07 05 F&B

CREARE

Creating Value in the

FOOD & BEVERAGEA research on the main European Companies

2015

Executive Summary

THE ECONOMIC ENVIRONMENT

THE RESEARCH SAMPLE

HISTORICALPERFORMANCE: PEOPLE-BASEDVIEW

MARKET POINT OF VIEW: SUSTAINING PERFORMANCE OVER TIME

• Theglobalmacroeconomicscenario• TheEuropeancontext• TheFood&Beveragesector

• Theresearchactivity

• ValueperformancefromaPeople-Drivenpointofview

• TheFood&Beveragesectoranalysis

• Themarketandsharepricesimpli-citexpectations

• ImplicitROICandgoodwillsustai-nability

• Themarketanditschallenges

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Glossary

HISTORICAL PERFORMANCE:THE TRADITIONAL APPROACH

HISTORICALPERFORMANCE: EVA® VIEW

OUR ‘HOT TOPICS’

ACTIVE VALUE ADVISORS.

• Brewers• Distillers&Vintners• Fishing

• Theimportanceof‘Quantity’and‘Quality’• ThemanagerialleveragetocreateValue• StructuraldifferencesamongtheFood&

Beveragesub-sectors• Championsand“Falling”Angels• ValuecreatedandMarketAppreciation

• RevenueManagement• Itstimetomanagechangeandrun

effectiveorganizations• FundamentalsofPeople-Driven

business• QuantitativeEasing• BigDataChallenge

• AboutActiveValueAdvisors.• ShareholderValue• CustomerValue• PeopleValue• CorporateValue

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Executive Summary

Persisting uncertainity and consequent relatively low consumerspendingadverselyaffectedtheglobalmacroeconomicscenarioalsoduring2014,leadingtogrowth weaker than expected.

Indeed,theWorldGDPGrowthendyearvalueisveryclosetothatof2013,nonetheless,positive signals come from the European Mar-kets,whichGDPGrowthishigherthanthatofthepreviousyear.

AsfarastheEuropeanMarket,theIMFforecastshighlight,inlinewiththehigher2014(vs2013)GDPGrowth,agrowingtrendthatwillkeepfeaturing thewholeEuropeanUnionuntill 2016.Such forecastsarecertainly affected by important economic and political factors (i.e.Lower oil prices; Lower interest rates; the “Quantitative Easing”).

It is important to understand the key drivers of

Value: “Quality” and “Quantity”

In the following pages we investigate these companies’ perfor-mances according to a traditional approach, thus reporting keydataandfiguresandprovidinganinitialclearideaaboutthesector.

Hereafter,aless traditional approachisused,theso-calledEVA® view.Coretosuchaview,istheunderstandingofthekeydriversofValue,“Quality”and“Quantity”.Thisrelativelynewapproachpro-videsclearerandmore exhaustive indications about the compa-nies and sector’s performances.

ThisresearchactivityinvestigatestheimpactofsuchaframeworkontheperformancesoftheFood&Beverageindustry.This sector dynamics have indeed been shaped by socio-economic factors.Itisthusimportanttounderstandthewayinwhichthecompaniesinthesectorwillfacefuturechalleng-esandopportunitiesrelatedtothegrowingdemandandtheconsequentcommodityprice increase.Eventually,acentralroleinthefutureoftheFood&Beveragesectorisrepresentedbytheconsumers’ changing eating habitsandbythenew “green” and “go local”(km-zero)trends.

Theresearchactivityinvolvesabasketof50 European companiesintheFood & Beverage sector,whichhasbeen furthersubdivided into the following6differentsub-sectors: “Brewers”, “Distillers&Vintners”,“SoftDrinks”,“Fishing”,“FoodProducts”and“Dairy”.

Decrease in oil prices;

“Quantitative Easing”; Lower

Interest Rates

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Thewholeanalysishasadopteda“MarketView”,sincewebelievethatpricesalwaysrevealconsum-ers’ judgmentswithwhichisfundamentaltoconfront.Moreover, it isvaluableto“read”acompany’spreformanceusingtheMarket and the prices as starting points.Thefollowingpagesprovideasnap-shotovertheCapitalMarketjudgementsontheleadingEuropeanCompanies,atApril2015.Inaddition,theyprovideadetailed “reading” of the 2014, and expected, Value Creation performances of the basketofcompaniesconsidered.

Finally,besidestheValueCreationapproachbasedonquantityandquality(return)ofInvestedCapitalwefocusedonamorePeople oriented approach,theso-calledPeople-Based view.ThisapproachideallysubstitutesCapitalwithHuman Capital,thusgeneratingvaluableinsights.WebelievethattheunderstandingofthePeople-Basedviewisfundamentalinordertokeep Value creation sustainable and durable over time.

Inlightoftheresearchoutcomes,whatcanfirmsdotoreinforceorenhancetheirValueCreationPerfor-mances?

Toanswerthisquestion,ActiveValueAdvisorswillprovideitsviewaboutsomerecent“HotTopics”thatcompaniesindifferentindustriesandsectorshavetodealwithwhenfacingchallengesrelatingtoprof-itability, efficiency and organizational flexibilityorwhentheyneedtoexploitthenewtechnologicaldevelopmentinthemost profitable way(i.e.BigData,CloudComputing,BusinessIntelligence).

A People oriented approach is

fundamental for Value creation sustainability

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The economic environment

The global macroeconomic scenarioThe2014globaleconomicscenariohasbeencharacterizedbypersisting uncertainty andconse-quentrelativelylowconsumerspendingandgrowth weaker than expectedandwidelydifferentiatedamongthedifferenteconomicsectors.Duringthefirstsemesteroftheyear,theWorldEconomywasindeedaffectedbyaslowdowninoutputgrowthandinternationaltrade.Aftersuchadecelerationthe economic activity re-started growing slowly,reachingend-yearvaluesveryclosetothoseof2013(+3,41%in2013,+3,39%in2014)1.Morespecifically,thisistheresultofabalancingbetweenaslightgrowthimprovementinAdvancedEconomies(+1,37%in2013,+1,80%in2014)andaslightgrowthdecreaseinEmergingMarkets(+5,0%in2013,+4,60%in2014).

IMF forecasts for thenext threehalfyearssuggest a possible global improvementandhighergrowthinbothAdvancedEcon-omiesandEmergingMarkets.

This predicted growth improvement is di-rectlyrelatedtoeconomicandpoliticalfac-torssuchasthedecrease in oil prices,low inflation rates, and important decisionssuchas theQuantitative Easing, leadingtolower interest rates.Nonethelessacen-tral aspect to consider is thegrowth dif-ferential between the U.S. and the other Advanced Economies,which,throughtheeffect of opposite monetary policies, hasled to thestrenghteningof theU.S.Dollarand which, eventually could translate intorelevant improvement of the Trade Bal-ance,especiallyinEuropeanCountries.

(GDP Growth %) 2013 2014 2015f 2016f

European UnionEuro areaAustriaBelgiumFinlandFranceGermanyGreeceIrelandItalyLuxembourgNetherlandsPortugalSpainDenmarkNorwaySwedenSwitzerlandUnited KingdomEmerging Europe

0,12 1,40 1,85 1,95-0,46 0,88 1,45 1,650,23 0,34 0,86 1,570,28 1,04 1,34 1,50-1,32 -0,11 0,83 1,420,29 0,36 1,16 1,490,21 1,61 1,62 1,67-3,90 0,77 2,52 3,690,17 4,78 3,87 3,28-1,70 -0,42 0,49 1,101,99 2,91 2,52 2,31-0,72 0,88 1,56 1,56-1,61 0,90 1,60 1,54-1,23 1,39 2,46 2,05-0,49 0,99 1,64 2,010,74 2,24 0,97 1,551,28 2,14 2,66 2,831,94 1,99 0,82 1,221,67 2,55 2,72 2,332,86 2,78 2,93 3,21

Figure1.GDPGrowthinEurope

The European contextInlinewiththepredictedconsequencesoftheglobalmacroecomicforcesontotheEuropeanEcono-mies,theIMFforecastshighlightagrowing trend, between 2014 and 2016,inTheEuropeanUnionasawholeandforthemajorityofEuropeanAdvancedEconomies.Thisgrowingtrendwillbeevenmoreevidentintheso-calledEmergingEurope(+2,78%in2014,+3,21in2016).

1DataWEOInternationalMonetaryFund-WorldEconomicOutlookDatabase,April2015

91,1 94,6 89,6 97,7112,7 118

127,2

161,4

201,4

160,3

188

229,9 213,3209,8

201,8

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

The Food & Beverage sectorThedifficulteconomiccontextofthelastdecadealsoaffectedtheperformanceofthecompaniesintheFood&Beveragesector.Furthermore,duringthepastdecades,thissectorhasbeenexperiencingsocio-economicchanges,whichhavebroadeneditschallenges:theconsolidation of global major players,theopening of new emerging markets,theevolution of tastes and the technological de-velopment,havealltogetherboostedanalwayswiderproductdiversification.Thoughthesedynamicsmightbecommontomanyothersectors,thefollowingfeaturestypicallycharacterizeandaffecttheFood&Beverageindustry:

Commodity Price: thefirstrelevantissuetoconsideriscertainlythehigh volatilityofthecommodi-typrices.Theeconomicanddemographicgrowthofthelasttwentyyears,andespeciallythatoftheEmergingCountries, hasboosted theaggregatedemand,whilst thewealthgrowthhas influencedsuchademandundermorequalitativeaspects,i.e.orientingthemiddle classes consuption towards more complex and richer foods(meatandfishfromintensivefarming)whichrequiretheexploitationofmore resourcesandimplyhigher costs.Ontheotherhand,the offer is geographically and tech-nically limited.Nonetheless,thegrowingurbanizationhasreducedthespaceusedforagriculture,fur-therincreasingthegap between demand and offer.Theendresultwasthusthehugepriceincrease

registeredduring2008and2011.

Figure2.FAOFoodPriceIndex

The strenghtening of the U.S. Dollar

will be fundamental for European F&B

firms

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Eating Habits: havinglowpurchasing power,consumersareincreasinglylookingfordiscountsandspecial offers,untyingthebuyingdecisionfromconsiderationsabouttheproducts’brandandhigh-lightingavastimprovementareaforwhatconcernsproducts’pricing strategies.Ontheotherhand,whentheimplementationofpricingstategiesisnotpossible,increasing the value perceivedbycus-

tomers becomes fundamental. Itis along with this last considera-tion that the “Bio Movement” isgainingincreasingsuccess.

