ACADEMIA DE STUDII ECONOMICE

BUCURETI
FACULTATEA DE ADMINISTRAREA AFACERILOR
cupredaren limbi strine

Investment Credit Analysis

S.C. No Limit Advertising S.R.L.
*The names of the competitors and the bank have been changed, in order to maintain their confidentiality
for the data received.
1.1 Description of the loan
S.C. No Limit Advertising S.R.L. applied for a credit of 200,000 over a period of 5 years. The credit will
be used for the acquisition of printing equipment, whose total value amounts to 250,000.
The equipment will be financed in the following way:

50,000from the company own resources;

200,000 through the requested credit.

The credit will be backed by a first rank mortgage on building with an area of 500 m2 (located in
Bucharest).
The accepted value for the collateral is 212,500.
The company has used only their own funds in the investments they have made up until this moment. The
constant improvement of printing equipment helps the company not only in the work of their employees
but it is also reflected in the customer satisfaction, who are satisfied with the work of the company.
The reimbursement of the loan will be made in equal monthly installments, according to a schedule
previously agreed upon by both parties. The source of the reimbursement is the monthly cash flow of the
company.
1.2 Description of the company
S.C. No Limit Advertising S.R.L. it was founded by the family Vasluianu in 1996.
Their social capital in 2015 was of 558,047 RON.
No Limit Advertising is a Romanian company which has its main interest in
advertising and public relations, headquartered in Bucharest, Romania. It provides
digital and traditional advertising, media services and marketing services (SAMS) to
national and multinational clients, being so a B2B company.

The company's SAMS services include direct marketing/customer, relationship

management services, sales promotion, healthcare communications, multicultural
and ethnic communications, corporate and financial communications, human
resource infrastructure, public relations, design services, interactive
communications, events marketing and management, sports marketing, and
production and pre-press services. Its media services include media planning, media
buying, and media sales.

No Limit Advertising provides a quality service to its customer, fact which is

emphasized by its customer oriented strategy and by its mission statement.

The company orientation towards B2B can be easily observed from its portfolio
(available on the website), which contains major companies in their industries. To
strengthen the previous sentence, here we give a few examples: Star Food, Petrom
and Generali Asigurari.
In 1993 the company started to import advertising merchandise from various
sources. In order to improve its service and to provide a customized solution to each
client, the company decided to buy its own manufacturing machinery, fact which
have given to the company a sustained competitive advantage towards its main
competitors.

The purchased machinery represents an important resource for the company, and
the employees skills represent an important capability which together with the
resource bring the previous mentioned competitive advantage.

The initial name was Antrex and later, in 2003, it became No Limit Advertising.

In time, No Limit Advertising, has developed an opportunistic strategy and the

company took advantage of each arisen opportunity. It signed contracts on the
sport with large companies in Romania and abroad as: Whirlpool, P & G, Royal
Canin, Kema, BAUROM, Prima TV Paprika, Sanamed, Zucchero etc.
1.3 Credit history
Until now, S.C. HOUSEWARE S.R.L did not have any relation with Bank BRD. The company works
with the following bank:
Table 1: S.C. No Limit Advertising S.R.L's Banking Relations
BANKS Type of Account Currency Monthly Cash Flow () Bank ABC Current account EURO 4,500,000
Bank DEF Current account RON, EURO 500,000
1.4 Market/Industry Analysis
After four very difficult years for the fragmented DIY market of Romania, time in which all retailers
have tried to restructure or to reposition themselves in the market, 2014 has brought an exit and three
important transactions, and the beginning of 2015 has shown a market lull.
Figure 1: Market share in the DIY market 2014
The market registered a growth up to 5% per year between 2013 and 2014. It was estimated that in the
following years, the growth would be around 6-7%, which means that the estimated value of the DIY
market is around 2.29 billion.
43%
12%
12%
12%
10%
7%
3%
1%
0%
Market share
S.C.HOUSEWARE S.R.L
Company A
Company B
Company C
Company D
Company E
Company F
Company G
Company H

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A. Analysis of companys competitors
The main competitors are:

DDB Romania is a Romanian company that is part of the Omnicom international network, which
is the largest group of communications companies in Romania. In 2012 after a partnership signed
with The Group, Brandstalk becomes DDB Romania. They made advertising campaigns for
HelpNet , Lipton, Fuchs and the national campaign #suntuntaran . This company is well
established on the market and has a vast portfolio and also has a turnover of 3 mil euros.

