Issuu on Google+

Strictly Private and Confidential

This document is an extract of the full report www.e-valuation.us

ECONOMIC AND FINANCIAL ANALYSIS [Company XYZ] January 2011

New York - London – Miami - Madrid


Strictly Private and Confidential

www.e-valuation.us

INDEX

Page 1 RATIO ANALYSIS – Profitability

X

2 RATIO ANALYSIS - Productivity

X

3 RATIO ANALYSIS – Balance

X

4 RATIO ANALYSIS – Balance (In days of sales)

X

5 RATIO ANALYSIS – Solvency

X

6 Appendix I. e-Valuation Company Presentation

X

7 Appendix II. Financial Projections

X

8 Appendix III. Data provided by Company XYZ

X

9 Appendix IV. Glossary

X

10 Appendix V. e-Valuation’s References

X

11 Appendix VI. Contact Details

X


Strictly Private and Confidential

January 2011

www.e-valuation.us

Company XYZ – ECONOMIC AND FINANCIAL ANALYSIS

1. RATIO ANALYSIS – Profitability

PROFITABILITY 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.

Return On Assets (ROA) Gross Economic Profitability Return On Equity (ROE) Gross Financial Profitability EBITDA Margin Operating Margin over Debt Net Margin EBITDA Margin over Debt Financial Costs over EBITDA Financial Costs over Sales Financial Result / EBITDA Financial Margin Earnings Before Taxes / Equity

3

2005

2006

2007

2008

1.3% 2.8% 6.7% 14.6% 4.0% 4.8% 1.8% 5.7% 31.8% 2.2% 26.5% 1.1% 10.3%

(1.6%) 3.1% (12.2%) 23.6% 4.6% 4.3% (2.4%) 5.0% 50.5% 2.9% 4.5% 0.2% (11.6%)

(2.2%) (0.6%) (19.7%) (5.6%) (0.9%) (1.6%) (3.3%) (0.9%) (416.0%) 3.8% (448.5%) 4.3% (26.3%)

(3.6%) (6.1%) (17.0%) (28.5%) (12.7%) (11.8%) (7.5%) (11.0%) (48.3%) 5.4% (24.7%) 3.1% (23.5%)


Strictly Private and Confidential

January 2011

Company XYZ – ECONOMIC AND FINANCIAL ANALYSIS

1. RATIO ANALYSIS – Profitability

www.e-valuation.us

Return On Equity (ROE) 10 %

EBITDA Margin 6%

6,7 %

4,0%

4,6%

4%

5%

2%

0% (5%)

0%

2005

2006

2007

2008

(2%)

(4%)

(10%)

(15%) (20%)

2005

2006

2007 (0,9%)

2008

(6%)

(12,2 %)

(8%) (10%)

(17,0 %)

(12%)

(19,7 %)

(25%)

(14%)

(12,7%)

 Financial profitability is calculated as net income over equity and

 EBITDA stands for Earnings Before Interest, Taxes, Depreciation

refers to the profitability of the funds invested by the shareholders of the company.

and Amortization, and its margin is calculated dividing this magnitude by total revenues. A high EBITDA margin is positive given that it shows that operating expenses represent a small part of total revenues.

 Company XYZ’s ROE has experienced a negative evolution. In 2008 the ROE improves in relation to 2009 as a result of the the capital increase (if there is more capital, each share has to bear a lower amount of losses).

 Company XYZ´s EBITDA margin was very negative in 2008 which indicates a need of restructuring the company’s operating expenses in a more efficient way.

4


Strictly Private and Confidential

January 2011

www.e-valuation.us

Company XYZ – ECONOMIC AND FINANCIAL ANALYSIS

2. RATIO ANALYSIS - Productivity

PRODUCTIVITY 1. 2. 3. 4. 5. 6.