Carbon Footprint: nowadays,theundergoingchangeineatinghab-itsissymbolizedbytheclashbe-tween“healthy food”and“junk food”,nonethelessitispresuma-blethatinthenearfuture,suchachangewillbemoredeeplylinkedto sustainability themes. It is inthis fashionthat theorientationof

consumerstowardslocallyproducedfoods(km-zero)isbecominganimportanttrend.However,con-sideringbothethical issuesrelatedtothesafeguardingofdevelopingcoutries(heavilydependingonexports)andtechnical issueslinkedtothelimitedpossibilityoffindingawiderangeofproductslocally,it is not clear if, and how, producers will be able to adapt to the “go local” trend.

Tougher Regulation: especially following the recent development ofTTIP Trade Agreements, it isnecessarytoprovidesolutionstothedebatedthemesofproperandhealthynutritionandsustainability.Thissolutionmightcomefrommandatory labelsreportinginformationaboutthenutritionalvaluesoffoodproductsandtheenvironmentalimpactrelatedtotheirproduction.Thismightthereforerepresentavaluableopportunityforthoseproducers,whichprovidingashared standardforthecomputationofthe“carbonfootprint”,shouldberewardedbyconsumers.

Retailers & Private Label: anincreasing varietyofproductsandproducersarenowavailabletocon-sumers.Indeedtheold-fashionedretailersarebecomingalso“producers”,mainlyprovidingfirst price products,whichpairedwithincreasingpricesanddecreasingcustomers’loyalty,arefindingincreas-ingspaceinthemarket.Thecommercialpoweroffamous brandsisconsequentlyreduced,whennoteliminated.

These,inanutshell,arethedynamicsthatwillcharacterizetheFoodandBeveragesectorinthecomingyears.Thewayinwhichcompanieswillfacethechallengesinthemarketwillinevitablyaffecttheirper-formanceandvaluecreated.

Figure3.FAOPrice(Dairy,Cereals,Meat)

0

50

100

150

200

250

300

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Meat

Dairy

Cereals

The research sample

The research activityTheaimoftheresearchactivityhasbeenthatof in-vestigatingtheperformanceobtainedbytheFood&Beverage sector in 2014 by analysing abasket of European listed companies.

Morespecifically,thesamplehasbeenselectedre-ferring to 50 among the first companies ranked bymarket capitalization. The companies belongingto the sample have been further chategorized into6 sub-samples:7Brewers;7Distillers&Vintners;2SoftDrinks;5Fishing;23FoodProducts;6Dairy.Abriefdescriptionofsuchcompanies isgivenby thefollowingtableandgraphs:

DataReutersThomsonOne,valuesin€Mln(DataatApril8th2015)

Figure4.Theresearchsamplepersales%

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Northern Eu. Sales = 26%

Southern Eu.Sales = 2%

Western Eu.Sales = 72%

BRW Sales = 40,9%

D&V Sales = 13,3%

SDR Sales = 0,4%

FSH Sales = 1,2%

FPR Sales = 37,2%

DRY Sales = 6,9%

ANHEUSER-BUSCH INBEVSABMILLER PLCHEINEKEN N.V.CARLSBERGGREENE KING PLCMARSTON'S PLCOLVI OYJ

DIAGEO PLCPERNOD RICARDDAVIDE CAMPARI-MILANO S.P.A. REMY COINTREAUC & C GROUP PUBLIC LIMITED COMPANYSTOCK SPIRITS GROUP PLCLAURENT-PERRIER

BRITVIC PLCA.G. BARR P.L.C.

MARINE HARVEST ASASALMAR ASALERØY SEAFOOD GROUP ASAAUSTEVOLL SEAFOOD ASAGRIEG SEAFOOD ASA

NESTLÉ S.A.KERRY GROUP PUBLIC LIMITED COMPANYCHOCOLADEFABRIKEN LINDT & SPRÜNGLI AGORKLA ASABARRY CALLEBAUT AGARYZTA AGTATE & LYLE PLCNUTRECO NVEBRO FOODS, SASÜDZUCKER AGGREENCORE GROUPKWS SAAT AGVILMORIN & CIEGREGGS PLCSOCIETE L D CCORBION N.V.AGRANA BETEILIGUNGSLOTUS BAKERIESCLOETTA ABBONDUELLERAISIO OYJDEOLEO SAVALSOIA SPA

DANONEGLANBIA PUBLIC LIMITED COMPANYPARMALAT S.P.A.EMMI AGDAIRY CREST GROUP PLCBONGRAIN SA

DRY

BRW

D&V

SDR

FSH

FPR

Country Cap.onBEL 186.235 GBR 80.334 NLD 42.181 DNK 9.497 GBR 2.514 GBR 1.267 FIN 416

GBR 65.470 FRA 29.847 ITA 4.028

FRA 3.443 IRL 1.290

GBR 544 FRA 492

GBR 2.537 GBR 1.011

NOR 4.826 NOR 1.560 NOR 1.515 NOR 1.028 NOR 310

CHE 229.043 IRL 11.433

CHE 7.995 NOR 7.505 CHE 5.525 CHE 5.419 GBR 4.085 NLD 3.248 ESP 2.740 DEU 2.478 GBR 1.830 DEU 1.798 FRA 1.565 GBR 1.428 FRA 1.251 NLD 1.159 AUT 1.129 BEL 1.000

SWE 788 FRA 774 FIN 531 ESP 485 ITA 278

FRA 41.396 IRL 5.225 ITA 4.575

CHE 1.679 GBR 854 FRA 800

9

Historical Performance:the traditional approach

9.744

200.213

69.289

10.116

205.310

68.345

Southern Europe

Western Europe

Northern Europe

20142013

Comparativeanalysisofthesampleperformancesobtaineddur-ing2014and2013showsthat,onaggregate,sales have only slightly increased,passingfrom279Bnto284Bn(+2,0%).

Morespecifically,itisimportanttounderlinethatallthesub-sec-tors,withtheexceptionofDistillers&Vintners,havewitnessedasalesincrease.ThegeographicaldistributionofsalesdisplaysahighergrowthinSouthern Europe (+3,8%)followedbyWesternEurope(+2,5%),whilstNothernEuropehasbeencharacterizedbyaslightreduction(-1,4%).

For what concernsmarginality and profitability, the Food &Beveragesector,thoughstillmaintainingvery good levels(Ebit/Salesequalto15,8%andProfit/Salesequalto11,5%),hasbeencharacterizedbyamodestworsening of performances.

Giventheabovepremises,webelievethatthesefindingsarenotcompletelyexhaustive:thegatheredevidencesarenotunivocalandtheregisteredperformancesdiffersignificantlybetweentheconsideredsub-sectos,andevenmoreamongthesinglecom-paniesof thesample.Thus, theaimof thefollowingreasoningand of the table reported in Figure 9 is to provide the readerwithvaluableinsights,reportingamoredetailedanalysisoftheResearchSample.

BrewersTheBrewerssub-sector’ssaleshavegrownby3%,from2013to2014, thusalignedwiththetotalsalesgrowth in theFood&Beverage sector. TheEbit/Sales ratio has improved (22,1% in2013vs22,7%in2014),butontheotherhand,somenegativesignalsarisefromarelevantdetrimentofprofits,-25%comparedto2013,withaprofitability ratio fallingfrom20,4%to14,8%.Amongthecompaniesofthissub-sectorwepointout:

ANHEUSER-BUSCH INBEV:theBelgiangroup,leaderinbeerproductionandcommercialization, has registeredsales for 35Bnin2014(+10%)anditisthefirstamongtheBrewersandthesecondinthewholesampleforEbit/Sales(30%)andProfit/Sales(20%).

Figure6.PerformanceFood&Beverage(Total)

2Figure6,7and8Legend:SalesEbitProfit

12,2%% 11,5%%

+2%

-4% 0%

16,0% 15,8%

TOT%13% TOT%14%

20,4% 14,8%

+3%

-25%

+6% 22,1% 22,7%

BRW$13$ BRW$14$

Figure7.PerformanceFood&Beverage(Sub-sectors)

17,6% 17,0%

-8%

-11%

-10% 27,8% 27,1%

D&V 13 D&V 14

Figure5.Salesbyarea

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Distillers & VintnersThissub-sector,during2014,haswitnessedanegative down-turn (-8%),withcompanies registeringsalesdecreases from-1%to-19%.TheaggregateperformancehasbeenworstforboththeEbit/Salesratio(27,8%in2013vs27,1%in2014)andprofitability(17,6%in2013vs17,0%in2014).Nevertheless,itisimportanttounderlinethatforboththeaggregatemeasuresandthesinglecompanies’ones,theresultsarestillverygood,thoughworstthan2013.

TheperformanceofDiageo,amongtheothers,isnotable,in-deed,thoughkeepinghighvaluesforboththeEbit/Salesratio,(being,with31%,thetopperformerofthewholesample)andtheProfit/Salesratio(22%),itssalesreduction(-10%)hasbeenperfectlyreflectedontobothoperatingincomeandprofit.

FishingThe Fishing sub-sector scored very good results, both intermsof sales (+23%)andEbit (+29%).However, theprofit-abilityof thesub-sectorasawholeandof thesinglecompa-nieshaslargelydecreased(14,1%in2013,6,2%in2014).Thefallofprofits isduetodifferences inextraordinary items,andmorespecificallyinthefairvalueofbiologicalassets.Amongthecompanies (allNorwegian), themost relevant isMARINE HARVEST ASA,whichfocusisontheproduction,processingandsaleoffarmedsalmon,andwhichsalesaccountformorethan3Bnin2014thankstoa33% growthcomparedto2013.

