WEBVTT 1 00:00:00.875 --> 00:00:03.595 Welcome to this Vidcast, which is devoted to Tots. 2 00:00:04.185 --> 00:00:07.795 Tots is a very well-known brand name, Italian brand name. 3 00:00:07.795 --> 00:00:12.195 In the shoe industry, the company is experiencing some risks 4 00:00:12.535 --> 00:00:15.035 and difficulties and wants to reinforce 5 00:00:15.055 --> 00:00:16.875 and restructure its capital, so it's going 6 00:00:16.875 --> 00:00:20.315 to welcome the R no family indirectly 7 00:00:20.345 --> 00:00:23.115 through LVMH Mu with ton 8 00:00:23.335 --> 00:00:27.075 and directly through a private equity fund, El Catton, 9 00:00:27.455 --> 00:00:30.675 but for the are no family is it the right moment 10 00:00:31.015 --> 00:00:32.635 to invest in Todds? 11 00:00:34.105 --> 00:00:38.375 Todds is really a family story. Philippo de Valle. 12 00:00:38.375 --> 00:00:42.095 Initially a shoemaker created a company in 1920. 13 00:00:42.845 --> 00:00:44.215 Then he run the business 14 00:00:44.955 --> 00:00:47.775 and he developed it throughout the decades. 15 00:00:48.555 --> 00:00:52.935 In the 1950s, there is a disruption in the business, 16 00:00:52.935 --> 00:00:56.295 which is invention of the stiletto, the Stiletto Hill. 17 00:00:57.325 --> 00:01:00.375 It's going to really change the shoe industry. 18 00:01:00.675 --> 00:01:02.535 Now, seventies, eighties, 19 00:01:02.535 --> 00:01:04.615 and nineties are a period 20 00:01:04.635 --> 00:01:07.055 of international expansion for Tots. 21 00:01:07.315 --> 00:01:10.935 In 1978, the brand name Tots is created. 22 00:01:11.405 --> 00:01:13.335 It's going to be followed by Faye 23 00:01:13.395 --> 00:01:17.855 and Hogan respectively in 1986 and 88. 24 00:01:18.835 --> 00:01:22.815 The company is very well known for its moccasin with spikes, 25 00:01:22.815 --> 00:01:23.895 with peacocks 26 00:01:24.395 --> 00:01:28.535 and it's not exactly luxury, high-end luxury of any kind 27 00:01:28.535 --> 00:01:31.255 of luxury, but it's casual chic 28 00:01:31.995 --> 00:01:35.335 and a number of very well known people in the royalties 29 00:01:35.475 --> 00:01:37.255 or anywhere else are going to wear. 30 00:01:37.575 --> 00:01:42.455 Thoughts. Lady Diana Princess, car of Monaco, king, 31 00:01:42.725 --> 00:01:44.335 Juan, Carlos, Johnny. 32 00:01:44.855 --> 00:01:46.415 Annually in the business 33 00:01:46.515 --> 00:01:49.575 and a number of Hollywood people, they are going to 34 00:01:50.495 --> 00:01:53.375 transform this brand into something which is widely known. 35 00:01:54.235 --> 00:01:58.615 The company is also going to use the help of very recognized 36 00:01:58.795 --> 00:02:03.335 and well-known designers such as Carl Lagerfeld for Hogan. 37 00:02:04.665 --> 00:02:07.125 In order to finance its expansion 38 00:02:07.145 --> 00:02:08.685 and its development, the company is going 39 00:02:08.685 --> 00:02:12.725 to be listed on the Milano stock exchange in 2000. 40 00:02:13.345 --> 00:02:17.685 At that time, the revenues are exceeding 220 million 41 00:02:18.015 --> 00:02:21.605 euros and the company is generating its revenues throughout 42 00:02:21.655 --> 00:02:23.365 68 points of sales. 43 00:02:24.085 --> 00:02:28.805 Thoughts at that time represents almost 60% of the revenues 44 00:02:29.505 --> 00:02:32.845 and even though the company decided to go abroad, 45 00:02:33.215 --> 00:02:36.045 Italy still represents more than half of the revenues. 46 00:02:36.665 --> 00:02:39.485 The EBITDA margin is absolutely significant 47 00:02:39.555 --> 00:02:42.645 with almost 26% of revenues, 48 00:02:42.735 --> 00:02:44.805 57 million euros. 49 00:02:45.425 --> 00:02:49.165 The company is going to issue shares after the IPO. 50 00:02:49.165 --> 00:02:50.885 There are 30 million shares 51 00:02:51.345 --> 00:02:54.725 and these shares are offered at 40 euros per share, 52 00:02:54.725 --> 00:02:57.525 which basically means the market value of equity 53 00:02:57.625 --> 00:03:00.325 of 1.2 billion euros 54 00:03:01.075 --> 00:03:03.645 that de Valley family retains. 55 00:03:03.665 --> 00:03:06.845 The control weighs about 73% 56 00:03:06.865 --> 00:03:09.005 of the shares post IPO. 57 00:03:10.585 --> 00:03:12.445 As far as the stock price is concerned, 58 00:03:12.445 --> 00:03:14.045 this tuition is not very glorious. 59 00:03:14.045 --> 00:03:15.925 Today in 2024, 60 00:03:16.345 --> 00:03:19.485 the stock prices is 34 euros per share. 61 00:03:19.585 --> 00:03:23.245 Before the offer made by the Arnold family multiplied 62 00:03:23.245 --> 00:03:24.805 by a number of shares outstanding, 63 00:03:24.805 --> 00:03:26.965 which is higher than when the company was listed. 64 00:03:27.625 --> 00:03:32.245 The market capitalization is still 1.2 billion euros, 65 00:03:32.705 --> 00:03:34.205 but with a lower stock price. 66 00:03:34.945 --> 00:03:38.005 In the meantime, the revenues were multiplied by five. 67 00:03:38.695 --> 00:03:42.245 Total sales today is more than 1.1 billion euros, 68 00:03:42.865 --> 00:03:46.125 but if the revenues were multiplied by five, the number 69 00:03:46.125 --> 00:03:48.805 of points of sales was multiplied by more than five 70 00:03:48.875 --> 00:03:51.085 with 444 points of sales. 71 00:03:51.785 --> 00:03:54.845 Now what does it mean? It means that the revenues per point 72 00:03:54.845 --> 00:03:59.365 of sale is down from 3.6 million to 2.5 million 73 00:04:00.015 --> 00:04:01.165 euros per point of sales, 74 00:04:01.465 --> 00:04:03.565 and in the meantime there was some inflation. 75 00:04:04.395 --> 00:04:05.885 What about the EBITDA margin? 76 00:04:06.395 --> 00:04:08.325 It's lower than when the company was listed. 77 00:04:08.585 --> 00:04:10.285 It was 25 point something. 78 00:04:10.295 --> 00:04:13.845 Today it's 22 point something percent of revenues, 79 00:04:14.425 --> 00:04:16.605 so the EBITDA is still quite high, 80 00:04:16.605 --> 00:04:17.805 especially when you consider 81 00:04:17.805 --> 00:04:21.005 that the capital expenditures represent four 82 00:04:21.185 --> 00:04:22.845 to 5% of revenues. 