Answer all questions and sub-questions asked in this assignment. You will need to use Excel for calculations and more complex formulas, but make sure to show and explain your work when transferring results to your main Word document with your answers.
Include both your Excel worksheet(s) created and the Word document with answers when submitting your assignment.
- Show ALL your work and/or intermediate calculations where appropriate, as NO marks will be given for answers without justification i.e. provide enough detail that the reader knows what went into deriving the answer.
- Questions requiring written explanations must be done so thoroughly using Corporate Finance terms and theory.
III. Selection of the company must be approved by the lecturer before working on the assignment.
Choose a non-financial company in any sector that publishes full IFRS accounts on its Web site. Write a credit memo on this company according to the following structure: UK base company
- Company’s background: 4-5 bullet points, no more than 150 words. What the company does; what industry it operates in; how long it’s been in existence; company’s size in terms of revenue, EBITDA, number of employees.
- Historical credit analysis (based on the last 3 years comprising company’s operating performance, liquidity / access to markets, cash flow and debt maturity / capital structure. There should be 3-4 bullet points under each sub-heading, and the total length of this section should be no more than 450 words (excluding charts).
Reflect historical trends and peer comparison if appropriate. For Operating performance: comment on the company’s revenue, EBITDA, cost structure. For Liquidity / Access to Markets: how much cash the company has, by what factor cash covers short-term debt, give recent examples of the company’s access to debt and capital markets. For Cash Flow: trends in operating cash flow and net cash flow; significant cash uses (e.g. capital expenditure, dividends). For Debt maturity / Capital Structure: create a debt maturity profile in Excel; comment on key debt ratios (Gross Debt / EBITDA, Net Debt / EBITDA, Total Debt / Total Capital).
3-4 key credit risks and mitigants to each: this section should be no more than 400 words.
Risk 1: Falling margins and tough competition in the mature and
saturated Polish telecom market (Probability: High, Impact: Moderate)
Pol-Tel operates in a highly competitive and saturated Polish market head to head with two other telecom giants: Tel-Pol and Tal-Tol. Pol-Tel may not be able to sustain its leading position in the long term.
- As of June 2014, Pol-Tel remained the largest mobile operator in Poland by subscriber base, although its lead over Tel-Pol was only 4%.
- In 2013, Pol-Tel revised its relationship with retail dealers, transferring from the fixed fees paid for SIM cards sold by dealers, to a revenue sharing model. Although this has led to a modest reduction in Pol-Tel’s subscriber base, its quality improved, which resulted in increase in minutes of usage and average revenue per user.
- Pol-Tel’s technology risk is moderate compared to some of its key competitors (Tal-Pol). The expansion of Pol-Tel’s 3G network was largely completed by the end of 2013.
- 3-year financial projections including clear assumptions: no more than 400 words excluding tables and charts.
Use ‘Empty projection model’ Excel file for your work.
- Summary – the overall assessment of the company’s creditworthiness: no more than 100 words.
The report must not exceed 1,500 words (excluding abstract, references, table and figures).