Business Model Design Report

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This presentation is a final report of a business model design project for a European construction service provider. The firm started a "Margin Improvement Program" comprising of five initiatives. One of these initiatives is aimed at the European "Home Markets," which focuses on:
- Development of an adapted business model
- Performance improvement plans
The report provides a strategic assessment of the firm's competitive position in 5 European countries including new business models, cost reduction opportunities and business alignment.

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Business Model Design Report

  1. 1. Business Model of Home Markets Final Report Date
  2. 2. - 4 - The Home Markets project consists of four phases Project management Communication between Project Team and Management Teams Home Markets Project management Communication between Project Team and Management Teams Home Markets Key issues Approach per home market Work PlanWork Plan Planning and Visioning Planning and Visioning Financials and orga- nization Market and compe- titors Country Factbases Country Factbases Current situation analysis Current situation analysis Phase 1 Phase 2 Adjusted business model Adjusted business model Phase 3 ImplementationImplementation Phase 4 Implementation (out of scope) Implementation (out of scope) Alternative models Benefits and risks Business Model Business Model Imple- mentation Imple- mentation Implemen- tation plan Implemen- tation plan Organ- ization Financials This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  3. 3. - 7 - Executive Summary 1. Current Situation: Profitability in the Home Markets is very modest • The five home markets generated a 4.7% EBIT margin on average annual sales of € 163m • Revenues are decreasing or stagnating since 2001 in all countries and for most activities • Virtually all the profit is generated from dredging in Germany and the UK 2. Markets and Competitors: Client X does not exploit all its competitive advantages • After a downturn, the market outlook is fairly stable with a moderate upturn on the mid term • Client X is market leader with a decentralised business model • Most competitors however have a more centralised, more focused approach – the decentral approach of Client X limits economies of scale – management is distracted by a large number of activities without strategic and financial benefits • Rohde Nielsen en de Boer are growing faster than Client X • New investments in large/effective equipment require larger scale of operations and more coordination thus centralisation This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  4. 4. - 10 - Twelve PMC’s (Product/Market/Combinations) have been defined for the for home markets in scope Activity map Home markets SUB -BSUB-A SISTER COMPANY Client X Sweden COMPANY C Dredging • Local • Intermediate • Central • Coast Protection (rocks) • Coast Protection (sand) • Outfalls, landfalls and pipelines • Sand & Gravel supply Others • Harbour construction • Foundation • Civil works • Bore Piling • Munition clearing This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  5. 5. - 13 - Average EBIT was less than 5% of revenues 38,5 18,6 19,9 2,3 1,5 0,5 10,8 7,8 0 10 20 30 40 50 Project Cash Flow - Hires = Gross Margin - Operational Overhead + Plant Result - Workshop Result - General Overheads = EBIT 24%24% 11%11% 1,4%1,4% +0,9%+0,9%12,2%12,2% EBIT Buildup (Annual Average 1999 - 2003) €m 0,3%0,3% 6,6%6,6% 4,7%4,7% This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  6. 6. - 16 - The German and UK dredging activities generate virtually all of the profit, non-dredging and smaller countries are marginal activities Revenue and EBIT by Product-Market-Combination ranked by EBIT Margin (1999 - 2003) € 1.5m in losses Sub x Sub A sister company X Client X Company A Central dredging (in home markets P&L) Revenue: € 31m EBIT: € -0.8m Cumulative Average Annual Revenues (€ m) CumulativeAveragreAnnualEBIT(€m) 200150100500 12 9 6 3 0 Munition Intermediate Coast protection Munition Intermediate Intermediate Local Sand & Gravel Supply Local Coast protection Harbour Civil works Outfalls Intermediate Marine piling Local Harbour construction Bore Piling Foundation one-off project channel This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  7. 7. - 19 - Agenda 1. Introduction 2. Current Situation 3. Markets and Competitors 4. New Business Model 5. Implementation 3.3. This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  8. 8. - 22 - Client X has a very decentralised business model for its European home markets limited support and coordination Activity Map Home Markets UKGermany Finland Sweden Iberia Products Dredging • Intermediate • Central • Outfalls, landfalls, pipelines • Local • Coast Protection (rocks) • Coast Protection (sand) • Sand & Gravel supply Other Products • Harbour construction • Munition clearing • Foundation • Civil works • Bore Piling Country Organisation • Marketing • Tendering • Operations • Plant Management • Workshop • Finance/IT/HR Central Organisation • Tendering • Operations • Plant Management • Workshop • Finance/IT/HR This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  9. 9. - 25 - Client X has a strong position in all home markets 0 20 40 60 80 100 120 140 Iberia* Sweden Finland UK Germany Client X Others Dredging market in the home markets by country and contractor (2003, estimated) * Excluding activities of central fleet which are not shown in P&L Iberia home market Position #1 #1 #1 #1 laggard in Spain # 1 in Portugal This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  10. 