83 00:04:22.845 --> 00:04:24.605 The free cashflow is still quite high, 84 00:04:25.345 --> 00:04:28.925 but if the stock price is lower than when the capital was 85 00:04:28.925 --> 00:04:32.245 listed, when in the meantime the revenues were multiplied 86 00:04:32.265 --> 00:04:34.685 by five, it means that there is a matter of trust, 87 00:04:35.025 --> 00:04:38.485 of credibility, of ability to secure the future. 88 00:04:38.755 --> 00:04:41.565 This is what is in the minds of investors today. 89 00:04:43.305 --> 00:04:44.525 Now, you should not believe 90 00:04:44.525 --> 00:04:46.245 that the stock price was quite stable 91 00:04:46.345 --> 00:04:49.805 around 40 euros per share during the whole period. 92 00:04:50.585 --> 00:04:52.685 In fact, during a few years up to the beginning 93 00:04:52.685 --> 00:04:55.845 of the subprime crisis, the stock prices fluctuating 94 00:04:56.185 --> 00:04:58.445 around 40 euros per share. 95 00:04:59.265 --> 00:05:02.845 The subprime crisis is going to be good news for tots 96 00:05:02.845 --> 00:05:06.085 because the company's going to show a fantastic resilience 97 00:05:06.615 --> 00:05:10.325 while the economy is collapsing, the company's revenues 98 00:05:10.545 --> 00:05:12.085 and profits are up. 99 00:05:12.625 --> 00:05:14.245 The consequences that the stock price 100 00:05:14.245 --> 00:05:16.445 of the company is go is skyrocketing 101 00:05:16.865 --> 00:05:21.485 and is going to reach In 20 12, 20 13, a maximum 102 00:05:21.665 --> 00:05:23.965 of 140 euros 103 00:05:24.665 --> 00:05:28.365 and since then there was a dramatic drop in the stock price. 104 00:05:28.825 --> 00:05:32.165 The company is experiencing problems in its revenues, 105 00:05:32.385 --> 00:05:33.565 in its profitability 106 00:05:34.185 --> 00:05:36.925 and from 20 12 20 13 down 107 00:05:37.105 --> 00:05:41.045 to 20 17, 20 18, the stock price is going 108 00:05:41.045 --> 00:05:45.605 to go down from 140 to 40 fluctuating since then. 109 00:05:48.985 --> 00:05:51.405 Now that was the evolution of thoughts, 110 00:05:51.405 --> 00:05:53.005 stock price standing alone. 111 00:05:53.715 --> 00:05:56.765 What about benchmarking thoughts against a 112 00:05:56.905 --> 00:05:58.005 Milano stock exchange? 113 00:05:58.185 --> 00:06:00.485 The MIB 30 stock market index, 114 00:06:00.705 --> 00:06:03.805 if you look at the last five years, there are two periods, 115 00:06:04.385 --> 00:06:08.245 one period from five years ago to end of 2022, 116 00:06:09.155 --> 00:06:10.205 more or less thoughts 117 00:06:10.305 --> 00:06:12.845 and MIB are moving in the same direction. 118 00:06:12.915 --> 00:06:15.925 Sometimes there is a correlation, sometimes not, 119 00:06:16.505 --> 00:06:19.325 but if you look at what happened to Todd's stock price 120 00:06:19.845 --> 00:06:23.805 starting at the end of 2022 up to today, its stabilization. 121 00:06:24.585 --> 00:06:28.485 In the meantime, the stock market index was up 122 00:06:28.705 --> 00:06:33.285 by about 65%, so the G correlation is very big 123 00:06:33.665 --> 00:06:36.725 and it is not very favorable For tots. 124 00:06:37.805 --> 00:06:39.895 That was about the story of the company 125 00:06:40.595 --> 00:06:43.215 and its stock market performance. 126 00:06:43.665 --> 00:06:46.815 Let's now deep dive into the economics of this company. 127 00:06:47.555 --> 00:06:51.615 The company is selling three segments, shoes, leather goods 128 00:06:51.715 --> 00:06:52.735 and appel. 129 00:06:53.715 --> 00:06:55.575 The relative share of each 130 00:06:55.575 --> 00:06:58.695 and every segment is quite stable throughout the years. 131 00:06:59.155 --> 00:07:01.095 If you look at the last 10 years, 132 00:07:01.625 --> 00:07:06.055 shoes represent a bit less, a bit more, a bit less than 80%. 133 00:07:06.685 --> 00:07:09.055 Apparel is lower than 10 134 00:07:09.595 --> 00:07:12.095 and leather goods between 10 and 20. 135 00:07:12.585 --> 00:07:14.815 Throughout the years it's quite stable. 136 00:07:15.005 --> 00:07:18.695 What is not stable is the evolution of revenues. 137 00:07:19.955 --> 00:07:22.135 If you look at the evolution of revenues, 138 00:07:22.155 --> 00:07:24.935 it was about 1,000,000,010 years ago. 139 00:07:25.315 --> 00:07:27.655 It went up in 2015 140 00:07:27.875 --> 00:07:32.135 and then started to go down gradually year 141 00:07:32.185 --> 00:07:34.575 after year up to 2019. 142 00:07:34.635 --> 00:07:38.615 Of course in 2020 there's a major drop in the revenues 143 00:07:38.635 --> 00:07:42.895 by 30% because of the covid pandemic, a kind 144 00:07:42.895 --> 00:07:44.535 of recovery in 2021. 145 00:07:45.075 --> 00:07:48.775 Now the company is back to 1 billion in 2022, 146 00:07:49.145 --> 00:07:52.095 which is good news, but this is just a recovery. 147 00:07:52.635 --> 00:07:56.375 2023 is a very good year with an increase in the revenues 148 00:07:56.435 --> 00:08:00.455 by more than 10%, so the company is 149 00:08:00.975 --> 00:08:03.175 bouncing back at least in the revenues. 150 00:08:05.395 --> 00:08:08.995 Interestingly, the EB EBITDA is following the same path 151 00:08:10.005 --> 00:08:12.195 while second half of the 2010. 152 00:08:12.695 --> 00:08:14.635 The revenues are gradually down. 153 00:08:15.295 --> 00:08:19.155 The current ebitda, a percentage to revenue is also down. 154 00:08:19.655 --> 00:08:22.475 It was about 20% in 2014. 155 00:08:23.025 --> 00:08:27.195 It's down to about 13% in 2018. 156 00:08:27.905 --> 00:08:31.315 There's a major increase in 2019 157 00:08:31.615 --> 00:08:35.875 for very simple reason, which is IFRS 16. 