Okay, we're gonna make a start for today. Then. All we're gonna be talking about today is trading comparables.

I'm trying to think about how we can value a business by looking to other similar businesses.

That's essentially what we're looking to do through all of this process.

And there is a process to it. What we'll look through is how we can calculate some of the numbers.

What we'll also do is look at some real well practical examples as well to try and put this into some context for you.

Rather than just giving you a whole bunch of formulas to look at.

What we'll do is actually look at how we can analyze this data within, our Felix data side to actually see what we can see for an example company.

So we'll do that as we go through.

We've only got an hour for this afternoon, so we're done by, well, 3:00 PM here, UK time, and 10:00 AM Eastern time in, in the States.

So we will crack on. If you have any questions, please feel free to drop them into the chat function or the q and a section.

That would be great as well.

And what I'll do is I'll share my screen and we'll get into the material.

So, what we are gonna be having a look at here is all of our, let me get everything visible for me.

We're gonna be looking at all of the, training comparables section.

And what we're gonna be thinking about here in relation to training comparables is how we can value a company.

We are not going to think about every single one of those slides here. We're gonna pick out some of the key issues.

If you do have specific questions on anything chat function or the q and a function is totally available to you, please do stop me at any point as I'm going through, you will wanna unmute yourself and just ask me a question.

That is absolutely fine, no problem at all.

So in terms of our starting point, the first thing we're gonna be thinking about is what are we trying to do with this, uh, training comparables? Well, the idea is that we're gonna try to look at one or a group of companies to try to get some understanding about how the market is valuing these types of companies.

And what we're gonna try and find is some metric that we refer to as a multiple that summarizes the relationship between the valuation of these other companies and some sort of value driver for them.

That value driver could be a profit metric.

So definitely we could have down here something like our earnings per share.

It also could be our EBITDA that is not uncommon or EBIT potentially as well.

Could be revenues, could be the assets of the business.

Anything like that we might think is the key way that we can talk about, well, what's this company worth? And from the profitability perspective, if we look at earnings per share or EBIT or ebitda, then what we're saying is, if we know how much profit this company can make in a year, that tells us maybe everything we need to know about how valuable that company should be.

And this relationship between the value and the value driver will give us this multiple that will then assume applies to the company that we are trying to value as well.

And for the company that we know, we will know it's value driver.

If it's, if it's it's profit metric, for example, we then need to multiply by this multiple, multiple from all these other comp comparable companies to give us the value of the company that we are looking at.

So that's what we're thinking about.

Let's couple of points here in the slide just to pick up before we go any further.

First thing to say is that we're looking for a comparable company.

Now, this is never gonna be exactly the same, but we want it to be similar enough, similar sort of maybe geographical spread, similar sort of industry definitely that's operating in.

And we also want to be careful to note that the value driver should be normalized.

And what that means is if you're looking at the profits of the company, EBIT or earnings per share, you don't just want to take the number on the face of the income statement.

You want to look at an adjusted number that takes out any maybe non-recurring items.

Maybe there's some non-recurring expenses in there that were in last year's profit maybe, but you wouldn't expect them to be there in again in the future.

So maybe this is profits of depressed because the company went through a big reorganization and spent a lot of money on that reorganization, but that depression on the profit won't be there again in the future.

So the normalization is kind of getting us back to what the profit of this company would be in a, in a normal year, taking out those one-off items.

We can see those items often quite, quickly when we're looking at real world company financial statements. And we'll do that in a second. Okay? In terms of the point here where we're saying that the value driver must be consistent, that really is addressed on the next slide.

And the key point here to note is that if you are going to use your earnings per share, which is driven by your net income as this value driver, what you've got a note about that is that that net income that gives us the earnings per share, okay, is the profit that's made for the shareholders of the company, okay? And as a result, what you need to do is compare it to the value for the shareholders of the company, which would just be the equity potentially and the, or the share price, okay? The other way that we might think about our valuation multiples is to maybe use EBIT or EBITDA.

And that is giving us the profit before we think about interest.

That's the key part there.

And before interest is important because that is before we pay any return to our debt holders.

So if we're looking at a profit metric here, EBIT or EBITDA, that is the profit generated irrespective of how the company's finance that mix of debt and equity, then we also should be probably thinking about a value for the business that is irrespective or independent of and much debt financing they've got.

And this is something that we refer to as the enterprise value.

So the ev here is the enterprise value, okay? So that's the value of the business, independent of irrespective of how much debt finance, and there is lawyers, if as an M&A transaction may be, the lawyers might refer to this enterprise value as the cash free debt-free value.

It's essentially saying what would the value of the company be if they had no debt? Okay? So that's the logic here for this enterprise value, that EBITDA would not be affected if their company had no debt.

Because the interest isn't deducted and the enterprise value similarly not impacted by the mix of debt and equity.

So as a result, they're consistent.

So either we're looking at share price and earnings per share, both for equity, all we're looking at enterprise value, independent of capital structure and EBIT or EBITDA unimpacted by independent of your capital structure and how much debt you've got.

Okay? So that's what we mean by the multiples being consistent for us.

Okay? So hopefully those points are, are okay for us.

We're gonna focus on the enterprise value multiples.

The logic being that maybe if you think about buying a house, when we're thinking about comparing our house to a neighbor's house, maybe that neighbor's just sold their house and they I don't know made 300,000 for selling it.

Well, that's the money they got after they paid their mortgage off.

