Slix 6 Annual Report

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Final presentation for an MBA Business Execution course.

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Slix 6 Annual Report

  1. 1. Furthermore the downturn was accompanied by large swings in foreign exchange rates placing pressure on our costs and brought additional instability onto the investment climate. Our challenge in 2009: BALANCING SHORT-TERM RESULTS AND LONG-TERM GROWTH We made two critical choices to deal with these challenges: (1) we focused on cash and costs to protect the financial foundation of our businesses. (2) We slightly reduce prices to reflect movement into the value for money segment in the northern and southern markets. With our financials in order, we focused on brand-building and consumer insights. We identified and funded product innovation and large scale marketing initiatives across the business. Lastly we recognized our role in the society as one of the leading corporations for body care. This responsibility is expressed by our unique social campaign in the southern market where we make both monetary and value based long-term contributions. Our path of growth We’ve continued to make strategic investments to generate strong growth in future years. We are investing heavily into new manufacturing capacity to support future growth. Over the next five years, we will add 20 new type A machines. These investments will serve our consumers by lowering costs and
  2. 2. Financial Summary: Increase in the Company’s Fair Market Value In the last two years the net worth of the Company has increased by nearly 160% £18,000,000 Company Valuation £16,000,000 Slix 6 Q0 4 Q Q8 Share Market Value £31.00 £80.16 £14,000,000 Number of Shares 200,000 200,000 Market Capitalization £6,200,000 £16,032,000 £12,000,000 Market Capitalization + Control Premium 20% £1,240,000 £3,206,400 Fair Market Value of £10,000,000 100% Equity Fair Market Value of 100% Equity £7,440,000 £19,238,400 £8,000,000 » P/E = 6.19x » EBITDA multiple = 3.11x £6,000,000 » Sales multiple = 0.88x £4,000,000 Q0 Q8
  3. 3. Financial Summary by Year Debt-to-Equity Ratio 100% $20,000,000 80% 33% $15,000,000 57% 60% £21.8M £19.7M $10,000,000 40% 67% $5,000,000 20% 43% 15.7% 14.2% $0 0% Y1 Y2 Y1 Y2 Net income (loss) Total revenues Shareholders equity Interest Bearing debt
  4. 4. Proportion of sales, by product line Profit Contribution, by product line Y2 (11%) Y1 Y2 (3%) (28%) Y1 (22%) Deodorants Deodorants Razors Razors Y1 (78%) Y2 (72%) Y1 (97%) Y2 (89%)
  5. 5. Deodorants’ Profit Contribution Razors’ Profit Contribution £2,500,000 44% 45% 20% 40% 40% £350,000 16% £2,000,000 31% 34% 33% 31% 35% 15% 31% 30% 12% 30% £250,000 £1,500,000 25% 9% 10% 20% 6% £1,000,000 6% £150,000 15% 3% 5% 10% £500,000 £50,000 5% 0% £0 0% Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 -£50,000 -3% -3% -5% Profit Contibution Operating Margin Profit Contibution Operating Margin
  6. 6. Mission: Maintain highest share price Market relevance from revenue stream throughout the game (Deodorants) Objective: Focus on profit leadership South: » Target upper price segment Export North 25% 29% » Gain market share through Marketing Mix » Gain brand recognition through A&P North: » Target upper price segment » Focus on profitabiltiy » Grow through marketing mix Export: South » Very little A&P 46% » Maintain competitive prices » Be among the top-sellers
  7. 7. Market relevance from revenue stream (Razors) Mission: Maintain highest share price throughout the game Objective: Focus on profit leadership North 11% Export: » Be among the top-sellers » Maintain competitive prices » Very little A&P South South: 28% » Gain market share through Marketing Mix Export » Little A&P 61% North: » Grow through marketing mix » Focus on profitabiltiy » Little A&P
  8. 8. Slix 6’s Share Price Vs Industry Average » Share price above the industry average for two years £120 £100 £80 £60 £40 £20 £0 Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 SLIX 6 Industry Average