158 00:08:36.535 --> 00:08:38.035 The rents which were paid 159 00:08:38.095 --> 00:08:40.515 by the company were no more considered 160 00:08:40.515 --> 00:08:44.035 as a cash operating expense in the calculation of the EBDA. 161 00:08:44.535 --> 00:08:47.395 But now these rents are capitalized in the balance sheet. 162 00:08:47.395 --> 00:08:48.715 The right of use assets 163 00:08:49.015 --> 00:08:52.235 and the rents are transferred from cash operating expenses 164 00:08:52.695 --> 00:08:54.035 to amortization 165 00:08:54.655 --> 00:08:57.405 and then as a consequence the EBDA is going to be up, 166 00:08:57.465 --> 00:08:59.285 but it's completely an illusion. 167 00:09:00.185 --> 00:09:02.885 2020 it's down to 5% 168 00:09:03.305 --> 00:09:06.965 and then there is a kind of recovery of the EBDA, 169 00:09:06.965 --> 00:09:11.125 which is today 2220 3%, but take care 170 00:09:11.125 --> 00:09:15.325 because now there is no rent in the EBDA calculation. 171 00:09:16.995 --> 00:09:18.725 This is why it's quite interesting 172 00:09:18.725 --> 00:09:22.485 to look at the operating expenses item by item 173 00:09:23.475 --> 00:09:25.005 cost of raw materials. 174 00:09:25.505 --> 00:09:27.605 10 years ago it was about 30% 175 00:09:27.985 --> 00:09:30.925 and today it's a bit less than 25%. 176 00:09:31.465 --> 00:09:34.285 So the cost of raw materials as a percentage 177 00:09:34.285 --> 00:09:36.085 to revenues is down. 178 00:09:36.825 --> 00:09:39.965 Is it due to the fact that raw materials are less expensive 179 00:09:40.465 --> 00:09:44.245 or to the fact that they put less quality raw materials in 180 00:09:44.245 --> 00:09:47.045 the shoes or to the fact that they increase the revenues 181 00:09:47.045 --> 00:09:50.645 and the selling prices more than the cost of raw materials? 182 00:09:51.395 --> 00:09:52.445 It's an open question, 183 00:09:52.465 --> 00:09:55.245 but what is interesting is if you look at the external 184 00:09:55.645 --> 00:09:58.445 expenses, what they name cost of services, 185 00:09:59.195 --> 00:10:03.325 it's up from a little bit less to 25 to almost 30%. 186 00:10:03.385 --> 00:10:05.605 So what was gained in the cost 187 00:10:05.605 --> 00:10:08.765 of raw materials is lost in the cost of services. 188 00:10:09.315 --> 00:10:12.125 What is very interesting to observe is the evolution 189 00:10:12.125 --> 00:10:13.805 of staff personal cost. 190 00:10:14.645 --> 00:10:18.005 Personal cost was about 16% 10 years ago 191 00:10:18.305 --> 00:10:21.445 and then it went up to 30% in 2020. 192 00:10:22.105 --> 00:10:25.805 Of course it's exaggerated because uh, revenues are down, 193 00:10:25.905 --> 00:10:30.885 but the year before it was 23%, then it went down to 23 194 00:10:30.885 --> 00:10:32.805 and today it's about 22 to 23. 195 00:10:32.825 --> 00:10:36.605 So there is a major increase in the personal costs in the 196 00:10:36.605 --> 00:10:37.925 labor related expenses. 197 00:10:38.825 --> 00:10:40.805 Now what about the occupancy costs? 198 00:10:40.825 --> 00:10:44.645 The occupancy costs are down in 2019 199 00:10:44.795 --> 00:10:46.805 because of IFRS. 200 00:10:47.025 --> 00:10:48.925 Now, if you confront depreciation 201 00:10:48.945 --> 00:10:50.805 and amortization throughout the years 202 00:10:51.065 --> 00:10:52.845 and occupancy costs, you remember 203 00:10:53.235 --> 00:10:55.245 that one is replaced by the other. 204 00:10:55.705 --> 00:10:58.125 At the end of the day, there is no change. 205 00:11:00.385 --> 00:11:03.605 We have looked at the evolution of the EBD as a percentage 206 00:11:03.605 --> 00:11:08.045 to revenues mentioning that there is a problem of trade off 207 00:11:08.045 --> 00:11:10.125 between rents and depreciation. 208 00:11:10.865 --> 00:11:13.245 Now this trade off does not show in the calculation 209 00:11:13.245 --> 00:11:16.685 of the ebit either it's rent or depreciation, 210 00:11:16.905 --> 00:11:18.765 but it is an operating expense. 211 00:11:19.505 --> 00:11:23.365 Now if you look at the evolution of EBIT out of revenues, 212 00:11:23.365 --> 00:11:25.485 the return on sales, it's down 213 00:11:26.105 --> 00:11:28.205 and it's down from 2014 214 00:11:28.305 --> 00:11:32.165 to 20 18, 20 19 down from 15 215 00:11:32.545 --> 00:11:34.005 to about 10%. 216 00:11:34.825 --> 00:11:37.925 Of course there will be a major drop in 2020 again 217 00:11:37.925 --> 00:11:41.485 because of the pandemic and then the return on sales is up, 218 00:11:41.545 --> 00:11:45.845 but today it's about 8%, so it's roughly the same figure 219 00:11:46.025 --> 00:11:47.925 as in 2018, 220 00:11:48.225 --> 00:11:51.405 but much less than 2014. 221 00:11:52.605 --> 00:11:54.325 Interestingly, the current EBIT 222 00:11:54.545 --> 00:11:56.805 and the EBIT are quite the same, which means 223 00:11:56.805 --> 00:11:59.245 that in this company there's not kind 224 00:11:59.245 --> 00:12:02.405 of exceptional items which are taken into account. 225 00:12:02.425 --> 00:12:04.365 The calculation of the return on sales 226 00:12:06.405 --> 00:12:08.195 after having described the evolution 227 00:12:08.195 --> 00:12:10.795 of the commercial profitability is a return on sales, 228 00:12:11.545 --> 00:12:14.115 nice time to turn to the assets turnovers, 229 00:12:14.115 --> 00:12:15.235 the assets productivity. 230 00:12:15.865 --> 00:12:17.635 Then we'll be able to combine one 231 00:12:17.775 --> 00:12:20.155 and the other, multiply one by the other. 232 00:12:20.255 --> 00:12:23.675 We will get the return capital employed, which confronted 233 00:12:23.675 --> 00:12:26.795 with the work tells us if the company's performing or not. 234 00:12:27.775 --> 00:12:29.635 As far as assets turnover, let's start 235 00:12:29.635 --> 00:12:33.315 with the current assets minus current liability is a working 236 00:12:33.315 --> 00:12:34.555 capital requirement. 237 00:12:35.335 --> 00:12:38.355 The cash conversion cycle is very interesting 238 00:12:38.355 --> 00:12:39.635 to observe throughout the years. 