march 2005 BD Terrier Conseil 1

Marbles story : a traditional and Marbles story : a traditional and booming game !booming game !

People play marbles for ages : People play marbles for ages : Egyptians, Greeks, Romans Egyptians, Greeks, Romans used to play marbles… used to play marbles…

One of the oldest marbles One of the oldest marbles (Oxford museum) should have (Oxford museum) should have 6 000 years6 000 years

Not only children play Not only children play marbles, but adults as wellmarbles, but adults as well

Easy to carry, easy to play Easy to carry, easy to play Low cost/low priceLow cost/low price Worlwide business today !Worlwide business today !

march 2005 BD Terrier Conseil 2

Marbles businessMarbles business

Product may look traditional, despite Product may look traditional, despite manufactured with modern technologies manufactured with modern technologies

Must comply with safety regulations Must comply with safety regulations Product’s look has to be very attractive: flashy Product’s look has to be very attractive: flashy

or subtle colorsor subtle colors Tough competition from Asia; ww marketTough competition from Asia; ww market Cost structure (Europe): about 1/3, 1/3, 1/3 Cost structure (Europe): about 1/3, 1/3, 1/3

materials, manpower, depreciation materials, manpower, depreciation Channels of distribution changing quicklyChannels of distribution changing quickly

– Before: retailers and small local shopsBefore: retailers and small local shops– Today: more & more large stores and internet Today: more & more large stores and internet

Offer: trend to a limited diversificationOffer: trend to a limited diversification– Materials: (ceramics, stones, composites)Materials: (ceramics, stones, composites)– Additional games (marbles cicuits)Additional games (marbles cicuits)

march 2005 BD Terrier Conseil 3

Marbles March story Marbles March story « Marche & fils » company was founded in 1873, near Paris « Marche & fils » company was founded in 1873, near Paris The company was sold in 1965 to Mr Jean-Claude Martinez, The company was sold in 1965 to Mr Jean-Claude Martinez,

who moved all the facilities near Marseilles, keeping the same who moved all the facilities near Marseilles, keeping the same brand name and updating all the manufacturing processbrand name and updating all the manufacturing process

After his death in 1988, his heirs sold part of the shares to After his death in 1988, his heirs sold part of the shares to venture capital funds banks (40%), and some individuals (25%). venture capital funds banks (40%), and some individuals (25%).

One of them, Denis Agathe, is CEO; he kept the « Marche » One of them, Denis Agathe, is CEO; he kept the « Marche » name in France, and developped abroad the new brand name name in France, and developped abroad the new brand name «Marbles March » «Marbles March »

Under his prudent and innovating management, « Marbles Under his prudent and innovating management, « Marbles March » SA has enjoyed a steady and profitable growth March » SA has enjoyed a steady and profitable growth

Sales 2003 : 45 M€ (export 30 %); EBIT/Sales 12 %Sales 2003 : 45 M€ (export 30 %); EBIT/Sales 12 % Markets require new investmentsMarkets require new investments 3 major projects are presented to executive committee and need 3 major projects are presented to executive committee and need

to be ranked (business attractivity, financial return, risks…)to be ranked (business attractivity, financial return, risks…)

march 2005 BD Terrier Conseil 4

Marbles March key data (2003)Marbles March key data (2003)

march 2005 BD Terrier Conseil 5

Marbles March major projects Marbles March major projects (summary)(summary)

Marketing & Development VP, Hervé Lenoir, would Marketing & Development VP, Hervé Lenoir, would like to extend the existing offer to « Hi-Tech » marbles, like to extend the existing offer to « Hi-Tech » marbles, producing flashes when hitting an obstacleproducing flashes when hitting an obstacle

Sales VP, Jacques Leblanc, intends to takeover Sales VP, Jacques Leblanc, intends to takeover « Princess Cheung Ping » company (China), to develop « Princess Cheung Ping » company (China), to develop the local and booming marketthe local and booming market

Operations VP, Georges Marron, heading IS Operations VP, Georges Marron, heading IS department, wants to set in an Erp, due to poor department, wants to set in an Erp, due to poor reliability and performance of existing systemsreliability and performance of existing systems

march 2005 BD Terrier Conseil 6

« Hi-Tech » project« Hi-Tech » projectmain assumptionsmain assumptions

Requires 7 M€ budget in 2004 and 2005Requires 7 M€ budget in 2004 and 2005 New offer, in a « niche » market, should lead to New offer, in a « niche » market, should lead to