Figure8.PerformanceFood&Beverage(Sub-sectors)

Modest sales growth and slight

decrease in overall profits

5,6%% 7,4%%

+3%

+35%

+16% 10,9% 12,3%

SDR 13 SDR 14

14,1% 6,2%

+23%

-46%

+29% 15,2% 15,9%

FSH 13 FSH 14

8,3% 11,0%

+2%

+35% -3%

12,6% 12,0%

FPR 13 FPR 14

5,3% 4,3% +1% -18%

+1%

7,6% 7,6%

DRY 13 DRY 14

Figure5.Salesbyarea

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Figure9.HistoricalPerformance:traditionalapproach(DataReutersThomsonOne,valuesin€Mln)







DR

YB

RW

D&

VS

DR

FS

HF

PR

2013 2014 Δ % 2013 2014 % Sales 2013 2014 % Sales32.478 35.643 +10% 9.784 10.536 +30% 10.823 6.980 +20%13.156 12.588 -4% 2.880 2.901 +23% 2.467 2.548 +20%19.203 19.257 ≈ 2.408 2.788 +14% 1.364 1.516 +8%

8.927 8.653 -3% 1.285 1.122 +13% 734 592 +7%1.482 1.615 +9% 318 329 +20% 122 119 +7%

971 977 +1% 195 194 +20% 73 63- -6%327 328 ≈ 43 39 +12% 34 33 +10%

14.183 12.725 -10% 4.379 3.888 +31% 3.083 2.789 +22%8.575 7.945 -7% 2.230 2.057 +26% 1.189 1.016 +13%1.524 1.560 +2% 300 298 +19% 150 129 +8%1.193 1.032 -14% 236 148 +14% 130 62 +6%

477 620 +30% 114 124 +20% 89 83 +13%359 291 -19% 66 54 +19% 9 36 +12%223 221 -1% 40 40 +18% 20 22 +10%

1.640 1.668 +2% 167 196 +12% 77 111 +7%295 315 +7% 43 48 +15% 32 35 +11%

2.298 3.056 +33% 366 505 +17% 301 112 +4%748 860 +15% 151 225 +26% 214 143 +17%

1.289 1.506 +17% 189 200 +13% 207 126 +8%1.459 1.717 +18% 177 226 +13% 84 66 +4%

288 319 +11% 39 31 +10% 52 17 +5%

75.878 75.428 -1% 11.739 11.304 +15% 8.246 11.902 +16%5.837 5.757 -1% 583 608 +11% 84 480 +8%2.373 2.787 +17% 322 379 +14% 249 282 +10%3.956 3.543 -10% 278 374 +11% 83 199 +6%4.021 4.830 +20% 275 335 +7% 184 208 +4%4.521 4.840 +7% 365 439 +9% 110 107 +2%4.039 3.904 -3% 430 417 +11% 311 339 +9%3.867 5.253 +36% 188 230 +4% 150 152 +3%1.957 2.121 +8% 221 214 +10% 133 152 +7%7.879 7.735 -2% 921 596 +8% 593 282 +4%1.422 1.564 +10% 79 90 +6% 84 58 +4%1.147 1.178 +3% 123 116 +10% 88 77 +7%1.472 1.500 +2% 151 150 +10% 99 84 +6%

946 997 +5% 51 69 +7% 30 47 +5%2.923 3.026 +4% 75 105 +3% 61 78 +3%

744 770 +4% 60 13 +2% 1 18- -2%3.066 3.043 -1% 214 152 +5% 149 108 +4%

332 348 +5% 38 47 +14% 28 37 +11%538 584 +9% 65 63 +11% 29 27 +5%

1.896 1.921 +1% 78 73 +4% 52 15 +1%558 494 -12% 33 24 +5% 26 6 +1%813 773 -5% 51 51 +7% 20 74- -10%100 114 +14% 10 15 +13% 10 11 +9%

21.298 21.144 -1% 2.118 2.151 +10% 1.422 1.119 +5%2.382 2.538 +7% 167 186 +7% 150 146 +6%5.350 5.548 +4% 252 276 +5% 221 203 +4%2.716 2.803 +3% 132 137 +5% 86 65 +2%1.714 1.726 +1% 76 70 +4% 68 62 +4%4.408 4.607 +5% 150 97 +2% 49 45 +1%

Sales EBIT Profit

Historical Performance: EVA® view

Theanalysisofthehistorical performancethroughthetraditionalapproachhasneitherhighlightedaspecificpatternrepresentingthe2014performanceoftheFood&Beveragesector,norfullygraspedthe impactof thecurrenteconomicscenariooversuchaperformance.However,whether the eco-nomic resources invested in a company are gradually losing value,the“fault” might not (only) be appointable toexogenous factorsortotheuncertainitycharacterizingthetimesweareliving.

Sometimes,theadoptionofatraditional approach might make us short-sightedanddoesnotallowustodetectandhighlightpotentialproblemsintheadoptedstrategy,aswellaspotentialsolutionstosuchproblems.AclearandsharedvisionofwhatisneededtocreateValue,andoftheleversthatcanbeusedinordertodoit,mightcertainlyhelpboththeManagementandtheinvestors.Butfirst...

- Do we really know what influences the companies’ ability to create Value and generate Wealth? -

Inorder togenerateValue - i.e.positiveEconomicProfit (EVA®) -both Quality and Quantity are important.Thisisexactlythereasonwhy“small”firmscangenerateanenormouswealth,whilst“large”firmscandestroyalotofValue.

The importance of “Quantity” and “Quality”Qualityreferstoarelativemeasurethatidentifiessomething of a higher level compared to a given hurdle rate.Thus,fromaninvestorpointofview,aqualityinvestmentisaninvestmentthatgeneretes higher returns than that obtained with other equally risky investments.

InordertomeasuretheQualityofeachcompanyinoursamplewehavecomputedtheInvested Capital Return Rate(ROIC3)andcompareditwithwhatinvestorswouldexpecttogetinordertosustainanalo-

gousrisklevels(WACC4).Inacompany,the Quantity of Invested Capital5 able to ensure returnn higher than its Opportunity Cost,isthesecondleverneededtocreateValue.Beingagrowthdriver,themoreCapitalwillbeemployedwithahighreturnrate,thehigherthewealthcreatedwillbe.

Figure 10 shows graphically and on aggregate the determinantsof theFood&Beverage2014performance. It is thusevident thatanunchanged Quantityhasbeenaccompainedbyaslightlyde-creasing Quality (-2%).Nonetheless,a positive contribution to Value Creation comes from the WACC reduction. As a result,comparedto2013,theaggregateperformancehasimproved(26,9Bnin2013vs27,5Bnin2014).

The ability of generating Value

depends on the Quantity of Capital yielding more than its opportunity cost Quality)

Figure10.EVAperformancedeterminants13-14

3ROIC=ReturnonInvestedCapital;4WACC=WeightedAverageCostofCapital;5IC=InvestedCapital(SumofDebtandEquityaccountingvalues)

Historical Performance: EVA® view

20%

18%

4,7% 4,3%

177.495' 180.208'

1%#

3%#

5%#

7%#

9%#

11%#

13%#

15%#

17%#

19%#

21%#

0200400600800

1.0001.2001.4001.6001.8002.000

2013 2014

CIROICWACC

12

13

The managerial leverage to create Value Quantity and Qualityarecertainlytheuniquepillars sustaining Value creation,butatthesametime,therearemultipleleverstobeusedbythemanagementinordertoinfluencethesepillars.

Qualitymightbepursuedthrough:

• An Economical Efficiency improvement.ThisoccurswhenanequallevelofInvestedCapitalisassociatedwithhigherreturns(Positive∆ROIC);

• A contractual/market conditions improvement(Negative∆Wacc)referredtothecompany’sIn-vestedCapitalsourceoffinancing.

Quantitymightbepursuedthrough:

• An Invested Capital growth(∆Growth).Orrather,howmuchnewCapitalhasbeenallocatedwithanequalQualityperformance;

• A better Capital Efficiency. i.e.theamountofnewCapitalallocatedwithanhigherQualityperfor-mance.

Figure11graphicallyrepresentsthecontributionofeachmanageriallevertotheFood&Beveragesec-tor∆performance(2014vs2013).

Thefirstclear insight is that the improvementof theEVA®performance ismainlydue to theWACC reduction (favouredby theQuantitativeEasing).The∆WACC,indeed,accountsforthe288%ofthe∆EVA.Moreover,thewide gap between the ROIC and the WACC, enlarges the effect of a slight increase of the Invested Capital.Thisimpliesapositiveeffectof the∆Growthover the∆EVA® (+142%). On theotherhand,a lower Economical efficiency has mitigated the former positive effects.Thisisduetothefactthatprofitabilityandcap-italhavemovedinoppositedirections(NOPAT-1,18%,InvestedCapital+1,53%).Finally,thenewinvestmentscharacterizedbyalowerROIChavecausedanegligibleCapitalEfficiencyreduction.

Figure11.∆EVA13-14ManagerialLevers

Figure12.∆EVA13-14Components

The WACC reduction has

driven the 2014 performance improvement

288%

142%

-324% -5% 100%

∆ WACC ∆ Growth ∆ Eco. Efficiency

∆ Cap. Efficiency

∆ EVA

25%

-169%

27%

217% 100%

∆ NOPBT ∆ Taxes ∆ W.C. Cost ∆ F.A. Cost ∆ EVA

100%

13,5%

-77% -5% 2%

-6%

Sales Op. Cost Taxes W.C. Cost F.A. Cost EVA

Brewers

100%

9,5%

-84% -3% -1% -2%


Fishing

100%

8,6% -88% -2% 0% -1%


Soft Drinks

100%

15,3%

-73% -4%

-1% -7%


Distillers &

Vintners

100%

7,2% -88% -3% 0% -2%


Food Products

Figure13.Sub-sectors2014performance

Figure12onceagainconfirmstheimportanceoftheWACCreductionover theEVA®∆performance,which,asamatterof fact, isalmostentirelyexplainedbyalower Cost of Equity (DuetotheQuantitativeEasing).

Structural differences among the Food & Bever-age sub-sectorsAmongthedifferentFood&Beveragesub-sectors,asonecouldeas-ilyfigureout,therearesomestructuraldifferences:

• Brewers and Distillers & Vintners

The traditional approach correctly highlighted the high-er profitability of these two sub-sectors,with respect to thewholeFood&Beveragesector. Indeed, theiroperating costsareequalto,respectively,77%forBrewersand73%forDistillers&Vintners.

As a consequence, they have registered the best EVA® per-formances of the sector:EVA/Sales=13,5%forBrewersand15,3%forDistillers&Vintners.

However,comparingthisresultswiththeInvestedCapital,onlytheBrewersperformanceisamongthetopinthewholesector(EVA/IC=16,3%).Instead,Distillers&VintnersEVA/IC(9,9%)isthelowerinthesector,influencedbyagreaterCapitalincidence(InvestedCapital/Sales=1,55againstanaverageof0,7).