239 00:12:40.255 --> 00:12:41.675 If you look at the last 10 years, 240 00:12:41.715 --> 00:12:43.795 accounts receivable is quite constant. 241 00:12:44.225 --> 00:12:47.595 It's a little bit more than 30 days of revenue, 30 days 242 00:12:47.595 --> 00:12:51.795 of sales, which is quite low for a very good reason. 243 00:12:52.215 --> 00:12:55.155 You generate direct sales direct to customers. 244 00:12:55.175 --> 00:12:57.995 So customers are paying cash in the points of sales. 245 00:12:58.835 --> 00:13:02.275 Accounts payable is about 60 days, so you understand 246 00:13:02.275 --> 00:13:04.395 that receivables being less than payable. 247 00:13:04.455 --> 00:13:07.515 The difference between these two is contributing 248 00:13:07.635 --> 00:13:09.515 to the financing of the inventory level, 249 00:13:09.575 --> 00:13:11.555 but the inventories are very high. 250 00:13:12.225 --> 00:13:15.115 More than 130 dayss of revenues 251 00:13:15.455 --> 00:13:17.275 and inventory is in the balance sheet. 252 00:13:17.585 --> 00:13:19.395 It's not a matter of revenue, it's a matter 253 00:13:19.395 --> 00:13:20.475 of production cost. 254 00:13:20.475 --> 00:13:22.995 So you understand that the company has a huge level 255 00:13:22.995 --> 00:13:26.395 of inventories, which is quite normal in the business, 256 00:13:26.395 --> 00:13:28.915 which is maybe not exactly luxury, 257 00:13:29.215 --> 00:13:32.035 but close to that the casual chic. 258 00:13:32.495 --> 00:13:36.475 So at the end of the day, the cash conversion cycle is up. 259 00:13:36.475 --> 00:13:41.115 Throughout the years it was about 100 days in 2014 260 00:13:41.465 --> 00:13:43.715 it's now 120 days. 261 00:13:43.895 --> 00:13:47.315 So there is a deterioration of the cash conversion cycle, 262 00:13:47.605 --> 00:13:50.395 which has a negative impact on the asset's productivity. 263 00:13:51.705 --> 00:13:53.355 Once we have observed the evolution 264 00:13:53.355 --> 00:13:56.915 of the cash conversion cycle, which is not that positive, 265 00:13:57.285 --> 00:14:00.155 let's have a look at the non-current assets, productivity, 266 00:14:01.025 --> 00:14:03.955 non-current means tangibles and intangibles. 267 00:14:04.155 --> 00:14:06.475 Tangibles is about property, plant and equipment 268 00:14:07.095 --> 00:14:08.955 and there you have a kind of good news 269 00:14:09.505 --> 00:14:13.555 because the companies revenues divided by property plant 270 00:14:13.555 --> 00:14:17.875 and equipment is up from 4.5 in 2014 271 00:14:18.465 --> 00:14:22.075 gradually up to 2020 and significantly up 272 00:14:22.105 --> 00:14:25.875 because today one Euro invested in manufacturing 273 00:14:26.595 --> 00:14:29.835 generates almost eight euros of revenues. 274 00:14:30.295 --> 00:14:32.835 So this is quite good news about the industrial 275 00:14:33.055 --> 00:14:34.835 and manufacturing productivity. 276 00:14:35.695 --> 00:14:39.275 Now, if you divide the revenues by the intangible assets, 277 00:14:39.715 --> 00:14:43.435 goodwill brands consequence of acquisition, you understand 278 00:14:43.435 --> 00:14:45.835 that something happened in 2016 279 00:14:45.835 --> 00:14:47.755 because it dramatically went down. 280 00:14:47.855 --> 00:14:51.245 It is a consequence of an acquisition which I am going 281 00:14:51.245 --> 00:14:52.525 to explain a little bit later. 282 00:14:53.265 --> 00:14:54.765 Now, if you combine non Karen 283 00:14:54.865 --> 00:14:57.725 and Karen assets working capital requirement, 284 00:14:57.745 --> 00:14:59.205 you get the assets turnover. 285 00:15:00.065 --> 00:15:03.685 The assets turnover was 1.5 at the beginning of this period. 286 00:15:04.025 --> 00:15:07.885 It went down in 2016 as a consequence of the acquisition 287 00:15:08.465 --> 00:15:11.125 to one and then it stabilized 288 00:15:11.225 --> 00:15:14.965 and went down to 0.4, 0.5 289 00:15:15.065 --> 00:15:18.645 and to the 0.6, not because of the acquisition but 290 00:15:18.645 --> 00:15:22.085 because of the deterioration of the cash conversion cycle. 291 00:15:22.945 --> 00:15:27.365 If you calculate an asset turnover excluding the goodwill 292 00:15:27.365 --> 00:15:29.725 and brands, you get exactly to the same conclusion 293 00:15:30.035 --> 00:15:31.885 because if you exclude brands 294 00:15:31.905 --> 00:15:34.845 and goodwill, what happens in 2016? 295 00:15:34.845 --> 00:15:39.045 Nothing though the assets turnover excluding goodwill 296 00:15:39.045 --> 00:15:42.485 and brands is quite stable up to 2017 297 00:15:42.785 --> 00:15:46.725 and then is going to gradually deteriorate as a consequence 298 00:15:46.785 --> 00:15:49.965 of the cash conversion cycle, which is deteriorating. 299 00:15:50.335 --> 00:15:54.845 Again, as a conclusion, you observe a deterioration 300 00:15:54.905 --> 00:15:56.765 of the cash conversion cycle 301 00:15:57.625 --> 00:16:01.245 and also an increase in the intangible assets, goodwill 302 00:16:01.245 --> 00:16:06.085 and brands without any corresponding increase in the sales 303 00:16:06.385 --> 00:16:07.445 and in the revenues. 304 00:16:08.065 --> 00:16:11.365 Two bad news, the assets turnover is down. 305 00:16:12.845 --> 00:16:14.945 Now we can combine the return on sales 306 00:16:15.245 --> 00:16:18.305 and the assets turnover, multiplying one by the other. 307 00:16:18.365 --> 00:16:21.905 We get the DuPont formula, the return on capital employed, 308 00:16:22.565 --> 00:16:26.945 the return capital employed was more than 20% in 2014. 309 00:16:27.485 --> 00:16:31.105 You remember at that time the stock price was at its maximum 310 00:16:31.965 --> 00:16:35.105 and it started gradually getting down 311 00:16:35.335 --> 00:16:39.745 because both return on sales and assets turnover went down. 312 00:16:40.775 --> 00:16:44.625 Obviously in 2020 the return capital is dramatically 313 00:16:45.265 --> 00:16:47.745 negative because of the covid pandemic. 