Valuing Carluccio's ( '000 except per share)

Year
Revenues [Growth rate of 8% through 2014,]

2009
69,017

2010
74,538

2011
80,501

EBIT [before exceptionals] 6.7% but it is under pressure4,648

Effective tax rate at 30% UK statutory rate 28% + 2% 1,982
Earnings after tax
2,666
+ Depreciation& Amortz (growing 3% pa)
2,493
- Capital expenditures matching slowing reduce by 10% pa
4,390
Free cash flow
PV@8% of FCFs yrs 2010-2014
Terminal value estimate
Perpetual growth at 3% [FCFyr6/(Kw - g)]

4,994
1,498
3,496
2,568
3,951
2,113
13,893

5,394
1,618
3,776
2,645
3,556

PV of terminal value
Estimated value of operating cash flows
Add cash at 28 Sept 2009
Estimated value of firm

68,792
82,684
3,056
85,740

2,864

Shares outstanding
Estimated value per share in
Market price September 2009

58,373,000
1.47
0.95

2012
86,942

2013
93,897

2014
###

5,825
1,748
4,078
2,724
3,200
3,601

6,291
1,887
4,404
2,806
2,880
4,329

6,794
2,038
4,756
2,890
2,592
5,054
Terminal value year 5
101,078

Cost of capital: Earnings yield at sept 2009 was only

2.7% (2.6p/95p). Earnings yield for 2008 was 4.5%.
Lets assume a more realistic 8%.

Carluccios Income statements

2008
interim

Full year
2008

'000

2007

'000

sales growth

2006

'000

'000

Revenue

30,372 100.00%

24%
64,137 100.00%

Cost of sales
Gross Profit

24,745
5,627

81.47%
18.53%

51,819
12,318

80.79%
19.21%

42,288 79.40%
10,969 20.60%

36,810
8,949

80.44%
19.56%

Operating Expenses:
Exceptional flotation expenses
Adminstrative expenses
Total Administrative Expenses

0
2,908
2,908

0.00%
9.57%
9.57%

0
6,797
6,797

0.00%
10.60%
10.60%

0 0.00%
6,101 11.46%
6,101 11.46%

939
4,849
5,788

2.05%
10.60%
12.65%

Operating profit

2,719

8.95%

5,521

8.61%

4,868

9.14%

3,161

6.91%

Interest receivable
Income (loss) before provision for income taxes
Taxation charge

52
2,771
876

0.17%
9.12%
2.88%

108
5,629
1,982

0.17%
8.78%
3.09%

74
4,942
1,432

0.14%
9.28%
2.69%

21
3,182
802

0.05%
6.95%
1.75%

Net income (loss)

1,895

6.24%

3,647

5.69%

3,510

6.59%

2,380

5.20%

Cash Flow from operations

8,835

Income Statement represented

Revenue
Cost of sales
Food and beverage estimate 28% sales
Restaurant and shop labour actual
Rental actual (see accounts note 5)
Other operating costs.. Residual
Total cost of sales
Gross Profit
Operating Expenses:
Adminstrative expenses
Total Administrative Expenses
Operating profit

Income Statement represented in contribution format (to

operating profit level)

2009: '000

Revenue

69,017

100.0%

Variable costs
Food and beverage say 28% sales (estimate)
Restaurant and shop labour variable (say 50% of actual 23,204k)
Other operating costs (say 40% of 8,515k)
Total variable costs

19,325
11,602
3,406
34,333

28.0%
16.8%

Contribution

34,684

50.3%

Fixed costs
Rents (actual)
Adminstrative expenses assume 100% fixed (actual)
Restaurant and shop labour fixed (say 50% of 23,204k)
Other operating expenses fixed element (60% of 8,515k)

6,109
8,924
11,602
5,109

8.9%
12.9%
16.8%
7.4%

Total fixed costs

Operating profit

31,744
2,940

46.0%

[Note: If food and beverage is 19,325, Restaurant Labour is 23,204, Rent is

6,109 and Admin expenses is 8,924; then other operating expenses must be the
difference between these costs and total operating costs of 66,077, which amounts
to 8,515]. In the absence of a precise knowedge of Carluccio's cost behaviour, the
above schedule apportions this 8,515 (illustratively) on a 40% variable and 60%
fixed basis

