Davide Campari Milano SpA

Operating Model

"I gioielli di famiglia non si vendono; si regalano"

"Family heirlooms should not be sold; they should be gifted"

Countess Angiola Maria Barbizzoli, last heiress of the Campari family, 1976

Alberto Ghezzi
Campari
Financial Model

Inputs
Original Financial Statements
Historicals

(EUR m) Driver Driver 2013 2014

Color coding

Hardcoded value Blue

Calculation Black
Assumption / driver
Historical financial recall
Assumption / driver for the steady state

Income statement

Net sales 1,524.1 1,560.0

Cost of goods sold (COGS) (713.7) (728.3)
Advertising and promotion (249.2) (260.8)
Selling, general & adminsitrative expenses (SGAs) (261.6) (272.7)
One-off items (10.3) (43.2)
Operating profit 289.3 255.0

Financial income 5.8 5.9

Financial expenses (64.7) (66.2)
One-off's financial expenses (0.2) (0.8)
Income from associates (0.2) (0.2)
Put options costs 0.2 0.5
Pre-tax profits 230.2 194.2

Taxes (79.8) (64.7)

Net profit 150.4 129.5

Balance sheet

Net tangible fixed assets 396.6 441.5

Biological assets 17.3 17.5
Property 0.5 1.5
Goodwill and trademarks 1,556.4 1,841.0
Intangible assets 26.0 29.8
Interests in associates 0.9 0.7
Deferred tax assets 12.4 19.1
Other non-current assets 33.7 56.7
Total non-current assets 2,043.8 2,407.8

Inventories 442.6 477.0

Current biological assets 4.5 4.1
Trade receivables 288.5 313.6
Financial receivables 31.5 22.8
Cash at cash equivalents 444.2 230.9
Receivables for income taxes 17.0 13.0
Other receivables 29.4 26.7
Total current assets 1,257.7 1,088.1

Non-current assets for sale 1.0 21.9

Total assets 3,302.5 3,517.8

Share capital 58.1 58.1

Reserves 1,333.6 1,516.8
Group's shareholders' equity 1,391.7 1,574.9
Minorty interests 4.5 5.1
Total shareholders' equity 1,396.2 1,580.0

Bonds 1,127.1 1,086.9

Other non-current financial payables 48.7 25.8
Staff severance fund 8.6 9.4
Risks fund 32.4 37.9
Deferred tax 204.7 266.2
Total non-current liabilities 1,421.5 1,426.2

Banks loan 122.3 36.7

Other financial payables 44.4 117.4
Trade payables 198.1 223.2
Payables for taxes 7.2 4.9
Other current liabilities 112.8 127.8
Total current liabilities 484.8 510.0

Liabilities held for sale 0.0 1.6

Total liabilities and equity 3,302.5 3,517.8

Information from the notes to financial statements

Depreciation included into OPEX

COGS (28.1) (25.2)
Advertisement (0.3) (0.5)
SGAs (5.8) (6.5)
Total D&A (34.2) (32.2)

Amortization included into OPEX

COGS (0.9) (2.4)
Advertisement - -
SGAs (4.5) (4.8)
Total D&A (5.4) (7.2)

Sales breakdown
Americas 623.3 613.9
Italy 376.4 411.5
Rest of Europe 368.3 426.4
Asia & Pacific 156.2 108.2
Check 0.1 -

Aperol 146.2 156.4

SKYY Vodka 184.8 187.2
Campari 136.5 149.8
Other Global Brands (Wild Turkey..) 261.2 238.1
Regional Brands (Cynar, GlenGrant..) 254.1 261.2
Local Brands (Ouzo, Crodino..) 212.7 221.8
Others 328.7 345.4
1,524.1 1,560.0
- -

Market information

Dividend related to the year 39.8 46.1

WA shares outstanding - Basic (m) 1,156.0 1,156.0
WA shares outstanding - Fully diluted (m) 1,161.0 1,161.0
Share price at year end 3.0 2.6
Market capitalization 3,529.4 2,995.4
Historicals Explicit forecast

2015 2016 2017 2018 2019 2020 2021 Notes

1,656.8 1,726.5
(739.8) (741.9) Type historical consolidated financial statements, IS and BS.
Ignore historical cash flows. You will build a new cash flow
(286.3) (308.6) statement.
(298.0) (323.4)
(22.9) (33.2)
309.8 319.4

7.8 15.4
(68.7) (74.0)
0.9 (24.6)
0.0 0.0
(0.4) 0.6
249.4 236.8

(73.4) (70.5)
176.1 166.3

444.1 494.3
16.8 0.4
0.4 121.9
1,906.6 2,504.9
25.6 26.3
(0.0) 0.0
12.6 37.2
47.9 64.3
2,454.1 3,249.3

496.2 535.5
2.1 7.5
295.9 306.4
69.9 7.2
844.3 354.1
16.3 12.3
21.6 26.8
1,746.3 1,249.8

23.6 35.2

4,224.0 4,534.3

58.1 58.1
1,687.4 1,841.9
1,745.5 1,900.0
 0.3 0.0
1,745.8 1,900.0

1,276.1 992.4
10.5 506.4
8.3 36.5
32.8 96.6
291.5 456.6
1,619.3 2,088.5

29.3 106.9
465.1 18.8
217.2 262.8
13.3 14.0
124.0 138.6
848.9 541.1

10.0 4.7

4,224.0 4,534.3

(30.1) (32.3)
Add relevant details from notes (future debt schedule, sales
(0.7) (0.7) breakdown, past dividends..)
(6.9) (8.0)
Campari's IFRS income statement uses a by-function standa
(37.7) (41.0) therefore all costs related to product sold, advertising and
corporate structure are separated. No evidence is given on a
nature division, which is necessary to get D&A and therefore
compute EBITDA.
(3.3) (4.9)
In the notes to the financial statements, see below, details o
- - D&A component of each cost item is given.
(6.4) (6.8)
(9.7) (11.7)

701.6 726.3
416.3 407.1
422.9 469.6
116.0 123.5
(0.0) -

174.8 207.2
192.6 189.9
159.0 172.7
279.6 276.2
268.5 293.5
227.2 224.4
355.1 362.6
1,656.8 1,726.5
- -

45.7 52.1
1,156.0 1,158.0
1,161.0 1,180.0
4.0 4.7
4,644.0 5,487.0
ted financial statements, IS and BS.
You will build a new cash flow
m notes (future debt schedule, sales
ds..)

tatement uses a by-function standard

ed to product sold, advertising and
separated. No evidence is given on a by-
necessary to get D&A and therefore later

cial statements, see below, details on the

cost item is given.
Restated Financial Statements
Historicals

(EUR m) Driver 2013 2014

Income statement

Sales 1,524.1 1,560.0

Growth 2.4%

Cost of goods sold (COGS) (684.7) (700.7)

Advertising and promotion (248.9) (260.3)
Selling, general & adminsitrative expenses (SGAs) (251.3) (261.4)
EBITDA 339.2 337.6
Margin 22.3% 21.6%

Depreciation (34.2) (32.2)

Amortization (5.4) (7.2)
EBIT 299.6 298.2
Margin 19.7% 19.1%

Interest income 5.8 5.9

Interest expenses (64.5) (65.7)
Income from associates (0.2) (0.2)
Except. items (10.5) (44.0)
EBT 230.2 194.2

Income taxes (79.8) (64.7)

Net income 150.4 129.5
Margin 9.9% 8.3%

Dividend distribution 39.8 46.1

Retained portion 110.6 83.4

Balance sheet

Trade receivables 288.5 313.6

Trade payables (198.1) (223.2)
Inventory 442.6 477.0
Other current assets & liabilities (42.1) (70.2)
Deferred taxes (192.3) (247.1)
Long term provisions (32.4) (37.9)
Noncash working capital 266.2 212.2

Tangible assets 418.9 464.6

Goodwill and trademarks 1,582.4 1,870.8
Fixed assets 2,001.3 2,335.4

Core capital employed 2,267.5 2,547.6

Investments 0.9 0.7

Employee severance (8.6) (9.4)
Other non-operational assets 34.7 77.0
Surplus assets 27.0 68.3

Net capital employed 2,294.5 2,615.9

ST financial debt 44.4 117.4

Bank loans 122.3 36.7
Bonds and securities 1,175.8 1,112.7
Gross financial debt 1,342.5 1,266.8
Excess cash & equivalents (444.2) (230.9)
Net debt 898.3 1,035.9

Share capital 58.1 58.1

Retained earnings 1,333.6 1,516.8
Group equity 1,391.7 1,574.9
Minorities 4.5 5.1
Total equity 1,396.2 1,580.0

Total funds invested 2,294.5 2,615.9

Check 0.0 0.0

Cash flows

EBIT 299.6 298.2

(Operational taxes) (83.6) (83.2)
NOPAT 216.0 215.0
Depreciation 34.2 32.2
Amortization 5.4 7.2
Gross cash flows 255.6 254.4

Change in noncash WC 54.0

Tangible CAPEX (77.9)
Intangible CAPEX (295.6)
FCFO (65.1)

Tax shields 18.5

Interest income 5.9
Interest expenses (65.7)
Income from associates (0.2)
Except. items (44.0)
Change in gross debt (75.7)
Change in surplus assets (41.3)
FCFE (267.6)

Dividends (46.1)
Other movements in group equity 99.8
Change in minorities 0.6

Change in cash (213.3)

Check 0.0

Cash flows: calculations starting from net income

Net income 129.5

+ D&A 39.4
+ Interests 59.8
+ Exceptionals 44.0
+ Associates 0.2
- Tax shields (18.5)
Change in WC 54.0
CAPEX (373.5)
FCFO (65.1)
Check -

Net income 129.5

+ D&A 39.4
Change in WC 54.0
CAPEX (373.5)
Change in gross debt (75.7)
Change in surplus assets (41.3)
FCFE (267.6)
Check -
Historicals Explicit forecast

2015 2016 2017 2018 2019 2020 2021 Notes

1,656.8 1,726.5 Reorganize historical IS and BS according to the s

6.2% 4.2% to be used in the forecasting phase.
Check that total funds invested balance in the two
(706.4) (704.7)
and that the reorganized net income is equal to th
(285.6) (307.9)
(284.7) (308.6)
380.1 405.3
22.9% 23.5%

(37.7) (41.0)
(9.7) (11.7)
332.7 352.6
20.1% 20.4%

7.8 15.4
(69.1) (73.4)
0.0 0.0
(22.0) (57.8)
249.4 236.8

(73.4) (70.5)
176.1 166.3
10.6% 9.6%

45.7 52.1
130.4 114.2

295.9 306.4
(217.2) (262.8)
496.2 535.5
(29.6) (106.3)
(278.9) (419.4)
(32.8) (96.6)
233.6 (43.2)

463.4 624.1
1,932.2 2,531.2
2,395.6 3,155.3

2,629.2 3,112.1

(0.0) 0.0
(8.3) (36.5)
61.6 94.8
53.3 58.3

2,682.5 3,170.4

465.1 18.8
29.3 106.9
1,286.6 1,498.8
1,781.0 1,624.5
(844.3) (354.1)
 936.6 1,270.4

58.1 58.1
1,687.4 1,841.9
1,745.5 1,900.0
0.3 0.0
1,745.8 1,900.0

2,682.5 3,170.4

0.0 0.0
Build cash flows.
Check that the cash value at year end in the
BS matches the end value in the previous year
332.7 352.6 + the CF generated in the year (row called
(92.8) (98.4) "check").
239.9 254.2
37.7 41.0
9.7 11.7
287.3 306.9

(21.4) 276.8
(36.5) (201.7)
(71.1) (610.7)
158.3 (228.7)

19.5 27.9
7.8 15.4
(69.1) (73.4)
0.0 0.0
(22.0) (57.8)
514.2 (156.5)
15.0 (5.0)
623.7 (478.1)

(45.7) (52.1)
40.3 40.3
(4.8) (0.3)

613.4 (490.2)
0.0 0.0

176.1 166.3
47.4 52.7 For the sole purpose of reconciling different best
practices, the CF statement can be built starting
61.3 58.0
net income as well (more common in the US and
22.0 57.8 IFRS templates).
- -
(19.5) (27.9) Eventually the layouts match to the same results
(21.4) 276.8
(107.6) (812.4)
158.3 (228.7)
- -

176.1 166.3
47.4 52.7
(21.4) 276.8
(107.6) (812.4)
514.2 (156.5)
15.0 (5.0)
623.7 (478.1)
- -
 S and BS according to the structure intended
casting phase.
invested balance in the two sides of the BS
zed net income is equal to the original.
value at year end in the
value in the previous year
in the year (row called

of reconciling different best

ement can be built starting from
more common in the US and in

s match to the same results.