• Soft Drinks and Food Products

Thesetwosub-sector,thoughcharacterizedbyahighincidenceofoperatingcosts,haveregisteredquite good performances in terms of EVA®(EVA/Salesrespectively8,6%and7,2%).Suchperformancesareeven better, if not exceptional, when com-pared to the Invested Capital(EVA/ICrespectively30,6%and17%).

ThisismostlyduetoalowerCapitalincidence,withrespecttotheothersub-sectors(InvestedCapital/Salesrespectivelyequalto0,3and0,4againstanaverageof0,7).

14

100%

13,5%

-77% -5% 2%

-6%


Brewers

100%

9,5%

-84% -3% -1% -2%


Fishing

100%

8,6% -88% -2% 0% -1%


Soft Drinks

100%

15,3%

-73% -4%

-1% -7%


Distillers &

Vintners

100%

7,2% -88% -3% 0% -2%


Food Products

100%

4,1% -92% -2% 0% -1%


Dairy

15

721.289 787.344

166.649& 169.646&

554.640&617.698&

2013 2014

MVA

IC

EV

Champions and “Falling” AngelsSincetheperformancesofthesinglecompaniesarenotnecessarilyreflectedbythoseofthesectorandofthesub-sectors,Figure16,throughasimplifiedviewofsuchperformances(EVA,∆EVAand∆Sales),aimsatprovidingsometipsfortheirsystemiccategorization:

• Champion: growingandunexceptionableperformance.BothintermsofsalesgrowthandunderanEVA®view;

• Focusing: slowergrowthbuthigherandmorefocusedValueCreation;

• “Falling” Angel: companies,whichhavebeenchampions,butarenowfacingdecreasingperfor-mances;

• Need for Rebirth: nowdecliningoraffectedbyheavydifficulties.TheyarewitnessingacompleteandgeneralizedValuedestruction;

• What after Growth?: companiesonlyormainlygrowthoriented.Itisnecessarytoverifyorredefinethegoals;

• Need for control: companiesfeaturingatemporarydownturn.

Value created and Market AppreciationCapitalMarketsperformtheimportantroleofquantifying,dailyanddynamically,theValueCreatedbycompanies.

Consequently,throughtheanalysisofshareprices,it is possible to measure the differential between the value recognized to the company’s Invested Capital by the market (EV) and the accounting value of such capital (IC).Thisdifferentialreflectsacompany’smarketappreciationhigher(orlower)thanthecapitalactuallyinvestedinsuchcompany.

Figure15graphicallyexplainsthattheMVAappreciationispositivelyrelatedtotheEVA®performanceValue:indeedtheMVAisequaltothepresentvalueofallthefutureexpectedEconomicValueAdded(EVA®).

!1,0%x%

0,0%x%

1,0%x%

2,0%x%

3,0%x%

4,0%x%

-10% -5% 0% 5% 10% 15% 20% 25% 30% 35% 40%

MVA/Invested,Ca

pital,

EVA/Invested,Capital,

Figure15.MVAandEVA:anoverallview

LowerAppreciationvstheF&Bsector

HigherAppreciationvstheF&Bsector

Figure14.MVAandValueCreated13-14(Valuesin€Mln)

Figure16.HistoricPerformance:afirstclassification

6LegendtothetableinFigure16:Champion ! ! !Focusing ! ! "Falling angel ! " "

Need for rebirth ! ! !What after growth? ! ! "Need for control " ! "

16







DRY

BRW

D&

VSD

RFS

HFP

R

EVA (+/-)

Δ EVA (+/-)

Δ SALES (+/-) Status

21,40% ! ! ! Champion5,06% ! " " Falling angel7,59% ! ! ! Champion8,12% ! ! " Focusing7,94% ! " ! Need for control8,64% ! ! ! Champion8,20% ! " ! Need for control

18,06% ! " " Falling angel13,78% ! " " Falling angel12,08% ! ! ! Champion

3,53% ! " " Falling angel

12,78% ! ! ! Champion10,27% ! " " Falling angel

2,25% ! " " Falling angel

8,32% ! ! ! Champion10,17% ! ! ! Champion

10,77% ! ! ! Champion16,16% ! ! ! Champion

7,24% ! ! ! Champion7,06% ! ! ! Champion3,57% ! ! ! Champion

9,04% ! " " Falling angel7,80% ! " " Falling angel6,42% ! ! ! Champion4,80% ! ! " Focusing4,43% ! ! ! Champion5,97% ! ! ! Champion7,58% ! " " Falling angel2,71% ! ! ! Champion

15,59% ! ! ! Champion4,08% ! " " Falling angel5,91% ! " ! Need for control4,63% ! " ! Need for control5,20% ! " ! Need for control4,03% ! ! ! Champion1,45% ! ! ! Champion

-4,12% " " ! What after growth?1,63% ! " " Falling angel7,79% ! ! ! Champion5,51% ! " ! Need for control1,08% ! ! ! Champion2,80% ! " " Falling angel

-9,56% " " " Need for rebirth7,47% ! " ! Need for control

5,85% ! " " Falling angel4,62% ! ! ! Champion1,91% ! ! ! Champion2,72% ! ! ! Champion2,59% ! " ! Need for control0,18% ! " ! Need for control

Performance AnalysisEVA /SALES

17

Historical Performance:People-Based view

OneofthemostimportantfeaturesoftheEVA®approachistheabilitytoprovidealternative interpreta-tions of the company’s management performancesandtolinktheValueCreatedbysuchcompanieswithitsdeterminants.

Therefore,byapplyingasimplealgebraicdecompositiontothetraditionalformulationofthismetric7,wecanobtainanEVA® People-Based computedasthedifferencebetweentheHuman Resources Pro-ductivityandtheirAverage Cost(Quality),multipliedbythenumber of Internal Resources (Quantity).

Statingitinanotherway,wecandeterminetheEconomic Profit using “People” rather than “Cap-ital”, thus identifying,underaPeople-Drivenperspective, thedifferent (andmaybemore important)leversthroughwhichthecompany’sValuemightbeenhanced.

Value performance from a People-Driven perspectiveAsitistruethatacompany,inordertogenerateValue,needsitsCapitaltobe:

• Profitable;

• Adequately remunerated with respect to its Opportunity Cost.

fromaPeople-Drivenperspective, acompany inorder togenerateValueneedsitsInternalResourcestobe:

• Productive;

• Adequately remunerated for the activities they carry out;

• Properly managed and placed within the Structure.

Asamatteroffact,peoplerepresentacompetenceandspecificity“Capital”thatshouldbemadeasmuchprofitableaspossibleandthatshouldimplementthecompany’sabilityofcreatingValue.

The Food & Beverage sector analysisFigure17shows that thePeople-Basedviewmightbeapplied toallthesub-sectors,beingthepersonnel cost relevant and almost stable amongthem.

Figure18provides,foreachcompany,adetailedviewofthedeter-minants of thePeople-Drivenperformance.Moreover it correlatessuchperformanceswiththoseoftherelativesub-sectors(Columns2,4and6).Thus,ithighlightsthat,amongthesub-sectorsandthecompanies,not only the resources productivity is disomogene-ous, but also their cost.

We can refer to Capital as the

Human Capital. This implies the identification of new levers to

exploit in order to enhance Value

0% 20% 40% 60% 80% 100%

Brewers

Distillers & Vintners

Soft Drinks

Fishing

Food Products

Dairy

TOT 14

Other&Opera)ng&Costs& Capital&Cost& Personnel&Cost&

Figure17.CompositionofOperatingCosts7“Traditional”EconomicProfit=(ROIC-WACC)*InvestedCapital;“People-Based”EconomicProfit=(Res.Productivity-AverageLabourCost)*N°Res.TogetthePeople-BasedEconomicProfitweshouldalgebraicallydecomposeits“Traditional”for-mulation.ThefirststepconsistsintheidentificationoftheSalesperemployee,netofCost(IncludingAmor-tization,TaxesandCapitalChargedeployedtocoverFinancingandCapitalCosts).ThereforeweobtainameasureoftheProductivityperemployee,fromwhich,substractingtheAverageLabourCostsandmultiplyingbythenumberofInternalResources,weobtainthePeople-BasedEconomicProfit.

Figure18.HistoricalPerformance:People-Basedview(DataReutersThomsonOne,valuesin€)







DRY

BRW

D&

VSD

RFS

HFP

R154.029 76 1,3 x 26 0,9 x 50 1,7 x69.947 36 0,6 x 27 0,9 x 9 0,3 x76.136 58 1,0 x 39 1,3 x 19 0,7 x46.832 45 0,8 x 30 1,0 x 15 0,5 x12.132 44 0,8 x 33 1,1 x 11 0,4 x12.854 22 0,4 x 16 0,5 x 7 0,2 x

1.958 35 0,6 x 22 0,7 x 14 0,5 x58 29 29

26.588 155 1,2 x 69 1,1 x 86 1,2 x18.308 121 0,9 x 62 0,9 x 60 0,9 x

4.000 101 0,7 x 54 0,8 x 47 0,7 x1.755 107 0,8 x 86 1,3 x 21 0,3 x1.524 106 0,8 x 54 0,8 x 52 0,7 x

923 68 0,5 x 36 0,6 x 32 0,5 x435 91 0,7 x 80 1,2 x 11 0,2 x

135 65 70 3.159 107 1,1 x 63 1,0 x 44 1,1 x

999 84 0,8 x 52 0,9 x 32 0,8 x102 60 41

10.700 68 0,8 x 37 0,8 x 31 0,8 x1.000 224 2,7 x 85 1,9 x 139 3,7 x2.100 124 1,5 x 72 1,6 x 52 1,4 x4.500 70 0,8 x 43 0,9 x 27 0,7 x

641 81 1,0 x 63 1,4 x 18 0,5 x83 46 37

339.000 59 1,0 x 39 1,0 x 20 1,1 x23.767 63 1,1 x 44 1,1 x 19 1,1 x10.712 72 1,2 x 55 1,4 x 17 0,9 x12.921 67 1,2 x 54 1,3 x 13 0,7 x

9.319 65 1,1 x 42 1,0 x 23 1,3 x18.733 47 0,8 x 32 0,8 x 15 0,9 x

4.467 134 2,3 x 68 1,7 x 66 3,7 x11.005 57 1,0 x 44 1,1 x 13 0,7 x4.800 123 2,1 x 55 1,4 x 69 3,8 x

18.459 61 1,1 x 44 1,1 x 17 1,0 x9.780 41 0,7 x 32 0,8 x 9 0,5 x4.847 58 1,0 x 47 1,2 x 11 0,6 x6.562 68 1,2 x 56 1,4 x 12 0,7 x

