something to smile about? - Euromoney Institutional Investor PLC

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 PLC 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 Electonic 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 PLC 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 Autocars/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 todiscover exactly how much value corporatemanagement has added to 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 notonly highlight where a company hasadded or destroyed shareholder valuebut gives investors a good indication ofhow capable the management team is.CFOS LEADING EUROPEShell Judith BoyntonGSK John CoombeBP Byron GroteNovartis Raymond BreuNokia Olli Pekka KallasvuoNestle Wolfgang H ReichenbergerTotal Robert CastaigneDefine shareholder value?Nurturing the conditions to best createshareholder wealth is harder than youmight think. Boards can often lack ashared perspective on how stock marketsevaluates corporate performance.Equally, they may not fully understandthe key strategic factors for creatingvalue in today’s market. That’s wherethe CFO is meant to step in.The CFO has traditionally served as acompany’s shareholder value steward.He is often the first to introduce corevalue principles, is the one pushing forthe resources, methodologies and –most importantly – management timerequired to 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 to his strong leadership, clarity offocus and firm controls over cash.But what is shareholder value?“Shareholder value is why we come towork 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 jobto provide value to 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 toBASF 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