10. - 28 - Strategic performance has been tested on these elements Economies of Scale Economies of Scale Economies of Scope Economies of Scope Competitive Advantage Competitive Advantage • Benchmark with European specialists • Synergy analysis non-dredging activities • Financial performance non-dredging activities This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  11. 11. - 31 - Synergy with the Core (Intermediate and Central Dredging) Average EBITMargin -40% -25% -10% 5% 20% = € 6m in average annual revenues Coast protection Munition Local Sand/Gravel CoastalHarbourCivil works Outfalls HarbourLocalHarbour Bore Piling Foundation Local SUB A SUB X sister company X Client X Company X Large parts of the portfolio can be divested without jeopardising economies of scope or profitability Low High Local Support core and profitable: • create competitive advantage through economies of scope Support core but not profitable: • need to be reconsidered Profitable but limited support of core: • manage at arm’s length • or divest when time is right Not profitable and limited support of core: • should be divested Non core activities portfolio assessment Local This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  12. 12. - 34 - Seven principles for the new business model have been developed Achieve economies of scale Achieve economies of scale Optimise resources by centralisation Optimise resources by centralisation Outsource all workshops Outsource all workshops Divest non-core loss making activities Divest non-core loss making activities Maintain strong local presence Maintain strong local presence Optimise economies of scope Optimise economies of scope Exploit competitive advantages Exploit competitive advantages Share general overheads Share general overheads Reconsider other marginal activities Reconsider other marginal activities To improve productivity To maintain differentiation Consider exiting local dredging Consider exiting local dredging This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  13. 13. - 37 - = € 6m in average annual revenues HH WD TO BS IP The options differ in their gradual divestment of activities Non core* activities portfolio assessment Synergy EBITMargin -40% -25% -10% 5% 20% Coast protection Munition Local Sand/Gravel CoastalHarbourCivil works Outfalls HarbourLocalHarbour Bore Piling Foundation Local Low High Local Local Synergy EBITMargin -40% -25% -10% 5% 20% Coast protection Munition Local Sand/Gravel Coastal OutfallsHarbour Low High Local Synergy EBITMargin -40% -25% -10% 5% 20% Coast protection Sand/Gravel Outfalls Low High Synergy EBITMargin -40% -25% -10% 5% 20% Coast protection Munition Local Sand/Gravel CoastalHarbour Outfalls HarbourLocal Low High Local DD AA BB CC* Non core means excluding Intermediate and Central dredging This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  14. 14. - 40 - Finally in Option D only central and intermediate dredging remain, with limited support from local offices Activity Map Home Markets (Option D) Country Organisation • Marketing • Tendering • Operations • Plant Management • Workshop • Finance/IT/HR Central Organisation • Tendering • Operations • Plant Management • Workshop • Finance/IT/HR Further reduction of support activities UKGermany Finland Sweden Iberia Products Dredging • Intermediate • Central • Outfalls, landfalls, pipelines • Local • Coast Protection (rocks) • Coast Protection (sand) • Sand & Gravel supply Other Products • Harbour construction • Munition clearing • Foundation • Civil works • Bore Piling This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  15. 15. - 43 - These options can be tested on financial and intangible criteria Financial ImpactFinancial Impact IntangiblesIntangibles • Headcount and cost analysis • Pro forma P&L’s • NPV impact • Qualitative assessment of strategic and operational factors RewardsRewards RisksRisks Options Evaluation Options Evaluation • Assessment of size and impact of the transformation This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  16. 16. - 46 - Centralized plant management in options B, C and D should result in better utilisation 0 10 20 30 40 50 Plant1 Plant2 Plant3 Plant4 Plant5 Plant6 Plant7 Plant8 Plant9 Plant10 Plant11 Plant12 Plant13 Plant14 Plant15 Plant16 Plant17 Plant18 Plant19 WeeksUtilisedperYear Utilisation of intermediate equipment (1999-2003 average) Plant Need to coordinate will increase as plant is getting bigger and more efficient Note: excludes potential benefits from rationalization of local equipment Below 30 weeks Ø = 31 weeks Ø = 32 weeks Average utilisation is conservatively estimated to increase from 31 to 32 week per year Actual utilisation This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  17. 17. - 49 - Current headcount is 777 fte A HH WD TO BS IP RTD* Central Total Manager 1 1 1 1 4 0 8 Operations 5 3 6 3 2 0 27 Fin/IT/HR 9 6,5 8 4 6 0 33,5 Tendering 6 7 4 1 2 0 20 Plant Man’t 1 0,5 1 0 0 0 2,5 Health/ QA 2 1,5 1 1 0 0 5,5 Office 4 6,5 2 0 3 0 15,5 Plant services 4 4 6 0 0 0 14 Other staff 38 20 45 5 4 0 112 Total staff 70 50 74 15 21 8 0 238 Direct labour 180 76 164 32 49 0 501 Workshop staff 0 - 6 - 7 0 13 Workshop labour 0 - 25 - 0 25 Total workshop - 31 - 7 0 38 Grand total 250 126 269 47 77 8 0 777 * not part of financial data and only involves staff members related to intermediate and central dreding Headcount (FTE, 2003) This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  18. 