Assumptions Cockpit
Historicals

(EUR m) 2013 2014

Sales forecast

Bottle price (inc. VAT) Source: Tesco, Esselunga, Amazon

Aperol 10.0 11.0
SKYY Vodka 14.0 14.0
Campari 13.0 14.0

Bottle price (exc. VAT)

Aperol 8.2 9.0
SKYY Vodka 11.5 11.5
Campari 10.7 11.5

Global inflation forecast Source: The Economist

Bottle volumes
Aperol 17.8 17.3
4) Historical volumes of bottle sold, implied =
SKYY Vodka Sales / unit prices 16.1 16.3
Campari 12.8 13.1

Bottle volumes growth Source: Campari's Investors Relations, own assumptions

Aperol (2.7%)
5) Historical years: implied growth rates in bottles sold
SKYY Vodka 1.3%
Campari 2.0%

Brand growth
Other Global Priority Brands (Wild Turkey..) (8.9%)
Regional Priority Brands (Cynar, GlenGrant..) 2.8%
Local Priority Brands (Ouzo, Crodino..) 4.3%
Others 5.1%

Operating expenses forecast

COGS as a % of sales 44.9% 44.9%

Advertising and promotion as a % of sales 16.3% 16.7%

Investment forecast

Tangible CAPEX as a % of sales 5.0%

Depreciation rate 7.7%
Useful life (years) 13.0

Intangible CAPEX as a % of sales 18.9%

Intangibles amortization as a % of BOP Intangibles 0.5%

Days receivables (Sales) 56.6 60.1

Days payables (COGS) 86.6 95.3
Days inventory (Sales) 106.0 111.6
Other current assets / liabilities as a % of sales (2.8%) (4.5%)

Financing forecast

Payout ratio 26.5% 35.6%

Rights issues (issue of common stock)

ST debt as a % of sales 2.9% 7.5%

Effective interest rate for debt 5.0%
Bonds issuance schedule
Bonds maturity schedule
Effective interest rate for cash / overdraft 1.7%

Tax forecast

VAT 22.0% 22.0%

Income tax 1 on EBT (IRES) 24.0% 24.0%
Income tax 2 on EBIT (IRAP) 3.9% 3.9%

Steady state assumptions

Terminal growth rate (2022 onwards)

Historicals Explicit forecast

2015 2016 2017 2018 2019 2020 2021 Notes

Sales will be broken down into_

- 3 core brands: each with a price * volume forecast
- 4 minor brand classes: each with a total growth rate forecast
11.0 11.0
15.0 15.0
14.0 14.0
1) Average global price per bottle of the main brands which will be fo
breakdown (Aperol, SKYY and Campari)

9.0 9.0 9.2 9.4 9.6 9.8 10.0 2) Since store prices include value added tax (VAT), while income st
DO NOT, prices must be grossed-down taking off VAT. Price excl. VA
12.3 12.3 12.6 12.8 13.1 13.4 13.7
/(1+VAT)
11.5 11.5 11.7 12.0 12.2 12.5 12.7

2.1% 2.3% 2.0% 2.1% 2.1% 3) Forecast future unit prices: price t = price t-1 *(1+inflation t)

19.4 23.0 27.6 33.6 40.4 47.6 55.3 6) Forecast future volumes by growth: volume t = volume t-1 *(1+gr
15.7 15.4 15.4 15.4 15.4 15.4 15.4
13.9 15.0 16.2 17.3 18.6 20.0 21.4

7) Forecast years: CHOOSE a level of future growth in bottles sold

APEROL: due to strong marketing campaing, growth will increase in
11.8% 18.5% 20.0% 22.0% 20.0% 18.0% 16.0% then return to lower levels in the medium term
SKYY: due to the brand decline, no growth in sales volumes is assum
(4.0%) (1.4%) - - - - - CAMPARI: historical average used as a driver
6.1% 8.6% 7.4% 7.4% 7.4% 7.4% 7.4% Growth rate in bottles year t = (Volume t / volume t-1) -1

17.4% (1.2%) 2.5% 2.5% 2.5% 2.5% 2.5%

2.8% 9.3% 5.0% 5.0% 5.0% 5.0% 5.0% 8) "Minor" brands and other sales are estimated with no P*Q breakdow
The historical growth rate of the brand category is computed and used
2.4% (1.2%) 1.8% 1.8% 1.8% 1.8% 1.8% to choose the forecast driver growth rate
2.8% 2.1% 3.3% 3.3% 3.3% 3.3% 3.3%

Cost of goods sold and advertisement are estimated with the % on s

1) Compute historical averages: COGS t / Sales t
42.6% 40.8% 43.3% 43.3% 43.3% 43.3% 43.3% 2) Use percentage average as a reference to quantify the driver
17.2% 17.8% 17.0% 17.0% 17.0% 17.0% 17.0%

2.2% 11.7% 3.6% 3.6% 3.6% 3.6% 3.6%

Same as COGS, CAPEX in tangible assets is forecast as a % of sales
8.1% 8.8% 8.8% 8.8% 8.8% 8.8% 8.8%
12.3 11.3 11.3 11.3 11.3 11.3 11.3

D&A forecast will require a measure of useful life. It can me manua

4.3% 35.4% 4.3% 4.3% 4.3% 4.3% 4.3% (e.g. 10 years, so 1/10 = 10% depreciation rate) or implied in histo
0.5% 0.6% 0.5% 0.5% 0.5% 0.5% 0.5% / CAPEX t

53.4 53.1 55.8 55.8 55.8 55.8 55.8

92.0 111.6 96.4 96.4 96.4 96.4 96.4
Trade receivables: forecast with the indirect method, using DSO as
109.3 113.2 110.0 110.0 110.0 110.0 110.0 Same approach for payables (DPO), inventory (days inventory)
 Trade receivables: forecast with the indirect method, using DSO as
Same approach for payables (DPO), inventory (days inventory)

(1.8%) (6.2%) (6.2%) (6.2%) (6.2%) (6.2%) (6.2%)

Dividends: payout ratio as an indirect method driver

Payout t = Dividends t / Net income t
26.0% 31.3% 29.8% 29.8% 29.8% 29.8% 29.8%

Short term debt: % on sales as an indirect method driver (it make

debt is usually revolving credit facilities, or recourse factoring)
28.1% 1.1% 1.1% 1.1% 1.1% 1.1% 1.1%
4.5% 4.3% 4.6% 4.6% 4.6% 4.6% 4.6%

(397.2) (595.3) Bonds have clear maturities, available in the annual report. Assum
1.5% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% issue.

22.0% 22.0% 22.0% 22.0% 22.0% 22.0% 22.0% Statutory VAT rate and income tax rates in Italy (consolidating com
24.0% 24.0% 24.0% 24.0% 24.0% 24.0% 24.0% entity where all earnings eventually domicile).
Italian tax on income has two parts: 24% on EBT (IRES) and 3,9%
3.9% 3.9% 3.9% 3.9% 3.9% 3.9% 3.9% Both will be modeled.

2.1%
o_
price * volume forecast
with a total growth rate forecast

bottle of the main brands which will be forecast by a P*Q

nd Campari)

e value added tax (VAT), while income statement revenues

ossed-down taking off VAT. Price excl. VAT = Store price

es: price t = price t-1 *(1+inflation t)

by growth: volume t = volume t-1 *(1+growth rate t)

a level of future growth in bottles sold

keting campaing, growth will increase in the short term, to
n the medium term
cline, no growth in sales volumes is assumed
e used as a driver
t = (Volume t / volume t-1) -1

sales are estimated with no P*Q breakdown.

the brand category is computed and used as a reference
growth rate

ertisement are estimated with the % on sales as a driver

ges: COGS t / Sales t
as a reference to quantify the driver

tangible assets is forecast as a % of sales

measure of useful life. It can me manually hardcoded

10% depreciation rate) or implied in historicals, as D&A t

st with the indirect method, using DSO as a driver.

les (DPO), inventory (days inventory)
st with the indirect method, using DSO as a driver.
les (DPO), inventory (days inventory)

s an indirect method driver

Net income t

les as an indirect method driver (it makes sense as ST

credit facilities, or recourse factoring)

es, available in the annual report. Assuming no new bond

come tax rates in Italy (consolidating company and the

eventually domicile).
two parts: 24% on EBT (IRES) and 3,9% on EBIT (IRAP).
Campari
Financial Model

Calculations
 Sales and Operating Expenses Forecasts
Historicals

(EUR m) 2013 2014

Sales forecast

Aperol
SKYY Vodka
Campari

Other Global Brands (Wild Turkey..)

Regional Brands (Cynar, GlenGrant..)
Local Brands (Ouzo, Crodino..)
Others
IS Output Total sales
Growth

Operational forecasts

IS Output COGS
IS Output Advertising and promotion

IS Output SGAs
Historicals Explicit forecast

2015 2016 2017 2018 2019 2020 2021 Notes

253.8 316.8 387.8 467.2 553.3

193.9 198.4 202.3 206.6 210.9 Main 3 brands sales = unit price * volume

189.2 207.8 227.5 249.4 273.4

276.2 283.0 290.0 297.1 304.4 311.9

4 minor brand classes: forecast future sales by growth: sales t
293.5 308.1 323.4 339.4 356.3 374.0 *(1+growth rate t)
224.4 228.6 232.8 237.0 241.4 245.8
362.6 374.7 387.1 400.0 413.4 427.2
1,726.5 1,831.3 1,956.2 2,091.3 2,238.6 2,396.4
6.1% 6.8% 6.9% 7.0% 7.0%

COGS and advertisement forecast with the % of sales. COGS t

(793.4) (847.5) (906.0) (969.8) (1,038.2) % sales driver)
(311.7) (333.0) (356.0) (381.1) (407.9)

SGAs: fixed cost. Growing by inflation (used from above). SGA

(308.6) (315.1) (322.3) (328.8) (335.7) (342.7) 1*(1+inflation t)
 price * volume

ecast future sales by growth: sales t = sales t-1

orecast with the % of sales. COGS t = sales t * (COGS

by inflation (used from above). SGA t = SGA t-

 Investments Forecasts
Historicals

(EUR m) 2013 2014

Working capital forecast

BS Output Trade receivables

BS Output Trade payables
BS Output Inventory
BS Output Other current assets & liabilities

BS Output Deferred taxes

BS Output Long term provisions

Investment forecasts

Evolution of tangible assets

BOP tangible assets
+ Tangible CAPEX
- Depreciation
BS Output = EOP tangible assets

Existing assets 2016 624.1 Recall each year's CAPEX as a

separate line
CAPEX Year 2017 2017 65.9
CAPEX Year 2018 2018 70.4
CAPEX Year 2019 2019 75.3
CAPEX Year 2020 2020 80.6
CAPEX Year 2021 2021 86.2
IS Output Total depreciation

BS Output BOP Goodwill & trademarks

Intangible CAPEX
IS Output Amortization
EOP Goodwill & trademarks
Historicals Explicit forecast

2015 2016 2017 2018 2019 2020 2021 Notes

WC items: e.g. receivables.