19.500 22 0,4 x 20 0,5 x 2 0,1 x16.105 43 0,7 x 40 1,0 x 3 0,2 x

1.900 64 1,1 x 81 2,0 x 17- -0,9 x8.778 38 0,7 x 32 0,8 x 6 0,3 x1.250 85 1,5 x 63 1,6 x 22 1,2 x2.500 65 1,1 x 53 1,3 x 13 0,7 x6.983 52 0,9 x 49 1,2 x 3 0,2 x1.900 27 0,5 x 20 0,5 x 7 0,4 x

718 37- -0,6 x 66 1,7 x 103- -5,8 x112 147 2,5 x 71 1,8 x 76 4,2 x

58 40 18 99.927 42 0,9 x 30 0,9 x 12 1,2 x

5.800 64 1,4 x 44 1,3 x 20 1,9 x16.472 50 1,1 x 44 1,3 x 6 0,6 x

5.220 78 1,7 x 64 1,8 x 15 1,4 x4.545 59 1,3 x 49 1,4 x 10 0,9 x

19.300 41 0,9 x 40 1,2 x 0 0,0 x45 35 11

Cost per employee

EVA per employeeEmployees Productivity

per employee

18

Brewers sub-sector

Distillers & Vintners sub-sector

Soft Drinks sub-sector

Fishing sub-sector

Food Products sub-sector

Dairy sub-sector

19

Market Point of View: sustaining performance over time

Creatingwealthandvaluethrougha“Quality”and“Quantity”improvementisoneofthecoreaspectsof “doingbusiness”;neverthelessensuring thebusinessSustainabilityover time iscertainlynot lessimportant.

Therefore,analyzingthecurrent performancesisaverygoodstartingpoint,butequallyimportantistounderstandthemarketexpectationsaboutthefuture performances of the company:

-IsitlikelythatapositiveEVA®performancewillrepeatinthefuture?-

-DoesthemarketbelieveinapossibleturnaroundfornegativeEVA®performances?-

The Market and share prices implicit expectationsTheCapitalMarkethastheimportantroleofquantifying,throughthedailyquotations,theexpectations of multiple investorsandoperatorsabout the futureperformancesofagivencompany.Therefore,theanalysisofsharepricesprovidesvaluableindicationsaboutthesustainabilityofthecurrentperfor-mance.

Asamatteroffact,thecompany’smarketappreciation(MarketValueAdded)isameasure of the Value Createdandcanbeseenasthesum of all the future expected (by the Market) EVA® performances. TheMVAcouldbedecomposedinto:

• EVA® Perpetuity

ItrepresentstheportionofMVAexplainedconsideringthehypothesisthatthelast performance (2013) will remain constant in the future.AddingsuchacomponenttotheInvestedCapitalwecanobtainaproxyoftheCurrent Value of the company(COV8).

• Future Growth Value

Computedbydifference,itrepresentstheportion of MVA expressing the value of performance improvements/downgrades expected by the market,withrespecttore-centresultsobtained.

EV 787 Bln

COV759 Bln

Net IC170 Bln

Net IC170 Bln

MVA618 Bln EP

589 Bln

∆EVAFGV28 Bln

Figure19.EVAMethodology:anoverallview9

8COV=CurrentOperationValue9AVAreworkingonDataReutersThomsonOne.MarketdataatApril2015

Companies’s goal is to generate

Value, but this have to be sustainable

over time

20

TheApril2015FGV positive value(fortheFood&Beveragesectorasawhole)impliedanaggregate EVA® performance expected improvement.However,this result is not reflected by all the sub-sec-tors,onthecontrary,the only one reflecting such positive expectations is Brewers (PositiveFGV,FGV/IC=0,7x).Theexpectationswereinsteadalmostneutral for the sub-sectors Distillers & Vint-ners, Food Products and Soft Drinks,whileFishingandDairywerecharacterizedbypessimisticex-pectations.

Significantdifferencescouldinsteadbeobservedamongthesinglecompaniescomposingthesample.Generally,optimisticexpectationsareassociatedtopoorcurrentperfomances,whilstpessimisticex-pectationsareassociatedtoparticularlypositiveperformances.Nonetheless,wecanobserveexcep-tionstothisruleofthumb.

Inordertocapturetheextentofeachcompany’sFGVinamorepragmaticandpreciseway,thetableinfigure20reportsthecurrentsharepricesandthefollowingmeasures:

• BV10: thepricecomponentexplainedbytheTangibleBookValue;

• MVA: thepricecomponentexplainedbytheMarketValueAdded.

Equivalently,arethenreported:

• BV + EP: thepricecomponentexplainedbythesumoftheTangibleBookValueandthelastEVA®performancehypothesizedasremainingconstantovertime(EVA®Perpetuity);

• FGV: thepricecomponentexplainedby theMarketExpectationsabout the future improvements/downgradesofthelastperformance(FutureGrowthValue).

Thetableiseasytointerpretandanswersthequestion:

- What affects the share prices? The acquired performances or the prospective ones? -

Implicit ROIC and Goodwill sustainabilityTheMarketassociatescurrent performance improvements,reachedthrough“Quantity”(Growth)or“Quality”(Efficiency),topositive expectations(FGV>0).Andviceversafornegativeexpectations.

Linkingsuchexpectationstothesecondcomponent(Quality)ithasbeenpossibletocomputeaROIC adjusted_Expected Performance,whichincorporates the implicit expectations in the current mar-ket quotations.Forarelevantportionoftheanalyzedcompanies,suchavalueislower than the return obtained during the last year.Thisisaclueaboutthepessimism of the Market.

Performancesustainabilityiseventuallyrelatedtointangibles:thegoodwill indeed captures incremen-tal performance expectations,which,whethernotachievedimplyawrittenoff.

IfwehypothesizetoexploitonlytheQualitycomponent(andnotQuantity),theuseofaROICadjusted_MinimumPerformancereflectingtheminimumleveltobereachedsothatthegoodwillvalueisadequate,allowsustounderstandthemarketbelievesaboutitssustainability.The ROIC thus obtained, whether higher than the one expressed by market expectations, indicates a too optimistic judgement of the “expectations” reported in the financial statements.Thetableinfigure20reportsajudgmentaboutgoodwillsustainability(/)Whetherthisjudgmentisnegative,theBoardshouldthinkaboutstartinganimpairmentprocess.

10ComputednetofGoodwill(ReasonwhysomeoftheBookValuesobtainedarenegative)

21

Figure20.SharePrices,ExpectationsandPerformanceSustainability(DataReutersThomsonOne,valuesin€Mln)11

11AVAreworkingonDataReutersThomsonOne.MarketdataatApril2015

Price

08 Apr. BV (price) MVA (price) BV+EP (price) FGV (price) 2014 Expected 2014ANHEUSER-BUSCH INBEV € 115,80 -€ 13,20 € 129,00 € 110,33 € 5,47 40,3% 41,8% 58.523 !!!

SABMILLER PLC € 4.970,16 € 448,58 € 4.521,58 € 1.097,81 € 3.872,36 10,5% 30,1% 15.500 !!!

HEINEKEN N.V. € 73,23 € 3,47 € 69,76 € 75,70 -€ 2,47 15,1% 14,7% 10.803 !!

CARLSBERG € 79,90 -€ 0,20 € 80,10 € 172,33 -€ 92,43 15,9% 9,2% 7.072 !

GREENE KING PLC € 1.147,59 € 638,25 € 509,34 € 1.647,64 -€ 500,05 10,0% 8,0% n.a.MARSTON'S PLC € 217,50 € 141,81 € 75,68 € 466,31 -€ 248,81 9,2% 6,3% 288 !

OLVI OYJ € 24,28 € 9,27 € 15,00 € 84,46 -€ 60,19 13,9% 4,4% 23 !!

DIAGEO PLC € 2.603,94 € 311,65 € 2.292,29 € 2.194,81 € 409,13 17,1% 19,7% 1.550 !!!

PERNOD RICARD € 112,45 € 31,95 € 80,50 € 145,40 -€ 32,95 12,5% 10,2% 5.047 !!

DAVIDE CAMPARI-MILANO S.P.A. € 6,88 € 1,06 € 5,82 € 14,74 -€ 7,86 16,5% 8,8% 1.115 !!

REMY COINTREAU € 70,69 € 24,83 € 45,86 € 44,05 € 26,64 7,4% 11,1% 23 !!

C & C GROUP PUBLIC LIMITED COMPANY € 3,79 € 0,90 € 2,89 € 3,86 -€ 0,07 20,8% 20,4% 457 !!

STOCK SPIRITS GROUP PLC € 271,87 € 134,70 € 137,17 € 579,60 -€ 307,73 11,8% 5,9% 62 !

LAURENT-PERRIER € 82,70 € 59,49 € 23,21 € 83,86 -€ 1,16 4,9% 4,8% 25 !

BRITVIC PLC € 1.023,57 -€ 70,03 € 1.093,60 € 1.247,12 -€ 223,55 41,0% 34,9% 251 !!!

A.G. BARR P.L.C. € 865,48 € 161,67 € 703,81 € 811,54 € 53,94 23,4% 25,0% 30 !!!

MARINE HARVEST ASA € 10,72 € 2,40 € 8,32 € 20,66 -€ 9,94 20,1% 11,4% 580 !!

SALMAR ASA € 13,77 € 4,89 € 8,87 € 32,27 -€ 18,51 21,4% 9,9% n.a. !!

LERØY SEAFOOD GROUP ASA € 27,76 € 13,62 € 14,15 € 52,88 -€ 25,11 14,6% 8,3% n.a. !

AUSTEVOLL SEAFOOD ASA € 5,07 € 4,48 € 0,59 € 21,33 -€ 16,26 10,2% 3,7% n.a. !

GRIEG SEAFOOD ASA € 2,78 € 1,86 € 0,91 € 4,11 -€ 1,34 6,8% 5,2% 12 !

NESTLÉ S.A. € 71,03 € 10,01 € 61,01 € 66,58 € 4,44 22,2% 23,6% 31.206 !!!

KERRY GROUP PUBLIC LIMITED COMPANY € 65,01 € 2,37 € 62,64 € 59,39 € 5,62 32,4% 35,0% 1.870 !!!

CHOCOLADEFABRIKEN LINDT & SPRÜNGLI AG € 58.737,12 € 10.012,28 € 48.724,84 € 36.539,78 € 22.197,34 10,7% 16,6% 648 !!!