18. - 52 - D implies a headcount reduction of almost 500 fte D HH WD TO BS IP RTD Central Total Δ Manager 1 1 1 1 1 3 8 0 Operations 1 2 1,5 0 0 2 6,5 20,5 Fin/IT/HR** 2 4 1 1 2 3 13 20,5 Tendering 2 3 1 1 2 4 13 7 Plant Man’t 0,5 1 1 0 3 5,5 -3 Health/ QA 1 0 0 0 1 2 3,5 Office 1 2 1 1 2 1,5 8,5 7 Plant services 2 3 2 0 0 0 7 7 Other staff 12 15 15 5 0 0 47 65 Total staff 21 31,5 23,5 10 7 0 17,5 110,5 127,5 Direct labour 35 55 54 32 0 0 176 325 Workshop staff - 1 - 0 0 1 12 Workshop labour - 0 - 0 0 0 25 Total workshop - 1 - 0 0 1 37 Grand total 56 86,5 78,5 42 7 0 17,5 287,5 489,5 Headcount (FTE, 2003) This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  19. 19. - 55 - -10 -5 0 5 10 Best option varies by country Note: Source: XYZ analysis €m Option EBIT By Country and Option Germany Finland UK A B C D Iberia Sweden This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  20. 20. - 58 - Overall B is the best option Risk Reward = € 100m Average Annual Revenue A B C D Low High Low High Note: Reward based on NPV and intangibles Risk versus Reward for Strategic Options • Loss of profitable business • Loss of competitive differentiation • Limited additional transformation effects • NPV lower • Some loss of competitive differentiation • Somewhat larger transformation risks This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  21. 21. - 61 - Agenda 1. Introduction 2. Current Situation 3. Markets and Competitors 4. New Business Model 5. Implementation5.5. This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  22. 22. - 64 - Country Fact Bases 1. Subsidiary X 2. Subsidiary A 3. sister company X 4. Client X Sweden 5. Company Z 1.1. This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  23. 23. - 67 - This presentation summarises the results of the current situation analysis for the German home market First issues Approach per home market Plan of work Plan of work Planning and Visioning Planning and Visioning Financials and orga- nization Market and compe- titors InsightInsight Current situation analysis Current situation analysis Phase 1 Phase 2 Adjusted business model Adjusted business model Phase 3 Implementation plan Implementation plan Phase 4 Implementation (out of scope) Implementation (out of scope) Alternative models Benefits and risks Business Model Business Model Imple- mentation Imple- mentation Implemen- tation plan Implemen- tation plan Organizati on Financials Approach ‘Home Markets’ Project This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  24. 24. - 70 - Agenda 1. Introduction 2. Current Situation 3. Market and Competitors 4. Internal Analysis 5. Summary 2.2. This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  25. 25. - 73 - The EBIT margin is under pressure by lower prices and revenues 81% 82% 111% 126% 29% 1999 2000 2001 2002 2003 7,2 6,3 9 12,4 7,2 1999 2000 2001 2002 2003 Pre-tax ROCE Cash Flow Margin Depreciation/Sales Net Asset Turnover EBIT Margin (Semi) Fixed Cost/Sales X Return On Capital Employed subsidiary X (Average 1999 - 2003) 30% 27% 24% 24% 20% 1999 2000 2001 2002 2003 5% 5% 3% 5% 5% 1999 2000 2001 2002 2003 13% 9% 8% 9% 11% 1999 2000 2001 2002 2003 11% 13% 12% 10% 4% 1999 2000 2001 2002 2003 -/- -/- This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  26. 26. - 76 - Return On Capital Employed is therefore lower when calculated on a cash basis Average Balance Sheet 1999 - 2003 • Land and buildings 0,7 • Plant & equipment + 7,4 • Intanglibles 0 • Working Capital - 1,3 • Net Assets = 6,7 • Accumulated Depreciation + 30,8 • Accumulated Amortisation + 0 • Inflation Adjustment + 12,6 • Gross Assets = 50,1 Average Balance Sheet 1999 - 2003 • Land and buildings 0,7 • Plant & equipment + 7,4 • Intanglibles 0 • Working Capital - 1,3 • Net Assets = 6,7 • Accumulated Depreciation + 30,8 • Accumulated Amortisation + 0 • Inflation Adjustment + 12,6 • Gross Assets = 50,1 Average P&L 1999 - 2003 • Turnover 53,9 • Cash Flow 13,5 • Gross Margin 8,2 • Operational/Plant/Workshop 0,3 • G&A - 2,9 • EBIT = 5,7 • NOPAT @ 1-25% = 4,3 • Depreciation + 2,5 • Gross Cash Flow = 6,7 Average P&L 1999 - 2003 • Turnover 53,9 • Cash Flow 13,5 • Gross Margin 8,2 • Operational/Plant/Workshop 0,3 • G&A - 2,9 • EBIT = 5,7 • NOPAT @ 1-25% = 4,3 • Depreciation + 2,5 • Gross Cash Flow = 6,7 Cash Generated by the Business Cash Invested in the Business Cash Flow Return On Investment = 11.6% Key assumptions: Fixed asset life: 20 year for dredging and coastal protection, 10 year for marine piling and 5 year for munition clearing Fixed asset age: 12 year for dredging and coastal protection, 9 years for marine piling and 4 years for munition clearing 25% average tax rate and 2,5% inflation per year Source: HH Administration; XYZ analysis This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  27. 27. - 79 - Overview of average cash flow and EBIT margins Cumulative 5 year Average CF Margin per PMC EBITmargin Cumulative 5 year Average EBIT Margin per PMC Revenue (€ x million) CashflowMargin 0% 10% 20% 30% 40% 0 10 20 30 40 50 Local dredging Intermediate dredging Central dredging Marine piling Coastal protection Munitions clearing 50% 60 0% 5% 10% 15% 20% 0 10 20 30 40 50 Local dredging Intermediate dredging Central dredging Marine piling Coastal protection Munitions clearing Revenue (€ x million) This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  28. 