341.7 365.0 390.2 417.7 447.2 Receivables t = (sales t*(1+VAT)*DSO driver)/365 (i.e. reverse

(255.5) (273.0) (291.8) (312.4) (334.4)

552.1 589.7 630.4 674.8 722.4
(112.8) (120.4) (128.8) (137.8) (147.5) Assumed constant

(419.4) (419.4) (419.4) (419.4) (419.4) (419.4)

Assumed constant
(96.6) (96.6) (96.6) (96.6) (96.6) (96.6)

Control account for tangible assets: EOP t asset = BOP asset t

BOP asset t = EOP asset t-1
624.1 646.1 666.5 685.4 702.7
65.9 70.4 75.3 80.6 86.2
(41.0) (43.9) (49.9) (56.4) (63.3) (70.7)
624.1 646.1 666.5 685.4 702.7 718.2 Tangible CAPEX t = sales t * (CAPEX as % sales driver)

(41.0) (41.0) (41.0) (41.0) (41.0)

(2.9) (5.8) (5.8) (5.8) (5.8)
- (3.1) (6.2) (6.2) (6.2)
- - (3.3) (6.7) (6.7)
- - - (3.6) (7.1)
- - - - (3.8)
(43.9) (49.9) (56.4) (63.3) (70.7)

2,531.2 2,596.5 2,666.8 2,742.5 2,824.1

78.6 84.0 89.8 96.1 102.9
(13.3) (13.7) (14.0) (14.4) (14.9)
2,531.2 2,596.5 2,666.8 2,742.5 2,824.1 2,912.1
+VAT)*DSO driver)/365 (i.e. reversed DSO formula)

e assets: EOP t asset = BOP asset t + CAPEX t - D&A t

1

* (CAPEX as % sales driver)

 Tax and Other Items Forecasts
Historicals

(EUR m) 2013 2014

Other balance sheet items forecast

BS Output Employee severance

BS Output Investments
BS Output Other non-operational assets

IS Output Income from associates

IS Output Except. items

Income taxes

Output Recall Income before taxes

Output Recall EBIT

Income tax 1 on EBT (IRES)

Income tax 2 on EBIT (IRAP)
IS Output Income taxes
Historicals Explicit forecast

2015 2016 2017 2018 2019 2020 2021 Notes

Assumed constant
(36.5) (36.5) (36.5) (36.5) (36.5) (36.5)
Assumed constant
- 0.0 0.0 0.0 0.0 0.0
Assumed constant
94.8 94.8 94.8 94.8 94.8 94.8

Assumed zero
0.0 0.0 0.0 0.0 0.0
Assumed zero
0.0 0.0 0.0 0.0 0.0

287.9 324.3 369.7 421.4 472.8

353.9 389.8 430.1 474.3 522.1
EBT t * 24%
(69.1) (77.8) (88.7) (101.1) (113.5)
(13.8) (15.2) (16.8) (18.5) (20.4)
EBIT t * 3,9%
(82.9) (93.0) (105.5) (119.6) (133.8)
 Financing Forecasts
Historicals

(EUR m) 2013 2014

Equity forecast

Output Recall Total net income

IS Output Dividends

Evolution of retained earnings

BOP retained earnings
Linking Cell + Total net income
- Dividends
BS Output EOP retained earnings

BS Output Minorities
BS Output Share capital

Debt forecast

BS Output ST financial debt

BS Output Bank loans
BS Output Bonds and securities

IS Output Interest expense

Gross financial debt

Revolver forecast

Cash / bank overdraft evolution

BOP cash
Output Recall + change in cash
Linking Cell = EOP cash / overdraft

IS Output Interest inc. (exp.) on cash (overdraft)

Historicals Explicit forecast

2015 2016 2017 2018 2019 2020 2021 Notes

Recall net income from Output: first fun

and BS
205.0 231.3 264.2 301.8 339.0
61.2 69.0 78.8 90.0 101.1 Forecast dividends with payout ratio, indirec

1,841.9 1,985.7 2,148.0 2,333.4 2,545.1

205.0 231.3 264.2 301.8 339.0
(61.2) (69.0) (78.8) (90.0) (101.1)
1,841.9 1,985.7 2,148.0 2,333.4 2,545.1 2,783.0 Control account for equity EOP t resereves
income t - dividends t
BOP reserves t = EOP reserves t-1
- 0.0 0.0 0.0 0.0 0.0
58.1 58.1 58.1 58.1 58.1 58.1 Indirect forecast: ST debt t = sales t * (% sa

19.9 21.3 22.8 24.4 26.1

106.9 106.9 106.9 106.9 106.9 106.9 Assumed constant
1,498.8 1,498.8 1,498.8 1,101.6 506.3 506.3
Control account: EOP t bonds = BOP t bond
repayments t
(75.2) (75.2) (66.1) (43.2) (29.5) BOP t bonds = EOP t-1 bonds. The extra bo
1,624.5 1,625.6 1,627.0 1,231.3 637.6 639.3 keep a positive cash balance

Interest expense t = interest rate driver * a

354.1 359.1 396.1 52.5 (470.7)

5.0 37.0 (343.7) (523.2) 90.7 Recall cash from Output: second funda
and BS
354.1 359.1 396.1 52.5 (470.7) (380.0)

9.2 9.7 5.8 (9.7) (19.7) Interest income t = interest rate driver
If in the model cash gets negative (ove
picks the interest expense rate instead

Computing interest on cash with EOP c

circularity. Let Excel work with it in: File >
make sure that "Workbook calculation" is se
the option "Enable iterative calculation" is O
et income from Output: first fundamental link, bw IS

dividends with payout ratio, indirect method.

account for equity EOP t resereves = BOP reserves t + net

t - dividends t
erves t = EOP reserves t-1

orecast: ST debt t = sales t * (% sales driver)

d constant

account: EOP t bonds = BOP t bonds + issuances t -

ents t
onds = EOP t-1 bonds. The extra bond in 2020 is needed to
positive cash balance

expense t = interest rate driver * average gross debt t;t-1

cash from Output: second fundamental link, bw CF

t income t = interest rate driver * average cash t;t-1.

e model cash gets negative (overdraft), the formula
he interest expense rate instead.

ting interest on cash with EOP cash creates a

rity. Let Excel work with it in: File > Options > Formulas:
ure that "Workbook calculation" is set on "Automatic" and that
on "Enable iterative calculation" is ON.
Campari
Financial Model

Output
Output Financial Statements
Historicals

(EUR m) 2013 2014

Income statement

Sales 1,524.1 1,560.0

Growth 2.4%

Cost of goods sold (COGS) (684.7) (700.7)

Advertising and promotion (248.9) (260.3)
Operating leases (251.3) (261.4)
EBITDA 339.2 337.6
Margin 22.3% 21.6%

Depreciation (34.2) (32.2)

Amortization (5.4) (7.2)
EBIT 299.6 298.2
Margin 19.7% 19.1%

Interest income 5.8 5.9

Interest expenses (64.5) (65.7)
Income from associates (0.2) (0.2)
Except. items (10.5) (44.0)
EBT 230.2 194.2

Income taxes (79.8) (64.7)

Net income 150.4 129.5
Margin 9.9% 8.3%

Dividend distribution 39.8 46.1

Retained portion 110.6 83.4

Balance sheet

Trade receivables 288.5 313.6

Trade payables (198.1) (223.2)
Inventory 442.6 477.0
Other current assets & liabilities (42.1) (70.2)
Deferred taxes (192.3) (247.1)
Long term provisions (32.4) (37.9)
Noncash working capital 266.2 212.2

Tangible assets 418.9 464.6

Goodwill and trademarks 1,582.4 1,870.8
Fixed assets 2,001.3 2,335.4

Core capital employed 2,267.5 2,547.6

Investments 0.9 0.7

Employee severance (8.6) (9.4)
Other non-operational assets 34.7 77.0
Surplus assets 27.0 68.3

Net capital employed 2,294.5 2,615.9

ST financial debt 44.4 117.4

Bank loans 122.3 36.7
Bonds and securities 1,175.8 1,112.7
Gross financial debt 1,342.5 1,266.8
Excess cash & equivalents (444.2) (230.9)
Net debt 898.3 1,035.9

Share capital 58.1 58.1

Retained earnings 1,333.6 1,516.8
Group equity 1,391.7 1,574.9
Minorities 4.5 5.1
Total equity 1,396.2 1,580.0

Total funds invested 2,294.5 2,615.9

Check 0.0 0.0

Cash flows

EBIT 298.2
(Operational taxes) (83.2)
NOPAT 215.0
Depreciation 32.2
Amortization 7.2
Gross cash flows 254.4

Change in noncash WC 54.0

Tangible CAPEX (77.9)
Intangible CAPEX (295.6)
FCFO (65.1)

Tax shields 18.5

Interest income 5.9
Interest expenses (65.7)
Income from associates (0.2)
Except. items (44.0)
Change in gross debt (75.7)
Change in surplus assets (41.3)
FCFE (267.6)

Dividends (46.1)
Other movements in group equity 99.8
Change in minorities 0.6

Change in cash (213.3)

Check 0.0
Historicals Explicit forecast

2015 2016 2017 2018 2019 2020 2021 Notes

Link all results into Output - No calculations in it

1,656.8 1,726.5 1,831.3 1,956.2 2,091.3 2,238.6 2,396.4
6.2% 4.2% 6.1% 6.8% 6.9% 7.0% 7.0%

(706.4) (704.7) (793.4) (847.5) (906.0) (969.8) (1,038.2)

(285.6) (307.9) (311.7) (333.0) (356.0) (381.1) (407.9)
(284.7) (308.6) (315.1) (322.3) (328.8) (335.7) (342.7)
380.1 405.3 411.1 453.4 500.5 552.1 607.6
22.9% 23.5% 22.4% 23.2% 23.9% 24.7% 25.4%

(37.7) (41.0) (43.9) (49.9) (56.4) (63.3) (70.7)

(9.7) (11.7) (13.3) (13.7) (14.0) (14.4) (14.9)
332.7 352.6 353.9 389.8 430.1 474.3 522.1
20.1% 20.4% 19.3% 19.9% 20.6% 21.2% 21.8%

7.8 15.4 9.2 9.7 5.8 (9.7) (19.7)

(69.1) (73.4) (75.2) (75.2) (66.1) (43.2) (29.5)
0.0 0.0 0.0 0.0 0.0 0.0 0.0
(22.0) (57.8) 0.0 0.0 0.0 0.0 0.0
249.4 236.8 287.9 324.3 369.7 421.4 472.8

(73.4) (70.5) (82.9) (93.0) (105.5) (119.6) (133.8)

176.1 166.3 205.0 231.3 264.2 301.8 339.0
10.6% 9.6% 11.2% 11.8% 12.6% 13.5% 14.1%

45.7 52.1 61.2 69.0 78.8 90.0 101.1

130.4 114.2 143.8 162.3 185.4 211.7 237.9

295.9 306.4 341.7 365.0 390.2 417.7 447.2

(217.2) (262.8) (255.5) (273.0) (291.8) (312.4) (334.4)
496.2 535.5 552.1 589.7 630.4 674.8 722.4
(29.6) (106.3) (112.8) (120.4) (128.8) (137.8) (147.5)
(278.9) (419.4) (419.4) (419.4) (419.4) (419.4) (419.4)
(32.8) (96.6) (96.6) (96.6) (96.6) (96.6) (96.6)
233.6 (43.2) 9.5 45.3 84.1 126.4 171.7

463.4 624.1 646.1 666.5 685.4 702.7 718.2

1,932.2 2,531.2 2,596.5 2,666.8 2,742.5 2,824.1 2,912.1
2,395.6 3,155.3 3,242.6 3,333.3 3,427.9 3,526.8 3,630.4

2,629.2 3,112.1 3,252.1 3,378.7 3,512.0 3,653.2 3,802.0

(0.0) 0.0 0.0 0.0 0.0 0.0 0.0

(8.3) (36.5) (36.5) (36.5) (36.5) (36.5) (36.5)
61.6 94.8 94.8 94.8 94.8 94.8 94.8
53.3 58.3 58.3 58.3 58.3 58.3 58.3

2,682.5 3,170.4 3,310.4 3,437.0 3,570.3 3,711.5 3,860.3

465.1 18.8 19.9 21.3 22.8 24.4 26.1

29.3 106.9 106.9 106.9 106.9 106.9 106.9
1,286.6 1,498.8 1,498.8 1,498.8 1,101.6 506.3 506.3
1,781.0 1,624.5 1,625.6 1,627.0 1,231.3 637.6 639.3
Cash links net cash flow into BS
(844.3) (354.1) (359.1) (396.1) (52.5) 470.7 380.0
 Cash links net cash flow into BS

936.6 1,270.4 1,266.5 1,230.9 1,178.8 1,108.3 1,019.3

58.1 58.1 58.1 58.1 58.1 58.1 58.1

1,687.4 1,841.9 1,985.7 2,148.0 2,333.4 2,545.1 2,783.0 Reserves link net income into BS

1,745.5 1,900.0 2,043.8 2,206.1 2,391.5 2,603.2 2,841.1

0.3 0.0 0.0 0.0 0.0 0.0 0.0
1,745.8 1,900.0 2,043.8 2,206.1 2,391.5 2,603.2 2,841.1

2,682.5 3,170.4 3,310.4 3,437.0 3,570.3 3,711.5 3,860.3

0.0 0.0 0.0 0.0 0.0 0.0 0.0

Build CF statement from scratch

332.7 352.6 353.9 389.8 430.1 474.3 522.1

(92.8) (98.4) (98.7) (108.8) (120.0) (132.3) (145.7)
239.9 254.2 255.2 281.1 310.1 342.0 376.4
37.7 41.0 43.9 49.9 56.4 63.3 70.7
9.7 11.7 13.3 13.7 14.0 14.4 14.9
287.3 306.9 312.4 344.7 380.5 419.7 461.9

(21.4) 276.8 (52.7) (35.9) (38.7) (42.3) (45.3)

(36.5) (201.7) (65.9) (70.4) (75.3) (80.6) (86.2)
(71.1) (610.7) (78.6) (84.0) (89.8) (96.1) (102.9)
158.3 (228.7) 115.2 154.5 176.8 200.8 227.6

19.5 27.9 15.8 15.7 14.5 12.7 11.8

7.8 15.4 9.2 9.7 5.8 (9.7) (19.7)
(69.1) (73.4) (75.2) (75.2) (66.1) (43.2) (29.5)
0.0 0.0 0.0 0.0 0.0 0.0 0.0
(22.0) (57.8) 0.0 0.0 0.0 0.0 0.0
514.2 (156.5) 1.1 1.4 (395.7) (593.7) 1.7
15.0 (5.0) 0.0 0.0 0.0 0.0 0.0
623.7 (478.1) 66.2 106.0 (264.8) (433.1) 191.9

