something to smile about? - Euromoney Institutional Investor PLC
something to smile about? - Euromoney Institutional Investor PLC
something to smile about? - Euromoney Institutional Investor PLC
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LEAD STORYVALUE CREATIONTop 25 Europe (by market value)Company Name Industry MVA Market Value Capital EVA NOPAT ROCE1 Shell combined Oil Comp - Integrated 93,946 195,314 90,772 6,125 12,416 15.9%2 GSK Medical - Drugs 86,968 121,994 37,503 6,347 9,107 25.7%3 BP <strong>PLC</strong> Oil Comp - Integrated 69,006 192,160 112,251 144 8,786 8.0%4 Novartis Medical - Drugs 59,662 96,985 37,260 2,743 5,252 13.8%5 Nokia OYJ Telecoms Equipment 56,686 73,530 16,671 2,429 3,852 24.6%6 Nestle SA Food-Misc 52,254 103,950 51,136 3,953 7,082 13.6%7 Total SA Oil Comp - Integrated 51,952 114,630 65,399 1,798 6,703 11.3%8 Roche Holding Medical - Drugs 43,661 89,207 42,126 (1,203) 1,742 4.0%9 ENI SPA Oil Comp - Integrated 28,990 84,195 53,111 1,471 5,729 11.0%10 Unilever Group Food-Misc 27,541 62,008 33,839 1,494 4,292 11.5%11 Carrefour SA Food-Retail 21,978 44,808 21,947 621 2,435 10.5%12 Orange SA Cellular Telecom 16,757 39,844 22,676 (6,049) (3,819) -15.4%13 Siemens AG Diversified 11,999 52,082 39,542 (1,031) 2,244 5.4%14 Philips Electronics Elec<strong>to</strong>nic Compo 11,548 31,170 19,443 (4,925) (2,907) -13.2%15 France Telecom Telephone - Integrated 11,360 113,852 92,711 (29,954) (18,476) -18.0%16 ENEL SPA Electric - Integrated 9,877 63,308 53,360 (1,289) 2,694 5.2%17 BASF AG Chemicals 8,556 32,077 23,125 249 2,043 8.9%18 Tesco <strong>PLC</strong> Food-Retail 8,143 26,609 18,404 305 1,776 10.1%19 E. ON AG Electric - Integrated 5,132 99,743 88,101 (5,408) 789 1.0%20 Telefonica SA Telephone - Integrated 4,834 83,745 73,398 (6,053) 996 1.3%21 DaimlerChrysler AG Au<strong>to</strong>cars/Light Trucks 248 139,642 138,962 (9,128) 5,521 3.8%22 Deutsche Telekom AG Telephone - Integrated (2,005) 125,748 123,764 (20,258) (7,559) -5.6%23 Telecom Italia S Telephone - Integrated (17,723) 65,550 74,288 (4,638) 3,557 4.5%24 Vivendi Universal SA Media (37,963) 50,621 83,087 (10,413) (1,938) -1.9%25 Vodafone Group Cellular Telecom (143,865) 150,541 295,675 (11,676) 11,130 4.1%Market value as of 31 December 2002Capital as of 31 December 2002, year-end operating capitalExchange rate as of 31 December 2002, EUR per USD 0.9531, source BloombergExcludes banks, insurance and other financial institutionsSOURCE: STERN STEWARTgreater assertiveness by shareholders.They are more eager than ever <strong>to</strong>discover exactly how much value corporatemanagement has added <strong>to</strong> theirinvestment capital and spelling outwhat it is that the management teamshould be credited with achieving.Value Based Management, based onMVA/EVA, is a management approachthat ensures corporations are run consistentlyon value – and normally onmaximising shareholder value. Itincludes creating value, managing forvalue and measuring value. It usessimple transparent metrics that no<strong>to</strong>nly highlight where a company hasadded or destroyed shareholder valuebut gives inves<strong>to</strong>rs a good indication ofhow capable the management team is.CFOS LEADING EUROPEShell Judith Boyn<strong>to</strong>nGSK John CoombeBP Byron GroteNovartis Raymond BreuNokia Olli Pekka KallasvuoNestle Wolfgang H ReichenbergerTotal Robert CastaigneDefine shareholder value?Nurturing the conditions <strong>to</strong> best createshareholder wealth is harder than youmight think. Boards can often lack ashared perspective on how s<strong>to</strong>ck marketsevaluates corporate performance.Equally, they may not fully understandthe key strategic fac<strong>to</strong>rs for creatingvalue in <strong>to</strong>day’s market. That’s wherethe CFO is meant <strong>to</strong> step in.The CFO has traditionally served as acompany’s shareholder value steward.He is often the first <strong>to</strong> introduce corevalue principles, is the one pushing forthe resources, methodologies and –most importantly – management timerequired <strong>to</strong> make ‘value´ work. It isinevitably he who argues that effectivecompany-wide programmes will returnRoche Holding Erich HunzikerENI Marco MangiagalliUnilever Rudy MarkhamCarrefour Jose-Luis DuranOrange Wilfried VerstraeteSiemens Heinz-Joachim NeuburgerPhilips Jan H M HommenFrance Telecom Michel CombesENEL Fulvio Contimany times the initial investment. So ifa CFO is the shareholder value steward,then a positive MVA/EVA is surely acredit <strong>to</strong> his strong leadership, clarity offocus and firm controls over cash.But what is shareholder value?“Shareholder value is why we come <strong>to</strong>work everyday,” says Pat Mulva, head ofIR at Exxon Mobil, the world’s largest oilcompany (which does not have a CFO,by the way). “Everyday we compete forthat investment dollar and it is our job<strong>to</strong> provide value <strong>to</strong> the people makingthat investment decision everyday.”Mulva defines shareholder value asthe appreciation of the share price andthe long-term impact of dividends andshare buy-backs. In 2002, Exxon distributedmore than $10 billion <strong>to</strong>BASF Kurt BockTesco Andrew Higginson (FD)E.ON Erhard SchipporeitTelefonica Santiago ValbuenaDaimlerChrysler Dr Manfred GentzDeutsche Telekom Karl-Gerhard EickTelecom Italia Enrico ParazziniVivendi Sandrine DufourVodafone Kenneth Hydon24 cf March 2004 corporatefinancemag.com