28. - 82 - Overview of ratio’s per PMC Revenue Growth CF Margin Gross Margin Plant, worksh., oper. overh. result G&A EBIT margin ROCE CFROI* Local Dredging 4% 24% 12% 5% 6% 10% 90% 7% Intermediate Dredging - 13% 39% 25% 3% 7% 22% 58% 12% Central Dredging 6% 35% 15% -2% 6% 7% 37% 3% Total Dredging 1% 32% 17% 2% 6% 13% 60% 8% Coastal Protection -16% 19% 12% -1% 6% 6% 75% 12% Marine Piling 14% 11% 8% -2% 5% 1% 61% 12% Munitions Clearing Germany -25% 27% 24% -2% 2% 20% >> 100% >> 25% Munitions Clearing other countries -30% 6% -3% -2% 2% -7% << -100% << - 10% Grand total -4% 25% 15% 1% 5% 10% 84% 12% Grand total excl. central -6% 23% 15% 1% 5% 11% 97% 14% Financial Ratio Analysis (1999 - 2003 Average) Source: HH Administration; XYZ analysis This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  29. 29. - 85 - The expected upturn in the economy will not immediately result in growth for the construction market 0% 1% 2% 3% 4% 5% 1999 2001 2003 2005 2007 An economic upturn is expected ... • Low interest rates (but high €) • Growth in US and UK • More international stability ... but pressure on total construction market remains • Negative growth -/- 0.2% in 2004 for the construction market as a whole (+1.5% in nominal terms) • Government spending on construction to shrink 2.8% in 2004 (-/- 1.1% nominal) due to savings programmes • Continuing need for government to curb spending – tax cuts – need to comply to €-criteria German GDP growth (nominal) Source: EIU; Ifo; DIW This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  30. 30. - 88 - Subsidiary X’ competitors are more cost focused, competitive advantage will have to come from economies of scale and scope B Europeans () A Local Dredging Local Specialists () Strong Neutral Client X/ HH Central Dredging Marine Civil Eng. Construction Sales Know how Operations Local Construction Companies Interm. Dredging Weak Cost focus/ large projects/ technical know how Cost focus/ interm. projects Cost focus/ smal projects/ local know how Activity Maps Major Types of Competitors This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  31. 31. - 91 - Current indirect headcount is 60 feet Managing DirectorManaging Director Area Marine Piling Area Marine Piling TenderingTendering Proj. Man’rsProj. Man’rs SecretarySecretaryHealth/SafetyHealth/Safety Area NordseeArea Nordsee Proj. Man’rsProj. Man’rs AreaArea Proj. Man’rsProj. Man’rs AdminAdmin HRHR ITIT Organisation Structure Subsidiary X (December 2003) Area MunitionArea Munition TenderingTendering Proj. Man’rsProj. Man’rs TDTD WorkshopWorkshop ResourcesResources ServicesServicesTenderingTendering 11 22 33 11 66 11 33 11 44 11 11 22 111,61,6 AdminAdmin FinanceFinanceAdminAdmin AdminAdmin Resource Planning Resource Planning AdminAdmin 22 AdminAdmin 22 22 44 11 11 11 22 44 22 11 22 11 11 AdminAdmin 11 Total 60 fteTotal 60 fte .. General overhead .. Operational and workshop overhead -/- 1 May 2004 -/- 1 June 2004 This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  32. 32. - 94 - Agenda 1. Introduction 2. Current Situation 3. Market and Competitors 4. Internal Analysis 5. Summary5.5. This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  33. 33. Factbase Subsidiary A This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  34. 34. - 100 - The activities of WDC range from Dredging activities to Sand & Gravel Supply Activity map Westminster dredging Dredging • Local • Intermediate • Central UK Ireland Other dredging related activities* • Reclamation dredging • Coast protection • Outfalls, Landfalls & Pipeline • Sand & Gravel Supply * Environmental dredging is also distinguished as a PMC. There was however no turnover in that segment the last few years This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  35. 35. - 103 - On average, WDC has generated a 5% operating profit margin over the last five years 7,9 4,8 3,1 0,5 0,4 1,6 1,4 0,4 1,8 0 2 4 6 8 10 Project Cash Flow - Hires = Gross Margin - Ope- rational Overhead + Plant Result - Workshop Result - General Overheads = EBIT* + Sand and Gravel Supply** = WDC EBIT* 29%29% 17%17% 2%2% 1%1%11%11% EBIT Buildup (Average 1999 - 2003) £m 0%0% 6%6% 5%5% Note: Felixstowe at zero gross margin, EBIT excludes sundries * Excludes Sundries ** Includes Llanelli This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  36. 36. - 106 - However the Returns On Capital Employed excluding central have been relatively stable Excluding central dredging Return On Capital Employed WDC (Average 1999 - 2003) Note: Excluding PMC Sand & Gravel Supply; Felixstowe at zero gross margin * Implementation of Baan led to high current liabilties Source: WDC Administration; XYZ analysis 94% 31% 50% 35% 62% 1999 2000 2001 2002 2003 4 12,6 6,6 5,2 5,3 1999 2000* 2001 2002 2003 Pre-tax ROCE Cash Flow Margin Depreciation/Sales Net Asset Turnover EBIT Margin Other costs/Sales X 34% 25% 30% 24% 36% 1999 2000 2001 2002 2003 4% 4% 3% 3% 4% 1999 2000 2001 2002 2003 7% 19% 19% 15% 20% 1999 2000 2001 2002 2003 23% 2% 8% 7% 12% 1999 2000 2001 2002 2003 -/- -/- This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  37. 37. - 109 - Overview of the five year average profit & loss account for all PMCs P&L by product market combination (1999 - 2003 average) Dredging Other Total ex. Sand & Gravel Total ex. Central & Sand & G Total ex. Central & inc. Sand£ million Local Inter- mediate Central* Subtotal Coast protection Out/land- falls Sand & Gravel Revenue 5.8 7.0 9.1 21.9 3.5 2.2 5.1 27.5 18.4 23.5 Hires 0.9 0.9 2.4 4.3 0.2 0.3 4.8 2.4 Other cost 4.3 4.9 6.6 15.7 2.3 1.6 19.7 13.0 Gross Margin 0.6 1.2 0.1 1.8 0.9 0.3 3.1 3.0 Gross Margin (%) 10% 17% 1% 8% 27% 13% 11% 16% Project Cash flow 1.5 2.1 2.5 6.1 1.2 0.6 7.9 5.3 Cash flow margin 26% 30% 28% 28% 33% 27% 29% 29% Operational overhead -0.1 -0.1 -0.1 -0.4 -0.1 0.0 -0.5 -0.3 Plant Operations 0.3 0.1 0.0 0.5 0.0 -0.1 0.4 0.4 Workshop result 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 General Overheads -0.4 -0.4 -0.4 -1.3 -0.2 -0.1 -1.6 -1.2 EBIT 0.4 0.8 -0.5 0.7 0.7 0.0 0.3 1.4 1.9 2.2 EBIT Margin (%) 7% 11% -5% 3% 19% 2% 7% 5% 10% 9% This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  38. 