(45.7) (52.1) (61.2) (69.0) (78.8) (90.0) (101.1)

40.3 40.3 0.0 (0.0) 0.0 0.0 0.0
(4.8) (0.3) 0.0 0.0 0.0 0.0 0.0

613.4 (490.2) 5.0 37.0 (343.7) (523.2) 90.7

0.0 0.0 (0.0) 0.0 0.0 0.0 0.0
No calculations in it

w into BS
w into BS

me into BS

m scratch
Financial Analysis
Historicals

(EUR m) 2013 2014

Value creation and profitability analysis

Sales growth 2.4%

EBITDA margin 22.3% 21.6%
EBIT margin 19.7% 19.1%
Net income margin 9.9% 8.3%

Investment analysis - CAPEX

Total CAPEX 373.5

D&A 39.4

Expanding or downsizing? Expanding

Is the company divesting? No

D&A as a % of CAPEX 10.5%

D&A as a % average fixed asset 1.8%

Investment analysis - WC

DSO 56.6 60.1

DPO 86.6 95.3
Days inventory 106.0 111.6

Clients are paying Later

Campari is paying suppliers Later
Products stay on stock Longer

Financing analysis

Leverage D/E 0.6x 0.7x

Leverage D/(D+E) 39.2% 39.6%

Debt coverage 2.6x 3.1x

Interest coverage 5.1x 5.0x

DSCR (0.5x)

Liquidity analysis

Current ratio 2.6x 2.1x

Acid test 1.7x 1.2x

Profitability analysis

ROCE 8.3%

ROCE decomposition
Effective operating tax rate 33.3%
EBIT margin 19.1%
Asset turnover 64.8%
ROCE 8.3%
Check -

ROE 8.7%
Effective interest rate (with average ND) 6.2%

Non-cash equity metrics (supporting FCFE valuation)

Interest income, after tax 4.5
FCFE excluding interest income (after tax) (272.1)
Net income excluding interest income (after tax) 150.4 125.0
Equity, excluding cash 952.0 1,349.1
Noncash ROE 10.9%
Historicals Explicit forecast

2015 2016 2017 2018 2019 2020 2021

6.2% 4.2% 6.1% 6.8% 6.9% 7.0% 7.0%

22.9% 23.5% 22.4% 23.2% 23.9% 24.7% 25.4%
20.1% 20.4% 19.3% 19.9% 20.6% 21.2% 21.8%
10.6% 9.6% 11.2% 11.8% 12.6% 13.5% 14.1%

107.6 812.4 144.5 154.4 165.0 176.6 189.1

47.4 52.7 57.2 63.6 70.4 77.7 85.5

Expanding Expanding Expanding Expanding Expanding Expanding Expanding

No No No No No No No

44.0% 6.5% 39.6% 41.2% 42.7% 44.0% 45.2%

2.0% 1.9% 1.8% 1.9% 2.1% 2.2% 2.4%

53.4 53.1 55.8 55.8 55.8 55.8 55.8

92.0 111.6 96.4 96.4 96.4 96.4 96.4
109.3 113.2 110.0 110.0 110.0 110.0 110.0

Sooner Sooner Later Equally Equally Equally Equally

Sooner Later Sooner Sooner Equally Equally Equally
Less Longer Less Equally Equally Equally Equally

0.5x 0.7x 0.6x 0.6x 0.5x 0.4x 0.4x

34.9% 40.1% 38.3% 35.8% 33.0% 29.9% 26.4%

2.5x 3.1x 3.1x 2.7x 2.4x 2.0x 1.7x

5.4x 6.1x 5.4x 5.9x 7.1x 9.0x 10.6x

(0.3x) (1.1x) 1.8x 2.4x 0.4x 0.3x 4.8x

2.1x 2.3x
1.5x 1.3x

9.1% 8.6% 7.9% 8.4% 8.9% 9.5% 10.0%

29.4% 29.8% 28.8% 28.7% 28.5% 28.4% 28.3%

20.1% 20.4% 19.3% 19.9% 20.6% 21.2% 21.8%
64.0% 60.1% 57.6% 59.0% 60.7% 62.5% 64.3%
9.1% 8.6% 7.9% 8.4% 8.9% 9.5% 10.0%
- - - - - - -

10.6% 9.1% 10.4% 10.9% 11.5% 12.1% 12.5%

6.2% 5.3% 5.2% 5.2% 5.0% 4.6% 4.6%
 5.9 11.7 7.0 7.4 4.4 (7.4) (15.0)
617.8 (489.8) 59.2 98.6 (269.2) (425.8) 206.8
170.1 154.6 198.0 223.9 259.9 309.1 354.0
901.5 1,545.9 1,684.7 1,810.0 2,339.0 3,073.9 3,221.0
15.1% 12.6% 12.3% 12.8% 12.5% 11.4% 11.2%
Campari
Financial Model

Valuation
Weighted Average Cost of Capital

Market
(EUR m) Country Currency cap. Net debt Minorities

AB InBev NV Belgium EURm 203,034.8 102,854.8 9,562.9

Diageo Plc Britain GBPm 53,091.1 7,770.0 1,715.0
Heineken NV Netherlands EURm 40,618.2 11,132.0 1,335.0
Pernod Ricard SA France EURm 27,325.2 8,777.0 169.0
Brown Forman Corp USA USDm 17,508.8 1,967.0 -
Carlsberg AB Denmark DKKm 92,899.1 26,702.0 2,839.0
Remy Cointreau SA France EURm 4,026.1 390.3 1.5
Average

Davide Campari Milano SpA Italy EURm 5,487.0 1,270.4 -

Cost of equity

D/E - Market equilibrium (industry) leverage 24.3%

Market cap (MV of equity) at the valuation date 5,487.0
Net debt at the valuation date (with MV of bonds) 1,184.5
D/E - Historical Campari leverage at the valuation date 21.6%
D/E - Target leverage 40.0%
Chosen leverage D/E: 21.6%

Risk Free Rate (Average in 2016 of 10Y Italian Bonds BTP) 1.4%
Unlevered Beta (Industry average) 0.767
Tax Rate (applicable to tax shields) 24.0%
Re-Levered Beta 0.893
Market Risk Premium (Source: Fernandez 2017) 6.4%
Levered cost of equity 7.2%

Unlevered cost of equity 6.3%

Cost of debt

Risk Free Rate (Average in 2016 of 10Y Italian Bonds BTP) 1.4%
2016 interest coverage 6.1x
Spread on debt (Source: Damodaran's model) 1.25%
Cost of debt 2.7%

WACC

D/(D+E) 17.8%
E/(D+E) 82.2%
WACC 6.2%

WACC: leverage and spread

Spread on debt

0.1 (0.8%) 0.3% 1.3%

20.0%
30.0%
40.0%
D/E

50.0%
60.0%
 Preferred Raw beta Adj. levered Tax Unlevered
Pensions shares EV Leverage (W/3Y) beta rate beta A panel of alcoholic beverages c
each of them, Bloomberg provid
date) and financial statements
2,631.1 - 318,083.6 48.4% 1.121 1.0810 34.0% 0.819
(i.e. debt, cash, preferred share
490.0 - 63,066.1 14.2% 0.916 0.9441 19.0% 0.847 Also beta is provided (assuming
years). EV for each comparable
1,355.0 - 54,440.2 26.5% 0.839 0.8926 25.0% 0.744 debt, minorities, preferred share
(66.0) - 36,205.2 31.9% 0.787 0.8577 33.3% 0.707 Each levered comparable beta is
Their average is the unlevered in
270.0 - 19,745.8 11.2% 0.859 0.9060 40.0% 0.849
4,878.0 - 127,318.1 27.9% 0.619 0.7457 22.0% 0.612
31.6 - 4,449.5 9.7% 0.765 0.8433 33.3% 0.792
24.3% 0.767

(58.3) 6,699.1 23.2% 0.480 0.6533 24.0% 0.556

Leverage choice >> Historical

BV bonds MV bonds
1,498.8 1,412.9 Current trading price of Campari's listed bonds *
number of bonds

Leverage: you can choose among the historical leverage for

Campari recalculated at market values at the valuation date (using
market value of shares and bonds on the market); an
industry/equilibrium leverage (average of comparables' leverages)
or a target leverage which is reasonable for the evolution of the
company (in this last case, the model as well should have applied it
in forecasts..)

Risk free rate is the Italian 10-years BTP return, as an average of

yearly returns every day of the 12 months prior to valuation date
period. It is important to chose an interval wide eoungh to offset
short term events. Early 2016 was going through aggressive
expansionary monetary policies therefore a 1Y average helps
unbiasing the analysis.

bL and kEL at different leverages

pread on debt D/E bU bL kEL

2.3% 3.3%
20.0% 0.767 0.884 7.1%
30.0% 0.767 0.942 7.5%
40.0% 0.767 1.001 7.8%
50.0% 0.767 1.059 8.2%
60.0% 0.767 1.117 8.6%
A panel of alcoholic beverages comparable companies is found. For
each of them, Bloomberg provides market cap (as of the valuation
date) and financial statements information necessary to compute EV
(i.e. debt, cash, preferred shares, minorities, pensions)
Also beta is provided (assuming regressions with weekly data for 3
years). EV for each comparable sums all common bridge items (net
debt, minorities, preferred shares, pension assets/liabilities)
Each levered comparable beta is de-levered with its own tax rate.
Their average is the unlevered industry beta
Terminal Cash Flows
Fundamental Bankers' normalized
growth best practice
Terminal FCFO 2021 TV 2022 TV 2022

Sales 2,396.4 2,446.7

EBITDA 607.6 620.3
I
D&A (85.5) (193.1) b
EBIT 522.1 427.3 f
a
(Operational taxes) (145.7) (119.2)
NOPAT 376.4 384.3 308.1 T
f
D&A 85.5 193.1 d
Change in noncash WC (45.3) 0.0 i
C
CAPEX (189.1) (193.1) e
t
FCFO 227.6 303.9 308.1
i
-
Assumptions
Terminal growth rate 2.1%
EBITDA margin 25.4%
CAPEX / Sales 7.9%
2021 ROCE = Assumed to be terminal ROCE 10.0%
Implied terminal capital reinvestment rate 20.9%

Fundamental Simple
growth FCFE
Terminal FCFE 2021 TV 2022 TV 2022

Noncash net income 354.0 361.4

+ D&A 85.5
Change in WC (45.3)
CAPEX (189.1)
Change in gross debt 1.7
Change in surplus assets 0.0
FCFE 206.8 293.9 211.2
-

Assumptions
Terminal growth rate 2.1%
2021 noncash ROE = Terminal noncash ROE 11.2%
Implied terminal equity reinvestment rate 18.7%

Terminal tax shield 2021 TV 2022

Tax shields 11.8 6.7

Tax shield on interest expense 4.2
Tax effect of interest income 2.5

Gross debt 639.3 652.7

Cash (overdraft) (380.0) (388.0)

Assumptions
Terminal growth rate 2.1%
Cost of debt 2.7%
Interest income rate 2.6%
Income tax rate (with interest deductibility) 24.0%
Simple
FCFO Growing the last explicit FCFO would assume the same
TV 2022 historical reinvestments and potentially be inconsistent
with the long term return on capital employed.

Investment bankers often "normalize" the terminal FCFO,

by setting a CAPEX level consistently with the LT
forecasts (e.g. % sales), setting D&A = CAPEX and
assuming change in WC = 0.

This approach does not deviate excessively from the

fundamental growth, unless the CAPEX values are too
different from capital reinvestments. It hides two
inconsistencies: by setting D&A = CAPEX (even if the two
CAPEX values are equal), it changes the "tax saving
effect" of D&A. Moreover, the change in WC = 0 implies
that WC doesn't grow, which is inconsistent with
232.3
investments needed to support growth

Sure enough, we can derive the implied capital

reinvestment rate that the chosen LT growth rate and
the LT ROCE imply. This is the most complete and
precise approach.