  9. 9. Slix 6’s Share Price Vs Selected Competitors’ » Share price above the industry £120 average for two years » Highest share price for 5 quarters in £100 a row £80 » Decline in share price during Y2 due £60 to a couple of factors: » Lack of response from £40 consumers to the A&P £20 campaigns during the recessionary environment £0 » Successive price cuts which Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 lowered our profitability ratios EGO FRE SLIX 6 » Share price will grow when the economy recovers
  10. 10. Slix 6’s Revenues Vs Selected Competitors’ Revenues £22,000,000 » No. 1 in revenue generation for two years in a row £21,000,000 » Our revenues grew 11% in Y2 £20,000,000 £19,000,000 SLIX 6 £18,000,000 FRE EGO £17,000,000 £16,000,000 £15,000,000 Y1 Y2
  11. 11. Total Revenues Over the Last Two Years Revenues » No. 1 in revenue generation for two £40,000,000 years in a row » Our revenues grew 11% in Y2 £35,000,000 » Total revenues for the last two £30,000,000 £41.5M Y2 years sum £41.5million £40.1M Y2 £25,000,000 £34.1M Y2 £20,000,000 £15,000,000 £10,000,000 Y1 Y1 Y1 £5,000,000 £0 SLIX 6 FRE EGO
  12. 12. Slix 6’s Profits Vs Selected Competitors’ Revenues £3,500,000 » No. 1 in revenue generation for two years in a row £3,250,000 » Our revenues grew 11% in Y2 » Total revenues for the last two years sum £41.5million £3,000,000 Net Profits £2,750,000 SLIX 6 » Managed to keep the same profit FRE level during the recession EGO £2,500,000 £2,250,000 £2,000,000 Y1 Y2
  13. 13. Total Profits Over the Last Two Years Revenues » No. 1 in revenue generation for two £6,000,000 years in a row » Our revenues grew 11% in Y2 £5,000,000 » Total revenues for the last two £6.20M Y2 £6.16M Y2 years sum £41.5million £4,000,000 £4.89 Y2 Net Profits £3,000,000 » Managed to keep the same profit level during the recession » Net Profits for the last two years £2,000,000 totaled £6.2million Y1 Y1 Y1 » No. 1 in net profit generation for £1,000,000 two years in a row £0 SLIX 6 FRE EGO
  14. 14. Product Portfolio Available in all 3 Markets: NORTH, SOUTH, EXPORT
  15. 15. Overall Goal: Become a substantial player in all 3 markets & Maximize profitability in each market over the long-term. North: South: Esport: Overall Descritpion: Overall Descritpion: Overall Descritpion: 1. Dominant MNCs 1. Dominant MNCs 1. NO MNCs 2. High responsiveness to A&P 2. High per capita income  medium 2. Reliance on few large customers 3. Medium price sensitivity price sensitivity 3. High price sensitivivity Growth Strategy: Growth Strategy: 4. Low A&P responsiveness Gain substantial market Share Gain susbtaintial market share Growth Strategy: through large A&P Investm. through A&P investm. 1. Offer high quality at medium price Recession: Recession: 2. No A&P investments. Maintain market share Maintain market share 3. Investments in Salesforce. Ensure Profitability of both products Remian profitable with both products 4. Push strategy (surplus supply)
  16. 16. Product High Quality ingredients and packaging » High quality products D and R » Profitability Place Marketing Price » Long-Term Investment Availability in North, South, Export Mix Upper price segment Use of Price brackets Promotion Substantial use of Above and Below the line activities
  17. 17. Relative Market Share Stars undefined Growth Strategy from BCG Analysis Deodorant: » Growth phase: Large Investments for growth in North and South » Recession: Move towards cash cow by stabilizing market share Market and reducing investments Growth Rate Razors: » Avoid losses! » Sensitive pricing strategy » Push excess demand into market to create demand » Move towards cash cow in Export Cash Cows Dogs
  18. 18. Market Segmentation & Positioning North South Export Quality Quality Quality Price Price Price » SLIX 6 positioned in » SLIX 6 positioned in » SLIX 6 positioned in upper segment upper segment lower price segment » Medium Price » Medium/High Price » High Price pressure pressure pressure EGO FRE Multi National Cos SAUDI PRO
  19. 19. Pricing Strategy for Deodorants in the North Pricing Strategy for Razors in the North £0.98 £0.56 Excluding Vertigo’s £0.96 £0.54 Q8 price £0.94 £0.52 Industry Industry Average Average £0.92 Slix 6 £0.50 Slix 6 £0.90 £0.48 £0.88 £0.46 Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8
  20. 20. Pricing Strategy for Deodorants in the South Pricing Strategy for Razors in the South £1.00 £0.56 £0.98 Excluding £0.54 Vertigo’s Q8 price £0.96 £0.52 £0.94 Industry Average Industry Average £0.92 Slix 6 Slix 6 £0.50 £0.90 £0.48 £0.88 £0.86 £0.46 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q2 Q3 Q4 Q5 Q6 Q7 Q8