38. - 112 - Overview of ratio’s per PMC Revenue Growth CF Margin Gross Margin Plant, worksh., oper. res. G&A EBIT margin EBIT (£ million) Pre-tax ROCE CFROI Local Dredging 7% 26% 10% 4% 7% 7% 0.4 36% 1% Intermediate Dredging - 21% 30% 17% 0% 6% 11% 0.8 55% -1% Central Dredging* - 21% 28% 1% -1% 5% -5% -0.5 << -100% << -10% Total Dredging - 16% 28% 8% 0% 6% 3% 0.7 25% -3 % Coast protection - 5% 33% 27% -2% 6% 19% 0.7 >>100% << -10% Outfalls, Landfalls & Pipelines 15% 27% 13% -5% 6% 2% 0.0 9% 2% Sand & Gravel Supply 11% Na Na Na Na 7% 0.3 21% 6% Grand total (excl. Sand & Gravel) - 13% 29% 11% 0% 6% 5% 1.4 40% 1% Grand total (excl. Central & Sand & G) -4% 29% 16% 0% 6% 10% 1.9 58% 3% Grand total (excl. central incl. Sand & G) -1% Na Na Na Na 9% 2.2 31% 3% Financial Ratio Analysis (1999 - 2003 Average) * Source: WDC Administration; XYZ analysis This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  39. 39. - 115 - The outlook for the economy and the construction are fairly positive 0% 1% 2% 3% 4% 5% 6% 7% 1999 2001 2003 2005 2007 An minor economic upturn is expected ... • Growth in US, however limited growth in continental Europe • More international stability ... outlooks on construction market are modestly positive • Positive growth of 3% in 2004 and 2005 for the construction market as a whole • Central government spending on transport is expected to increase from 7,3 bn £ in 2003/04 to 8,4 bn £ in 2005/06 • Public finances will deteriorate in 2003/04. Observing the “golden rule” has to lead to – less increase in public spending – higher taxes UK GDP growth (nominal) Source: This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  40. 40. - 118 - Low cost remains the most important customer need, intermediate and central dredging require less local know-how Customer needs per product market combination Low cost • High productivity • Proper project design • Low Mob/Demob costs • Low overheads Local market presence Local operations Local Inter- mediate Central Coast Protection Sand and Gravel Dredging Other very important less important Outfalls * * proximity of licensed area This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  41. 41. - 121 - Current indirect headcount is 24,5 fte Managing Director*Managing Director* Estimating/ Marketing Estimating/ Marketing QA managerQA managerHealth/SafetyHealth/Safety Operations Management Operations Management TenderingTendering Finance / Administration* Finance / Administration* Organisation Structure WDC (December 2003) Office ManagerOffice Manager 11 0,50,5 0,80,8 0,50,511 Total 24,5 fteTotal 24,5 fte MarketingMarketing Ops Manager Ops Manager Project Managers Project Managers 99 Contract support Contract support 11 Crew Plan- ning/QA Crew Plan- ning/QA Survey Manager Survey Manager 11 SurveyorsSurveyors 55 Plant Services Plant Services 11 Super- intendents Super- intendents 33 33 22 AccountingAccounting Payroll & data proces. Payroll & data proces. 2.72.7 33 Business Dev’t Business Dev’t 11 General overhead Operational overhead Secretarial/ office serv’es Secretarial/ office serv’es 11 5.55.5 11 0,50,5 11 11 Contract & plant admin Contract & plant admin 44 * also work for Sand & Gravel and PPD This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  42. 42. - 124 - Country Fact Bases 1. Subsidiary X 2. Subsidiary A 3. sister company X 4. Client X 5. Company X 3.3. This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  43. 43. - 127 - This presentation summarises the results of the current situation analysis for the Finnish home market First issues Approach per home market Plan of work Plan of work Planning and Visioning Planning and Visioning Financials and orga- nization Market and compe- titors InsightInsight Current situation analysis Current situation analysis Phase 1 Phase 2 Adjusted business model Adjusted business model Phase 3 Implementation plan Implementation plan Phase 4 Implementation (out of scope) Implementation (out of scope) Alternative models Benefits and risks Business Model Business Model Imple- mentation Imple- mentation Implemen- tation plan Implemen- tation plan Organ- ization Financials Approach ‘Home Markets’ Project This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  44. 44. - 130 - Agenda 1. Introduction 2. Current Situation 3. Market and Competitors 4. Internal Analysis 2.2. This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  45. 45. - 133 - The return on capital employed is under pressure due to decreasing revenues and low margins; except for 2003 where revenues have grown 10% -6% 6% 8% 1% 1999 2002 4 4 4 2 3 1999 2002 ROCE Cash flow margin Depreciation/turnover Net asset turnover 4% -1% 1%2% 0% 1999 2002 EBIT margin (semi) fixed cost/turnover X 16% 17% 18% 13% 17% 1999 2002 6%6%6%6%5% 1999 2002 8%11%10%9% 10% 1999 2002 Return On Capital Employed sister company X (Average 1999 - 2003) -/- -/- This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  46. 46. - 136 - The negative plant operational result is mainly caused by supporting equipment for civil works because the utilisation of the main plants is on average above budget Average plant utilization per plant by purchasing value (average 3 years)* Average plant operational result per pmc (€ ‘000) -39 51 107 116 0 0 0 -125 -48 51 -77 -158 -42 -121 -40 72 -200 -150 -100 -50 0 50 100 150 Plantresult(€’000) Plant operations result for main plants Plant operations result for other equipment Local Ammunition Foundation Harbour construction Inter- mediate Central Bridges BorePiling 0 13 26 39 52 0 2,5 5 8 11 Plants by purchasing value (€ mln) Utilizationinweeks *Except AA: bought in 2003 plant utilization 10% above budget Actual Budget Manu-Pekka Koura2 Kuokka-Pekka2 Meri-Pekka Kahmari1 Pulteri This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  47. 