Established in 2003, Friends Advertising is presently anaffiliate of TBWA Worldwide, becoming

FRIENDS\TBWA asof May 2014.FRIENDS\TBWA is a unique blend of local talent
andconsumer knowledge, tested on more than 1.000 projectsfor companies in virtually all sectors,
with relevant workacross the marketing mix, from branding to integratedcampaigns. In their
portofolio are companies like McDonalds, Philip Morris, Heineken,Michelin, Henkel and many
others. Friends\TBWA had a turnover of 2.7 mil euros in the past year.

Godmother is a fully independent Romanian agency that has been on the market for 15 years.
This is the agency that has launched Google and YouTube in Romania and has kept both of them
as clients. Besides the two big companies mentioned above, Godmother also has in its portfolio
companies such as Oriflame, H&M and HTC.

B. Analysis of companys customers

S.C. HOUSEWARE S.R.L. has only a B2C activity. This means that the company sells only to end-user
customers, and therefore we can see that their customers are people from all around Romania but also
neighboring countries who want to buy materials for their homes or daily use.
C. Analysis of companys future projects
One of the most important projects for the company is the upgrade of the lifting equipment. The company
knows that this upgrade will satisfy not only their clients but also their employees, and therefore is of the
upmost importance to realize it as fast as possible.
Through this upgrade, the company estimates a growth in customer satisfaction of 10% and in sales of
5%. This upgrade will improve the performance of the company.

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1.5 Financial Analysis A. Turnover Evolution
Figure 2: Evolution of S.C. HOUSEWARE S.R.L. Turnover
According to the financial statements, from 2011 until 2014, the companys turnover increased in 3 years
with 69.23%. From 2011 to 2012, the turnover increased with 19.54%, the next year it increased with
11.14%, and from 2013 to 2014 it increased with 27.37%. From this we can see that the most productive
year was 2013.
This constant increase in the turnover of the company comes mainly from the constant expansion of the
retail chain throughout Romania. Opening at least one store every year, means that the company has more
customers and therefore and increase in profit and turnover.
B. Main Financial Ratios
Table 2: Structure of the company's main financial ratios
Years 2011 2012 2013 2014
Turnover (Mill. RON)
201.64 241.06 267.92 341.25
Net Profit (Mil. RON)
205.67 258.77 288.37 415.80
Total Equity (Mil. RON)
889.03 1444.19 1732.66 2348.46
0,00
50,00
100,00
150,00
200,00
250,00
300,00
350,00
400,00
2011 2012 2013 2014
Turnover (Million RON)

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Debt Ratio 0.29 0.36 0.38 0.57
Current Ratio 1.08 0.85 0.84 0.70
Operating Profit Margin
16.92% 13.44% 13.29% 15.27%
C. Assets Evolution
The increase in total assets of 22.37%, from 2013 to 2014, was due to an increase in fixed assets of
17.32% and an increase in current assets of 28.19%. The increase of fixed assets is due to the purchase of
the 10000 m2 land in Bacau.
1.6 Collateral Analysis
The credit will be guaranteed with the first rank mortgage of the 10000 m2 land in Bacau. All the assets
are owned by S.C. HOUSEWARE S.R.L.
The market value of the collateral is 230,000. To this value, the bank applies a risk coefficient of 25%
and therefore, the accepted value of the collateral is 172,500.
The value of the collateral covers the amount of the total loan agreement (the loan amount, the amount of
interest payable in the course of the 1st year) and the expenses related to the collateral enforcement.
1.7 SWOT Analysis
Strengths
-Great experience, 11 years on the market
-100% Romanian company
- Broad area of expertise

