This document provides insights into business valuation and analysis. It includes pro-forma financial statements of Telstra Corporation Limited and the implementation of the valuation procedure using the discount cash flow model. The study material is relevant for the course on strategic information systems for business.
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Running head:STRATEGIC INFORMATION SYSTEMS FOR BUSINESS Business Valuation and Analysis Name of the Student: Name of the University: Author’s Note: Course ID:
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1STRATEGIC INFORMATION SYSTEMS FOR BUSINESS Table of Contents 1.Preparing pro-forma financial statements of Telstra Corporation Limited:................................2 2. Implementing the valuation procedure using discount cash flow model:...................................6 Bibliography:...................................................................................................................................8
2STRATEGIC INFORMATION SYSTEMS FOR BUSINESS 1.Preparing pro-forma financial statements of Telstra Corporation Limited: Pro-Forma Balance Sheet Telstra Corporation Ltd For 2015 to 2018 (all numbers in $million) REVENUE2018201720162015 Gross sales $26,01 1 $26,01 3 $25,91 1 $25,52 8 Other income3,0312,1921,139584 Total revenue $29,04 2 $28,20 5 $27,05 0 $26,11 2 COST OF SALES Goods and services purchased$8,758$7,671$7,247$6,845 Total Cost of Goods Sold$8,758$7,671$7,247$6,845 Gross Profit (Loss) $20,28 4 $20,53 4 $19,80 3 $19,26 7 OPERATING EXPENSES Labour$5,157$5,381$5,041$4,782 other expenses4,9844,5064,3123,971 Depreciation and amortization4,4704,4414,1553,974 Total Selling Expenses $14,61 1 $14,32 8 $13,50 8 $12,72 7 Finance expense Finance income8213886147 Finance cost631729796846 Share of net (loss)/profit from joint ventures and associated entities-22321519 Total Finance Expenses$571$559$695$680 Total Operating Expenses $15,18 2 $14,88 7 $14,20 3 $13,40 7 Net Income Before Taxes$5,102$5,647$5,600$5,860 Taxes on income1,5731,7731,7681,746 Net Income After Taxes$3,529$3,874$3,832$4,114
3STRATEGIC INFORMATION SYSTEMS FOR BUSINESS NET INCOME (LOSS)$3,529$3,874$3,832$4,114 Pro-Forma Balance Sheet Telstra Corporation Ltd For 2015 to 2018 (all numbers in $million) ASSETS2018201720162015 Current Assets Cash and cash equivalents$629$938$3,550$1,396 Trade and other receivables$5,018$5,468$4,737$4,721 Inventories$801$893$557$491 Derivative financial assets$75$21$62$7 Current tax receivables$6$11$8$9 Prepayments$548$531$426$346 Total Current Assets$7,077$7,862$9,340$6,970 Fixed Assets Trade and other receivables$1,012$1,039$1,293$1,171 Inventories$19$29$29$32 Investments – accounted for using the equity method$1,237$194$171$201 Investments – other$36$292$394$137 Property, plant and equipment$22,108$21,350$20,581$20,450 Intangible assets$9,180$9,558$9,229$9,332 Derivative financial assets$1,897$1,623$2,180$1,790 Deferred tax assets$54$44$54$66 Defined benefit asset$250$142$15$296 Total Net Fixed Assets$35,793$34,271$33,946$33,475 TOTAL ASSETS$42,870$42,133$43,286$40,445 LIABILITIES Current Liabilities Trade and other payables$4,835$4,189$3,948$4,080 Employee benefits$868$865$913$844
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4STRATEGIC INFORMATION SYSTEMS FOR BUSINESS Other provisions$118$190$92$126 Borrowings$1,635$2,476$2,655$1,496 Derivative financial liabilities$1$42$286$214 Current tax payables$132$161$176$291 Revenue received in advance$1,227$1,236$1,118$1,078 Total Current Liabilities$8,816$9,159$9,188$8,129 Long-term Liabilities Other payables$65$70$66$74 Employee benefits$157$160$169$147 Other provisions$171$134$127$137 Borrowings$15,316$14,808$14,647$14,138 Derivative financial liabilities$388$536$663$911 Deferred tax liabilities$1,624$1,539$1,493$1,558 Defined benefit liability$7$6$4$4 Revenue received in