The same reasoning applies to FCFE valuation. This

method does not have a banker's best practice because
the method itself is rarely used among bankers

Tax shields include tax savings on interest expenses and

tax costs on interest income. In this specific case, 2021
cash is negative (i.e. short term financing) therefore it
pays an additional interest, rather than generating interest
income

Consistently with the fundamental growth approach, debt

and cash grow as much as the whole company in the long
run

Assume that in the LT, debt will be paying interests at a rate

equal to kD and cash generates interest income at the same
historical rate
Assume that in the LT, debt will be paying interests at a rate
equal to kD and cash generates interest income at the same
historical rate
DCF / APV Valuation
Historicals

(EUR m) 2013 2014

Assumptions

Perpetual growth 2.1%

WACC 6.2%
kEU 6.3%
kEL 7.2%
kD 2.7%
Tax shields - Theoretical tax rate 24.0%
Valuation date (= last fiscal year closing date) 31/12/2016

Year

DCF asset side (FCFO) 2013 2014

FCFO
Discount factor (WACC)
Present value of FCFO
Terminal value
PV of FCFO
PV of TV

Enterprise value
(Net debt)
Surplus assets (inc. associates & pensions)
(Minorities)
Equity value
Number of shares (NOSH) (m)
Equity value per share (€)
Implied EV / EBITDA 2016A multiple

Adjusted present value 2013 2014

FCFO
Discount factor (kEU)
Present value of FCFO
Terminal value
PV of FCFO
PV of TV
Unlevered value

Accounting yealry tax shields

Discount factor (kD)

Present value of TS
Terminal value
PV of TS
PV of TV
Value of tax shields

Enterprise value
(Net debt)
Surplus assets (inc. associates & pensions)
(Minorities)
Equity value
Number of shares (NOSH) (m)
Equity value per share (€)
Implied EV / EBITDA 2016A multiple

DCF equity side (FCFE) 2013 2014

Noncash FCFE
Discount factor (kEL)
Present value of FCFE
Terminal value
PV of FCFE
PV of TV

Equity value from continuing operations

Cash
Surplus assets (inc. associates & pensions)
(Minorities)
Equity value
Number of shares (NOSH) (m)
Equity value per share (€)

Gross debt
Enterprise value
Implied EV / EBITDA 2016A multiple

Sensitivity analysis

Lower bound 3,759.9 4,418.7

Upper bound 6,831.1 6,217.6
Average 5,047.7 5,273.8

In order for the following sensitivity tables to function properly, the grey-colored cells need to be hardcoded (raw numbers) and equa
corresponding input to subject to sensitivity

DCF asset side: equity value sensitivity: WACC and perpetual growth

Perpet

4,925.5 1.1%
5.2%
5.7%
WACC

6.2%
6.7%
7.2%

DCF asset side: implied multiple sensitivity: WACC and perpetual growth

Perpet

15.1 1.1%
5.2%
5.7%
WACC

6.2%
6.7%
7.2%
DCF equity side: equity value sensitivity: kEL and perpetual growth

Perpet

4,278.2 1.1%
6.2%
6.7%

kEL
7.2%
7.7%
8.2%

APV: equity value sensitivity: kEU and kD

Cos

5,839.3 2.7%
5.3%
5.8%

kEU
6.3%
6.8%
7.3%

Extra method: Economic value added (EVA) 2013 2014

Core capital employed

ROCE (on core CE)
EVA
Present value of EVA
TV EVA
PV of EVA
PV of EVA TV

Market value added (MVA)

Beginning core CE
Enterprise value
Historicals Explicit forecast TV

2015 2016 2017 2018 2019 2020 2021 2022 Notes

0 1 2 3 4 5

2015 2016 2017 2018 2019 2020 2021 2022

Discounting FCFO expressed at market valu

115.2 154.5 176.8 200.8 227.6 303.9 "core CE" only: core enterprise value. The g
0.941 0.886 0.834 0.785 0.739 is equity value, that is to say the market va
of group's equity. The bridge beween the tw
108.4 136.8 147.4 157.6 168.1 market value is therefore:
7,335.8
Core EV - net debt (hence; - debt + cash) +
718.4 surplus assets (- surplus liabilities) - minorit
5,419.3
Compare this to a reorganized BS.
6,137.6
(1,270.4)
58.3
0.0
4,925.5
1,180.0
4.2
15.1x

2015 2016 2017 2018 2019 2020 2021 2022

115.2 154.5 176.8 200.8 227.6 303.9

0.940 0.884 0.831 0.782 0.735
108.3 136.6 147.0 157.0 167.3
7,160.0
716.2
5,264.2
5,980.4

15.8 15.7 14.5 12.7 11.8 6.7

0.974 0.948 0.924 0.899 0.876

15.4 14.9 13.4 11.4 10.3
1,147.9
65.5
1,005.5
1,071.0

7,051.4
(1,270.4)
58.3
 0.0
5,839.3
1,180.0
4.9
17.4x

2015 2016 2017 2018 2019 2020 2021 2022

59.2 98.6 (269.2) (425.8) 206.8 293.9 This FCFE model treats cash out of the disco
FCFE, because FCFE calculations include the
0.933 0.871 0.813 0.759 0.708
crom cash (interest income) but not the "inv
55.3 85.9 (218.8) (323.0) 146.4 in cash (the change in cash across two years
Therefore FCFE needs to exclude all cash eff
5,819.3
interest income (after tax) will be netted out
(254.2)
4,120.0

3,865.8
354.1
58.3 Since this model's FCFE excludes the change
0.0 and the change in minorities, their contributi
value still hasn't been embedded so far. Grou
4,278.2 value needs to add cash and substract minor
Similarly, consider that surplus assets brough
1,180.0
and no reinvestment in their forecast: their v
3.6 be represented by the discounted FCFEs, the
needs to be added / subtracted.

1,624.5 Overall, this equity value "from continuing op

represents core CE net of gross financing.
5,490.3
13.5x

3,522.7
5,412.2
4,341.1

dcoded (raw numbers) and equal to the

Important note for data tables: the five values
on the X and Y axis can be linked to the mode
(therefore not hardcoded), but:
1) in the same sheet
2) they must be linked to a cell that is not dire
feeding the model. Therefore create a source "
the driver and link to it both the data table and
Perpetual growth Checks model itself

1.6% 2.1% 2.6% 3.1% -

-
-

Perpetual growth Checks

1.6% 2.1% 2.6% 3.1% -

-
-
 Perpetual growth Checks

1.6% 2.1% 2.6% 3.1% -

-
-

Testing the APV against kD needs to model higher kD

Cost of debt Checks only both because kD is already extremely low and,
more importantly, because lowering kD to a level
3.2% 3.7% 4.2% 4.7% - closer to LT growth would make the terminal value of
the tax shield meaningless (the perpetuity divides by a
- factor equal to kD - g)
-

2015 2016 2017 2018 2019 2020 2021 2022

3,112.1 3,252.1 3,378.7 3,512.0 3,653.2 3,802.0

7.9% 8.4% 8.9% 9.5% 10.0% 10.0%
52.2 69.6 90.5 113.7 138.7 144.4
49.1 61.7 75.4 89.3 102.5
3,485.0
378.0
2,574.6

2,952.5
3,112.1
6,064.6
 ting FCFO expressed at market values
E" only: core enterprise value. The goal
y value, that is to say the market value
p's equity. The bridge beween the two
value is therefore:

- net debt (hence; - debt + cash) +

assets (- surplus liabilities) - minorities

e this to a reorganized BS.

E model treats cash out of the discounted
cause FCFE calculations include the "income"
h (interest income) but not the "investment"
the change in cash across two years).
e FCFE needs to exclude all cash effects:
ncome (after tax) will be netted out

s model's FCFE excludes the change in cash

change in minorities, their contribution to
l hasn't been embedded so far. Group equity
eds to add cash and substract minorities.
consider that surplus assets brought no P&L
einvestment in their forecast: their value can't
sented by the discounted FCFEs, therefore it
be added / subtracted.

his equity value "from continuing operations"

ts core CE net of gross financing.

note for data tables: the five values to test

nd Y axis can be linked to the model
not hardcoded), but:
ame sheet
st be linked to a cell that is not directly
e model. Therefore create a source "above"
and link to it both the data table and the
f
Market multiples valuation
Actual multiples date
Forward +1 multiples date
For each comparable 6 multiples are computed, EV/Sales, EV/EBITDA, P/E,
(actual) and 2016 (forward +1 year). Of course forward multiples will requi
forecast for each comparable (found on the market by consensus, no need
31/12/2016 model for each..). A range of values is defined using mean and median mul
31/12/2017

(EUR m) Country Currency Market. cap. EV Sales Actual

AB InBev NV Belgium EURm 203,034.8 318,083.6 41,145.4

Diageo Plc Britain GBPm 53,091.1 63,066.1 12,050.0
Heineken NV Netherlands EURm 40,618.2 54,440.2 20,792.0
Pernod Ricard SA France EURm 27,325.2 36,205.2 8,682.0
Brown Forman Corp USA USDm 17,508.8 19,745.8 2,994.0
Carlsberg AB Denmark DKKm 92,899.1 127,318.1 62,614.0
Remy Cointreau SA France EURm 4,026.1 4,449.5 1,094.9
Average
Median

Davide Campari SpA Italy EURm 5,487.0 6,699.1 1,726.5

Method EV / Sales A EV / Sales A EV / Sales F

Multiple choice Average Median Average

Sales 2016 Sales 2016 Sales 2017

Campari's corresponding metric Actual Actual Forward
Campari's corresponding metric 1,726.5 1,726.5 1,831.3
Multiple 4.6x 4.2x 4.3x
Enterprise value 8,002.4 7,199.7 7,945.9

(Net debt) (1,270.4) (1,270.4) (1,270.4)

Surplus assets (inc. associates & pensions) 58.3 58.3 58.3
(Minorities) 0.0 0.0 0.0
Equity value 6,790.3 5,987.6 6,733.8

Net debt
(Surplus assets (inc. associates & pensions))
Minorities
Enterprise value

Implied multiples - DCF asset side 3.6x 3.6x 3.4x

Implicit multiples - DCF equity side 3.2x 3.2x 3.0x
Implicit multiples - APV 4.1x 4.1x 3.9x

Alternative to mean or median: regression fundamental multiple

Regression slope
Regression intercept
Fundamental multiple
R^2
omputed, EV/Sales, EV/EBITDA, P/E, each for 2015
Of course forward multiples will require 2016
n the market by consensus, no need to build a
defined using mean and median multiples.

Sales EBITDA EBITDA Net income Net income EV / Sales EV / Sales EV / EBITDA
Forward Actual Forward Actual Forward Actual Forward Actual

47,962.4 14,749.9 18,488.8 1,121.8 7,087.2 7.7x 6.6x 21.6x

12,478.7 3,904.0 4,303.0 2,662.0 2,934.2 5.2x 5.1x 16.2x
21,984.2 4,572.0 5,452.5 1,540.0 2,217.3 2.6x 2.5x 11.9x
9,001.3 2,314.0 2,648.4 1,235.0 1,504.5 4.2x 4.0x 15.6x
3,138.5 1,047.0 1,116.3 669.0 710.5 6.6x 6.3x 18.9x
63,648.8 12,914.0 13,394.3 4,486.0 4,935.6 2.0x 2.0x 9.9x
1,141.9 241.7 267.3 190.3 158.6 4.1x 3.9x 18.4x
4.6x 4.3x 16.1x
4.2x 4.0x 16.2x

1,831.3 405.3 411.1 166.3 205.0 3.9x 3.7x 16.5x

EV / EBITDA EV / EBITDA EV / EBITDA EV / EBITDA

EV / Sales F P/E A P/E A P/E F
A A F F

Median Average Median Average Median Average Median Average

Sales 2017 EBITDA 2016 EBITDA 2016 EBITDA 2017 EBITDA 2017 Net income Net income Net income
Forward Actual Actual Forward Forward 2016 Actual 2016 Actual 2017 Forward
1,831.3 405.3 405.3 411.1 411.1 166.3 166.3 205.0
4.0x 16.1x 16.2x 14.2x 14.7x 22.7x 21.6x 21.7x
7,365.9 6,508.0 6,547.3 5,835.2 6,025.6

(1,270.4) (1,270.4) (1,270.4) (1,270.4) (1,270.4)

58.3 58.3 58.3 58.3 58.3
0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
6,153.8 5,295.9 5,335.2 4,623.1 4,813.5 3,782.8 3,598.9 4,453.4

1,270.4 1,270.4 1,270.4

(58.3) (58.3) (58.3)
0.0 0.0 0.0
4,994.9 4,811.0 5,665.5

3.4x 15.1x 15.1x 14.9x 14.9x 29.6x 29.6x 24.0x

3.0x 13.5x 13.5x 13.4x 13.4x 25.7x 25.7x 20.9x
3.9x 17.4x 17.4x 17.2x 17.2x 35.1x 35.1x 28.5x

EV / Sales EV / Sales EV / EBITDA

Actual Forward Actual

(0.000) (0.000) (0.000)

5.1 4.8 16.5
5.1x 4.8x 16.4x
6.1% 7.1% 1.1%
 EV / EBITDA
P/E Actual P/E Forward
Forward

17.2x ns 28.6x
14.7x 19.9x 18.1x
10.0x 26.4x 18.3x
13.7x 22.1x 18.2x
17.7x 26.2x 24.6x
9.5x 20.7x 18.8x
16.6x 21.2x 25.4x
14.2x 22.7x 21.7x
14.7x 21.6x 18.8x

16.3x 33.0x 26.8x

P/E F

Median

Net income
2017 Forward
205.0
18.8x

Alberto:
Equity value subtracts
minorities because
Campari's net income still
0.0 includes P&L for minorities.
3,858.2

1,270.4
(58.3)
0.0
5,070.3

24.0x
20.9x
28.5x

EV / EBITDA
P/E Actual P/E Forward
Forward

(0.000) (0.001) 0.000

14.8 24.2 20.7
14.7x 24.1x 20.7x
3.3% 19.7% 4.5%
 For each target 2 multiples are computed, EV/S

Deal multiples valuation A range of values is defined using mean and m

Actual multiples date
Acquisition premium in the liquor industry
An acquisition premium neutralizes the majority
of a control stake.
BE CAREFUL that valuing Campari on a standal
31/12/2016 both divisible and private benefits (see second
divisible benefits. These M&A comparable deals
18.0% Source: Mergerstat benefit.

