QUESTION 4
Answer the following questions related to valuation multiples.
Consider the following financial statements of UK listed Vodafone Group Plc for the FY2017 (in £ millions) (same as in Q1).
| Profit & Loss Statement | FY2017 |
| Revenue | 47631 |
| Cost of sales | -34576 |
| Gross profit | 13055 |
| Selling and distribution expenses | -4349 |
| Administrative expenses | -6080 |
| Other operating expenses/income | 1099 |
| Operating profit | 3725 |
| Other non-operating expenses/income | 473 |
| Financing costs | -1406 |
| Profit/(loss) before taxation | 2792 |
| Income tax expense | -4764 |
| (Loss)/profit for the financial year from continuing operations | -1972 |
| (Loss)/profit for the financial year from discontinued operations | -4107 |
| (Loss)/profit for the financial year | -6079 |
| Consolidated Balance Sheet | FY2017 | Consolidated Balance Sheet | FY2017 | |
| Non-current assets | Equity | |||
| Intangible assets | 46220 | Shareholders' funds | 72,200 | |
| Property, plant and equipment | 30,204 | Non-controlling interests | 1,519 | |
| Other non-current assets | 35523 | Total Equity | 73,719 | |
| Total Non-current assets | 1,11,947 | Non-current liabilities | ||
| Current assets | Long-term borrowings | 34,523 | ||
| Inventory | 576 | Other non-current liabilities | 4053 | |
| Trade and other receivables | 9,861 | Total Non-current liabilities | 38,576 | |
| Cash and cash equivalents | 8,835 | Current liabilities | ||
| Other current assets | 23465 | Short-term borrowings | 12,051 | |
| Total Current assets | 42,737 | Trade and other payables | 16,834 | |
| Other non-current liabilities | 13504 | |||
| Total Current liabilities | 42,389 |
| Additional data for computing multiples: | |
| Share price on 31 Mar‘17 | £2.081/share |
| No. of shares outstanding | 27,792m shares |
a. Calculate following ratios:
i. P/Book
ii. EV/EBITDA
iii. EV/Sales
iv. P/Sales per share
b. Why do we use multiples (P/E, EV/EBITDA etc.) while doing valuation of a business? Explain their significance.
All figures in million pounds except per share data
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