2. OverviewOverview
This presentation is based on a
fictional case study, which consider
the expansion of Medical Logistics
operations and organic growth in
the field of medical supplies and
services both local and in the Sub-
Saharan African region.
This expansion is based upon the
implementation of a new sales and
marketing strategy that consist of
investing in new market niches and
the improvement of the already
existing ones.
3. SituationalSituational AnalysisAnalysis
Medical Logistics is a limited liability company that operate in the Sub-
Saharan African region.
They are specialised in the selling of medical products as well as medical
health services, with their operations covering Ghana,Togo and Benin.
Their market value as per 2013 was estimated at 2300 Million USD.
They are aiming at reaching a 20% market share by 2018
Company overview as per 2013:
-100 Million USD as turnover
-150 Employees
-4% of market share
-8% average yearly growth in market value for the coming 5 years
-460 Million USD of market value in the rural areas and 1840 Million USD of
market value for the urban areas.
4. FinancialFinancial AssumptionsAssumptions
These assumptions are a bit
simplistic for the sake of making this
case study analysis a more straight
forward of an exercise.
Some other parameters should have
been taken into consideration in a
more detailed presentation, just to
mention few:
-Business risk rate
-Weighted Average Cost of Capital
-Competitors analysis
-Seasonality
-Market Penetration
-Etc
5. BenchmarkingBenchmarking RatiosRatios
Financial ratios varies widely from
one industry to another. A service
company’s operations are different
from a production and
manufacturing company and so it is
for a financial institution.
In this study we have considered the
average ratios of around 250
American companies in the medical
supplies and services sector to set
our benchmark comparison.
6. VisualiseVisualise ItIt
The aim of this study as we have
mentioned earlier, is to explain the
effect if the implementation of the
expansion project which will enable
the company to reach its primary
objective of acquiring 20% of market
share in 5 coming years from an actual
figure of 4% of market share as already
mentioned.
To achieve this set objective, resources
are needed: Financial, human,
logistical as well as technological.
7. FinancialFinancial Analysis (Revenue)Analysis (Revenue)
The first step is to project the right amount of revenue that enable the
company to reach a higher profit.
Revenue Projections
In USD Year 1 Year 2 Year 3 Year 4 Year 5
USD/GHC Rate estimate 3,7 3,9 4,1 4,3 4,5
Local Market
Number of Units 360.000 540.000 621.000 707.940 736.258
Unit Price 100 115 132 152 175
Total 36.000.000 62.100.000 82.127.250 107.668.825 128.771.914
Foreign Market
Number of Units 1.440.000 2.160.000 2.484.000 2.831.760 2.945.030
Unit Price 105 121 139 160 184
Total 151.200.000 260.820.000 344.934.450 452.209.064 540.842.040
Net Revenue 187.200.000 322.920.000 427.061.700 559.877.889 669.613.955
8. FinancialFinancial Analysis (Personnel)Analysis (Personnel)
The second step is to project the right number of personnel that enable the
company to reach its financial targets
Personnel Plan Year 1 Year 2 Year 3 Year 4 Year 5
In USD
Total Number of employee 198 251 303 353 403
Total Salary & Wages 3.636.000 5.574.000 7.670.520 10.034.772 12.795.169
Total Benefits 872.640 1.337.760 1.840.925 2.408.345 3.070.841
Total Compensation 5.066.640 7.451.904 10.105.603 13.096.692 16.584.941
% of Revenue 2,7% 2,3% 2,4% 2,3% 2,5%
9. FinancialFinancial Analysis (Logistics and ICT)Analysis (Logistics and ICT)
Property and Equipment
In USD
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Actual
Net Revenues Assets 187.200.000 322.920.000 427.061.700 559.877.889 669.613.955
Capital Expenditures
Furniture 500.000 100.000 100.000 100.000 200.000 500.000
Equipments 1.500.000 250.000 250.000 250.000 250.000 400.000
Vehicles 2.500.000 500.000 1.000.000 2.000.000 5.000.000 8.000.000
Total Capital Expenditures 4.500.000 850.000 1.350.000 2.350.000 5.450.000 8.900.000
% of Revenue 0,5% 0,4% 0,6% 1,0% 1,3%
The third step is to project the needs in terms of equipment, warehousing
facilities, logistics and information technologies.
10. By analysing the financial standing of the company, we can easily draw the conclusion that the
expansion plan can be generated internally.
