The Ipo of Cfao
The IPO of CFAO – MCT 4 – 31 October, 2012
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1
Corporate Finance
Prof. Ken L. Bechmann, Ph.D.
The IPO of CFAO
ESSEC & MANNHEIM EMBA, Weekend 2013
MCT 4
Johannes Drexler Anton Golubev Fabricio Granados Curzio Scheurer Nataliya Shevchenko Matthias Wörner
Mannheim Business School 31st October, 2012
The IPO of CFAO – MCT 4 – 31 October, 2012
st
2
1. Discuss the performance and financial strategy (capital structure) of CFAO in the 20062008 period. The management of CFAO, or better to say of PPR as the main vendor, has been significantly focusing on improving the financial performance of CFAO to make it an attractive candidate for the stock market as well as drawing down capital by paying a high dividend to PPR. Between 2006 and 2008 the overall performance of CFAO was significantly better in comparison to the previous years. This improvement can be displayed at the first sight by the growth of sales with 13.6% p.a. in comparison to a ten-year average of 10% p.a.. The ratio cost of sales/total sales improved slightly (from 77.2% in 2006 to 76.75% in 2008). The management of CFAO was able to improve the gross margin by 31.75% within three years. The correlation between the increased sales volume and increased costs of the staff was not very significant which resulted in lower growth of the employees’ costs and higher revenues per employee. All these methods led to an increase of net income by 55 % within two years. We do not know the final goal of this action but assume that CFAO improved the performance dramatically to have an interesting story for the stock market for an IPO of CFAO. Besides the very sound development of the financial performance of CFAO the financial strategy changed considerably. The relatively low debt ratios in 2006 (20.5%) and 2007 (17.2%) were struck by the high dividend granted to the holding company PPR for 2007 (in 2008). This payout led to an increase of CFAO's debt ratio to 37.7%1. Nevertheless the debt
st
1
Corporate Finance
Prof. Ken L. Bechmann, Ph.D.
The IPO of CFAO
ESSEC & MANNHEIM EMBA, Weekend 2013
MCT 4
Johannes Drexler Anton Golubev Fabricio Granados Curzio Scheurer Nataliya Shevchenko Matthias Wörner
Mannheim Business School 31st October, 2012
The IPO of CFAO – MCT 4 – 31 October, 2012
st
2
1. Discuss the performance and financial strategy (capital structure) of CFAO in the 20062008 period. The management of CFAO, or better to say of PPR as the main vendor, has been significantly focusing on improving the financial performance of CFAO to make it an attractive candidate for the stock market as well as drawing down capital by paying a high dividend to PPR. Between 2006 and 2008 the overall performance of CFAO was significantly better in comparison to the previous years. This improvement can be displayed at the first sight by the growth of sales with 13.6% p.a. in comparison to a ten-year average of 10% p.a.. The ratio cost of sales/total sales improved slightly (from 77.2% in 2006 to 76.75% in 2008). The management of CFAO was able to improve the gross margin by 31.75% within three years. The correlation between the increased sales volume and increased costs of the staff was not very significant which resulted in lower growth of the employees’ costs and higher revenues per employee. All these methods led to an increase of net income by 55 % within two years. We do not know the final goal of this action but assume that CFAO improved the performance dramatically to have an interesting story for the stock market for an IPO of CFAO. Besides the very sound development of the financial performance of CFAO the financial strategy changed considerably. The relatively low debt ratios in 2006 (20.5%) and 2007 (17.2%) were struck by the high dividend granted to the holding company PPR for 2007 (in 2008). This payout led to an increase of CFAO's debt ratio to 37.7%1. Nevertheless the debt