  21. 21. Pricing Strategy for Deodorants in Export Pricing Strategy for Razors in Export £0.90 £0.54 £0.86 £0.52 £0.82 £0.50 Industry Industry £0.78 Average Average Slix 6 Slix 6 £0.48 £0.74 £0.70 £0.46 £0.66 £0.44 Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8
  22. 22. Demand Forecast & Budget planning Determine » All Markets: Target » Extra salesmen = 0.3% market share gain Market share » Price reduction: 2-3 pence = 0.3% market share gain Calculate » North: Determine required total commission » 0.5% Growth MS = 50.000 investment A&P A&P » Limit of salesmen: 7 » South: » 0.5% Growth MS = 75.000 investment A&P » Limit of salesmen: 11 » Export: Allocate Determine Resources » Price determining force for Market number of between D sales reps &R and as performance A&P » Limit of salesmen: 7
  23. 23. A&P Budget, by year and product line Proportion of units sold by product line £3,000,000 £2,500,000 £2.9M £2,000,000 £2.8M Y1 Y2 (36%) (42%) £1,500,000 Deodorants Razors £1,000,000 Y2 Y1 (58%) (64%) £500,000 £0.7M £0.7M £0 Y1 Y2 Dehodorants Razors
  24. 24. A&P Spending Vs Market Share North: in the Northern Market » Marketing spending in line with overall £800,000 16% market performance. » During Q5 a storm hit the northern region £700,000 14% affecting the Company’s capacity to supply £600,000 12% its products which resulted in a reduction in market share. £500,000 10% £400,000 8% £300,000 6% £200,000 4% £100,000 2% £0 0% Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Deodorants Razors Market Share D Market Share R
  25. 25. A&P Spending Vs Market Share North: in the Southern Market » Marketing spending in line with overall 16% market performance. £800,000 » During Q5 a storm hit the northern region 14% £700,000 affecting the Company’s capacity to supply 12% its products which resulted in a reduction £600,000 in market share. 10% £500,000 South: 8% » Significantly overspent in deodorants’ £400,000 publicity during Q2, otherwise Marketing 6% £300,000 spending in line with overall market 4% performance. £200,000 £100,000 2% £0 0% Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Deodorants Razors Market Share D Market Share R
  26. 26. A&P Spending Vs Market Share North: in the Export Market » Marketing spending in line with overall £800,000 market performance. 16% £700,000 » During Q5 a storm hit the northern region 14% affecting the Company’s capacity to supply £600,000 its products which resulted in a reduction 12% in market share. £500,000 10% South: £400,000 8% » Significantly overspent in deodorants’ publicity during Q2, otherwise Marketing £300,000 6% spending in line with overall market £200,000 4% performance. Export: £100,000 2% » Little spending in the Export market £0 0% » A&P spending has no relation with overall Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 market performance Deodorants Razors Market Share D Market Share R
  27. 27. Corporate Social Responsibility SLIX 6: Recognizing our Responsibility » Creation of a scholarship fund for children’s education in Saudi America. » Quarterly donations on qualified college-age students who meet Slix 6’s high scholastic standards. » £0.01 of every purchase of Slix 6 deodorants in the Southern Market of Saudi America, will be donated to the scholarship fund.
  28. 28. Corporate Social Responsibility CSR Spending Q1-Q8 £160,000 £140,000 +£17K SLIX 6: Recognizing our Responsibility £120,000 +£18K » On average £20,000 per Quarter donated £100,000 to education fund. +£21K £80,000 +£23K » Total of £142,504 donated over two £143K years. £60,000 £23K £40,000 » 140 academic scholarships awarded to £64K +£21K children ranging age 6-18 in southern £20,000 SaudiAmerica +£20K £0 Q1 Q2 Q3 Q4 Y1 Q5 Q6 Q7 Q8 Y2
  29. 29. Sample of Deodorant and Razor Ads
  30. 30. Number of employees by position Number of machines used in the production (as of the end of Y2) process, by quarter 30 3% 25 13% 20 10% Workers (144) M rented Supervisors (19) 15 A Type Salesmen (25) M owned Directors (7) 10 74% 5 0 Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8