47. - 139 - Although cash flow margins for dredging activities are above 17%; EBIT margins for dredging activities are between -3% and 3% (except for ammunition) Cumulative 5 year Average CF Margin per PMC EBITmargin Cumulative 5 year Average EBIT Margin per PMC Revenue (€ x million) CashflowMargin -10% 3% 15% 28% 40% 0 11,3 22,5 33,8 45,0 Local Ammunition Foundation Harbour construction Inter- mediate Central Civil works BorePiling -30% -15% 0% 15% 30% Local Ammunition Foundation Harbour construction Intermediate Central Civilworks BorePiling Revenue (€ x million) 0 11,3 22,5 33,8 45,0This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  48. 48. - 142 - Finland’s financial performance over the years results in a 1% Ebit margin, 9% ROCE and -1% CFROI Revenue Growth CF Margin Gross Margin Plant, worksh., oper. overh. result G&A EBIT margin ROCE CFROI* Local Dredging 20% 19% 12% -7% 8% -3% -9% -6% Intermediate Dredging 3% 19% 8% -1% 5% 2% 4% -1% Central Dredging 81% 20% 4% 3% 7% 0% 0% -2% Ammunition -100% 37% 28% 0% 2% 26% 101% Subtotal dredging 14% 22% 12% -1% 6% 5% 9% 2% Harbour construction 8% 15% 11% -1% 7% 2% 19% 3% Foundation -32% -2% -6% -3% 11% -20% -113% Bore Piling -22% 19% 10% -10% 13% -14% -15% Civil works -21% 11% 9% -1% 6% 2% 32% 8% Total 0% 16% 10% -2% 7% 1% 9% -1% Financial Ratio Analysis (1999 - 2003 Average) *Key assumptions: Fixed asset life: 20 year for dredging Fixed asset age: 18 year for dredging 25% average tax rate and 2,5% inflation per year Source: Client X; XYZ analysis This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  49. 49. - 145 - The local dredging market is expected to grow in 2005 and 2006; an increase of revenues in Estonia and Russia is expected in 2004 15.2 19.6 2.7 8.8 3.3 3.8 11.3 6.0 4.0 0.8 2.0 2.0 1.5 1.5 0 5 10 15 20 25 30 35 2004 2005 2006 Revenues (€ mln)* €mln Dredging Local Civil Foundation Harbour Quay wall Dredging Intermediate Dredging Central Civil works * Based on estimation of management company X including only projects > € 250k 15.7 25.7 30.8 5.0 1.1 4.7 1.2 0 5 10 15 20 25 30 35 2004 2005 2006 €mln Finland Russia Estonia Average expected acquiring chance is 50% (included in revenues shown) Revenues (€ mln)* This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  50. 50. - 148 - … and Harbour construction in Estonia Dredging DemandDredging Demand Capital DredgingCapital Dredging Maintenance Dredging Maintenance Dredging Technical state of ports Technical state of ports Economic GrowthEconomic Growth Major InitiativesMajor Initiatives Harbour construction Impact on PMCs Estonia Government Budgets Government Budgets Long term drivers of demand Impact on PMCs Finland Harbour construction This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  51. 51. - 151 - Agenda 1. Introduction 2. Current Situation 3. Market and Competitors 4. Internal Analysis4.4. This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  52. 52. - 154 - Agenda 1. Appendix competitorsI.I. This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  53. 53. - 157 - Other competitors are large construction companies which use subcontracting or have their own small dredging plants for supporting their construction projects YY SS LL • All construction activities •Unit infraservices focuses on tunneling, earth works, harbour construction. • All construction activities •Unit infraservices focuses on tunneling, earth works, harbour construction. •S (subdivision) Major fields are bridge building, harbour construction and pile driving. •S (subdivision) Major fields are bridge building, harbour construction and pile driving. •Civil engineering : rock, soil foundation engineering, concrete construction, highway, marine engineering •Civil engineering : rock, soil foundation engineering, concrete construction, highway, marine engineering •2 backhoe dredgers, one drill barge, cutter Tursas, towable barges (all old except one med. size backhoe dredger) •2 backhoe dredgers, one drill barge, cutter Tursas, towable barges (all old except one med. size backhoe dredger) •All construction equipment •Dredging activities using subcontracting •All construction equipment •Dredging activities using subcontracting •All construction equipment•All construction equipment •Strong competitor using all capabilities of the construction company. Uses dredging as support activity •Strong competitor using all capabilities of the construction company. Uses dredging as support activity •Strong competitor using all capabilities of the construction company. No dredging activities •Strong competitor using all capabilities of the construction company. No dredging activities •Head office Finland •12000 employees (2002) •Unit infraservices 700 empl •Head office Finland •12000 employees (2002) •Unit infraservices 700 empl •Head office Sweden •76000 employees (2002) • Finnish subsidiary (4500 empl.); •Head office Sweden •76000 employees (2002) • Finnish subsidiary (4500 empl.); • Head office Finland •subsidiary of L • 500 employees (2002) • Head office Finland •subsidiary of L • 500 employees (2002) •Total revenue € 1,8 billion •Unit infra revenue € 118 mil. •Unit infra result € 4,1 mil. •Total revenue € 1,8 billion •Unit infra revenue € 118 mil. •Unit infra result € 4,1 mil. •Total revenue € 1,2 billion •L OY € 190 mil.