314 00:16:48.015 --> 00:16:52.505 Then it's going to go to breakeven in 21, getting up in 22, 315 00:16:52.575 --> 00:16:54.145 getting up in 23, 316 00:16:54.805 --> 00:16:59.665 but the return capital employed is today 6% before tax. 317 00:17:00.175 --> 00:17:02.545 Obviously it does not pay the whack, 318 00:17:02.805 --> 00:17:05.305 so the company is not performing on a 319 00:17:05.305 --> 00:17:06.465 financial point of view. 320 00:17:08.475 --> 00:17:11.485 Same of evolution of return on investment as opposed 321 00:17:11.485 --> 00:17:12.885 to return capital employed. 322 00:17:13.635 --> 00:17:15.365 What differentiates return on investment 323 00:17:15.505 --> 00:17:17.045 and return capital is 324 00:17:17.045 --> 00:17:19.245 that in the return on investment you exclude 325 00:17:19.485 --> 00:17:20.845 goodwill and brand. 326 00:17:21.305 --> 00:17:25.165 Though what happens of course in 2016 the rose is down 327 00:17:25.165 --> 00:17:26.365 because of the acquisition, 328 00:17:26.745 --> 00:17:29.805 but in the meantime the return investment is also down 329 00:17:30.075 --> 00:17:31.125 year after year. 330 00:17:31.955 --> 00:17:33.685 Then it's going to be strongly negative 331 00:17:33.905 --> 00:17:35.605 and it's going to be recovering. 332 00:17:36.305 --> 00:17:39.725 But at the end of the day in 2023, 333 00:17:40.225 --> 00:17:42.525 the return capital again is 6%. 334 00:17:42.665 --> 00:17:45.685 The return investment is hardly 8%. 335 00:17:46.425 --> 00:17:49.365 So even though you don't take into account the goodwill 336 00:17:49.585 --> 00:17:52.925 and the brand which is accounted starting in 2016, 337 00:17:53.185 --> 00:17:57.165 the company is not profitable even if you take only the 338 00:17:57.165 --> 00:17:59.525 manufacturing and the economic 339 00:17:59.625 --> 00:18:02.125 and the operating performance of the group. 340 00:18:03.905 --> 00:18:07.525 Now, what happened in 2016, the continuation 341 00:18:07.605 --> 00:18:08.685 of the family story, 342 00:18:09.305 --> 00:18:12.645 the company is acquiring a very well-known brand in the 343 00:18:12.645 --> 00:18:14.725 luxury business, not casualty, 344 00:18:14.945 --> 00:18:17.405 really luxury business in shoe industry. 345 00:18:18.005 --> 00:18:22.805 Raje, Vivier, they pay 415 million euros 346 00:18:22.865 --> 00:18:26.165 for the brand who is selling the brand? 347 00:18:26.405 --> 00:18:30.605 A company whose name is Guam consult in marketing, 348 00:18:31.175 --> 00:18:33.645 which is a company limited liability company. 349 00:18:34.555 --> 00:18:35.565 What is Guam? 350 00:18:35.795 --> 00:18:37.805 Guan is the de Val family 351 00:18:38.355 --> 00:18:41.965 because the owners of the company are Andrea, the brother 352 00:18:41.985 --> 00:18:46.365 and Diego de Valle, Diego de la Vals, CCEO of Todds 353 00:18:47.315 --> 00:18:50.005 Guun is going to reinvest half of the amount, 354 00:18:50.145 --> 00:18:54.845 207000000.5 euros in an equity issue, 355 00:18:54.845 --> 00:18:57.605 which is going to be made by Todds. 356 00:18:58.385 --> 00:19:02.165 If Todds had experience at observe an increase in its debt 357 00:19:02.185 --> 00:19:06.325 by 400 million, the balance sheet would have been deed. 358 00:19:06.625 --> 00:19:09.085 So as American equity is used for half of the price 359 00:19:09.385 --> 00:19:11.685 and the increased debt for the other half of the price, 360 00:19:12.185 --> 00:19:13.565 the capital increase is going 361 00:19:13.565 --> 00:19:17.605 to be made at the price which is 83.5 euros per share, 362 00:19:17.605 --> 00:19:20.485 which is twice as much as a current stock price. 363 00:19:21.385 --> 00:19:23.925 But you understand that it is a D Vale family 364 00:19:24.535 --> 00:19:27.285 which is buying from the D Vale family 365 00:19:28.145 --> 00:19:31.125 and that's a little bit a question in terms 366 00:19:31.125 --> 00:19:35.325 of financial governance and potential conflict of interest. 367 00:19:35.635 --> 00:19:38.045 It's really an issue in terms of credibility. 368 00:19:40.265 --> 00:19:42.675 It's always interesting to confirm the evolution 369 00:19:42.675 --> 00:19:44.315 of the return on capital employed 370 00:19:44.615 --> 00:19:46.355 and the evolution of the market to book, 371 00:19:46.355 --> 00:19:49.635 which is a stock market Credibility of the company market 372 00:19:49.695 --> 00:19:50.835 to book is calculated. 373 00:19:50.915 --> 00:19:53.635 Dividing the enterprise value by the capital employed 374 00:19:54.145 --> 00:19:55.275 capital employee is 375 00:19:55.275 --> 00:19:57.235 how much you invested in business operations 376 00:19:57.895 --> 00:20:00.915 and enterprise value is the value of that market. 377 00:20:00.915 --> 00:20:02.995 Capital plus net financial debt 378 00:20:03.935 --> 00:20:07.755 and you observe always a kind of parallel evolution 379 00:20:07.895 --> 00:20:09.915 of rose and market book. 380 00:20:10.185 --> 00:20:13.035 It's true for any company including thoughts. 381 00:20:13.655 --> 00:20:16.995 The market book of the company was almost four times 382 00:20:17.895 --> 00:20:18.995 in 2014. 383 00:20:19.775 --> 00:20:22.795 In 2020 is down to about one. 384 00:20:23.425 --> 00:20:26.315 It's going to go up a little bit in 2021 385 00:20:26.575 --> 00:20:29.195 and today, 20 23, 20 24 386 00:20:29.255 --> 00:20:31.555 before the offer made by the Arnold family. 387 00:20:31.745 --> 00:20:34.075 It's about one. So there's no good will 388 00:20:34.335 --> 00:20:35.875 and there is no bad will. 389 00:20:35.875 --> 00:20:37.795 The company is evaluated exactly 390 00:20:38.375 --> 00:20:39.715 at the level which is the amount 391 00:20:39.715 --> 00:20:41.835 of money invested in the business operations. 