  31. 31. Cost of Technology: M Type Vs A Type 1,800,000 1,600,000 Labour + Machine Cost 1,400,000 1,200,000 1,000,000 800,000 600,000 Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12 Q13 Q14 Q15 Q16 Q17 Q18 Q19 Q20 Q21 Q22 Q23 Q24 M A
  32. 32. Profit Contribution per Unit Sold Profit Contribution per Unit Sold (Deodorants / BEQ8 = £0.60) (Razors / BEQ8 = £0.40) £1.00 £1.00 £0.80 £0.80 £0.60 £0.60 Profit Contribution Profit Contribution Other Costs per unit Other Costs per unit Marketing Cost per unit Marketing Cost per unit £0.40 £0.40 Unit Cost Unit Cost £0.20 £0.20 £0.00 £0.00 Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8
  33. 33. Standard Unit cost & the Production Analysis Variation Deodorants £0.4000 » Allocation of owned and rented machines between Deodorants and Razors £0.3800 » Allocation of new employees, and hence training costs between Deodorants and Razors £0.3600 AUC - D » Efficient use of raw materials SUC - D £0.3400 » Employee count in the double shift » Shift premiums for supervisors £0.3200 » Supervisor training costs £0.3000 1 2 3 4 5 6 7 8 Average Variation = + 2 cents
  34. 34. Standard Unit cost & the Production Analysis Variation Razors » Allocation of owned and rented machines £0.4000 between Razors and Deodorants £0.3800 » Allocation of new employees, and hence training costs between Razors and Deodorants £0.3600 AUC - R » Efficient usage of raw material SUC - R £0.3400 » Employee count in the double shift » Shift premiums for supervisors £0.3200 » Supervisor training cost £0.3000 » Making employees redundant, hence 1 2 3 4 5 6 7 8 redundancy cost allocated to Razors Average Variation = - 1 cent
  35. 35. Standard Unit cost & the Production Variation Razors Bid price: £0.50 » Deodorants: £ 0.46 » Razors : £ 0.41 £0.40 Profit if won: » Deodorants: £ 1.38M - £1.29M = £0.09M » Razors: £ 0.82M - £0.80 M = £0.02M £0.30 Profit Factory Space Redundancy Cost We make (least) £0.20 Training Cost Production Cost profit or no one £0.10 else does! £0.00 Deodorants Razors
  36. 36. Raw Material Closing Stock 300,000 2,000,000 Raw Materials: » Suppliers: » “S” - Price 250,000 1,600,000 » “A1” - Better Quality at lower cost during Q7 & Q8 200,000 » No shortages of raw material during the last 1,200,000 two years » Substantial reduction of raw material utilization 150,000 due to continuous investments in R&D during 800,000 Q3 & Q5 100,000 Inventory Turnover: 50,000 400,000 » 4 days of production 0 0 » 2 days of sales Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Chemicals Plastic Metal
  37. 37. Finalized Goods Closing Stock 1,000,000 Finalized Goods: » (D) Over-produced in Q3 for full capacity machine utilization 800,000 » Accumulation of unsold stock (D) during the recessionary period is an indication of a loss of market share, which occurred in the export 600,000 market » Good demand forecasting for R during Y2 400,000 200,000 Inventory Turnover: 0 » 12 days of production Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 » 5 days of sales Deodorants Razors
  38. 38. Financial Summary by Quarter » During Y1, revenue growth was 36% £10,000,000 supported by the entrance into 35% 32% the export (Q1) & southern (Q2) £9,000,000 markets £8,000,000 30% 31% 29% 29% 30% » EBITDA Margin averaged 29% £7,000,000 28% 28% 29% 27% 29% from Q2 onwards 28% 26% £6,000,000 24% » The gap between the EBITDA & 25% 24% 24% 25% operating margins widens as the £5,000,000 hired machines were replaced £4,000,000 22% 20% by owned ones £3,000,000 » Operating margin fell from 29% 16% 16% 16% 15% 14% (Q4) to 24% due to a £2,000,000 13% 13% 14% 14% 15% combination of a reduction in £1,000,000 D’s selling price & the £0 10% continuation of Y1’s level of A&P Q0 Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 expenditure strategy Total revenues Operating Margin EBITDA Margin Net margin
  39. 39. Profitability Ratios » By the end of Y2 the ROE indicator was 68% 200.0% - way beyond Saudiamerica’s risk free rate, Slix 6’s cost of debt & most certainly* 160.0% the Company’s Cost of Capital (CAPM & WACC) 120.0% » The Return on Assts (ROA) is also significant reaching 46% by the end of Y2. 80.0% 40.0% 0.0% Q0 Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 ROA (annualized) ROE (annualized) » *Neither the CAPM nor the WACC can be properly calculated due to the lack of information (betas, coutry risk premiums etc.)