(2002) •Total revenue € 1,2 billion •L OY € 190 mil.(2002) ProductsProducts EquipmentEquipment Competitive positionCompetitive position BackgroundBackground FinancialsFinancials •Strong competitor using all capabilities of the construction company. No dredging activities •Strong competitor using all capabilities of the construction company. No dredging activities •Total revenue € 15,7 billion •S OY € 1 bil.(2001) •S OY result € 14mil. •Total revenue € 15,7 billion •S OY € 1 bil.(2001) •S OY result € 14mil. This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  54. 54. - 160 - Agenda 1. Introduction 2. Current Situation 3. Market and Competitors 4. Internal Analysis 1.1. This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  55. 55. - 163 - Four PMC’s (Product/Market/Combinations) have been defined for Client X Sweden Definitions of Product Market combinations CentralCentral LocalLocal IntermediateIntermediateDredgingDredging Quay wallQuay wall Harbour Construction Harbour Construction 333 444 111 222 1. Small dredging works, local competitors, small equipment 2. Reasonable sized dredging works, local and foreign competitors, own large equipment 3. Large dredging works, international competitors, central Client X fleet added with prime movers from home market, pre-qualification tendering 4. Harbour construction of which quay wall is the most important aspect of the work This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  56. 56. - 166 - Dredging is reasonable stable in size except the Gothenburg project (2003:€ 6,6 mln); over the years revenues came from other countries due to work for sister companies 2,9 1,0 1,8 3,9 5,8 5,4 0,3 7,8 3,2 1,8 0 5 10 15 20 2001 2002 2003 Revenues by PMC (€ mln) €mln Dredging Local Harbour Quay wall Dredging Intermediate Dredging Central 6,2 2,2 11,1 0,1 1,1 2,6 0,6 0,2 1,1 0,8 0,5 0,1 3,6 0,1 0,4 0,4 1 1,7 0 5 10 15 20 2001 2002 2003 Revenues by country (€ mln) €mln Finland Others UK, Ireland Russia Sweden Denmark Netherlands Spain This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  57. 57. - 169 - Most plants are over 20 years old, but are upgraded; R has a bookvalue of € 3,3 million in 2003 (66% of total bookvalue of the equipment) = € 4 million is purchase value Size versus age of the main equipment Purchasevalue(inclupgrade)(€‘000) Age (2003) 0 2,5 5,0 7,5 10,0 0 8 15 23 30 R G* B * This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  58. 58. - 172 - Intermediate dredging is the only pmc with a EBIT margin above 0%... PL& per product market combination (2001 - 2003 average) Dredging Harbour Construction Total€ million Local Inter- mediate Central Revenue 1872 5049 2707 1660 11302 Hires 128 626 32 18 805 Other cost 1337 3515 2695 1508 9050 Gross Margin 407 908 -20 134 1447 Gross Margin (%) 22% 18% -1% 8% 13% Project Cash flow 535 1534 12 152 2252 Cash flow margin 29% 30% 0% 9% 20% Operational overhead 58 136 5 24 223 Plant Operations 127 201 0 50 384 Workshop result 0 0 0 0 0 General Overheads 252 467 119 195 1033 EBIT -30 103 -145 -134 -192 EBIT Margin (%) -2% 2% -5% -8% -2% This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  59. 59. - 175 - Client X financial performance over the years results in a -2% Ebit margin, -3% ROCE and -2% CFROI Revenue Growth CF Margin Gross Margin Plant, worksh., oper. overh. result G&A EBIT margin ROCE CFROI* Local Dredging -21% 29% 22% -10% 13% -2% -3% -1% Intermediate Dredging 18% 30% 18% -7% 9% 2% 3% 1% Central Dredging - 0% -1% 0% 4% -5% -37% -67% Harbour Construction -25% 9% 8% -4% 12% -8% -48% Total 30% 20% 13% -5% 9% -2% -3% -2% Financial Ratio Analysis (2001 - 2003 Average) *Key assumptions: Fixed asset life: 20 year for dredging Fixed asset age: 15 year for dredging 25% average tax rate and 2,5% inflation per year Source: Client X; XYZ analysis This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  60. 60. - 178 - The market outlook for identified new dredging projects is stable; Harbour construction is expected to increase; (almost) all revenues come from Sweden 0,3 0,4 0,3 8,7 3,5 4,3 4,2 3,2 17,7 5,5 3,1 0 5 10 15 20 25 2004 2005 2006 2007 Revenues (€ mln)* €mln Dredging Local Harbour construction Dredging Intermediate * Based on identified projects of management Sweden including only projects > € 250k 11,0 21,7 9,8 6,5 0,6 0,4 1,1 0 5 10 15 20 25 2004 2005 2006 2007 €mln Sweden Norway Denmark Average expected acquiring chance is around 35% (included in revenues shown) Revenues (€ mln)* This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  61. 61. - 181 - Harbour construction is expected to increase mainly due to the development of Swedish Harbours for Baltic trade Dredging DemandDredging Demand Capital DredgingCapital Dredging Maintenance Dredging Maintenance Dredging Physical ConditionsPhysical Conditions PrivatisationPrivatisation Economic GrowthEconomic Growth Major InitiativesMajor Initiatives Harbour construction Impact on PMCs Denmark and Norway Government Budgets Government Budgets Long term drivers of demand Harbour Construction Impact on PMCs Sweden This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  62. 62. - 184 - Agenda 1. Introduction 2. Current Situation 3. Market and Competitors 4. Internal Analysis4.4. This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  63. 63. - 187 - Back-up 1. Competitor profiles1.1. This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  64. 