ORKLA ASA € 7,37 € 2,93 € 4,43 € 8,21 -€ 0,84 9,9% 9,0% 1.143 !!

BARRY CALLEBAUT AG € 1.006,59 € 173,25 € 833,35 € 1.198,92 -€ 192,33 14,3% 12,4% 607 !!

ARYZTA AG € 59,03 € 4,46 € 54,57 € 63,63 -€ 4,60 17,8% 16,8% 2.300 !!

TATE & LYLE PLC € 873,85 € 234,14 € 639,71 € 1.691,43 -€ 817,58 24,8% 13,4% 276 !!

NUTRECO NV € 45,27 € 9,87 € 35,40 € 76,81 -€ 31,54 16,6% 10,3% 309 !!!

EBRO FOODS, SA € 17,81 -€ 64,06 € 81,87 € 46,61 -€ 28,80 -2,0% -0,9% 9.439 "

SÜDZUCKER AG € 12,16 € 4,63 € 7,53 € 24,10 -€ 11,95 13,7% 8,2% 1.738 !

GREENCORE GROUP € 327,60 -€ 59,42 € 387,02 € 422,70 -€ 95,10 171,6% 138,7% 588 !!!

KWS SAAT AG € 275,85 € 92,26 € 183,59 € 412,15 -€ 136,30 12,3% 8,2% 61 !!!

VILMORIN & CIE € 75,13 € 26,12 € 49,01 € 113,79 -€ 38,66 9,7% 7,0% 388 !

GREGGS PLC € 1.411,26 € 474,41 € 936,85 € 2.099,82 -€ 688,55 14,5% 10,0% n.a.SOCIETE L D C € 153,38 € 95,96 € 57,42 € 251,06 -€ 97,68 13,6% 7,9% 119 !

CORBION N.V. € 18,68 € 9,89 € 8,78 -€ 2,79 € 21,46 -1,6% 10,4% 58 !!

AGRANA BETEILIGUNGS € 79,50 € 57,20 € 22,30 € 129,73 -€ 50,23 7,7% 5,4% 230 !

LOTUS BAKERIES € 1.245,20 € 342,49 € 902,71 € 1.697,81 -€ 452,61 15,2% 11,3% n.a. !!!

CLOETTA AB € 2,83 € 0,75 € 2,07 € 4,17 -€ 1,34 10,1% 7,7% 243 !

BONDUELLE € 24,20 € 10,95 € 13,25 € 31,99 -€ 7,79 6,2% 5,3% 203 !

RAISIO OYJ € 4,00 € 0,93 € 3,07 € 2,81 € 1,19 10,7% 14,6% 172 !!

DEOLEO SA € 0,42 € 0,55 -€ 0,13 -€ 0,74 € 1,16 -1,6% 4,8% n.a. "

VALSOIA SPA € 26,61 € 6,89 € 19,72 € 48,79 -€ 22,18 28,8% 15,4% 3 !!!

DANONE € 64,30 € 0,23 € 64,07 € 64,40 -€ 0,10 19,1% 19,1% 11.582 !!!

GLANBIA PUBLIC LIMITED COMPANY € 17,65 € 2,49 € 15,16 € 16,05 € 1,60 15,2% 16,5% 263 !!!

PARMALAT S.P.A. € 2,50 € 1,51 € 0,99 € 3,27 -€ 0,77 10,4% 7,3% 574 !

EMMI AG € 313,78 € 137,63 € 176,15 € 585,93 -€ 272,15 10,5% 6,2% 262 !

DAIRY CREST GROUP PLC € 620,33 € 133,33 € 487,00 € 777,33 -€ 157,00 17,5% 14,5% 188 !!

BONGRAIN SA € 57,00 € 87,62 -€ 30,62 € 105,31 -€ 48,31 4,1% 2,8% n.a. ""

ROIC Goodwill

DRY

BRW

D&V

SDR

FSH

FPR

Mkt. Appreciation Mkt. Expectation

22

The Market and its challengesAnalysing the implicit expectations embedded in shareprices is extremely important in order to understand whether the companies’ strategies are appreciated by the market andwhether suchstrategiesprovide the rightanswerstoexpectations.Creatingamatrixwiththetwoaxes(EVA/IC andFGV/IC)wecan identify 4differentclusters,characterized by different expected performances andchallenges(Figure21).

Communication Challenges

Companies having good orexcellent performances and negative FGV values.Themarket ispessimisticandcon-siderstheircurrentperformancesunsustainable.

Development Challenges

Companies having poor or negative performances and positive FGV values.Themarketisoptimisticandbelievesinapossibleturnaround.

Lost Causes

Companieshavingnegative performances and negative FGV values.Inthesampleconsiderednoneofthecompa-niescanbeclassifiedinsuchcluster.

Excellences

Companieshavinggood performances and positive FGV values.Theyrepresentsthe“gems”ofthesector.Themar-ket considers sustainable their current performance sincesuchcompaniesaremaintaininga long lasting leadershipposition.

Figure21.FGVandEVA:anoverallview

-‐3,0 x

-‐2,0 x

-‐1,0 x

0,0 x

1,0 x

2,0 x

3,0 x

-10% -5% 0% 5% 10% 15% 20% 25% 30%

FGV/

Invested

Cap

ital

EVA/Invested Capital

LowerExpectationsvstheF&Bsector

HigherExpectationsvstheF&Bsector

DevelopmentChallenges

LostCauses

CommunicationChallenges

Excellences

“Reading” Stock Prices may help the

management in understanding and

quantifying the challenges of the

market

Figure22.Companiesintheclusters

Excellences

Development Challenges

Communication ChallengesEVA/IC FGV/IC

GREENCORE GROUP 167% -6,6 xOLVI OYJ 12% -4,8 xSALMAR ASA 17% -2,6 x

EVA/IC FGV/ICCORBION N.V. !7% 2,2 xDEOLEO SA !7% 1,2 xEBRO FOODS, SA !5% 0,5 x

EVA/IC FGV/ICANHEUSER-BUSCH INBEV 36% 0,3 xKERRY GROUP PLC 27% 0,5 xNESTLÉ S.A. 18% 0,3 x

23

Our ‘Hot Topics’

Revenue ManagementA wide range of opportunities to increase Value

Theeconomicenvironmenthasprofoundlychangedoverthepastfewyearsandtheon-goingstructuralshiftsareshapingacompetitivelandscapeinwhichit is becoming increasingly difficult to maintain satisfactory profit margins. Inordertopreservetheirfinancialperformance, firmshaveprimarilyfocusedtheireffortson two mana-gerial levers:ononehand,theyhavestrivedtooptimizetheuseofcorporateresources,reducing costs and increasing the efficiency of processes and organizational structures;on theotherhand, theyhave implementednew ‘Client-Intelligence’ approaches todevelopmoresophisticatedandcustom-er-orientedValuePropositions.However, these approachespresent somepitfalls anddo not necessarily guarantee thesustainable creation of Enterprise Value.Indeed,costoptimizationpoliciesaremainlyfocusedonachievingshort-term economic improvements,buttheyoftenneglectthefundamentalleversoffuturegrowth,thusjeopardizinglong-termprofitability.Furthermore,inmanyfirms,costcuttinginitiativeshavealreadyexhaustedalltheirpotential.Conversely,theinformationgatheredthroughthenewCRM systemsarealltoooftenburiedintheITde-partmentandinsufficientlyleveragedtodevelopValueaddedactivitiesandservices.Thus,theyareusuallyunderexploitedbytheSalesandMarketinganddonotcontributetotheextractionofValuefromthemarket.TherealityisthatCompaniesfaceimportantdecisionsregardingwhattosell,whentosell,to whomtosell,andfor how much.Why don’t you manage data-driven tactics and strategy to an-swer these questions in order to increase Revenues?TheprimaryaimofRevenueManagementissellingtheright prod-ucttotheright customerattheright timefortheright priceandwiththe right pack.TheessenceofthisdisciplineisinunderstandingCustomers’per-ception of product Value and accurately aligningproduct Prices,PlacementandavailabilitywitheachCustomersegment.Revenue Management absorbs a wide range of opportunities toincreaserevenue.Acompanycanutilizedifferentcategories likeaseriesof leversbutprincipally onemaydriveprofits inagivendi-rection.

Revenue Management

includes a wide range of

opportunities to increase Revenue

and Profit

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REVENUE

FIXED COSTS

VARIABLE COSTS

EBIT

100

66

26

89

+ 1% Price = + 12% Profit

What is Value Pricing?ValuePricingmeansastructuredapproachinthePrice levermanagementaselementofbalancebe-tweenShareholder ValueandCustomer Value.ThegrowthofsustainableValuecomesfroman‘optimal’Pricingsystemthatallowsatthesametime:1)EnsurethatShareholdersobtainanadequateReturnonInvestedCapital,maximizingtheprofitabilityofenterprisesinthelongrun;2)MeettheexpectationsofCustomers,indifferentialtermscomparedtothecompetition,abouthowmuchtheyshouldpayforthevaluetheyget.TheValuePricingalsoneedstobeanexpressionof theValue Perceived by Customers fordifferentcategoriesofProductsorServices.TheValuePerceivedbyCustomerschangesfordifferentcustomersegments,butalsoforcustomersegmentsthatliveindifferent Countries.Forthisreason,sametypesofGoods/ServicescandifferentlycostindifferentMarketsorCountries.

Pricing is the most important Revenue Management leverThiscategoryofRevenueManagementinvolvesredefining pricing strategyanddevelopingdisciplinedpricing tactics.Thekeyobjectiveofapricingstrategyisanticipating the value created for customersandthensetting specific prices tocapture that value.AstructuredapproachtotheutilizationofthePricefactorfavourstheoptimizationoftheofferwithoutaffectingthelong-term growth potential.

VALUE PRICING STRATEGIES AND MODELSactivevalue.eu

If Price is ones Product’s most

important lever, why do so many

companies discount hence eroding

brand equity and the Perceived Value of their Product or

Services?!

Data Collection

Setting Price & Value

Proposition

Client Condition

Management

Monitoring & Reporting

Price & Value Deployment

PRICING INFRASTRUCTURE

PRICING AND VALUE STRATEGY

RATE YOUR PRICING EXCELLENCE!

! X √ X !3 2 4 2 3

√ 4

! 3

!