4.9%
49.7%

4.3%

16.4%
53,257 100.00%

45,759 100.00%

8,002

5,720

Question 1 Metrics

2009

2008

2007

2006

a. Gross profit margin percentage

17.19%

19.21%

20.60%

19.56%

b. Mark up percentage

20.76%

23.77%

25.94%

24.31%

2.19%

5.69%

6.59%

5.20%

d. Tangible asset turnover

2.93

2.86

2.88

2.86

e. Total asset turnover

2.14

2.03

2.01

2.12

23,907
34.6%
36.2%

21,812
34.0%
37.2%

18,288
34.3%
37.8%

15,214
33.2%
35.7%

2.92

2.54

1.80

1.24

22

32

33

31

c. Net profit margin percentage

f Labour costs
Labour costs as a % of sales
Labour costs as a % of total cost
g. Debtors (Receivables) days
h. Trade creditors days

Associated
Finsbury Food Individual
Restaurant
Kerry Group British Foods Group
Ark Restaurant Group (US)
restaurant Grp Group
2008 millions 2008 millions millions
2008 millions 2008 millions 2008 $ millions

Sales

4,790

8,235

169

52

416

125

Operating Income

318

554

7.9

2.1

54

9.7

Net Income

177

371

4.1

0.6

32

6.9

Operating Income Margin

6.6%

6.7%

4.7%

4.0%

13.0%

7.8%

Net Income Margin

3.7%

4.5%

2.4%

1.1%

7.7%

5.5%

Group (US)

Carluccios Income statements

Carluccios Income statements
Carluccios Income statements

sales growth

2010
interim

2009
interim

'000

'000

Total turnover

8%
37,128 100.00%

Total cost of sales

Gross Profit

30,534
6,594

Operating Expenses:
Exceptional flotation expenses
Adminstrative expenses
Total Administrative Expenses
Operating profit

2009

2008

'000

Carluccios Income statements

2007

'000

2006

'000

'000

2010
interim

2009
interim

2008
interim

'000

'000

'000

34,497 100.00%

9%
69,017 100.00%

24%
64,137 100.00%

16.4%
53,257 100.00%

45,759 100.00% 37,128 100.00%

34,497 100.00%

30,372 100.00%

82.24%
17.76%

28,605
5,892

82.92%
17.08%

57,153
11,864

82.81%
17.19%

51,819
12,318

80.79%
19.21%

42,288 79.40%
10,969 20.60%

36,810
8,949

0
3,876
3,876

0.00%
10.44%
10.44%

0
3,402
3,402

0.00%
9.86%
9.86%

0
8,924
8,924

0.00%
12.93%
12.93%

0
6,797
6,797

0.00%
10.60%
10.60%

0 0.00%
6,101 11.46%
6,101 11.46%

2,718

7.32%

2,490

7.22%

2,940

4.26%

5,521

8.61%

4,868

Interest receivable
-7 -0.02%
Income (loss) before provision for income
2,711taxes
7.30%
Taxation charge
873
2.35%

19
2,509
863

0.06%
7.27%
2.50%

16
2,956
1,446

0.02%
4.28%
2.10%

108
5,629
1,982

0.17%
8.78%
3.09%

Net income (loss)

1,646

4.77%

1,510

2.19%

3,647

5.69%

Cash Flow from operations

1,838

4.95%

5,195

7,610

80.44% 30,534
19.56% 6,594

82.24%
17.76%

28,605
5,892

82.92%
17.08%

24,745
5,627

81.47%
18.53%

939
4,849
5,788

2.05%
10.60%
12.65%

0
3,876
3,876

0.00%
10.44%
10.44%

0
3,402
3,402

0.00%
9.86%
9.86%

0
2,908
2,908

0.00%
9.57%
9.57%

9.14%

3,161

6.91%

2,718

7.32%

2,490

7.22%

2,719

8.95%

74
4,942
1,432

0.14%
9.28%
2.69%

21
3,182
802

0.05%
6.95%
1.75%

-7
2,711
873

-0.02%
7.30%
2.35%

19
2,509
863

0.06%
7.27%
2.50%

52
2,771
876

0.17%
9.12%
2.88%

3,510

6.59%

2,380

5.20%

1,838

4.95%

1,646

4.77%

1,895

6.24%

8,002

5,720

Carluccios Balance Sheets

(in thousands)
(in thousands)

(in thousands)