6 M€ incremental sales (in 2006)6 M€ incremental sales (in 2006)– Growing after by 30 % paGrowing after by 30 % pa– With attractive selling prices => 50% gross profitWith attractive selling prices => 50% gross profit– Generating moderate operating expenses increaseGenerating moderate operating expenses increase

march 2005 BD Terrier Conseil 7

« Hi-Tech » project – summary « Hi-Tech » project – summary

march 2005 BD Terrier Conseil 8

« Hi-Tech » project – cumulative DCF « Hi-Tech » project – cumulative DCF

-4.5

-6.7-6.1

-5.5-4.8

-3.9

-2.9

-1.6

-0.2

1.5

-8

-7

-6

-5

-4

-3

-2

-1

0

1

2

3

4

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

march 2005 BD Terrier Conseil 9

« China » project« China » projectmain assumptionsmain assumptions

Requires 3 M€ budget in 2004 and 2005Requires 3 M€ budget in 2004 and 2005 Incremental sales 4 M€ (in 2004)Incremental sales 4 M€ (in 2004)– Growing after by 15 % paGrowing after by 15 % pa– With discounted selling prices => 34% gross profitWith discounted selling prices => 34% gross profit– Generating moderate operating expenses increaseGenerating moderate operating expenses increase– And limited incremental working capital (COD)And limited incremental working capital (COD)

march 2005 BD Terrier Conseil 10

« China » project – summary« China » project – summary

march 2005 BD Terrier Conseil 11

« China » project – cumulative DCF« China » project – cumulative DCF

-1.8-2.5 -2.2 -1.9 -1.5

-1.2-0.8

-0.5-0.1

0.3

-8

-7

-6

-5

-4

-3

-2

-1

0

1

2

3

4

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

march 2005 BD Terrier Conseil 12

« Erp » project« Erp » projectmain assumptionsmain assumptions

Requires 6.5 M€ budget in 2004 and 2005 Requires 6.5 M€ budget in 2004 and 2005 Generates savings (5 M€ operating expenses) then Generates savings (5 M€ operating expenses) then

implies moderate operating expenses increaseimplies moderate operating expenses increase Improves the performance of supply & distribution Improves the performance of supply & distribution

chain => decrease of Working Capital chain => decrease of Working Capital Improved delivery time => small incremental sales Improved delivery time => small incremental sales

(1 M€ in 2006), growing later by 10% pa with (1 M€ in 2006), growing later by 10% pa with improved gross profit margin (45%)improved gross profit margin (45%)

march 2005 BD Terrier Conseil 13

« Erp » project – summary« Erp » project – summary

march 2005 BD Terrier Conseil 14

« Erp » project – cumulative DCF« Erp » project – cumulative DCF

-3.8

-6.0

-4.3

-2.8

-1.8-1.4

-0.9-0.5

0.00.4

-8

-7

-6

-5

-4

-3

-2

-1

0

1

2

3

4

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

march 2005 BD Terrier Conseil 15

« Marbles March » projects:« Marbles March » projects:how prioritize ?how prioritize ?

The 3 projects require 15 The 3 projects require 15 M€ in 2004 and 2005M€ in 2004 and 2005

i.e 150 % Net Present i.e 150 % Net Present Value (as of end 2003)Value (as of end 2003)

Board of Directors does Board of Directors does not intend to take risksnot intend to take risks

Denis Agathe is Denis Agathe is concerned about the concerned about the decision to be madedecision to be made

He requests your He requests your assistanceassistance

-10.0

-15.1

-12.6

-10.2

-8.1

-6.5

-4.6

-2.6

-0.3

2.3

-16

-12

-8

-4

0

4

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

march 2005 BD Terrier Conseil 16

« Marbles March » projects : « Marbles March » projects : Questions Questions

On the basis of the above informations, prioritize the On the basis of the above informations, prioritize the projects according multiple-criteria analysisprojects according multiple-criteria analysis– Market priorities and strategic considerationsMarket priorities and strategic considerations– Financial return (data and assumptions may be amended)Financial return (data and assumptions may be amended)– Risk managementRisk management

Your findings and recommendations to be Your findings and recommendations to be – Summarized in a 10-12p report to be given to Stéphanie Viega Summarized in a 10-12p report to be given to Stéphanie Viega

(due date: April 13th)(due date: April 13th)– Presented to the all class on April 14th (5p PowerPoint)Presented to the all class on April 14th (5p PowerPoint)

hot line: terrier.comte@wanadoo.frhot line: terrier.comte@wanadoo.fr

march 2005 BD Terrier Conseil 17

Income statement - definitionsIncome statement - definitions

march 2005 BD Terrier Conseil 18

Balance sheet – definitionsBalance sheet – definitions

march 2005 BD Terrier Conseil 19

Balance sheet – definitionsBalance sheet – definitions