392 00:20:44.065 --> 00:20:47.285 Once you have observed that the dynamics of the rose 393 00:20:47.425 --> 00:20:49.565 and the market to book are quite the same. 394 00:20:50.075 --> 00:20:52.325 It's also interesting to calculate the market 395 00:20:52.425 --> 00:20:54.565 to book theoretical market to book. 396 00:20:55.045 --> 00:20:56.965 Assuming there is no growth in the free cash flow. 397 00:20:57.515 --> 00:21:00.565 It's simply the rose after tax divided by the wa 398 00:21:01.065 --> 00:21:03.605 and you confirm this theoretical market book 399 00:21:03.635 --> 00:21:06.125 with the actual market book to try 400 00:21:06.125 --> 00:21:08.045 to figure out if there is any potential 401 00:21:08.645 --> 00:21:11.245 increase in a rose in the stock price 402 00:21:11.905 --> 00:21:13.885 and this is exactly what we can observe. 403 00:21:14.545 --> 00:21:16.485 If you look at the rose after tax 404 00:21:16.985 --> 00:21:19.445 and you compare that with the wac, you understand 405 00:21:19.445 --> 00:21:21.205 that the rose after tax divided 406 00:21:21.265 --> 00:21:24.005 by the wack is less than one, which is 407 00:21:24.235 --> 00:21:26.525 what should be the market to book. 408 00:21:26.765 --> 00:21:29.685 Assuming there's no growth, you get a figure which is about 409 00:21:29.685 --> 00:21:31.285 0.5, 0.6. 410 00:21:31.465 --> 00:21:34.485 The actual market to book is more than one, which means 411 00:21:34.485 --> 00:21:36.605 that the market probably anticipates 412 00:21:36.605 --> 00:21:38.045 that there is a value in the brands 413 00:21:38.065 --> 00:21:40.325 and there's a potential for rebound. 414 00:21:42.225 --> 00:21:43.765 So the financial performance 415 00:21:43.765 --> 00:21:45.085 and the stock price evolution, 416 00:21:45.155 --> 00:21:47.005 it's not very much about good news, 417 00:21:47.665 --> 00:21:50.125 but there will be a threat which is going 418 00:21:50.125 --> 00:21:53.605 to show on stage a yearly family. 419 00:21:53.945 --> 00:21:55.165 So the holding of the family, 420 00:21:55.165 --> 00:21:59.125 which is named Xor in 2021 is investing 421 00:21:59.955 --> 00:22:03.245 541 million euros 422 00:22:03.585 --> 00:22:08.325 to buy 24% of the Christian Boutta brand. 423 00:22:09.325 --> 00:22:13.005 Boutta is a direct competitor to JE Vivier. 424 00:22:13.385 --> 00:22:16.045 So you understand that if the family is bringing its 425 00:22:16.435 --> 00:22:19.685 financial power to the evolution of the brand, 426 00:22:20.145 --> 00:22:23.165 it might be a big threat for your own company. 427 00:22:23.905 --> 00:22:26.045 So the company is not performing that well 428 00:22:26.345 --> 00:22:30.125 and there is a major competitor which is reinforcing its 429 00:22:30.125 --> 00:22:31.325 capital at that time. 430 00:22:33.135 --> 00:22:36.435 The consequence for Todd's family is absolutely simple. 431 00:22:36.695 --> 00:22:40.755 You simply have to restructure and strengthen your capital. 432 00:22:41.095 --> 00:22:43.755 You have to secure the shareholder portfolio 433 00:22:44.335 --> 00:22:47.675 and in addition to that, as it's a family business, you have 434 00:22:47.675 --> 00:22:50.795 to be able to properly manage the succession. 435 00:22:52.285 --> 00:22:55.515 There will be a first attempt in 2022, 436 00:22:55.655 --> 00:23:00.275 but it's going to be a failure the company wants to get out 437 00:23:00.375 --> 00:23:04.555 to to squeeze out the stock market to be able to restructure 438 00:23:05.215 --> 00:23:08.995 and the family's going to offer 40 euros per share. 439 00:23:09.215 --> 00:23:10.515 Forces squeeze out. 440 00:23:11.055 --> 00:23:13.715 But in order to be able to perform the squeeze out, you need 441 00:23:13.715 --> 00:23:18.235 to have in your hands more than 90% of the shares, 442 00:23:18.525 --> 00:23:20.195 which is not going to be the case. 443 00:23:20.575 --> 00:23:23.875 So that's why, and it was not successful. 444 00:23:23.945 --> 00:23:28.275 Unfortunately, there will be another risk which is going 445 00:23:28.275 --> 00:23:31.875 to pile up on this commercial and competitive risk. 446 00:23:31.985 --> 00:23:36.035 It's a financial risk, it the balance sheet of the company. 447 00:23:36.135 --> 00:23:37.555 10 years ago there was no debt, 448 00:23:37.555 --> 00:23:40.755 there was more cash than debt, the gearing was negative. 449 00:23:41.495 --> 00:23:45.685 20 17, 20 18, the gearing starts being positive. 450 00:23:46.425 --> 00:23:48.805 How do you evaluate the financial structure of a company? 451 00:23:48.935 --> 00:23:50.045 There are two ratios. 452 00:23:50.045 --> 00:23:52.205 One is a gearing debt divided by equity. 453 00:23:53.025 --> 00:23:55.765 Equity in the books are equity market value, 454 00:23:55.785 --> 00:23:58.605 but as a market to book is one, it's quite the same. 455 00:23:59.265 --> 00:24:03.845 And today the gearing is about 0.5, which is not dramatic, 456 00:24:04.385 --> 00:24:06.765 but there's another ratio which is named the leverage. 457 00:24:07.265 --> 00:24:10.005 How many years of EBITDA do you need to generate in order 458 00:24:10.005 --> 00:24:12.685 to be able to repair the net into raise bearing debt? 459 00:24:13.505 --> 00:24:16.405 It was quite high in 2020 of course, 460 00:24:16.405 --> 00:24:20.445 because the EBITDA was close to zero, it's down later on, 461 00:24:20.445 --> 00:24:24.405 but today it is still more and significantly more than two. 462 00:24:25.105 --> 00:24:28.725 So there is a kind of financial risk which is piling on top 463 00:24:28.725 --> 00:24:30.965 of the commercial and competitive risk. 464 00:24:32.345 --> 00:24:34.085 The second A to restructure 465 00:24:34.145 --> 00:24:37.045 and strengthen the capital is going to be successful 466 00:24:37.845 --> 00:24:42.045 LVMH MO at NC Louis Vuitton controlled 467 00:24:42.145 --> 00:24:45.725 by Bernardo and the AO family is going to enter 468 00:24:45.985 --> 00:24:50.445 and then strengthen its stake in the capital of tos. 469 00:24:52.195 --> 00:24:53.645 This is going to be achieved 470 00:24:53.645 --> 00:24:55.285 through a proposal which is going to be made 471 00:24:55.305 --> 00:24:56.965 by a private equity fund. 472 00:24:57.645 --> 00:25:01.365 L Catton El Catterton is at the end 473 00:25:01.365 --> 00:25:03.765 of the day the Arno family for L 474 00:25:04.385 --> 00:25:07.445 and Catterton, which is a private equity firm created 475 00:25:07.545 --> 00:25:08.765 in 1989. 