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It’s time to Manage Change and run effective Organizations

Organizationsmustlearnandadaptatanever-increasingpace.Technologicalchange,shrinkingproductlifecycles,increasingcustomerexpectations,andthenever-endingsearchforefficiencyalldemandthatexecutivesrespondnotonlybyconstantlyrevisitingproductandserviceofferings,butalsobyrealigningstrategy,structure,andprocesses.Wehaveallbeeninundatedwithvolumeswrittenonwaystomanagechangethroughleadership,partici-pation,andorganizationalalignment.Yetwhilethefloodtideofadvicegrows,success in implementing change does not appear to be improved.It’ssaidthatalthough90%ofcompaniessurveyedhadundertakensignificantorganizationalchangewith-intheprevioustwoyears,only5%hadavoidedsubstantialdisruptionsandfinishedontime.Suchdelayscanprovecostlyforfirmsengagedinmajorstrategicinitiatives.Corporaterestructurings-atrendthathasintensifiedrecently-haveoftenunder-performedduetothesubstantialbutoftenhiddencosts of transition.Similarly,MergersandAcquisitionsoftenfailtodelivertheexpectedfinancialresultspreciselybecauseitisdifficulttointegrate different cultures in a timely manner.Managing change is so difficult because organizations resist change initiatives.Unfortunately,thereisavastdifferencebetweenknowingthatresistancemightoccurandunderstand-ingwhereandwhyitwillemerge.Resistanceissodifficulttodiagnoseandconfrontbecauseitusuallyemanatesfromthetwosources,anorganization’s cultureanditsinformal structure,whicharemostdifficult to see.Theseforcesinfluencethesuccessofchangeinitiativesinadramat-ic,butinvisibleways.Fortunately, informal structure andorganizational culture arenotentirelyinvisible.TheOrganizational Network Analysis(ONA)offerswaytomovebeyondorganizationalchartsandtounderstandhow people ac-tually interact in an organization.Research shows that appropriate connectivity in networks with-in organizations can have substantial impacts onperformance,learning,innovationandbenefitsalsoaccruefromwell-connect-ednetworksbetweenorganizations.OfcourseNetworkAnalysisisnotanewsubject.Thisapproachhasenjoyedarich research traditionwithinanthropology,sociology,psychologyandalsomanagementstudies.Consequently,avastbodyofknowledgeontechniquesfortheanalysisofsocialnetworkshasbeenac-cumulated.

Managing Change

is so difficult because

organizations resist change

initiatives

26ORGANIZATIONAL NETWORK ANALYSISactivevalue.eu

Approaches to perform an ONA are innumerable, but not always effectiveTheanalyticsideofthesocialnetworksubjecthasbecomesorichthatoneofthemostwidelyreadprimersonsocialnetworkanalysisismorethaneighthundredpageslong!Yetalthoughnetworkanalyticshaveadvancedsubstantiallyoverthepastdecades,themanagerialappli-cationsoftheideashavenotkeptpace.Then,severalapproacheshavespreadinpracticetoidentifythehiddennetworksofrelationshipswithintheorganizationalstructureofthecompanybutnotalwaystheyre-vealedfeasibilityandeffectiveness.Someexamplesarelongandcomplexquestionnairessubmittedtoresources(butoftendifficulttointerpretinanobjectivemannerandwiththerightmethodologyofanalysis)ormethodsofreadingavailablee-data(suchasemail traffic data)withconsequentproblemsofprivacy,accuracyandcompleteness of information.ActiveValueAdvisors, inpartnershipwithDNA7,hasdevelopedasimple, fastbutextremely effectivemethodologytodeepentheValueofanorganizationthroughanetworkperspective.

The ONA makes visible the

connections between People and provides a complete

X-ray of the real functioning of the

organizationCarl

Pat

John

FredAlex

Bill

Sue

Steve

Lee

JuliaPeter

Sally

David

Sam

Paul

Marketing

Finance

Strategy

DNA7DNA7isapowerfultoolthatallowstoperformOrganizationalNetworkAnalysesinanefficient,butextremelydeepenway.DNA7allowsorganizationstomap complex networksof communication between internal resourcesandtheirinformal relationships.Soitwillbepossibletocarryoutacomprehensiveassessmentoftheorganizationfroma‘Network Perspective’providingatleast3 organizational views:1.Employees,2.Units,3.Companyasawhole.

Diagnostic AnalysisRealize a web-based analysis in order to obtain a snapshot of the organization through diagnostic indicators and different organizational views

Definescopeandorganizationalfocus

Administeraweb-basedsurvey(4-6questions)

Readandanalyzeresults

Provideevidencesanddetailedreports

Internal Network MapExtend some features of the platform to groups of resources in order to support internal processes, facilitate interaction and continuously monitor the organization

Definescopeandmainfeatures

Openweb-basedsurveytoselectedgroups

Collectprofilesandinternalexpertise

Launch&Training

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Fundamentals of People-Driven businessThinking of Human Resources as a ‘Capital’

People-DrivenCompaniesprovideauniquefeature:theirsuccessisdrivenbyPeoplewhorepresentthemain value driverandthestrategic axisbearingachievedResultsandcorporateProfitability.InthesecompaniestheStrategicmanagementofHumanResourcefocusesonspecificToolsandMeth-odologiesforplanning,measuringandvaluingtheHumanCapitalsupporttothecorporateValuecre-ationprocess.What does this mean? Where do we have to start to meet this challenge? Asafirststepeachcompanyshould implement tailoredperformancemetric-basedmeasurements forassessingenterpriseValueonthebasisofitsmaindeterminants.Economic Profit,unlikemanyotherdifferentmetricsandmeasurementsconventionallyusedinmanage-mentpractice,canberedefinedinordertohighlightthefollowing:• InternalResource’scontributiontoEnterpriseValue,• Onwhichleversshouldwefocusinordertoincreaseitincompanies

wherePeoplerepresentthemaindriverofProfitabilityandValuecre-ation.

EconomicProfitmay,infact,becalculatedassoastohighlightthedif-ferencebetweentheCost of EmployeesandtheirProductivityratherthanthedifferencebetweenCost and ReturnonInvested CapitalintheEnterprise.Youwill find out that inCapital-Intensive enterprises increasedReturnonInvestedCapitalorneweconomicresources investments inactivitiesthatprovidehigherReturnagainstCostofInvestedCapitalgeneratesaValueincrease,whereasinPeo-ple-Drivencompaniesthevaluedriverstoactonaremainlytwo:monitoringResourceProductivityandoptimizationoftheirCost.It’spossibletodeepenthesedeterminants:• Productivity:oneofthecentralelementatthebasisoftheProductivityofResourcesishowtheycol-

laborateandinteract.Thishelpstobefaster,moreeffectiveatworkand,therefore,moreproductive.PreciselytheOrganizationalNetworkAnalysisisamethodologythatcanbeappliedwithintheCompa-nytoincreasetheProductivityofResources.Thisanalysis,inaddition,canalsogiveusefulindicationsintermsofoptimalorganizationalsizingofpeople.

• Cost of Personnel:analysingproperlytheRemunerationpolicies,theOrganizationalRolesandtheCapabilitiesofHumanResources(informationanddatathatalmostalltheCompanieshave,butthattheydon’tfullyutilize)it’spossibletogetatleast 3 different Cost of PersonnelthatdifferentlyimpactontheabilitytocreateValue:

• EFFECTIVE COST OF PERSONNEL:it’sobtainedfromSalarythatResourcesreceivedannually• IDEAL COST OF PERSONNEL:it’sobtainedbyevaluatingtheorganizationalRolesaccordingto

theexistingstrategicProject/Design• INTRINSIC COST OF PERSONNEL: it’sobtainedbyanalysingpeopleskills,expertiseandcom-

petencies

Thanks to a specific

methodology it is possible to calculate the

People-Based view Economic

Profit

28PEOPLE VALUEactivevalue.eu

‘TRADITIONAL’ ECONOMIC PROFIT

Return on Capital Employed

Cost of Capital Employed

CapitalEmployed = - x( )

‘PEOPLE-BASED’ECONOMIC PROFIT

Resource Productivity

Cost of Personnel per Resource

Number of Resources= - x( )

ORGANIZATIONAL NETWORK ANALYSIS

The collaboration and the efficiency in the interaction between Resources, especially in complex organizations, are the central elements that determine the Productivity and may represent, therefore, an opportunity to create Value.

SALARY OPTIMIZATION AND STRATEGIC MANAGEMENT OF RESOURCES

AnalysingproperlytheRemunerationandCompensationpolicies,theOrganizationalRolesandtheCapabilitiesofHumanResourcesyoucangetatleast3differentCostofPersonnelthatdifferentlyimpactontheabilitytocreateValue.

‘PEOPLE-BASED’ECONOMIC PROFIT

Resource Productivity

Cost of Personnel per Resource

Number of Resources= - x( )

INTRINSIC COST OF PERSONNEL

IDEAL COST OF PERSONNEL

EFFECTIVE COST OF PERSONNEL

EstimatingtheimpactofdifferentarrangementoftheCostof

PersonnelontheValuecreationoftheCompany

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Quantitative EasingA (not only financial) discontinuity that influences lots of management levers and decisions

TheEuropeanCentralBankhasstartedactionaimedatstimulatingthetroubledEurozoneeconomyinthefaceofdeflationandrecession.Itseemsapurelyfinancial issue.Actually,forCompanies,therearemany aspects and decisions to govern.Butlet’sgoinorder.

What is it about?OneofthemaintoolsGovernmentsandcentralbankshavetocontrolgrowthisraisingorloweringinterestrates.Lowerinterestratesencouragepeopleorcompaniestospendmoney,ratherthansave.Butwheninterestratesarealmostatzero,centralbanksneedtoadoptdifferenttactics-suchaspumpingmoneydirectlyintotheeconomy.ThisprocessisknownasquantitativeeasingorQE.Thecentralbankbuys assets,usuallygovernment bonds,withmoneyithas“printed”-orcreatedelectronically.It thenusesthismoneytobuybondsfrominvestorssuchasbanksorpensionfundsusingthis“new”money,whichincreases the amount of cashinthefinancial system,encouragingfinancialinstitutionsto lendmore tobusinessesand individuals.This in turnshouldallow themto investandspendmore,hopefullyincreasinggrowth.