Productivity Staff Costs’ Growth Sales per Employee (€) Personal Margin Contribution Margin Average Staff Cost (€) Value Added per Employee (€)

5

2005

2006

2007

2008

114.3% 26.9% 123,888 23.5% 29,138 33,293

116.2% 28.4% 121,507 24.5% 29,733 34,548

93.9% 7.4% 110,826 27.1% 30,071 28,226

56.4% 1.5% 98,039 31.1% 30,516 17,213


Strictly Private and Confidential

January 2011

Company XYZ – ECONOMIC AND FINANCIAL ANALYSIS

2. RATIO ANALYSIS - Productivity

www.e-valuation.us

Value Added per Employee (€)

Average Staff Cost (€) 31,000

40,000 30,516

30,500

35,000

30,071

33,293

34,548 28,226

30,000 30,000 29,500

29,733

25,000

20,000

29,138

17,213

15,000

29,000

10,000 28,500

5,000

28,000

0,000 2005

2006

2007

2005

2008

2006

2007

2008

 Average staff cost indicates the average costs that the company has

 Value-added per employee is calculated as the total value-added

to bear for each worker, including social charges, extra payments, etc.

generated by the Company divided by the total number of employees. It is a measure of labor productivity and it has to be compared to the average staff cost. This ratio should always bee greater than the average staff cost.

 Company XYZ’s average staff cost has experimented a very reduced growth during the last years, which means that wages have increased at the same pace as the Consumer Price Index.

 Comparing both bar charts we can see that both in 2007 and in 2008 the average staff cost exceeded the value-added per employee, resulting in a substantial deterioration of the profit and loss account.

6


Strictly Private and Confidential

January 2011

www.e-valuation.us

3. RATIO ANALYSIS - Balance

BALANCE 1. 2. 3. 4. 5.

Company XYZ – ECONOMIC AND FINANCIAL ANALYSIS

Working Capital (€ 000) Working Capital Requirements (€ 000) Net Debt (€ 000) Balance Ratio Cash / Total Assets

2005

2006

2007

2008

1,698 9,907 10,046 1.42 0.35%

4,697 16,841 16,079 2.72 1.49%

3,315 18,940 17,625 2.99 0.55%

(1,494) 15,088 16,582 0.82 2.87%

Note 1: In this section we do not analyze or make conclusions about working capital, as such financial metric is analyzed together with liquidity ratios.

7


Strictly Private and Confidential

January 2011

Company XYZ – ECONOMIC AND FINANCIAL ANALYSIS

3. RATIO ANALYSIS - Balance

www.e-valuation.us

Working Capital Requirements (€ 000) 20,000 18,000 16,000 14,000 12,000 10,000 8,000

Net Debt (€ 000)

18,940

20,000 18,000 16,000 14,000 12,000 10,000 8,000

16,841 15,088

9,907

6,000 4,000 2,000 0,000

17,625 16,582

16,079

10,046

6,000 4,000 2,000 0,000 2005

2006

2007

2008

2005

2006

2007

2008

 Working capital needs are calculated by deducting the company’s

 A Company’s net debt is metric that shows a company's

current liabilities excluding short term debt, from its total liquid assets, excluding cash. Such financial metric puts in relation the amount that the company is financing to its clients and to other short term debtors, and the amount of financing that the company is obtaining from its short term creditors. If such metric is positive it indicates that in order to finance the company´s debtors, it will need to turn to bank and/or to equity financing.

overall debt situation by netting the value of a company's interestbearing debts with its cash and other similar liquid assets.

 Company XYZ´s net debt has increased since 2005 more than 18% per year, due to positive historical working capital needs and the deterioration of the profit and loss account.

 Company XYZ has historically registered positive and substantial working capital needs, which explains in a great part the pressure exerted on equity and the increase in the amount of debt.

8


Strictly Private and Confidential

January 2011

Company XYZ – ECONOMIC AND FINANCIAL ANALYSIS

Appendix I. e-Valora Company Presentation

www.e-valuation.us

e-Valuation offers financial consulting services to the private as well as to the public sector, and is specialized in company valuations. Among other services provided, we must highlight advisory services towards mergers and acquisitions, the elaboration of economic and financial studies, business and viability plans, and financial and business consulting services.

Since its foundation in November of 2000 by a team of experts coming from international investment banks, eValaluation has carried out more than 1,000 valuations of Spanish and foreign companies, from companies with less than 1 million Euros of turnover to companies with more than 500 million Euros of turnover, from start-ups to companies with more than 80 years of history, including services and industrial companies.

At the end of 2008, e-Valuation increased its professional team with members that have a wide experience in investment banking, coming from entities such as Bank of America or Rothschild, that have worked in projects belonging to every economic sector.

e-Valuation has got ISO 9001 Certification in Business Valuation Services, Corporate Finance Advisory Services and Elaboration of Valuation Multiples.