($m figures)

Announcement
Target Country Buyer Price
date

15/10/2015 Pivovarna Lasko DD Slovenia Heineken NV 340.6

19/08/2015 Myanmar Brewery Ltd Myanmar Kirin Holdings Ltd 553.9
16/11/2015 Home Brew Mart Inc USA Constellation Brands Inc 1,021.3
11/11/2015 MillerCoors LLC USA Coors Brewing Co. 12,019.1
17/09/2015 SABMiller PLC UK AB InBev SA 116,285.6
27/02/2015 The Old B. Distillery Ltd UK Tequila C La Rojena SA 703.7
05/06/2015 Cordier Mestrezat GC SA France Union Invivio 34.5
19/05/2015 New Silkroad Cult. Ltd China Macro-Link Intl Land Ltd 87.7
Average
Mediam
Average (minority)
Mediam (minority)

Method EV / Sales A

Multiple choice Average

Sales 2015
Campari's corresponding metric Actual
Campari's corresponding metric 1,726.5
Multiple 3.8x
Enterprise value 6,556.9
(Net debt) (1,270.4)
Surplus assets (inc. associates & pensions) 58.3
(Minorities) 0.0
Equity value 5,344.8

Implicit multiples - DCF asset side 3.6x

Implicit multiples - DCF equity side 3.2x
Implicit multiples - APV 4.1x
 target 2 multiples are computed, EV/Sales, EV/EBITDA for the deal year.
of values is defined using mean and median multiples.
sition premium neutralizes the majority acquisition factor embedded into M&A deals that include acquisition
rol stake.
FUL that valuing Campari on a standalone basis, as to be compared with current market prices, excludes
sible and private benefits (see second part of the course). Therefore current market prices do not include
benefits. These M&A comparable deals represent full acquisition values, therefore they include both kinds of

Stake EqV Debt Cash EV Sales EBITDA EV/Sales EV/EBITDA

100.0% 340.6 23.3 7.3 356.6 183.8 37.5 1.9x 9.5x

100.0% 553.9 130.0 34.4 649.5 133.6 47.4 4.9x 13.7x
80.0% 1,276.7 301.6 5.9 1,572.4 158.0 49.0 10.0x 32.1x
100.0% 12,019.1 - - 12,019.1 4,501.5 968.5 2.7x 12.4x
100.0% 116,285.6 30,054.3 234.7 146,105.2 19,637.8 7,208.0 7.4x 20.3x
100.0% 703.7 137.3 23.9 817.1 na 112.7 na 7.3x
51.0% 67.6 - - 67.6 68.3 (3.0) 1.0x ns
100.0% 87.7 65.3 8.6 144.4 41.0 na 3.5x na
4.5x 15.9x
3.5x 13.1x
3.8x 13.5x
3.0x 11.1x

EV / EBITDA EV / EBITDA
EV / Sales A
A A

Median Average Median

Sales 2015 EBITDA 2015 EBITDA 2015

Actual Actual Actual
1,726.5 405.3 405.3
3.0x 13.5x 11.1x
5,150.2 5,451.5 4,485.8
(1,270.4) (1,270.4) (1,270.4)
58.3 58.3 58.3
0.0 0.0 0.0
3,938.1 4,239.4 3,273.7

3.6x 15.1x 15.1x

3.2x 13.5x 13.5x
4.1x 17.4x 17.4x
 Valuation ranges (for equity value) with all methods are summarized on a "football field".
Valuation Summary Also Campari's market cap at the valuation date gives an additional value indicator.
Make your reasoned and defendable choice of a final value range, by looking at results and

5.487
Campari's market
Valuation Football Field
cap. 01/03/2017

DCF asset 3,759.9 6,831.1

methods
Intrinsic

APV 4,418.7 6,217.6

DCF equity 3,522.7 5,412.2

EV / Sales A 5,987.6 6,790.3

EV / Sales F 6,153.8 6,733.8

Trading multiples

EV / EBITDA A 5,295.9 5,335.2

EV / EBITDA F 4,623.1 4,813.5

P/E A 3,598.9 3,782.8

P/E F 3,858.2 4,453.4

EV / Sales A 3,938.1 5,344.8

multiple
Deal

EV / EBITDA A 3,273.7 4,239.4

Campari
reasonable
4.800 5.100 value range

EV / EV / Sales EV / EV / EV / Sales EV / Sales

EBITDA A A P/E F P/E A EBITDA F EBITDA A F A
4,239.4 5,344.8 4,453.4 3,782.8 4,813.5 5,335.2 6,733.8 6,790.3
3,273.7 3,938.1 3,858.2 3,598.9 4,623.1 5,295.9 6,153.8 5,987.6
965.7 1,406.7 595.2 183.9 190.4 39.3 580.0 802.6
ethods are summarized on a "football field".
te gives an additional value indicator.
f a final value range, by looking at results and outliers.

5.487
Campari's market
cap. 01/03/2017

6,831.1

6,217.6

5,412.2

5,987.6 6,790.3

6,153.8 6,733.8

5,335.2

4,813.5

3.4

5,344.8

Campari
reasonable
value range

DCF
equity APV DCF asset
5,412.2 6,217.6 6,831.1
3,522.7 4,418.7 3,759.9
1,889.5 1,798.9 3,071.2
Campari
Financial Model

Advanced Topics
Merger Model
Historicals Forecast

(EUR m) 2015 2016 2017

Inputs

Offer premium 15.0%

Deal assumptions
EBITDA synergies (% sales) 3.0%
Patent emerged in PPA 1,000.0
Useful life 10.0
M&A fees 0.5%

Financing assumptions
Heineken NOSH (m) 570.0
Heineken share price 71.3
Buyer premium -
Acquisition financing (Term loan) 3,000.0
Interest on cash 1.0%
Term loan interest 6.0%
Term loan maturity 5.0
Buyer tax rate 25.0%

Valuation and offer price

Offer premium 15.0%

Target's share price 4.7
Target's outstanding stares (diluted) 1,180.0
Equity value 6,310.1
Net debt to be paid off 1,270.4

Sources and uses

Buyer cash 3,035.0 Price to seller

Term loan 3,000.0 Pay off current ND
Buyer's new shares 1,577.0 Fees
Sources 7,612.0 Uses

Equity financing 1,577.0

Issues price in buyer's shares 71.3
Shares to issue 22.1

Income statement Buyer (Heineken)

Sales 20,511.0 20,792.0 21,984.2

COGS (12,931.0) (13,003.0) (13,540.0)
SGA (2,692.0) (3,217.0) (2,991.7)
Synergies
EBITDA 4,888.0 4,572.0 5,452.5

D&A (1,843.0) (2,016.0) (1,805.0)

Intangibles amortization
EBIT 3,045.0 2,556.0 3,647.5

Interest income 10.0 8.4 30.4

 Interest expenses (466.0) (467.4) (531.4)
Term loan interest
Exceptionals
EBT 2,589.0 2,097.0 3,146.5

Standalone taxes (697.0) (557.0) (929.2)

Tax effect of deal P&L changes
NI 1,892.0 1,540.0 2,217.3

WA shares outstanding - Basic (m) 572.0 570.0 570.0

WA shares outstanding - Fully diluted (m) 573.0 570.0 570.0
Earnings per share 3.30 2.70 3.89
Buyer EPS accretion (dilution)

Balance sheet Buyer (Heineken)

Noncash WC (2,726.0) (2,621.0) (3,194.0)

Fixed assets 27,735.0 26,656.0 28,787.0
Intangibles (deal PPA)
Stake (pre merger)
Deal goodwill
Surplus assets 1,818.0 2,097.0 1,942.0
Capital employed 26,827.0 26,132.0 27,535.0

This model
Cash 840.0 3,035.0 2,442.0
displays a
positive cash
balance with a + Old debt 12,597.0 14,594.0 15,456.0
sign (opposite to Term Loan M&A
the restatement
in the Output! Net debt 11,757.0 11,559.0 13,014.0
Sheet) for a
better
walkthrough of Group equity 13,535.0 13,238.0 13,321.0
the combination
Minorities 1,535.0 1,335.0 1,200.0
Total equity 15,070.0 14,573.0 14,521.0

Sources 26,827.0 26,132.0 27,535.0

- - -

Cash flows Buyer (Heineken)

EBIT 2,556.0 3,647.5

Total taxes (557.0) (929.2)
+ D&A (Business) 2,016.0 1,805.0
+ Intangibles amortization - -
Change in noncash WC (105.0) 573.0
CAPEX (937.0) (3,936.0)
FCFO 2,973.0 1,160.3

Interest income 8.4 30.4

Interest expense (467.4) (531.4)
Term loan interests - -
Change in SA (279.0) 155.0
Exceptionals - -
Term loan - -
Gross debt 1,997.0 862.0
FCFE 4,232.0 1,676.3

Issues / dividends (net of merger) (2,037.0) (2,269.3)

Net cash flow 2,195.0 (593.0)
BOP cash 840.0 3,035.0
EOP cash 3,035.0 2,442.0
Check - -

Deal calculations

Term loan
Principal
Interest

EOP deal intangibles

Amortization

Merger analysis - Short version 2017

Acquiror standalone net income 2,217.3

Acquiror standalone diluted NOSH 570.0
Acquiror standalone EPS 3.9

Target standalone net income 205.0

Combined net incone before adjustments 2,422.3

Intangibles amortization (100.0)

Synergies 54.9
Interests on new term loan (180.0)
Foregone interest expenses (income) on target net debt 66.0
Foregone interest income on buyer cash used in the deal (30.4)
Net interest income on buyer excess cash post deal 0.1
Total pre-tax adjustments (189.4)
Tax shield 47.3
Combined pro forma net income 2,280.2
Check with full model (0.1)

Acquiror newly issued shares 22.1

Acquiror post deal diluted NOSH 592.1
Pro forma EPS 3.9
Buyer EPS accretion (dilution) (1.0%)
Check with full model (0.0)

Synergies to break even analysis 2017

Standalone EPS 3.89

Proforma EPS 3.85
Diluted proforma NOSH 592.1
Extra (less) synergies to break even after tax 23.2
Extra (less) synergies to break even pre tax 30.9

Cash EPS analysis 2017

Base proforma NI 2,280.2

Intangibles amortization (100.0)
"Cash" net income 2,355.2
Pro forma "cash EPS" 4.0

Metric % Contribution

Contribution analysis 2016 Buyer Target Buyer

Sales 20,792.0 1,726.5 92.3%

EBITDA 4,572.0 405.3 91.9%
Core EV 51,415.2 7,522.2 87.2%
Equity value 40,618.2 6,310.1 86.6%

Value creation analysis Buyer Target Comb

Offer price 71.3 5.3 71.3

NOSH 570.0 1,180.0 592.1
Net income 2,217.3 205.0 2,280.2
EPS 3.9 0.2 3.9
Implied PE multiple 18.3x 30.8x 18.5x
EPS accretion (1.0%)

Value
Value per
Multiple accretion
share
(dilution)
Using acquiror multiple 18.3x 70.5 (1.0%)
Using WA multiple 18.5x 71.3 -
Using target multiple 30.8x 118.5 66.4%
 Forecast Historicals Forecast Historicals Forecast

2018 2015 2016 2017 2018 2015 2016 2017 2018

6,310.1 Goodwill summary calculation:

1,270.4 Cost of the acquisition 6,310.1
31.6 - Book value of Campari's equity (1,900.0)
7,612.0 - Recognised new intangibles (1,000.0)
+ Deferred taxes on new intang. 250.0
= Goodwill 3,660.1
Check and link to model: -

Heineken) Target (Campari) Combined

22,471.0 1,656.8 1,726.5 1,831.3 1,956.2 23,815.5 24,427.2

(13,967.0) (706.4) (704.7) (793.4) (847.5) (14,333.4) (14,814.5)
(3,435.0) (570.3) (616.5) (626.8) (655.3) (3,618.5) (4,090.3)
54.9 58.7
5,069.0 380.1 405.3 411.1 453.4 5,918.6 5,581.1