27th September 2009

28th September 2008

23rd September 2007

193
23,557
1,239
24,989

0.6%
73.02%
3.84%
77.46%

201
22,436
1,319
23,956

0.6%
71.13%
4.18%
75.95%

90
18,463
1,451
20,004

0.3%
69.79%

22
16,010

0.1%
74.33%

75.62%

16,032

74.43%

1,650
552
113
1,899
3,056
7,270

5.1%
1.7%
0.4%
5.9%
9.5%
22.5%

1,831
447
106
1,614
3,587
7,585

5.8%
1.4%
0.3%
5.1%
11.4%
24.0%

1,381
262
186
1,477
3,145
6,451

5.2%
1.0%
0.7%
5.6%
11.9%
24.4%

1,223
156
267
1,220
2,642
5,508

5.7%
0.7%
1.2%
5.7%
12.3%
25.6%

Total assets

32,259

100.0%

31,541

100.0%

26,455

100.0%

21,540

100.0%

Liabilities and Stockholders' Equity

Current liabilities:
Trade creditors
Corporation tax
Tax and social security
Accuals and deferred income
Provisions
Total current liabilities

3,411
901
1,797
4,338
132
10,579

10.6%
5.6%
5.6%
13.4%
0.4%
32.8%

4,492
751
2,064
3,924

14.2%
6.5%
6.5%
12.4%

3,803
649
1,535
4,564

14.3%
5.8%
5.8%
17.2%

3,117
178
1,416
4,004

14.5%
0.8%
6.6%
18.6%

11,231

35.6%

10,551

39.8%

8,715

40.5%

Non current assets

Intangible assets
Property, Plant and Equipment
Prepaid operating lease charges
Total fixed assets
Current Assets
Inventories
Trade debtors
Other debtors
Prepayments and accrued income
Cash at bank
Total current assets

23rd September 2006

Provision for deferred tax

Deferred income
Provisions
Capital and Reserves
Called up share capital
Share premium
EBT Reserve
Profit and Loss account
Total shareholders' funds

1,753
2,192
368

5.4%
6.8%
1.1%

1,602
1,950

5.1%
6.2%

1,433

5.4%

1,290

6.0%

2,919
2,682
-1,020
12,786
17,367

9.0%
8.3%
-3.2%
39.6%
53.8%

2,852
1,725

9.0%
5.5%

2,849
1,713

10.7%
6.5%

2,840
1,684

13.2%
7.8%

12,181
16,758

38.6%
53.1%

9,996
14,558

37.7%
54.8%

7,011
11,535

32.5%
53.6%

Total liabilities and stockholders' equity

32,259

100.0%

31,541

100.0%

26,542

100.0%

21,540

100.0%

Scenario 1 op profit
of 250k required

Scenario 2 sales reach

3,000,000, royalty 4%

Scenario 3 sales reach of

1,800,000 royalty remains
at 4%

Scenario 4 sales reach

4,000,000; royalty 4%

Total turnover

3,242,542 100.00%

3,000,000 100.00%

1,800,000

100.00%

4,000,000

100.00%

Total cost of sales

Gross Profit

2,619,650 80.79%
622,892 19.21%

2,423,700
576,300

80.79%
19.21%

1,454,220
345,780

80.79%
19.21%

3,231,600
768,400

80.79%
19.21%

Operating Expenses:
Royalty cost
Adminstrative expenses (fixed)
Total Administrative Expenses

129,702 4.00%
243,191 7.50%
372,892 11.50%

120,000
243,191
363,191

4.00%
8.11%
12.11%

72,000
243,191
315,191

4.00%
13.51%
17.51%

160,000
243,191
403,191

4.00%
6.08%
10.08%

Operating profit

250,000

213,109

7.10%

30,589

1.70%

365,209

9.13%

Daily sales assuming 300 days

No of covers assuming average 11.00

7.71%

10,808

10,000

6,000

13,333

983

909

545

1,212

Carluccio's Traditional RoE analysis

2009 000 2008 000
69,017
64,137
1,510
3,647
32,259
31,541
17,367
16,758

Turnover
Net Income
Y/end assets
Y/end Equity

ROE

2007'000
53,257
3,510
26,455
14,529

Driver 1

Net Profit
Margin

Driver 2

Net Income
Turnover

Net Income
Equity

2006 000
45,759
2,380
21,540
11,535
Driver 3

Asset
Leverage
Turnover X
Turnover
Total Assets

Total Assets
Equity

Carluccios 2009

8.7%

2.2%

2.14

1.86

Carluccios 2008

21.8%

5.7%

2.03

1.88

Carluccios 2007

24.2%

6.6%

2.01

1.82

Carluccio's 2006

20.6%

5.2%

2.12

1.87