476 00:25:09.875 --> 00:25:12.365 They merged in 2016, 477 00:25:12.905 --> 00:25:16.925 the Arno family bringing its own private equity vehicle, 478 00:25:17.095 --> 00:25:21.245 which is a the former financier. 479 00:25:21.945 --> 00:25:26.085 So in L Catton, Catton is the private equity initially 480 00:25:26.185 --> 00:25:27.965 and L is LVMH. 481 00:25:29.205 --> 00:25:31.765 Altogether they made very interesting investments 482 00:25:31.785 --> 00:25:33.125 as far as shoes are concerned. 483 00:25:33.125 --> 00:25:36.005 They were the owners of Birken stock, 484 00:25:36.385 --> 00:25:38.165 not exactly the same style. 485 00:25:38.835 --> 00:25:41.885 Birkenstock was listed seven months ago 486 00:25:42.425 --> 00:25:44.205 and from seven months ago to today, 487 00:25:44.205 --> 00:25:47.565 as the stock price went up from 40 to 60 year rate. 488 00:25:47.905 --> 00:25:50.365 So they are quite good at creating value 489 00:25:51.185 --> 00:25:54.125 and more than what happened to Dr. 490 00:25:54.635 --> 00:25:58.445 Martins. It's also shoes, but a kind of different style. 491 00:25:58.905 --> 00:26:02.645 And even though they received a fantastic support from Pete 492 00:26:02.885 --> 00:26:05.925 Townsend, uh, Dr. Martin Stoke price went down 493 00:26:05.985 --> 00:26:08.885 by 80% from its listing to today, 494 00:26:09.055 --> 00:26:10.885 which is not exactly performance. 495 00:26:11.945 --> 00:26:14.125 Now seriously what happens to Todds, 496 00:26:14.215 --> 00:26:16.685 there is a first acquisition of a stake made 497 00:26:16.685 --> 00:26:19.725 by LVMH in 2000 when the company's listed, 498 00:26:20.225 --> 00:26:22.645 but it's quite negligible, 3.2%. 499 00:26:23.355 --> 00:26:25.485 Then the company's going to reinforce 500 00:26:25.545 --> 00:26:28.605 to strengthen its equity stake in 2021 501 00:26:29.305 --> 00:26:32.245 and now LVMH holds 10%. 502 00:26:33.065 --> 00:26:37.645 The reinforcement was made at about 33 euros per share. 503 00:26:39.235 --> 00:26:41.455 The offer, which is made by Catton 504 00:26:41.995 --> 00:26:44.485 is 43 euros per share, 505 00:26:45.215 --> 00:26:47.725 which brings a market capitalization of the company, 506 00:26:47.865 --> 00:26:51.845 the value of equity to one point 54 billion euros. 507 00:26:52.585 --> 00:26:54.685 You add up net financial debt 508 00:26:54.705 --> 00:26:56.205 and you get the enterprise value. 509 00:26:56.545 --> 00:27:00.725 The enterprise value represents 7.8 years 510 00:27:00.985 --> 00:27:04.645 of ebitda, which is a very low multiple. 511 00:27:04.785 --> 00:27:07.525 If you consider that thoughts is for part 512 00:27:07.525 --> 00:27:09.685 of it in a casual shake business 513 00:27:10.065 --> 00:27:12.605 and for part of it in the luxury business 514 00:27:12.635 --> 00:27:14.765 with the JE Vier brand, 515 00:27:15.585 --> 00:27:20.125 now LVMH holds 10% will retain 10%. 516 00:27:20.785 --> 00:27:23.645 El Catton will take 36% 517 00:27:23.865 --> 00:27:25.365 and the De la Vale family 518 00:27:25.915 --> 00:27:29.605 will retain only 54% of the shares. 519 00:27:30.075 --> 00:27:33.445 It's more than 50, but it's less than two thirds. 520 00:27:34.155 --> 00:27:37.845 When it's completed, which is very likely to happen, 521 00:27:38.015 --> 00:27:40.565 there will be a stock market exit 522 00:27:40.785 --> 00:27:44.965 and Tots will become a 100% private firm. 523 00:27:46.585 --> 00:27:49.605 Now, that was about the financial engineering part of it. 524 00:27:49.855 --> 00:27:53.325 Let's have a look at the financial value of tots, 525 00:27:53.415 --> 00:27:55.005 which is the fundamental value 526 00:27:55.005 --> 00:27:58.165 of the company using the discounted free cash flow method. 527 00:27:58.625 --> 00:28:00.485 We are going to evaluate free cash flows 528 00:28:00.485 --> 00:28:02.165 and we'll discount them at the weighted 529 00:28:02.165 --> 00:28:03.205 average cost of capital. 530 00:28:04.225 --> 00:28:06.565 To calculate the work, we need some calculation 531 00:28:06.585 --> 00:28:08.925 and we need to identify the betas, 532 00:28:08.965 --> 00:28:10.605 a systematic risk efficient. 533 00:28:11.185 --> 00:28:12.485 On top of that, we will need 534 00:28:12.485 --> 00:28:14.245 to make some financial assumptions 535 00:28:14.245 --> 00:28:16.525 to calculate the free cash flow, profitability, 536 00:28:17.225 --> 00:28:21.085 EBITDA investment, CapEx, working capital requirement, 537 00:28:21.185 --> 00:28:23.405 and obviously what are the gross rates 538 00:28:23.425 --> 00:28:24.685 during the first period 539 00:28:24.985 --> 00:28:27.405 and for the calculation of the terminal value. 540 00:28:28.375 --> 00:28:29.595 If we look at the evolution 541 00:28:29.595 --> 00:28:33.635 of the beta since the company was listed early years, 542 00:28:34.615 --> 00:28:37.555 that's obvious, huge volatility in the beta, 543 00:28:37.555 --> 00:28:40.435 which does not mean anything on an economic point of view. 544 00:28:41.105 --> 00:28:45.235 Then if you observe what happened during the decay 2010, 545 00:28:46.065 --> 00:28:50.275 basically the beta was quite low around 0.5, 546 00:28:50.805 --> 00:28:51.835 which is quite low 547 00:28:51.835 --> 00:28:54.435 for a company in which you have some luxury brand. 548 00:28:54.745 --> 00:28:58.115 Then it started getting up again at the beginning 549 00:28:58.115 --> 00:28:59.195 of the 2020s 550 00:28:59.975 --> 00:29:03.715 and it went up to one, which is a figure I'm going 551 00:29:03.715 --> 00:29:06.235 to select, but it's quite a high figure. 