(1,885.0) (47.4) (52.7) (57.2) (63.6) (1,862.2) (1,948.6)

(100.0) (100.0)
3,184.0 332.7 352.6 353.9 389.8 3,956.4 3,532.5

24.4 7.8 15.4 9.2 9.7 0.1 7.9

 (548.4) (69.1) (73.4) (75.2) (75.2) (531.4) (548.4)
(180.0) (148.1)
(22.0) (57.8) - - - -
2,660.0 249.4 236.8 287.9 324.3 3,245.1 2,843.9

(757.0) (73.4) (70.5) (82.9) (93.0) (1,012.1) (850.0)

47.3 35.1
1,903.0 176.1 166.3 205.0 231.3 2,280.3 2,029.0

570.0 1,156.0 1,158.0 1,158.0 1,158.0 592.1 592.1

570.0 1,161.0 1,180.0 1,180.0 1,180.0 592.1 592.1
3.34 0.15 0.14 0.17 0.20 3.85 3.43
(1.0%) 2.6%

Heineken) Target (Campari) Combined

(3,687.0) 233.6 (43.2) 9.5 45.3 (2,914.2) (3,184.5) (3,641.7)

28,818.0 2,395.6 3,155.3 3,242.6 3,333.3 29,811.3 32,029.6 32,151.3
1,000.0 900.0 800.0
- - -
3,660.1 3,660.1 3,660.1
2,492.0 53.3 58.3 58.3 58.3 2,155.3 2,000.3 2,550.3
27,623.0 2,682.5 3,170.4 3,310.4 3,437.0 33,712.5 35,405.4 35,520.0

2,903.0 844.3 354.1 359.1 396.1 7.9 790.0 1,652.3

14,986.0 1,781.0 1,624.5 1,625.6 1,627.0 14,594.0 15,456.0 14,986.0

3,000.0 2,467.8 1,903.7
12,083.0 936.6 1,270.4 1,266.5 1,230.9 17,586.1 17,133.8 15,237.4

14,358.0 1,745.5 1,900.0 2,043.8 2,206.1 14,791.3 17,071.6 19,100.6

1,182.0 0.3 - - - 1,335.0 1,200.0 1,182.0
15,540.0 1,745.8 1,900.0 2,043.8 2,206.1 16,126.3 18,271.6 20,282.6

27,623.0 2,682.5 3,170.4 3,310.4 3,437.0 33,712.5 35,405.4 35,520.0

- - - - - - - - -

Heineken) Target (Campari) Combined

3,184.0 352.6 353.9 389.8 3,956.4 3,532.5

(757.0) (70.5) (82.9) (93.0) (964.8) (814.9)
1,885.0 52.7 57.2 63.6 1,862.2 1,948.6
- - - - 100.0 100.0
493.0 276.8 (52.7) (35.9) 270.3 457.1
(1,916.0) (812.4) (144.5) (154.4) (4,080.5) (2,070.4)
2,889.0 (200.8) 131.0 170.2 1,143.6 3,153.0

24.4 15.4 9.2 9.7 0.1 7.9

(548.4) (73.4) (75.2) (75.2) (531.4) (548.4)
- - - - (180.0) (148.1)
(550.0) (5.0) - - 155.0 (550.0)
- (57.8) - - - -
- - - - (532.2) (564.1)
(470.0) (156.5) 1.1 1.4 862.0 (470.0)
1,345.0 (478.1) 66.2 106.0 917.1 880.3

(884.0) (12.1) (61.2) (69.0) (135.0) (18.0)

461.0 (490.2) 5.0 37.0 782.1 862.3
 2,442.0 844.3 354.1 359.1 7.9 790.0
2,903.0 354.1 359.1 396.1 790.0 1,652.3
- - - - - -

Combined

1.0 2.0
(532.2) (564.1)
(180.0) (148.1)

1,000.0 900.0 800.0

(100.0) (100.0)

2018

1,903.0
570.0
3.3

231.3
2,134.3

(100.0)
58.7
(148.1)
65.5
(24.4)
7.9 In a short analysis, EOP forecase cash is not available
(148.3)
37.1
2,023.0
(5.9)

22.1
592.1
3.4
2.3%
(0.0)

2018

3.34
3.42
592.1
(46.2)
(61.6)

2018

2,023.0
(100.0)
2,098.0
3.5

% Contribution

Target
Equity
86.6% 13.4%
7.7% value

Core EV 87.2% 12.8%

EBITDA 91.9% 8.1%

 Equity
86.6% 13.4%
value
8.1%
12.8% Core EV 87.2% 12.8%
13.4%

EBITDA 91.9% 8.1%

Sales 92.3% 7.7%

Buyer Target

(0.0)
2. Equity 3. Debt 4. Pay off 5. Buy 6. Consoli- 7. M&A
financing financing old ND stake dation fees
2016 2016 2016 2016 2016 2016

(250.0)

1,000.0
6,310.1 (6,310.1)
3,660.1

1,577.0 3,000.0 (1,624.5) (6,310.1) (23.7)

(1,624.5)
3,000.0

1,577.0 (1,900.0) (23.7)

-

- - - - - -
Inputs

Deal fees (% deal value) 0.5%

Financing fees (% LBO debt raised) 2.0%

Senior loan
Senior loan leverage (/EBITDA) 3.0x
Senior loan interests 6.0%
Senior loan amortization periods 6.0

Subordinated debt
Subordinated debt leverage (/EBITDA) 1.0x
Subordinated debt interests 11.0%
Subordinated debt bullet maturity 12/2023
Warrant ownership to subordinated debt 5.0%

Revolving credit facility

Minimum cash balance 50.0
Revolving line of credit interests 6.0%
Entry multiple 18.0x
Buyer tax rate 25.0%

Entry valuation

Forward +1 EBITDA market multiple 18.0x

EBITDA 2017 E 411.1
EV 7,400.2
Net debt (1,270.4)
Surplus assets 58.3
Minorities -
Equity value 6,188.1
Price per share 5.2
Implied takeover premium 12.8%

Sources and uses

Equity 5,877.8 Proceeds to sellers 6,188.1

Subordinated debt 411.1 Pay off old net debt 1,270.4
Senior debt 1,233.4 Deal fees 30.9
Financing fees 32.9
Sources 7,522.3 Uses 7,522.3

Capital structure Amount % EBITDA x Rates Tenor Payment

Revolving credit facility - - - 6.0% na na

Senior debt 1,233.4 16.4% 3.0x 6.0% 6.0 Amortizing
Subordinated debt 411.1 5.5% 1.0x 11.0% 7.0 Bullet
Total debt 1,644.5 21.9% 4.0x
Equity 5,877.8 78.1% 14.3x 10.0% na na
Total capitalization 7,522.3 100.0% 18.3x

Income statement

EBITDA 380.1 405.3 411.1 453.4 500.5 552.1 607.6

D&A (Business) (47.4) (52.7) (57.2) (63.6) (70.4) (77.7) (85.5)
Fees amortization - - - - -
EBIT 332.7 352.6 353.9 389.8 430.1 474.3 522.1
Interest income (expenses) (61.3) (58.0) (129.2) (121.4) (115.3) (107.3) (97.2)
Exceptional P&L (22.0) (57.8) - - - - -
EBT 249.4 236.8 224.7 268.4 314.8 367.0 424.9
Income taxes (73.4) (70.5) (40.1) (49.2) (58.8) (69.6) (81.6)
Net Income 176.1 166.3 184.6 219.2 256.0 297.4 343.3 1. Pre 2. Equity 3. Debt 4. Pay off 5. Buy 6. Merge 7. LBO 8. Financ. 9. Post
LBO financing financing old debt stake the two fees fees LBO
Balance sheet Post LBO 2016 2016 2016 2016 2016 2016 2016 2016 2016

Noncash working capital 233.6 (43.2) 9.5 45.3 84.1 126.4 171.7 (43.2) (43.2)
Fixed assets (business) 2,395.6 3,155.3 3,242.6 3,333.3 3,427.9 3,526.8 3,630.4 3,155.3 3,155.3
Surplus assets & liabilities 53.3 58.3 58.3 58.3 58.3 58.3 58.3 58.3 58.3
Intangibles recognized during the business combination - - - - - - - -
Stake in Campari (NewCo before merger) - 6,188.1 (6,188.1) -
LBO Goodwill - 4,288.1 4,288.1 4,288.1 4,288.1 4,288.1 4,288.1 4,288.1 4,288.1
Capital employed 2,682.5 7,458.5 7,598.5 7,725.1 7,858.4 7,999.6 8,148.4 3,170.4 7,458.5

Cash 844.3 16.0 50.0 50.0 50.0 50.0 50.0 354.1 5,877.8 1,644.5 (1,624.5) (6,188.1) (23.2) (24.7) 16.0

Pre LBO ST financial debt 465.1 - - - - - - 18.8 (18.8) -

Pre LBO Bank loans 29.3 - - - - - - 106.9 (106.9) -
Pre LBO Bonds and securities 1,286.6 - - - - - - 1,498.8 (1,498.8) -
NewCo Revolving line of credit - 166.3 261.1 337.1 391.5 420.3 -
NewCo Subordinated / mezzanine debt 411.1 411.1 411.1 411.1 411.1 411.1 411.1 411.1
NewCo Senior loan 1,233.4 1,056.5 869.1 670.4 459.9 236.6 1,233.4 1,233.4
Net debt 936.6 1,628.5 1,583.9 1,491.4 1,368.7 1,212.4 1,018.0 1,270.4 1,628.5

Share capital 58.1 5,877.8 5,877.8 5,877.8 5,877.8 5,877.8 5,877.8 58.1 5,877.8 (58.1) 5,877.8
Reserves 1,687.4 (47.9) 136.7 355.9 611.9 909.3 1,252.6 1,841.9 (1,841.9) (23.2) (24.7) (47.9)
Minorities 0.3 - - - - - - - - In IFRS financin
Equity 1,745.8 5,830.0 6,014.5 6,233.7 6,489.7 6,787.1 7,130.4 1,900.0 5,830.0 should be deduc
Souces 2,682.5 7,458.5 7,598.5 7,725.1 7,858.4 7,999.6 8,148.4 3,170.4 7,458.5 the loan outstan
Check - - - - - (0.0) 0.0 - - - - - - - - -
immediately, wh
then measured
"amortized cost"
Cash flows method. In orde
overcomplicate
EBIT 352.6 353.9 389.8 430.1 474.3 522.1
model, fees here
Total taxes (70.5) (40.1) (49.2) (58.8) (69.6) (81.6) fully charged to
+ D&A (Business) 52.7 57.2 63.6 70.4 77.7 85.5 at the beginning
+ Fees amortization - - - - - -
Change in noncash WC 276.8 (52.7) (35.9) (38.7) (42.3) (45.3)
LBO Fees - - - - - -
CAPEX (812.4) (144.5) (154.4) (165.0) (176.6) (189.1)
FCFO (CF for debt service) (200.8) 173.8 214.0 238.0 263.5 291.6

Net interests (58.0) (129.2) (121.4) (115.3) (107.3) (97.2)

Change in SA (5.0) - - - - -
Exceptionals (57.8) - - - - -
Pre LBO debt (1,781.0) - - - - -
Subordinated Debt 411.1 - - - - -
Senior Debt 1,233.4 (176.8) (187.4) (198.7) (210.6) (223.2)
Cash flows before revolver (458.1) (132.2) (94.9) (76.0) (54.4) (28.8)
Revolving line of credit - 166.3 94.9 76.0 54.4 28.8
FCFE (458.1) 34.0 - - (0.0) 0.0
Share issues and dividends (net of merger difference) (370.2) - - - - -
Net cash flow (828.4) 34.0 - - (0.0) 0.0
BOP cash 844.3 16.0 50.0 50.0 50.0 50.0
EOP cash 16.0 50.0 50.0 50.0 50.0 50.0
Check - - - (0.0) 0.0 (0.0)

Ratios

ND/EBITDA 4.0x 3.9x 3.3x 2.7x 2.2x 1.7x

ND/E 21.8% 20.8% 19.3% 17.4% 15.2% 12.5%

Debt schedules

Senior loan
BOP 1,233.4 1,056.5 869.1 670.4 459.9
Year 1 2 3 4 5
Principal amortization (176.8) (187.4) (198.7) (210.6) (223.2)
EOP 1,233.4 1,056.5 869.1 670.4 459.9 236.6
Interest payment (74.0) (63.4) (52.1) (40.2) (27.6)
Check total payment (250.8) (250.8) (250.8) (250.8) (250.8)