64. - 190 - Rhode Nielsen is the main competitor in Denmark for dredging projects; Per Aarsleff for Harbour in Sweden P MadsenP Madsen E HöjE Höj Per AarsleffPer Aarsleff Capital/maintenance, dredging, Stone works, Piling works, Pipe&Cable works, Surveying Capital/maintenance, dredging, Stone works, Piling works, Pipe&Cable works, Surveying •Dredging •Piling •Harbour construction •Dredging •Piling •Harbour construction •Infrastructure projects (incl. marine construction) • Foundation works •Pipe rehabilition •Infrastructure projects (incl. marine construction) • Foundation works •Pipe rehabilition Around 6 vessels with crane; several barges Around 6 vessels with crane; several barges 1 bucketdredger, two barges, 4 other dreding vessels 1 bucketdredger, two barges, 4 other dreding vessels •All construction equipment •For marine construction: 11 major floating units including two large Jack-up platforms •All construction equipment •For marine construction: 11 major floating units including two large Jack-up platforms •Small competitor in Denmark•Small competitor in Denmark •Strong competitor using all capabilities of the construction company. •Strong competitor using all capabilities of the construction company. •Head office Denmark •74 employees •focus Northern Europe •Head office Denmark •74 employees •focus Northern Europe •Head office Denmark •30 employees •Head office Denmark •30 employees • Head office in Denmark •2150 employees •general infrastructure contractor • Head office in Denmark •2150 employees •general infrastructure contractor •Total revenue € 8 million •result 2002 € 0,1 million •Total revenue € 8 million •result 2002 € 0,1 million ProductsProducts EquipmentEquipment Competitive positionCompetitive position BackgroundBackground FinancialsFinancials •Small competitor in Denmark•Small competitor in Denmark •result 2002 € 0,3 million•result 2002 € 0,3 million This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  65. 65. - 193 - Agenda 1. Introduction 2. Current Situation 3. Market and Competitors 4. Internal Analysis 1.1. This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  66. 66. - 196 - Three PMC’s (Product/Market/Combinations) have been defined for rgn X Peninsula Definitions of Product Market combinations CentralCentral LocalLocal IntermediateIntermediateDredgingDredging 33 11 22 Small dredging works, local competitors, small equipment Reasonable sized dredging works, local and foreign competitors, mid sized equipment Large dredging works, international competitors, central Client X fleetThis document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  67. 67. - 199 - Revenues have dropped significantly in Portugal and are fluctuating in Spain 0 2 4 6 8 10 12 14 16 18 1999 2000 2001 2002 2003 Dredging Local Portugal Dredging Intermediate Spain Dredging Central Spain Dredging Intermediate Portugal Dredging Local Spain €m Revenues Company X by PMC Source: Client X Administraton; XYZ analysis Dredging Local Portugal Dredging Central Spain Revenue growth (1999=index) 0% 50% 100% 150% 1999 2000 2001 2002 2003 Dredging Intermediate Portugal Dredging Intermediate Spain (index=2001) This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  68. 68. - 202 - Most plants are over 15 years and already largely depreciated; except Gema and Bellatrix which have still a book value above € 1 million = € 2 million is purchase value Size versus age of the equipment Purchasevalue(€‘000) Age (2003) 0 1000 2000 3000 4000 0 6 13 19 25 G Ea B T Es Aa b multicats tugboats * Internal sales in 2000; Gema is older =Main Plants =Supporting equipment This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  69. 69. - 205 - Intermediate dredging has a EBIT margin of 13%, Local and Central dredging have EBIT margins of -5% and -12% PL& per product market combination (1999 - 2003 average) Dredging Total € million Local Inter- mediate Central Revenue 6.6 3.3 3.6 13.4 Hires 1.0 0.4 1.0 2.3 Other cost 4.7 2.2 2.9 9.7 Gross Margin 1.0 0.7 -0.3 1.5 Gross Margin (%) 15% 22% -7% 11% Project Cash flow 2.0 1.1 0.7 3.8 Cash flow margin 30% 34% 20% 28% Operational overhead 0 0 0 0 Plant Operations 0.3 0 -0.1 0.1 Workshop result 0.1 0 0 0.1 General Overheads 1.0 0.3 0.3 1.5 EBIT -0.3 0.4 -0.4 -0.4 EBIT Margin (%) -5% 13% -12% -3% This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  70. 70. - 208 - Company X’s financial performance over the years results in a -3% Ebit margin, - 6% ROCE and -1% CFROI Revenue Growth CF Margin Gross Margin Plant, worksh., oper. overh. result G&A EBIT margin ROCE CFROI* Local Dredging -20% 30% 15% -5% 15% -5% -15% -3% Intermediate Dredging 8% 34% 22% -1% 8% 13% 61% 9% Central Dredging -11% 20% -7% 3% 8% -12% -14% -10% Total -9% 28% 11% -2% 11% -3% -6% -1% Financial Ratio Analysis (1999 - 2003 Average) *Key assumptions: Fixed asset life: 20 year for dredging Fixed asset age: 18 year for dredging 25% average tax rate and 2,5% inflation per year Source: Client X; XYZ analysis This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
  71. 71. - 211 - Positive economic growth is expected in Spain and Portugal; in Spain the public sector construction projects are expected to drop in 2006 -1% 0% 1% 2% 3% 4% 5% 1999 2001 2003 2005 2007 An economic upturn is expected ... • International growth • International stability ... and positive growth is expected to continue in Spain • Past few years strong positive growth of construction market from major public sector construction projects • Growth is expected to continue until 2006. In 2006 EU structural funds will stop Iberian Real GDP growth Source: EIU Portugal Spain This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/business-model-design-report-685
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