The estimated needs in resources are:
-- New recruits 1,250,000 USD
-- In house training 50,000 USD
-- New Equipments and warehousing spaces 250,000USD
-- Furniture 100,000USD
-- New Fleet 500,000USD
-- Marketing plan execution 2,600,000USD
--Working capital to invest in inventories level 20,000,000USD
-- Miscellaneous 250,000USD
Total Needed 25,000,000USD
he project is going to be financed through a loan of 20M USD and Internal Cash flow 5M USD,
Although the company can afford to finance the project entirely from internal sources, its wiser
to loose 2,43% of net profit margin (4548000 USD), than to loose the 25M USD in case the
implementation did not yield the expected effect. In this the company would have shared its
financial risk 80/20 to a financial institution.
11.
12. Income Statement
In USD
Year 1 Year 2 Year 3 Year 4 Year 5
NET REVENUES 187.200.000 322.920.000 427.061.700 559.877.889 669.613.955
COST OF REVENUE 94.787.200 162.157.584 214.729.947 281.522.595 337.763.953
% of Revenues 50,6% 50,2% 50,3% 50,3% 50,4%
GROSS PROFIT 92.412.800 160.762.416 212.331.753 278.355.294 331.850.002
% of Revenues 49,4% 49,8% 49,7% 49,7% 49,6%
OPERATING EXPENSES
Sales & Marketing 163.680 327.360 414.110 455.521 501.074
General and Administration 21.525.760 27.020.293 34.059.670 42.619.804 54.807.826
Total Operating Expenses 21.689.440 27.347.653 34.473.781 43.075.326 55.308.900
% of Revenues 12% 8% 8% 8% 8%
EARNINGS FROM OPERATIONS 70.723.360 133.414.763 177.857.972 235.279.969 276.541.102
EARNINGS BEFORE INTEREST & TAXES 70.723.360 133.414.763 177.857.972 235.279.969 276.541.102
INTEREST INCOME / (EXPENSE) -6.000.000 0 0 0 0
NET EARNINGS BEFORE TAXES 64.723.360 133.414.763 177.857.972 235.279.969 276.541.102
TAXES -16.180.840 -33.353.691 -44.464.493 -58.819.992 -69.135.276
NET EARNINGS 48.542.520 100.061.072 133.393.479 176.459.976 207.405.827
% of Revenues 25,9% 31,0% 31,2% 31,5% 31,0%
13. Balance Sheet
In USD
Begin Year 1 Year 2 Year 3 Year 4 Year 5
ASSETS
CURRENT ASSETS
Cash 10.000.000 59.783.320 124.955.178 142.416.407 186.081.837 213.288.163
Accounts Receivable 12.500.000 28.080.000 40.478.022 53.446.772 70.068.718 83.802.186
Inventories 13.000.000 29.203.200 42.091.976 55.584.643 72.871.466 87.154.274
Other Current Assets 0 0 0 0 0 0
Total Current Assets 35.500.000 117.066.520 207.525.177 251.447.822 329.022.022 384.244.623
PROPERTY & EQUIPMENT 4.500.000 3.940.000 3.486.667 3.306.667 5.490.000 8.660.000
TOTAL ASSETS 40.000.000 121.006.520 211.011.843 254.754.488 334.512.022 392.904.623
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable & Accrued Expenses 10.000.000 22.464.000 32.408.251 42.757.417 56.054.974 67.041.749
Current portion of long term debt 0 0 0 0 0 0
Total Current Liabilities 10.000.000 22.464.000 32.408.251 42.757.417 56.054.974 67.041.749
LONG TERM DEBT (less current portion) 0 20.000.000 0 0 0 0
STOCKHOLDERS' EQUITY
CommonStock 30.000.000 30.000.000 30.000.000 30.000.000 30.000.000 30.000.000
Retained Earnings 0 48.542.520 148.603.592 181.997.071 248.457.047 295.862.874
Total Equity 30.000.000 78.542.520 178.603.592 211.997.071 278.457.047 325.862.874
TOTAL LIABILITIES & EQUITY 40.000.000 121.006.520 211.011.843 254.754.488 334.512.022 392.904.623
14. Break-Even Analysis
In USD
Year 1 Year 2 Year 3 Year 4 Year 5
Revenue 187.200.000 322.920.000 427.061.700 559.877.889 669.613.955
Unit Price