Its offices locations and contact details are the following :

e-Valuation Financial Services North America 14 Wall Street, 20th Floor New York City, New York 10005 United States of America

e-Valuation Financial Services Northern Europe One Canada Square, 29th Floor, Canary Wharf London E14 5DY United Kingdom

e-Valuation Financial Services Central and South America Brickell Avenue, 11th Floor Miami, 33131 United States of America

e-Valuation Financial Services Southern Europe c/ José Ortega y Gasset, 42 Madrid, Madrid 28006 Spain

20


Strictly Private and Confidential

January 2011

Company XYZ – ECONOMIC AND FINANCIAL ANALYSIS

Appendix IV. Glossary

www.e-valuation.us

Intangible Assets or Intangible Fixed Asset: Non-physical assets such as franchises, trademarks, patents, copyrights, goodwill, shares, securities and contracts (as distinguished from physical assets) that grant rights and privileges.

Tangible Assets or Tangible Fixed Asset: Physical assets (such as machinery, property, etc).

Amortization: Accounting procedure that gradually reduces the cost of value of an asset, tangible or intangible, (e.g. investments in research & development), through periodic charges to the profit and loss account in order to fix the costs during its estimated useful life.

Trading Comparable Companies: Those enterprises whose business value is obtained through methods that compare the company to be valued to similar enterprises. It is calculated dividing the market value of the last ones by a financial magnitude of the companies’ profit and loss account (such as net income, net sales, etc). When multiplying by the same enterprise’s magnitude of the company to be valued, we will obtain its approximate value.

EBITDA: EBITDA refers to operating profit before amortizations.

EBIT: Earnings Before Interest and Taxes.

Balance Sheet: Statement of a company’s financial position at a given point in time. Lists the assets of a company and how they have been financed. Total assets is equivalent to liabilities plus shareholders’ equity.

Cost of Supplies: Cost related to the production, supply, transport and storage of raw materials and the materials used in the production process. In this section can also be included the cost of outsourcing services to provide the customer.

Profit and Loss Account: Financial statement that shows the expenses and revenues generated during a period of time.

Weighted Average Cost of Capital: Calculated as the cost of equity * (equity value / firm value) + cost of debt * (net debt / firm value) * (1- corporate tax). It is a discount rate typically used to discount future free cash flows to the moment of valuation.

Discounted Cash Flows (DCF): Company’s valuation method based on the idea that the value of a company is related to what it is able to generate in the future. It is calculated as the future cash flows of a company, discounted back to present value using an appropriate discount rate.

Net Debt: Total debt of the company minus any cash or liquid funds that the company has but does not require for its operating activity. 32


Strictly Private and Confidential

January 2011

Company XYZ – ECONOMIC AND FINANCIAL ANALYSIS

Appendix V. e-Valuation’s References

www.e-valuation.us

2008 - 2009

Advertising

Ecological and Recycling

Logistics

Renewable Energies

Automotive

Editorial

Media

Restaurant

Aviation

Education and Training

Metallurgy

Retail

Biotechnology

Electronics

Quality Consulting

Software and Data Security

Brokerage and Financial Services

Engineering and Machinery

New Techonlogies

Sports

Building Materials Manufacturer

Entertainment and Leisure

Other Building Specilialists

Steel

Business Services

Forestry

Outsourcing Services

Technology

Construction and Contracts

Healthcare

Production and Distribution

Telecommunicaciones

Construction and Materials

Insurance

Public Administration

Textiles

Construction Related Services

Internet

Rail

Transportation and Logistics

Consulting, Audit and Advisory

Local TV

Recreation

Quemical Industry

NOTE: For confidentiality reasons clients´ name is not mentioned.

34


Estrictamente Privado y Confidencial

JUNE 2010

Company XYZ – ECONOMIC AND FINANCIAL ANALYSIS

Appendix VI. Contact Details

www.evalora.com

e-Valora Financial Services North America

e-Valora Financial Services Northern Europe

14 Wall Street, 20th Floor New York City, New York 10005 United States of America

One Canada Square, 29th Floor, Canary Wharf London E14 5DY United Kingdom

e-Valora Financial Services Central and South America

e-Valora Financial Services Southern Europe

111 Brickell Avenue, 11th Floor Miami, 33131 United States of America

c/ José Ortega y Gasset, 42 Madrid, Madrid 28006 Spain

35


Economic-Financial Study