552 00:29:06.615 --> 00:29:09.435 It leads to a wack of 7%. 553 00:29:09.495 --> 00:29:11.035 Forget about the calculations, 554 00:29:11.495 --> 00:29:14.595 but you understand that taking a beta of one is 555 00:29:15.405 --> 00:29:17.075 maximizing the whack 556 00:29:17.615 --> 00:29:20.635 and at the end of the day is quite pessimistic about the 557 00:29:20.635 --> 00:29:22.595 calculation of the fundamental value. 558 00:29:24.025 --> 00:29:25.685 To calculate the free cash flows 559 00:29:25.865 --> 00:29:27.285 and to discount them, we need 560 00:29:27.285 --> 00:29:28.885 to take some assumptions about growth. 561 00:29:29.665 --> 00:29:31.165 If you look at the last two years, 562 00:29:31.505 --> 00:29:35.205 the growth in the revenues were more than 10%. 563 00:29:36.175 --> 00:29:38.165 Let's consider that it might slow down 564 00:29:38.585 --> 00:29:42.845 and take 8% for the next five years, which is a kind 565 00:29:42.845 --> 00:29:44.725 of growth of 40%. 566 00:29:45.475 --> 00:29:47.365 It's quite reasonable if you consider the 567 00:29:47.365 --> 00:29:48.525 potential of the brand. 568 00:29:49.025 --> 00:29:52.765 To calculate the terminal value, I will take 2% 569 00:29:53.495 --> 00:29:56.285 industrial investment capital expenditures. 570 00:29:56.535 --> 00:30:01.085 Let's take 5% to between four and five. 571 00:30:01.415 --> 00:30:04.485 Let's take the upper per range of the interval. 572 00:30:05.155 --> 00:30:09.165 It's again quite conservative working capital requirement. 573 00:30:09.585 --> 00:30:11.605 It was up and up and up 574 00:30:11.705 --> 00:30:15.485 and it represents today 35% of the revenues. 575 00:30:16.055 --> 00:30:19.045 Let's take the current working capital requirement 576 00:30:19.045 --> 00:30:20.445 and cash conversion cycle 577 00:30:20.835 --> 00:30:23.525 because we are a little bit in luxury business. 578 00:30:23.635 --> 00:30:25.925 It's always about high levels of inventories. 579 00:30:26.145 --> 00:30:30.445 If you want to avoid missing sales ebitda, 580 00:30:31.225 --> 00:30:33.965 EBITDA was down, but let's consider that it remains 581 00:30:33.985 --> 00:30:37.845 and change at the level of 20 23, 20 3% 582 00:30:38.185 --> 00:30:42.245 of revenues without taking into account any potential 583 00:30:42.395 --> 00:30:46.245 synergies between tos, any improvement 584 00:30:46.825 --> 00:30:49.485 in the value, any improvement in the performance, 585 00:30:49.485 --> 00:30:50.725 in the commercial performance. 586 00:30:51.105 --> 00:30:52.725 Now let's have a look at the result. 587 00:30:53.835 --> 00:30:57.335 If we take into consideration all these conservative 588 00:30:57.465 --> 00:31:00.255 parameters, we get to a fun value, 589 00:31:00.255 --> 00:31:01.975 which is 72 euros per share. 590 00:31:02.755 --> 00:31:06.815 You remember that the offer made by Catton was 43 euros, 591 00:31:07.115 --> 00:31:09.615 so there is quite an interesting upside potential, 592 00:31:10.275 --> 00:31:12.615 and this subside potential is quite sensitive 593 00:31:12.615 --> 00:31:14.135 to the EBDA rate. 594 00:31:14.955 --> 00:31:16.775 You remember I took 23%. 595 00:31:17.075 --> 00:31:19.655 If you consider that there might be some improvement 596 00:31:20.355 --> 00:31:22.535 in the commercial performance of the company 597 00:31:22.595 --> 00:31:26.135 and we just increased by 2% from 23 to 25%. 598 00:31:26.405 --> 00:31:28.575 Then the fundamental value is 86. 599 00:31:29.115 --> 00:31:32.655 86 is just twice as much as the price, which is offered 600 00:31:32.715 --> 00:31:35.055 by Ed Catan to buy the shares. 601 00:31:35.635 --> 00:31:37.975 So at the end of the day, there's an sad potential 602 00:31:37.995 --> 00:31:42.335 of say 100%, which is quite good news for 603 00:31:42.955 --> 00:31:44.615 the purchasing family. 604 00:31:46.825 --> 00:31:49.025 A few concluding remarks, let's go back 605 00:31:49.025 --> 00:31:50.025 to the initial question. 606 00:31:50.055 --> 00:31:51.185 What about the timing? 607 00:31:51.725 --> 00:31:52.985 The timing looked great 608 00:31:53.455 --> 00:31:56.785 because Tots is in a period of recovery. 609 00:31:57.205 --> 00:32:00.545 The revenues are up, the EBITDA is improving, 610 00:32:00.845 --> 00:32:04.865 and now it's not fully maybe in the stock price, 611 00:32:04.925 --> 00:32:08.745 but they are no family as identified a potential gold mine. 612 00:32:09.375 --> 00:32:11.745 They take an equity stake, they reinforce, 613 00:32:12.165 --> 00:32:15.785 and at the end of the day they have a significant percentage 614 00:32:15.845 --> 00:32:17.865 of a company, which is quite promising, 615 00:32:18.565 --> 00:32:22.065 but there is another remark which is about families 616 00:32:22.255 --> 00:32:26.105 because it's a family which is purchasing the assets 617 00:32:26.125 --> 00:32:27.225 of another family. 618 00:32:27.415 --> 00:32:31.105 It's family capitalism and it's very much about growth. 619 00:32:31.375 --> 00:32:32.825 It's very much about control, 620 00:32:33.365 --> 00:32:35.825 but it's very much also about the financial power 621 00:32:35.895 --> 00:32:38.505 because what happened to Bernardo, 622 00:32:39.025 --> 00:32:42.325 He went for massive external growth 623 00:32:42.385 --> 00:32:45.525 and he created an empire, which is extremely powerful. 624 00:32:45.585 --> 00:32:49.245 In the meantime, the De La Vale family was quite happy 625 00:32:49.245 --> 00:32:52.485 with the company whose revenues were about 1 billion, 626 00:32:53.305 --> 00:32:56.805 but it's probably not enough to survive in the long term 627 00:32:57.025 --> 00:32:59.125 and especially when you have to deal with 628 00:32:59.695 --> 00:33:02.405 succession plans inside the family. 629 00:33:03.495 --> 00:33:04.285 Thank you very much.