advance$1,312$1,161$1,022$837 Total Long-term Liabilities$19,040$18,414$18,191$17,806 SHAREHOLDERS' EQUITY Share capital$4,428$4,421$5,167$5,198 Reserves($117)($105)$62$372 Retained profits$10,716$10,225$10,642$8,533 Non-controlling interests($13)$19$36$407 Total Shareholders' Equity$15,014$14,560$15,907$14,510 TOTAL LIABILITIES & EQUITY$42,870$42,133$43,286$40,445 Telstra Corporation Ltd Cash Flow Statement (all numbers in $million) For the Year Ending2018201720162015 Cash at Beginning of Year9363,5501,3965,527 Operations Cash receipts from Receipts from customers (inclusive of goods and services tax (GST)) 31,90 1 31,28 8 31,16 3 29,52 1 Government grants received174235182166 Cash paid for
5STRATEGIC INFORMATION SYSTEMS FOR BUSINESS Payments to suppliers and employees (inclusive of GST) - 21,94 8 - 21,99 7 - 21,17 9 - 19,62 1 Net placement of deposits by Autohome Inc. that are not part of cash equivalents00-1730 Income taxes paid- 1,521 - 1,751 - 1,860 - 1,755 Net Cash Flow from Operations8,6067,7758,1338,311 Investing Activities Cash receipts from Government grants received91000 Proceeds from sale of property, plant and equipment79667947094 Proceeds from sale of business and shares in controlled entities (net of cash disposed) 4901,3401 Proceeds from sale of other investments24285563 Distributions received from equity accounted investments91082184 Interest received65109131167 Proceeds from finance lease principal amounts12510410565 Cash paid for Payments for property, plant and equipment(3,57 1) (3,72 5) (3,05 1) (2,84 5) Payments for intangible assets(1,36 1) (1,59 6) (1,14 3) (2,25 7) Payments for business and shares in controlled entities (net of cash acquired)(56)(63)(92)(986) Payments for equity accounted investments(15)(6)(38)(48) Payments for other investments(67)(76)(67)(70) Net Cash Flow from Investing Activities - 3,911 - 4,279 - 2,207 - 5,692 Financing Activities Cash receipts from
6STRATEGIC INFORMATION SYSTEMS FOR BUSINESS Proceeds from borrowings4,1954,7104,9871,793 Proceeds from sale of controlled entity shares000333 Other226125 Cash paid for Repayment of borrowings- 5,148 - 4,571 - 3,954 - 3,413 Repayment of finance lease principal amounts-120-131-101-47 Share buy-back0- 1,5020- 1,004 Purchase of shares for employee share plans-18-22-68-54 Finance costs paid-776-854-860-916 Dividend paid to equity holders of Telstra Entity - 3,150 - 3,736 - 3,787 - 3,699 Net Cash Flow from Financing Activities - 5,015 - 6,104 - 3,777 - 6,882 Net Increase in Cash-320- 2,6082,149- 4,263 Effects of exchange rate changes on cash and cash equivalents4-65132 Cash at End of Year6209363,5501,396 2. Implementing the valuation procedure using discount cash flow model: Free Cash Flow Estimate 2018201720162015 Net cash from Operating Activities8,606.0 7, 775.0 8,1 33.0 8,3 11.0 Capital Expenditures(5,070.0) (5,4 66.0) (4,3 91.0) (6,20 6.0) Free Cash Flow (FCF)3,536.0 2, 309.0 3,7 42.0 2,1 05.0 3 Year Average Free Cash flow2,923.0 InputsCash flow & Present Value Table
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7STRATEGIC INFORMATION SYSTEMS FOR BUSINESS Number of years considered5Sl NoYear Cash flow PV of Cash flow FCF Growth rate for first 5 years1.38%1 2014 - 152,963.382,693.98 FCF Growth rate for last 5 years0.69%2 2015 - 163,004.322,482.91 Terminal Growth Rate2.00%3 2016 - 173,045.832,288.37 Discount Rate10%4 2017 - 183,087.902,109.08 5 2018 - 193,130.561,943.83 Intrinsic Value Calculation Total PV of cash flow36,302.07Terminal Year2018 - 19 Total Debt16,951.00Terminal Value39,914.70 Cash & Cash Balance629.00 PV of Terminal Value24,783.89 Net Debt16,322.00 Share Capital4,428.00 Face Value1.00 Number of Shares4,428 Share Price4.51
8STRATEGIC INFORMATION SYSTEMS FOR BUSINESS Bibliography: Telstra.com.au.2019.Telstra-Shareprice-Investors.[online]Availableat: https://www.telstra.com.au/aboutus/investors/share-price [Accessed 28 May 2019].