018
OCF/Net
Sales
2018
0.017
2017
0.047
From 2017 to 2018, this ratio decreased noticeably,
the reason is because of the dramatically decrease
of operating cash flow
2018
2017
2016
Net Cash used in
Financing
-306.9
0
137
Activities
In 2018, Cash outflow
in Financing Activities was very high compares to previous
years.
Net Long-Term
Debt
2018
Dividend
2018
2017
2016
-289.1
-2.9
-224.3
2017
2016
0
0
0
CASH FLOW
Avon has suspended dividend payment since the first quarter of 2016
Repurchase of
Common
Stock
2018
-3.2
2017
-7.2
This is under the repurchase program of Avon
2016
-5.6
The
big amount repurchasing
of common stock.
Avon buy back stock to send a positive signal
that the market is undervalue their stock.
Avon have started their repurchase program
since 1997 and kept continue this program until
now
Sales of
series C
convertible
preferred
stock
2018
0
2017
0
Treasury
Stock
2018
-4602.3
2017
-4600
2016
-4599.7
On March 1, 2016, the Company issued and
sold to Cerberus Investor 435,000 shares of
newly issued series C preferred stock
AVON
ROA
Industr
y
2018
2017
2016
-42.40%
-0.72%
0.54%
-3.14%
The negative ROA mainly came from the negative net income.
They spend too much to pay tax on foreign exchange.
In 2018, the revenue decreased.
The restructuring program left a lot of impact on Avon revenue.
Industry
2018
2017
2016
Profit Margin
-0.39%
0.35%
-1.88%
Total Assets
Turnover
1.85
1.55
1.67
Equity Multiplier
-7.44
-14.98
-8.73
5.39%
-8.10%
27.43%
ROE
-80.00%
The dramatical change of ROE was due to the fluctuation of Profit
margin and Equity Multiplier.
The positive ROE is from negative Profit Margin and negative Multiplier.
Company was running losses on their borrowings.
REVLON
UPGRADE STRATEGY
Focusing on innovation.
Releasing new products.
Launching American Crew in key
European Airports, expanding
travel retail segments.
THE
ACTIONS
DIGITAL GROWTH
Establishing relations with online
retailers.
Focusing on its own website.
Improving its content by building strong
internal capabilities.
HANDLE RISKS
Improving report structures and
business processes.
Focusing on China Market, as it grew
54% in 2018.
Decreasing debts.
AVON
THE
ACTIONS
IMPROVING ITS DIRECT SELLING BUSINESS.
Conducting Cost – Saving Program.
Investing in commercial and IT infrastructures where
its cash – making exceeds the investment.
Reducing debt level.
Stopping “bring cash back home” program.
RENOVATING AVON.
Improving its competitiveness.
Digitizing Avon Brand.
Offer trendy and new products.
IMPROVING ECOMMERCE AND
CONTROLLING UNEXPECTED
COSTS
Improving technologies to make the
reductions in delays, high efficiency,
using resources effectively and
improving Representative skills.
“OPEN UP AVON”
Revenue
2019
2018
% Change
1720.2
1822.9
-5.63%
sales declines - retailers reducing inventory and overall category
declines.
CoGS
2019
2018
% Change
750.7
807.2
-7.00%
REVLON
NINE-MONTH END 2019
Gross Profit
2018
2017
% Change
969.5
1015.7
-4.55%
2018
2017
% Change
-183.50
-223.90
-18.04%
The decrease of CoGS was larger than the decrease of Revenue.
SG&A Exp
2019
2018
% Change
848.6
967.7
-12.31%
Lower SG&A expenses - reduce overhead costs and marketing
expenses
M&A Costs
2019
2018
% Change
0.7
12
-94.17%
M&A Costs reduced
Net Loss
here is a good sign for Revlon as in 9 months-end 2019, the loss is less
serious.
Revenue
CoGS
SG&A
Exp
Interest
Exp
2019
2018
% Change
3549.7
4169.6
-14.87%
2019
2018
% Change
-1482.7
-1657.8
-10.56%
2019
2018
% Change
-1869.4
-2145.6
-12.87%
2019
2018
% Change
-95.9
-102
-5.98%
AVON
NINE-MONTH END 2019
Income
Tax
2019
2018
% Change
-78.2
-136.5
-42.71%
2019
2018
-29
0
Loss income from
discontinued operations
The start of 2019, Avon completed the sale of China
manufacturing operations to TheFaceShop.Co
Net income
2019
2018
% Change
54
55.7
-3.05%
REFERENCES
1. https://www.revlon.com/
2. https://www.avon.com/
3. https://loudcloudhealth.com/beauty-industry-statistics/
4. https://www.alliedmarketresearch.com/cosmetics-market
5. https://www.marketwatch.com/press-release/cosmetics-products-market-2019global-industry-trends-share-size-demand-growth-opportunities-industry-revenuefuture-and-business-analysis-by-forecast-2023-2019-07-11
6. https://www.prnewswire.com/news-releases/global-cosmetics-market-to-2025-
300910555.html
7. https://www.nasdaq.com/articles/avon-announces-long-term-financial-targetsgrowth-strategy-2018-09-24
8. https://www.gurufocus.com/news/835313/why-a-recovery-could-be-ahead-forrevlon
TURNITIN
REPORT
THANK YOU
FOR READING
OUR MAGAZINE
HAPPY HOLIDAY