What does it mean for Companies?Forcompanies this isamanagement issueand therearevariousfactorsthatimpactandinfluenceeachmanagerialdecision.Whatchangesisthe“value”oftheCompany.Ifinterest ratesfallandprices rise,thegreaterwealthgeneratedmovestowardriskier assetssuchasshares.Capitalizationsofthecompaniesgrow.Forcompaniesalsofinancing capacity,capital expenditurepol-iciesandgearing decisionschange.If you are a manager, are you able to define, with a good degree of reasonableness, annual (and future!) goals for your Compa-ny?Also incentive planswillbeaffected.

Quantitative Easing represents a discontinuity

that influences manymanagerial levers

30TARGET SETTING ‘OUTSIDE IN’activevalue.eu

WHAT RISES AND FALLS WHAT PRINCIPALLY CHANGES

PRICES

CAPITALIZATION

FINANCIAL CAPACITY

INTEREST RATES

CAPEX POLICIES

GEARING DECISIONS

VALUE CREATED

INCENTIVE PLANS

However,thesearejusttransitory phenomena.For thisreason, it’sessential forCompaniestohavemethodsandtechnicalities tomanageandmastertheseleversinordernot to make badorpartial decisions.ThroughTarget Setting modelingandsimulation,youcantietheimplicit expectations in the stock mar-ket pricestotheoperating resultsthatrepresentthefundamental Values of the Company.Similarly,thankstoappropriatemodels,youcandefineanddeclinemanagementobjectivestobelinkedtoanIncentive PlaninrelationtospecificEnterprise Values.Why does it make sense?• Tomasterandmodelrelevant managerial leverstakingintoac-

countexternal discontinuitiesthatcouldleadtopartialorwrongdecisions

• Toassess the level of challenge of Business Plans,consist-entlywiththe‘true’ValueoftheCompany

• To make possible innovative - and especially meritocratic -Governance Systems.

Target Setting technicalities help managers to define

management objectives linked to the ‘real’ Value of

the Company

TARGET SETTING TECNICALITIES TO DEFINE/MODELING MANAGEMENT OBJECTIVES

ENTERPRISE VALUE

CURRENT OPERATIONS VALUE

FUTURE GROWTH VALUE

BREAK DOWN OF EXPECTATIONS PER YEAR

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Big Data challenge

Theonethingweknowaboutdataisthattheywillcontinuetogrow.Inthemain,theychange rapidly.Wealsoknowthattheycontainmanyvaluable informationashistoricalevidences,markettrends,orcus-tomerpreferencesthatcanleadtomoreeffectivemarketing,newrevenueopportunities,bettercustomerservice,improvedoperationalefficiency,competitiveadvantagesandotherbusinessbenefits.Sincetheterm‘Business Intelligence’wascoined,newtechnologieshavegreatlyexpandedourunder-standingonhowCompaniescangainadvantagefromtheirdataandtheirrepresentation.Therole of IT inbusinesshas changed radicallyinrecentyears,thankstotheboomoftheavailabledataandsimplyprovideatechnologicalinfrastructuretodayisnotenoughtoimplementastrategy.Inthiscontexttheterm“BusinessIntelligence”isaconceptthatexpressestheneedtothinkbeyondtheparadigmofdataanalysisasisolatedfrombusinessgoals.Infact,withtheBusinessIntelligence,technologyandbusinessobjectivesmustblendintoaharmonioussetofoperationssothatthebusiness strategy can drive the IT in providing useful information to help companies in their growth.Adapting thedataproviding tobusinessneedshasalwaysbeendifficult,andmanycompanieshavegreatdifficultyinassessingexactlywhatinformationisneededtoachievespecificobjectives.This type of business analysis requires clarity of vision and objec-tives, solid framework of reasoning.Inthepast,BusinessIntelligenceprojectswerelimited‘bytechnology’becauseof the inability tohavedeepen informationandmakethemavailable.Todaynewtechnologies,suchasBigData,Analytics,Mo-bileandCloudcomputingareabletoacquiremassiveanddetailedstreamsofdata,inarelativelyeasyandconvenient way.But having everything is equal to have nothing if we don’t know what to do and, certainly, is not just a matter of tools.NowtheroleofManagementisto know what to look forandmaxi-mize the use of data to support strategic decisions.

The challenge for Managers is to know what to look for and

maximise the use of data to support

strategic decisions

BUSINESS INTELLIGENCE APPLICATIONS FOR COMPANIES

MEASUREMENT

ANALYTICS

REPORTING

COLLABORATION PLATFORM

For management, the real challenge is cultural.It’snecessarytoconvincemanagerstotheautonomous use of technology,eventhosenotusedtowork-ingwithdata.

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Whatshouldraiseisthelevelofprofessionalismbypassingthemessagethatthephenomenaaredetailedandthatit’snotonlyimportantunderstandinghow to do,butalsowhat to do.It is a real change of cultural paradigm.

WHAT COMPANIES ARE LEAVING

DATA INFORMATION TECHNOLOGY END USERS

CUSTOMER VALUEactivevalue.eu

1. Limited data available

2. Data not always updated

3. Difficulty in producing drill down analyses

4. No uniqueness of data

5. Report made with the eye (and help!) of IT

6. Limited output, difficulty to customized

WHAT COMPANIES ARE FACING

DATA BUSINESS INTELLIGENCE APPS END USERS

1. Multitude of available data

2. Data always updated

3. Ease of analysis and disaggregation

4. Uniqueness and data centralization

5. Report directly created by End Users

6. Many customizable output

INFORMATION TECHNOLOGY OTHER DEPARTMENTS

INTERNAL

EXTERNAL

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Active Value Advisors.

4 Competence Centres

ActiveValueAdvisorsisanindependentmanagementconsultingfirmthatactsasapartnerforCompa-nieswhoneedtostrengthentheirGovernanceSystemandforthoseCompanieswhowanttopursueapathofgrowththroughsolutionsconsistentwiththeobjectiveofcreatingsustainableValue.TheprofessionalsofActiveValueAdvisorshavelongexperienceinassistingmajorItalianlistedgroupsinthedevelopmentofBusinessPlans,intheselectionofactionstoimproveValueperformanceandintheassistancetothechangeprocessthatthecompetitivedynamicsandmarketopportunitiesrequire.Incarryingoutthemandatesweuseacommonlanguagedeclinedinmanyprofessionalservicespertain-ingtovariousmanagementissues:Shareholder Value,Customer Value,People ValueandCorporate Value.Eachcentreofcompetencesrespondstoafundamentaldimensionofthemanagementsystem:theShareholder,theCustomer,theInternalResources,thevalueoftheAssets.Thankstothecollaborationwithaccreditedprofessionals in theareaof StrategicPricing,ActiveValueAdvisorshasenrichedtheirskillsandprofessionalmethodswith innovativemodelsandtoolsofValuePricing.

SHAREHOLDER VALUE

• FamilyConstitution• TargetSetting‘OutsideIn’• AlternativeStrategies• BusinessUnitStrategies• PerformanceImprovement• ValueBenchmarking

PEOPLE VALUE

• OrganizationalNetworkAnalysis• ActionLearningforChangeManagement• PeopleAudit• RolesandResponsibilities• RewardingSystems• IncentiveMechanisms

CUSTOMER VALUE

• CustomerSatisfactionSurvey• SocialMediaIntelligence• DemandCurveAnalysisandSegmentation• CRMSystemDevelopment• CommercialPoliciesEnhancement• ValuePricingModelsandStrategies

CORPORATE VALUE

• ComplexEvaluations• TransactionServices• CapitalAllocation• SourcesofFundingMix• ImpairmentofGoodwill

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Glossary

ECONOMIC VALUE ADDED or ECONOMIC PROFIT (EVA®)EconomicValueAdded(EVA),isameasurethatenablesmanagerstoseewhethertheyareearninganadequatereturn.Wherereturnsarelowerthanmightreasonablybeexpectedforinvestmentsofsimilarrisk(i.e.theyarebelowthecostofcapital),EVAisnegative,andthefirmfacestheflightofcapitalandalowerstockprice.Quitesimply,EVAisameasureofprofitlessthecostofallcapitalemployed.Itistheonemeasurethatproperlyaccountsforallthecomplextrade-offs,oftenbetweentheincomestatementandbalancesheet,involvedincreatingvalue.EVAisalsothespreadbetweenacompany’sreturnonandcostofcapital,multipliedbytheinvestedcapital.Accordingtothismodel-equivalenttotheDCF-theEnterpriseValueisequaltotheInvestedCapitalplusthePresentValueofEVAperformancethatManagementwillgenerateinthefuture(MarketValueAdded-MVA).ThereforetheEnterpriseVal-ueisrelatedtotheEVAperformance.ThegreatertheEVAexpectationsperformancefortheCompany,thegreatertheValueoftheCompany.

MARKET VALUE ADDED (MVA)It’stheValuethat,atacertaindate,shareholdersofacompanyhavethanoriginallyinvested.

It iscalculatedasthedifferencebetweentheEnterpriseValueandtheCapitalInvestedintheCompany(Debt+Equity),goodwillincluded.MVAcanbefurtherbrokendownintoFutureGrowthValue(FGV)andValueofcurrentperformance.

FUTURE GROWTH VALUE (FGV)FGVisthesummationofPresentValueoffutureexpectedEVAimprovements.Toputitsimply,FGVisthecapitalizedvalueofpresentvalueoffuturestreamofexpectedimprovementsinEVA.

EVA PERPETUITY (EP)PresentvalueofanEVAperformanceassumedtobeconstant.

WEIGHTED AVERAGE COST OF CAPITAL (WACC)Weightedaveragecostofcapital(WACC)isacalculationofafirm’scostofcapitalinwhicheachcategoryofcapitalisproportionatelyweighted.Allcapitalsources-commonstock,preferredstock,bondsandanyotherlong-termdebt-areincludedinaWACCcalculation.TheWACCequationisthecostofeachcapitalcomponentmultipliedbyitsproportionalweightandthensummed.

RETURN ON INVESTED CAPITAL (ROIC)It’susedtoassessacompany’sefficiencyatallocatingthecapitalunderitscontroltoprofitableinvestments.Thereturnoninvestedcapitalmeasuregivesasenseofhowwellacompanyisusingitsmoneytogeneratereturns.Comparingacompany’sreturnoncapital(ROIC)withitscostofcapital(WACC)revealswhetherinvestedcapitalwasusedeffectively.ThegeneralequationforROICis:NOPAT/TANGIBLEINVESTEDCAPITAL.

Active Value Advisors.

T +39 02 36697100

F +39 02 36697101

E [email protected]

I www.activevalue.eu

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