-Vast portfolio and an important list of client companies such as: Star Food, Petrom and Generali
Asigurari.
-Good track record.
Weaknesses
-Not enough technology
-Not enough resources
-The need to obtain credits, this being the second one.
-Not enough clients
-Still not a resounding name on the advertising market in Romania

Opportunities
-The possibility to expand, from a resource point of view.
-Attracting new talents right from the university or other companies
-Combining the experience of the owners with new fresh and young minds.
-Financial growth
-New contracts

Threats
-Companies that are on the same market segment as our company
-The unstable economic environment
-The continuous and fast change in the advertising field
-Losing employees
-Losing clients

1.8 Risk evaluation

Table 3: S.C. HOUSEWARE S.R.L.'s Risk Evaluation
KEY RISKS MITIGATION FACTORS

Business Risk: Intellectual property is a key asset for advertising and is a valuable asset and can
be attacked or exploited by third parties, which can lead to long, complex (and expensive)
disputes.

Market Risk: There is a range of rules and regulations governing advertising activity. Clients rely
on our expertise and, if an advert is found to breach the rules and a fine is imposed on them or
they are required to pull an advert, they may well bring a claim for negligence against us to
recoup the resulting loss.
Comparative advertising : Comparing products and services to those of competitors is a tricky
area. If it is understood poorly the client could be liable for trade mark infringement and possibly
libel and malicious falsehood.

Repayment Risk Good reputation + Good financials = Ability to pay debts on time

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1.9 Credit scoring
Table 4: S.C. HOUSEWARE S.R.L.'s credit scoring
Evaluation criteria Weight Values Mark Evaluation
Qualitative Criteria
1 Management quality, business strategy collateral received
25% Extensive experience in the domain of the company, good business strategy, very well-known
company
1 0.25
2 Ownership structure 5% All owned by management
2 0.1
Quantitative Criteria
1 Current ratio 17% 1.08 3 0.51
2 Solvability 20% 3.47 1 0.2
3 Operating profit margin 13% 16.92% 1 0.13
4 Interest cover 11% 21.2 1 0.11
5 Equity ratio 9% 71.15% 1 0.09
Client rating financial performance
100% 1.39 - A
The companys overall credit score is 1.39, which according to the banks norms, is included in the A
category of credits, meaning performing credits. In this class, there are included borrowers with profitable
activities and solid financials, which have no problems in repaying the loans.

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1.10 Credit committee decision
Taking into consideration all the facts and figures presented, the credit committee approved the
investment credit under the conditions found below:
- Credit type: investment credit - Purpose: purchase of new lifting equipment - Amount: 165,000 -
Interest: 7.3% - Collateral: 1st rank mortgage on land - Contract date: June 2016 - Maturity date: May
2020 - Other conditions: o The company will carry at least 70% of the payments through the bank. o The
company will not apply for other credits without the written approval of the bank.
If the company does not fulfil on the conditions mentioned above, the bank has the right to increase the
interest rate by 2.5% or to consider the contract null and to demand the payment in advance of all the
obligations.

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S.C. HOUSEWARE S.R.L.
Balance sheet + Income statement 2014
Fixed Assets 1,688,159,660
Current Assets 806,959,835
Stocks (materials, consumables, production on process, semi-finished good etc.)
649,722,344
Receivables 51,979,099
Cash at bank 103,114,538
Prepayments 910,455
Total Assets 3,300,845,931
Liabilities 747,562,789
Deferred income 10,321
Customer deposits
204,815,981
Total Liabilities
952,389,091
Reserves 594,848
Total capital 1,747,861,992
Paid subscribed capital 600,000,000
Shareholders Equity 2,348,456,840

Sales
956789126
Net turnover 3,412,509,790
Total revenue 3,463,955,523

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Total expenses 2,985,048,259
Loss before tax 0
Net profit 415,798,163
Net loss 0