CASE VINERY

BUSINESS
Financial Analysis and Reporting
Alexis Midol

Introduction

Seasonal Activity: the wine business depends on

weather conditions which have a direct impact
on prices of wines.
Business environment:

A new CEO: son of Mister A Family Business

A new contract with Carrefour: large quantities
of bottles bought
An activity based on low margins

A firm profitable (x21 net profit between 2011

and 2012)
A medium-cap firm: turnover = 263,000M

Analysis of the profitability of the firm

Synthesis Chart

Revenues
Annual growth
rate
EBITDA
EBITDA Evolution
EBITDA/Sales

Depreciation....
EBIT
EBIT Evolution
EBIT/Sales

Net Income
Net Income

2011
66470

2012
129470

2013
262780

5810

8,74%

95%
6400
10,15%
4,94%

103%
11610
81,41%
4,42%

1120
4690

1280
5120

1840
9770

7,06%

9,17%
3,95%

90,82%
3,72%

-130

260

2930

Comments
The firm is profitable: 2,930M in 2013

The profitability of the firm is mainly

linked to the level of sales which is
unstable (business environment).
Increasing rapidly and regularly

Trading turnover x 5.6

Manufacturing
turnover x 1.8

An EBITDA/Sales positive but

decreasing !

Analysis of the profitability of the firm

Few difference between EBIT and EBITDA

low amount of depreciation despite the
large investments made between 2012
and 2013
EBITDA/Sales >20% but unstable not
good indicator of quality of topmanagement
Working capital highly positive: sign of
possible expansion of its activities.
High growth and positive WC =>
destruction of cash

Cash Flow Statement

Analysis
Cash Flow Statement

CF statement

2012

Net Income
Adjustments
Depreciation
Provisions

(1220)

5140

CFF

Changes in Cash

1600

5150

(260)

(2940)

(3600)

(370)

1280

1840

Steady CFO due the growth of

sales and the positive WC
CFI: important investments have
been made in order to fulfill the
new demand (Carrefour) + new
range of products

1840

3600

CFI

CFO

2930

1280

Change in WC

2013

260

Comments

CFF: new financial debts have

been contracted which explains
the important increase

Cash Flow Statement

Analysis
Comments

Free-Cash Flow

EBITDA
- Change in WC
- Capex
- Income tax
FCFF

2012
6400
(3600)
(260)
1563
8 697

2013
11610
1220
(2940)
1707
11 623

Increasing FCF due to important

growth of sales which do more
than compensate the huge
investments made.

Analysis of the Financial

Structure
Comments

Ratios
Ratios

Gearing > 4: the firm is

mainly financed with financial
debts (including shareholders
loans)

But the financial structure is

evolving with an increasing
part of the equity thanks to
the net profits absorption.
Risky financial structure as
shows the NFD/EDITDA ratio.

2011

2012

2013

Gearing

8,962

7,091

3,887

NFD/EBITDA
Cash Coverage
Ratio

4,489

3,513

2,042

1,407

1,778

3,709

The low level of the Cash

Coverage ratio (>1) shows
the probable difficulty to
meet its obligation to its
lenders whether in a shortterm and a long-term

Analysis of the returns

ROCE Dupont Analysis

Comments

Dupont
Analysis
Margin
Assets
Turnover

4,7%
2,6%
2,5%
229,29 504,76 881,52
%
%
%

ROCE

10,8% 13,3%

21,8%

Du Pont analysis :

Return in sales, decreased

from 4.7% to 2.6% as the
firm is less profitable
But the Asset turnover
largely compensate that
decreased. Indeed it rose
from 5 in 2012 to 8 in 2013.
It means that the firm can
generate more sales with
the same amount of
assets : its efficiency
increased.

Quality of the new CEO

Is his new strategy a good one ?

Yes, because it enables to develop importantly revenues

thanks to large investments (+2,000M changes in Fixed
Assets)
The investments made did not have a huge impact on
EBIT and enable the firm to get higher net profit.
But leading a policy of low margins needs high volume in
order to maintain or to increase the net profit. Moreover, the
firm is depending only on Carrefour which has an highly
bargaining power
The new strategy allows the firm to grow organically and to
improve its financial structure.

What about the profitability?

The firm is profitable as we have seen before

BUT: EBITDA/Sales is decreasing very hazardous + not
constant at all the top management does not handle it.

Quality of the new CEO

What about the financial structure?

Risky: large part of NFD compared to equity which makes

the financial structure risky especially for shareholders.
But this situation is improving. Thanks to a 0 dividend
policy (family business makes it easier), the equity part
over the NFD one is increasing.

What about the performance for shareholders?

ROE >10% with an average rate of 17% on the period.

BUT: This ratio is not constant which is worrying for
shareholders, it denotes not a good quality of top
management
The 0 dividend policy could be negative for any future
request to shareholders (issuance of new shares etc.)