  40. 40. Liquidity ratios » By the end of Y2 the ROE indicator was 68% 3.5x - way beyond Saudiamerica’s risk free rate, Slix 6’s cost of debt & most certainly* 3.0x the Company’s Cost of Capital (CAPM & WACC) 2.5x » The Return on Assets (ROA) is also 2.0x significant reaching 46% by the end of Y2. » Liquidity ratios indicate that the Company 1.5x has always been able to cover its current 1.0x liabilities. 0.5x Q0 Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Current assets / Current liabilities Acid test
  41. 41. Leverage Ratios » By the end of Y2 the ROE indicator was 68% 250% - way beyond Saudiamerica’srisk-free rate, Slix 6’s cost of debt & most certainly* 200% the Company’s Cost of Capital (CAPM & WACC) 150% » The Return on Assets (ROA) is also significant reaching 46% by the end of Y2. 100% » Liquidity ratios indicate that the Company has always been able to cover its current 50% liabilities. » Leverage ratios in Q8 were significantly 0% reduced compared to Q1’s; due to a long Q0 Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 term debt refinancing & repayment scheme executed throughout Y2. Total liabilities / Total assets Total liabilities / Equity
  42. 42. Cash Flow Management » Management’s strategy throughout the last couple of years has been to substitute hired machines with owned ones, preferring the £1,200,000 purchase of A type machines over the M type £800,000 » During Y1 the Company financed its CAPEX by contracting several loans. » As a result Company’s cash flows were tight £400,000 in those periods in which machines were purchased » Cash requirements were covered by making £0 use of the overdraft allowance Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 » There were no machines purchased in Q4, Q6 & Q8 -£400,000 » Debentures issued in Q4 & Q5 were used to Deventures Ending Cash Balance refinance the long term debt Overdraft » The Company NEVER went into the mafia Maximum Overdraft Allowance
  43. 43. more machines: » 4 A machines » 10 M machines » Stronger balance sheet with £0 £3,000,000 £1,000,000 £2,000,000 £4,000,000 £5,000,000 Net Fixed Assets (Q0) £0.63M + Y1 Capital Expenditures +£3.3M - Y1 Machine Depreciation -£0.44M Net Fixed Assets (Q4) & Advance Payments on Machines (£1M) £2.5M £1.0M + Y2 Capital Expenditures +£2.2M Capital Expenditures - Y2 Machine Depreciation -£0.86M Net Fixed Assets (Q8) £4.8M
  44. 44. Dividend Policy £500,000 250% » Dividend payments during Y1 totaled £0.81M. 200% » During Y2 the Company paid £1.4M in £400,000 200% dividends, 70% more than the previous year. £300,000 150% » The increase in dividend payments serve as a partial compensation to our £200,000 100% shareholders for the reduction in the company’s share price during Y2. 53% £100,000 50% » The current dividend payout ratio will be 21% 11% sustained during the next year & until 46% 5% -10% 2% Saudi America’s economy has fully £0 0% Q0 Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 recovered. (£100,000) -50% Dividends Percentual Change
  45. 45. Esteban Lecumberri CEO Hamid Houshmand Alexandra Kniewasser PR & CSR Director Marketing Director Alexander Gocke Vasumathi Arumugam Finance Director Operations Director OsayomoreOssuetta CaseyCorry HR Director R&D Director
  46. 46. » Leadership is cohesive in that decisions are agreed upon before any actions were carried out; which has been proven to be effective in strategic decision making » The board of directors share a collective vision of the company’s objectives » Overall performance as a team was necessary to achieve our ranking » There was an understanding in each other’s capabilities and how each one functioned to carry along each teammate
  47. 47. Leadership Formations Strengths Weakness ¤ All roles were clearly defined from the ¤ We became too comfortable with our start strategy and marketing mix as it kept ¤ We brainstormed our opinions & made us at the top for a long time decisions as a team ¤ We were a risk averse team ¤ We were mutually answerable SWOT Opportunities Threats ¤ The export market can be used to ¤ Our competitors in the 3 markets increase our profits in that more sales were willing to take more risks occur here with less marketing ¤ Add products to our product portfolio to penetrate into various markets
  48. 48. Demand forecast Q8-Q10 Export Quarter 10 South We’re going global not postal! Quarter 9 Quarter 8 Our large marketing budget has created a brand identity that will carry over to our new markets 3 year plan to cover the East & West (Saudi America) North CRM software has indentified these two regions as significant buyers presently Approached by five undisclosed firms in the East/West to sell our products 8 10 12 14 16 18 20
  49. 49. Body Lotion Tooth Paste Deodorants for women The Future is product diversification!
  50. 50. March ‘10 Study Findings: » Bathing more than once per week is becoming the norm among SaudiAmericans. » They are also starting to wash their teeth three times a day. » In response, partnering with Slix6 marketing, R&D has come out with new products to complement the current portfolio. » Free trial size will be promoted through purchase of a Slix 6 razor or deodorant with the added product line, we were able to negotiate a 5% discountthrough our supplier. » The advertising campaign for Dfem has already been planned and will be launched in Y3.

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