Subordinated / mezzanine debt

BOP 411.1 411.1 411.1 411.1 411.1 411.1 411.1
Maturity - - - - - - (411.1)
EOP 411.1 411.1 411.1 411.1 411.1 411.1 411.1 -
Interest payments (45.2) (45.2) (45.2) (45.2) (45.2) (45.2) (45.2)

Revolving line of credit

BOP cash 16.0 50.0 50.0 50.0 50.0
CF before line of credit (132.2) (94.9) (76.0) (54.4) (28.8)
Cash available to repay or (required from) the line of credit (166.3) (94.9) (76.0) (54.4) (28.8)
EOP revolver 166.3 261.1 337.1 391.5 420.3
Interest payments (10.0) (12.8) (17.9) (21.9) (24.4)

Others

Amortization
Intangibles - - - - - -

Exit valuation in year 5

EBITDA exit multiple (= entry multiple) 18.0x

Exit EBITDA 607.6
Enterprise Value 10,936.4
Net debt at exit (1,018.0)
SA 58.3
Minorities -
Equity Value 9,976.7

Return analysis

Ownership after subordinated warrant exercise

Campari previous shareholders 95.0%
Subordinated Debt 5.0%
Total 100.0%

PE shareholders
Cash flows (5,877.8) - - - - 9,477.8
IRR 10.0%
Cash multiple 1.6x

Subordinated debtholders
Cash flows (411.1) 45.2 45.2 45.2 45.2 544.1 - 411.1
Interests 45.2 45.2 45.2 45.2 45.2
Principal (411.1) - - - - - - 411.1
Proceeds from warrant equity at exit 498.8
IRR 22.3%
Cash multiple 2.8x
Premium Analysis and Analysis at Various Prices
Equity value Metric Comps 2,000.0 2,500.0 3,000.0 3,500.0

NOSH 1,180.0 1,180.0 1,180.0 1,180.0

Value per share 1.69 2.12 2.54 2.97
Current market cap 5,487.0 5,487.0 5,487.0 5,487.0
Current stock price 4.65 4.65 4.65 4.65
Premium over current stock price (63.6%) (54.4%) (45.3%) (36.2%)

Net debt 1,270.4 1,270.4 1,270.4 1,270.4

(Surplus assets) (58.3) (58.3) (58.3) (58.3)
Minorities - - - -
Enterprise value 3,212.1 3,712.1 4,212.1 4,712.1

EV/Sales
2016A 1,726.5 4.6x 1.9x 2.2x 2.4x 2.7x
2017E 1,831.3 4.3x 1.8x 2.0x 2.3x 2.6x
EV/EBITDA
2016A 405.3 16.1x 7.9x 9.2x 10.4x 11.6x
2017E 411.1 14.2x 7.8x 9.0x 10.2x 11.5x
P/E
2016A 166.3 22.7x 12.0x 15.0x 18.0x 21.0x
2017E 205.0 21.7x 9.8x 12.2x 14.6x 17.1x
4,000.0 4,500.0 5,000.0 5,500.0 6,000.0 6,500.0

1,180.0 1,180.0 1,180.0 1,180.0 1,180.0 1,180.0

3.39 3.81 4.24 4.66 5.08 5.51
5,487.0 5,487.0 5,487.0 5,487.0 5,487.0 5,487.0
4.65 4.65 4.65 4.65 4.65 4.65
(27.1%) (18.0%) (8.9%) 0.2% 9.3% 18.5%

1,270.4 1,270.4 1,270.4 1,270.4 1,270.4 1,270.4

(58.3) (58.3) (58.3) (58.3) (58.3) (58.3)
- - - - - -
5,212.1 5,712.1 6,212.1 6,712.1 7,212.1 7,712.1

3.0x 3.3x 3.6x 3.9x 4.2x 4.5x

2.8x 3.1x 3.4x 3.7x 3.9x 4.2x

12.9x 14.1x 15.3x 16.6x 17.8x 19.0x

12.7x 13.9x 15.1x 16.3x 17.5x 18.8x

24.1x 27.1x 30.1x 33.1x 36.1x 39.1x

19.5x 22.0x 24.4x 26.8x 29.3x 31.7x
 Backup for Lecture Slides

Balance sheet (€m) 2015 2016 2015 2016

FA Net tangible fixed assets 444 494 Share capital 58 58

FA Biological assets 17 0 Reserves 1,687 1,842
FA Property 0 122 Group's shareholders' equity 1,746 1,900
FA Goodwill and trademarks 1,907 2,505 Minorty interests 0 -
FA Intangible assets 26 26 Total shareholders' equity 1,746 1,900
SA Interests in associates (0) -
WC Deferred tax assets 13 37 Bonds 1,276 992
SA Other non-current assets 48 64 Other non-current financial payables 11 506
Total non-current assets 2,454 3,249 Staff severance fund 8 37
Risks fund 33 97
WC Inventories 496 536 Deferred tax 292 457
FA Current biological assets 2 8 Total non-current liabilities 1,619 2,089
WC Trade receivables 296 306
WC Financial receivables 70 7 Banks loan 29 107
ND - Cash at cash equivalents 844 354 Other financial payables 465 19
WC Receivables for income taxes 16 12 Trade payables 217 263
WC Other receivables 22 27 Payables for taxes 13 14
Total current assets 1,746 1,250 Other current liabilities 124 139
Total current liabilities 849 541

SA Non-current assets for sale 24 35 Liabilities held for sale 10 5

Total assets 4,224 4,534 Total liabilities and equity 4,224 4,534

Restated balance sheet (€m) 2015 2016 2015 2016

Trade receivables 296 306 ST financial debt 465 19

Trade payables (217) (263) Bank loans 29 107
Inventory 496 536 Bonds and securities 1,287 1,499
Deferred taxes (279) (419) Gross debt 1,781.0 1,624.5
Long term provisions (33) (97) Excess cash & equivalents (844) (354)
Other current assets & liabilities (30) (106) Net debt 937 1,270
Noncash working capital 234 (43)
Share capital 58 58
Tangible assets 463 624 Retained earnings 1,687 1,842
Goodwill and trademarks 1,932 2,531 Group equity 1,746 1,900
Fixed assets 2,396 3,155 Minorities 0 -
Total equity 1,746 1,900
Core capital employed 2,629 3,112

Investments (0) -
Employee severance (8) (37)
Other non-operational assets 62 95
Surplus assets 53 58

Net capital employed 2,682 3,170 Total funds invested 2,682 3,170
Income statement (€m) 2015 2016

Net sales 1,657 1,727

Cost of goods sold (COGS) (740) (742)
Advertising and promotion (286) (309)
SGAs (298) (323)
One-off items (23) (33)
Operating profit 310 319

Financial income 8 15
Financial expenses (69) (74)
One-off's financial expenses 1 (25)
Income from associates - -
Put options costs (0) 1
Pre-tax profits 249 237

Taxes (73) (71)

Net profit 176 166

Extra details about IS (€m) 2015 2016

D&A included into OPEX

COGS (33.4) (37.2)
Advertisement (0.7) (0.7)
SGAs (13.3) (14.8)
Total D&A (47.4) (52.7)

Restated IS (€m) 2015 2016

Sales 1,657 1,727

Cost of goods sold (COGS) (706) (705)
Advertising and promotion (286) (308)
SGAs (285) (309)
EBITDA 380 405
Margin 22.9% 23.5%

Depreciation (47) (53)

EBIT 333 353
Margin 20.1% 20.4%

Net interests (61) (58)

Income from associates 0 0
Except. items (22) (58)
EBT 249 237

Income taxes (73) (71)

Net income 176 166
Margin 10.6% 9.6%

Operating taxes (€m) 2015 2016

Effective tax rate 29.4% 29.8%

Operating taxes (98) (105)
Tax shield 24 34
NOPLAT 235 248

Cash flows (€m) 2016

EBIT 353
(Operational taxes) (105)
Depreciation 53
Gross cash flows 300

Change in noncash WC 277

Intangible CAPEX (812)

FCFO (235)

Tax shields 34
Net interests (58)
Income from associates 0
Except. items (58)

Change in gross debt (156)

Change in surplus assets (5)

FCFE (478)

Change in equity (12)

Change in cash (490)

Beginning cash from the BS 844

Ending cash from the BS 354
Change in the year (490)
Financial analysis

Sales (€m) Sales growth

99 366
00 434 18.6%
01 494 13.9%
02 661 33.7%
03 714 8.1%
04 751 5.2%
05 810 7.8%
06 932 15.1%
07 958 2.7%
08 942 (1.6%)
09 1,008 7.0%
10 1,163 15.3%
11 1,274 9.6%
12 1,341 5.2%
13 1,524 13.7%
14 1,560 2.4%
15 1,657 6.2%
16 1,727 4.2%

33.7%

18.6%
13.9% 15.1% 15.3% 13.7%
8.1% 9.6%
5.2% 7.8% 2.7%
7.0% 5.2% 6.2% 4.2%
2.4%
(1.6%)

1,657 1,727
1,524 1,560
1,274 1,341
1,163
932 958 942 1,008
714 751 810
661
434 494
366

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

Sales (€m) Sales growth

FA and CAPEX (€m) 2015 2016

Fixed assets 2,396 3,155

D&A 47
CAPEX 812
CAPEX - D&A > 0

Working capital (€m) 2015 2016

Sales 1,657 1,727

COGS 706 705

Trade receivables 296 306

Trade payables 217 263
Inventory 496 536

VAT rate 22.0% 22.0%

Days sales outstanding 53 53

Days payables outstanding 92 112
Days inventory 109 113

Financing (€m) 2015 2016

Net debt 937 1,270

Gross debt (ST, LT, bonds) 1,781 1,625
New debt / (repayments) (156)

Total equity 1,746 1,900

Net interest income (cost) (61) (58)

EBITDA 380 405

EBIT 333 353
FCFO (235)

Leverage ND / E 0.5x 0.7x

Leverage ND/(ND+E) 34.9% 40.1%

Debt coverage 2.5x 3.1x

Interest coverage (-) 5.4x 6.1x

DSCR (1.1x)

Net income 176 166

Dividends related to the year 46 52
Payout ratio 26% 31%

Liquidity (€m) 2015 2016

Current assets 1,746 1,250

Inventory 496 536
Current assets - inventory 1,250 714
Current liabilities 849 541

Current ratio 2.1x 2.3x

Acid test 1.5x 1.3x
Profitability (€m) 2015 2016

Sales 1,657 1,727

EBIT 333 353
NOPLAT 235 248
Net interests (61) (58)
Net income 176 166

Effective tax rate 29.4% 29.8%

Core capital employed 2,629 3,112
Net capital employed 2,682 3,170
ND 937 1,270
Equity 1,746 1,900

ROCE 8.9% 8.0%

(1-t) 70.6% 70.2%
Asset turnover 0.6x 0.6x
EBIT margin 20.1% 20.4%

ROE 10.1% 8.8%

Effective interest rate (ROD) 6.5% 4.6%

ROCE with decomposition 8.9% 8.0%

Check - -

ROE with leverage effect formula 11.2% 11.1%

Check 1.2% 2.4% It does not reconcile because of an internal inconsistency: all of the items
below EBIT which are not net interests have been forgotten, they are neither into
NOPLAT nor into net interests.
NOPLAT net of exceptionals 219.3 207.0 Adjusted NOPLAT which includes exceptionals and associates P&L
ROCE net of exceptionals 8.2% 6.5% Adjusted ROCE
ROE (leverage effect formula) 10.1% 8.8%
Check - - Finally, the leverage effect ROE formula perfercly reconciles with ROE

Profitability (€m) 2015 2016

Average price 3.277 4.213

NOSH (m) weighted average 580.8 580.8
Net income 176 166
Dividends related to the year 46 52

EPS 0.303 0.286

DPS 0.079 0.090
P/E 10.8x 14.7x
Dividend yield 2.4% 2.1%

Income statement 2017 2018

Sales 1,831 1,956

Costs (1,420) (1,503)
D&A (13) (14)
Interest income 9 10
Interest expense (75) (75)
Net income 205 231

Balance sheet 2017 2018

Noncash WC 9 45
Fixed assets 3,243 3,333
Surplus assets 58 58
Cash 359 396
Assets 3,669 3,833

Debt 1,626 1,627

Equity 2,044 2,206
Liabilities 3,669 3,833

Cash flows 2017 2018

FCFO 115 154

Interest income 9 10
Interest expense (75) (75)
Tax shields 16 16
Change in debt 0 0
FCFE 66 106
Change in equity (61) (69)
Change in cash 5 37

Beginning cash 354 359

Ending cash 359 396
 E
E

ND
ND
SA -
WC -
WC -

ND
ND
WC -
WC -
WC -

SA -
 13.7%
%
5.2% 6.2% 4.2%
2.4%

1,657 1,727
1,524 1,560
4 1,341

12 13 14 15 16
rgotten, they are neither into