Variable 93.819.200 161.147.440 213.605.789 280.269.020 336.315.021
Fixed 968.000 1.010.144 1.124.158 1.253.574 1.448.932
Total 94.787.200 162.157.584 214.729.947 281.522.595 337.763.953
Operating Expenses
Variable 20.000.000 25.000.000 31.250.000 39.062.500 48.828.125
Fixed 1.689.440 2.347.653 3.223.781 4.012.826 6.480.775
Total 21.689.440 27.347.653 34.473.781 43.075.326 55.308.900
Total Costs & Expenses
Variable 113.819.200 186.147.440 244.855.789 319.331.520 385.143.146
Fixed 2.657.440 3.357.797 4.347.939 5.266.400 7.929.706
Total 116.476.640 189.505.237 249.203.728 324.597.920 393.072.852
Variable Costs/Revenue Ratio 0,61 0,58 0,57 0,57 0,58
Break-Even Point Revenues 6.779.331 7.927.759 10.190.879 12.257.682 18.665.684
15. Cash Flow Statement
In USD
Year 1 Year 2 Year 3 Year 4 Year 5
OPERATING ACTIVITIES
Net Earnings 48.542.520 100.061.072 133.393.479 176.459.976 207.405.827
Depreciation 1.410.000 1.803.333 2.530.000 3.266.667 5.730.000
Working Capital Changes
(Increase)/Decrease Accounts Receivable -15.580.000 -12.398.022 -12.968.750 -16.621.946 -13.733.469
(Increase)/Decrease Inventories -16.203.200 -12.888.776 -13.492.666 -17.286.824 -14.282.807
Increase/(Decrease) Accts Pay & Accrued Expenses 12.464.000 9.944.251 10.349.166 13.297.557 10.986.775
Net Cash Provided/(Used) by Operating Activities 30.633.320 86.521.858 119.811.229 159.115.430 196.106.326
INVESTING ACTIVITIES
Property & Equipment -850.000 -1.350.000 -2.350.000 -5.450.000 -8.900.000
Other
Net Cash Used in Investing Activities -850.000 -1.350.000 -2.350.000 -5.450.000 -8.900.000
FINANCING ACTIVITIES
Increase/(Decrease) Long Term Debt 20.000.000 -20.000.000 0 0 0
Dividends Declared 0 0 -100.000.000 -110.000.000 -160.000.000
Net Cash Provided / (Used) by Financing 20.000.000 -20.000.000 -100.000.000 -110.000.000 -160.000.000
INCREASE/(DECREASE) IN CASH 49.783.320 65.171.858 17.461.229 43.665.430 27.206.326
CASH AT BEGINNING OF YEAR 10.000.000 59.783.320 124.955.178 142.416.407 186.081.837
CASH AT END OF YEAR 59.783.320 124.955.178 142.416.407 186.081.837 213.288.163
16. Year 1 Year 2 Year 3 Year 4 Year 5
Summary Financials in USD
Revenue 187.200.000 322.920.000 427.061.700 559.877.889 669.613.955
Gross Profit 92.412.800 160.762.416 212.331.753 278.355.294 331.850.002
EBIT 70.723.360 133.414.763 177.857.972 235.279.969 276.541.102
EBITDA 72.133.360 135.218.096 180.387.972 238.546.635 282.271.102
Net Earnings 48.542.520 100.061.072 133.393.479 176.459.976 207.405.827
Net Cash from Operating Activities 30.633.320 86.521.858 119.811.229 159.115.430 196.106.326
Capital Expenditures 850.000 1.350.000 2.350.000 5.450.000 8.900.000
Interest Income/(Expense) -6.000.000 0 0 0 0
Dividends 0 0 100.000.000 110.000.000 160.000.000
Cash 59.783.320 124.955.178 142.416.407 186.081.837 213.288.163
Total Equity 78.542.520 178.603.592 211.997.071 278.457.047 325.862.874
Total Debt 20.000.000 0 0 0 0
Growth
Revenue Growth Rate - CAGR: 73% 32% 31% 20%
Net Earnings Growth Rate - CAGR: 106,1% 33,3% 32,3% 17,5%
Ratios
Current Ratio 5,2 6,4 5,9 5,9 5,7
Debt to Capital (LT Debt + Equity) 20% 0% 0% 0% 0%
Profitability
Gross Profit % 49,4% 49,8% 49,7% 49,7% 49,6%
Operating Expenses % 11,6% 8,5% 8,1% 7,7% 8,3%
Net Earnings % 25,9% 31,0% 31,2% 31,5% 31,0%
Returns
Return on Assets 40,1% 47,4% 52,4% 52,8% 52,8%
Return on Equity 61,8% 56,0% 62,9% 63,4% 63,6%Return on Capital (LT Debt +
Equity) 49,3% 56,0% 62,9% 63,4% 63,6%
