White Paper on Fixed Asset Valuation & Fair Value Measurement

Investaura Management Consultants was engaged by a major telecom group to perform a comprehensive valuation on non-current assets in the telecommunications network operations run by the client in four countries.

The revaluation was undertaken in compliance with the IFRS framework, in particular IFRS 13 (Fair Value measurement), IAS 36 (impairment), IAS 16 (tangible non-current assets) and IAS 38 (intangibles).

Whereas writing down non-current assets when their value is impaired is generally standard practice under GAAP, reflecting the concept of prudence, IFRS allows for a re-valuation to both sides, including marking non-current assets up to market. The basis for measurement is either the cost model (historical cost less accumulated depreciation), or the revaluation model (fair market value).

Landmark project for a telco in MEA: Fixed Asset Valuation (IFRS 13)

Investaura has recently completed a fixed asset revaluation project for a major telecom service provider operating in multiple countries in the MEA region.

The project was undertaken over a 3-month period and looked into $1bn of fixed assets in the following asset classes: Land, Building, Towers, Telecoms equipment, Software, Spectrum and licences.

Investaura’s new book is now available on Amazon: “Business Planning for Managers and Entrepreneurs”

Investaura Management Consultants is pleased to announce the publication of its new book on Business Planning for Managers and Entrepreneurs (ISBN 978-3-9813734-2-4), written by Pierre A. Lurin, a Managing Partner at Investaura.

The paperback edition complements the hardback edition first published in 2010, which has been updated and improved. Apart from the new cover, the book addresses a wider audience and includes a foreward where the author shares his recent experience acquired over the period 2010-2014, as well as personal insight on current and future trends.

Financial ratio analysis: FREE Excel template!

There are 4 main categories of financial ratios and KPIs used by financial practitioners, each addressing a specific question:

Question 1: “Is the business profitable?” -> Profitability ratios, calculated from the P&L (e.g. Gross margin, EBITDA margin, EBIT margin)

Question 2: “Is the business liquid in the short term?” -> Liquitidity ratios, calculated from the Balance Sheet (e.g. current ratio, liquid ratio, cash ratio)

Question 3: “Is the business financially stable in the long term?” –Stability ratios, calculated from the Balance Sheet (e.g. debt-to-equity ratio, gearing, debt cover ratio)

Question 4: “Is profitability high enough compared to what we have invested?” –Capital Efficiency ratios (e.g. ROE taking an ‘equity’ perspective; ROIC taking an ‘entity’ point of view).

Ten years holding shares in France Telecom: I can’t see the ‘Orange’, I can only see ‘red’

Ten years ago, I bought shares in Orange (the mobile business) and France Telecom (the parent of Orange), which are now one and the same company. I made two mistakes at the time:

  • After France Telecom’s share price had gone down by more than 80%, I thought that it was strongly protected against further price decrease, and would go up over the long term. It didn’t.
  • Even if profit margins in France were to decrease under competitive pressure in the fixed line business, I thought that France Telecom’s turnover would go up, driven by mobile services and the international business. It didn’t either.

So I was double wrong. And this is what happened to my original investment. Not a disaster, but certainly not great. Time to fire France Telecom?

The acquisition of WhatsApp by Facebook: too expensive, or too cheap?

Obviously the SMS business has been a cash-cow for mobile operators for close to 20 years now, and it was high time that something happens to shake-up the status quo. This seems to be exactly what the WhatsApp team has managed to do. No surprise that it didn’t get unnoticed. On 19th February 2014, Facebook announced that it had agreed to acquire WhatsApp, a 50-staff company, for $19 billion (about 20% in cash and the rest in equity).

This looks mind-boggling at first. But WhatsApp currently has 450 million (mobile) users world wide. Also, in view of recent social media transactions, the pricing of the WhatsApp acquisition does not look so crazy. Sure, the Zuckerberg ‘kid’ and his shareholders must know what they are doing?

Business Planning and Costing made easy: free financial template!

Business planning and costing don’t have to be complicated. They aren’t! INVESTAURA is pleased to provide you with this simple Excel template to help you get started.

You need to register for free as a ‘Discovery’ member on this web site to download the Business Planning and Costing simple Excel template (more than 1800 downloads). Go to the registration page.

Our highly popular Seminar on ‘Finance for non-Financial Managers’ is coming to you

Have you ever wished that you would better understand Finance and Business Planning? Maybe with a view to take ‘Profit responsibility’ within your company?

Then this seminar is for you.

Accounting and Finance are not hard to learn, and everybody can learn them. The 3-day training will bring you up to speed with the key concepts used in Finance: the difference between cash and profit; key financial ratios; valuation of businesses and investment plans; the cost of capital, and many more.

In addition to trainer-led presentations that are richly illustrated with examples from the Telecoms & IT industry, the participants will solve a series of exercises and work on the ‘TetraStars’ case study.

Why P/E ratios are useless, unless you are Warren Buffett

In a previous article (‘Stop using the IRR!‘), we explained why the Internal Rate of Return is a completely misleading and useless measure of finance performance; and recommended to use the ROE (Return on Equity), the ROIC (Return on Invested Capital), as well as the peak funding requirement, the payback period and the NPV (Net Present Value).

There is another die hard in business: the P/E ratio for a company listed on the stock market. This is the ratio of the share price to its earnings after tax.

The average P/E ratio of US equities was 14 in the 20th century, and roughly the same in other countries.

So now, this is how the story goes in the media: “P/E ratio lower than 10 – BUY! The stock is a bargain!”. Or “P/E ratio higher than 20 – SELL! The stock is expensive”.