Strategisk analyse og værdiansættelse af Bang & Olufsen pr 21. oktober 2008

Helle Hee Raun

Studenteropgave: Kandidatafhandlinger


Ongoing discussions in the medias regarding the future of Bang & Olufsen (B&O) make it interesting to do an analysis of the company to assess the current value of the shares. Whereas B&O is a niche player in the exclusive market segment and is characterised by a very strong brand and broad geographical presence strong indications exist of a weakening product development activity within the company. As a consequence of technological development, decreasing prices on electronic equipment in general and thus changing demand from consumers, B&O is heavily reliant on the product development activity of the company in order to differentiate from competitors. Another complicating factor to the business environment of B&O is the success of Loewe, the only direct competitor to B&O and a company which despite the crisis and decreasing prices in general has experienced and expect continued revenue and EBIT growth going forward. Although Loewe currently is mainly a national German player, the company plans to broaden their geographical presence and will thereby compete with B&O in a number of countries going forward. Due to the combination of the above, a very weak product pipeline and the financial crisis, B&O revenues from branded business relating to sale of TV and audio equipment to consumers will be decreasing considerably until 2009/10. More promising futures are expected for the business activities “Automotive” and “Enterprise” focused on the car and hotel businesses respectively. Further it is expected that revenues from the IcePower technology will increase from 2009/10 as this is aligned with the demand from environmentally focused consumers. Long-term revenue development will depend on the product development of B&O. I expect decreasing revenues in the mature B&O markets, as the conversion into digital TV technology for the majority of the population in these markets will be over and B&O as part of the strategy will continue to focus on TV sales. As a proportion of the production costs is fixed and as management will increase the development costs the cash flows B&O will be negative going forward given the above expected revenue development. If the revenue assumptions change however, whereby B&O increase expected revenue growth per annum in the Middle East, Russia and Japan and obtain revenue growth in the current mature markets after the end of the financial crisis in 2009/10, future revenue will increase to the highest level ever for B&O in 2012/13. In order for the future cash flows to justify the current value of the share of 146,5 it is required that B&O also manages to maintain the gross margin at 45,8% as in the 2007/08. A potential consequence of the expected negative cash flows from operations going forward is to stop and liquidate the business activity of B&O. The most significant asset in this valuation is the B&O brand. Royalty rate calculations for niche brands indicate that the value of the brand could be in the region of DKK 1 billion; if this is applied and all assets and liabilities are valued separately my calculations indicate a current value per share of 151,3. Over time operational losses and increased liabilities will however diminish the value of the share and therefore investors need to pay close attention to the development in the liabilities of B&O going forward.

UddannelserCand.merc.aud Regnskab og Revision, (Kandidatuddannelse) Afsluttende afhandling
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