When we're trying to con value, trying to value our house compared to their house, what that homeowner got the owner of the property, the asset got, that's kind of irrespective for us, or not a direct comparison because it matters how much of a mortgage they've got. If they've got no mortgage, then they would've sold the house for 300,000.

If they've got a 700,000 mortgage, they, they must've sold the house for a million.

So the value of the asset is much more of an easy comparison. Especially we're trying to pick up two companies and see if there's a comparison between the companies. We don't wanna think about how much debt those companies have got, which might be different.

So when we're thinking about our valuation, we're gonna think about using enterprise value multiples.

Okay? So, we've looked at some of the key multiples here from an enterprise value basis.

That's our value of the business, independent of how much debt or equity there is.

Could look at enterprise value to EBIT or EBITDA.

The benefit of using EBITDA is that it cleans up any differences in maybe accounting policies.

It clears up any differences that might arise from different levels of acquisition.

Often acquisitions will create higher depreciation numbers.

So those are the benefits of using EBITDA.

You could use revenues just for some context maybe.

And if you're looking at value in the company's shares, the value for the shareholders only then maybe a PE ratio or a price to book ratio might be something you wanna look at.

The PE price to book ratio is where the, the driver here is the assets the company owns right at the moment.

So maybe you might think about, oil exploration firms where the biggest driver of the value of the business is the licenses they have, if you like, in terms of the ability to go and extract oil.

Okay? So that's our multiples we might have a look at.

So this is the key slide that we're gonna spend a lot of time having a look at through the course of our next 45 minutes or so, we're trying to build up some multiples that we can then can use to value our company.

Okay? So the first step, the most important step, definitely a challenging step is to choose some comparable companies.

It's really easy for me to say that if we're trying value a particular company, if we're trying value, I know we're trying to value Red Bull, maybe then you could say, okay, well let's look at other similar companies. Let's look at other drinks manufacturing companies. And you might look at Coca-Cola or PepsiCo and you might say, well, they're similar enough like, like Monster as well maybe.

And that's maybe, okay, they're all global brands, they're all kind of similar. That's maybe a good starting point.

But when you drive a little bit deeper into the into the numbers, you might find that, well PepsiCo, they're not just a drinks manufacturer, they're a drinks and snack business really as well.

So is that really a comparable company? It's not exactly the same, but it's maybe as good as you've got.

So you do need to understand the companies that you're saying are these comparable companies as well.

When we're trying to pick up that set.

And that's the first thing we're gonna have a look at.

So if you go and jump into Felix, so you go back to the front page of Felix here, then you'd have been able to jump into this Felix live session down the bottom left hand side.

But if you go to the analyze section on the right hand side where we all this data let's just pick a company. Let's have a look at Kraft Heinz. Okay? So if we look at Kraft Heinz, so just start typing it in and then we can go into that.

It's ticker is CHKHC.

What we've got in Felix here is all the data in relation to this company.

We'll talk about some of these data points, uh, a little bit later on. But if you go down to the middle bottom of the page, then what you can see straight away here is that we've got a list of comparable companies.

So we've got some comparable companies here for Kraft Heinz to see what if they're similar companies or not.

Okay? And the way that Felix is set up, they'll give you a list of companies that we think might be the most comparable companies for you.

You don't have to take those on board if you don't want to.

You can get rid of them by clicking on any of these Xs that will get rid of those companies.

You can also, if you want to add new companies in yourself, then you can definitely go and find those for yourself.

You might maybe say that in terms of comparison to Kraft Heinz, you might say that well maybe JM Smucker is a good comparable company as well.

So we might bring that in as well and that would be added to the list.

Important points to note, okay, the size of the business is relevant on some levels, but more importantly what we wanna have a look at is these multiples here in the third column, okay? And what you can see from these multiples is straight away that actually there's quite a lot of consistency across this sector.

All of these multiples, which is the enterprise value divided by the calendar year one.

So next calendar year profits, so forecast into the future effectively.

They've all got pretty similar numbers.

So they're all sort of in the 10 11 sort of range, which is giving us some indication that for companies in the, the sort of snap manufacturing business, in the US but also there's, these are global companies to some degree as well.

The market is saying that if you take your EBITDA forecast for next year and multiply it by 10, that'll pretty much get us to the enterprise value for most companies in this sector.

So that's some really good consistent data for us here that we can find a bunch of similar companies, we can look at those companies and see what their multiples look like.

And as a result of that we can see whether there is any maybe drivers for us trying to value maybe a private company that doesn't have a listed share price and therefore you wouldn't be able to do this analysis for.

So the question then is, okay, well there might be some outliers in here. You might look at Mondelez and say, well, Mondelez has got a much bigger multiple here. They've got 16.3 times.

Their enterprise value 16.3 times as much as the EBITDA they're forecast to make next year.

So that seems maybe like they're overvalued.

But then if you have a look at the data, some of the key drivers of these multiples, we've got those listed on the next two columns for us, profit margins are really important in terms of driving multiples. Typically say the higher the profit margin, the more valuable the company, the more able they are to save off competition by maybe cutting prices and still remaining profitable. If you've got more headroom to do that, but maybe we can see more clearly, it would appear that the growth rates that mon less is expecting to see in their profits into the future, into their revenues into the future is much higher than any of the other companies in the sector.

So that's why they're getting a much higher valuation multiple, because if you've got the company, you won't just get next year's EBITDA.

You get the year after that and the year after that and the year after that as well.

So that higher growth rate suggests that there's more value in the business than is represented by next year's profits.

So as a result they end up with a higher valuation multiple, although the companies are in a similar sort of one, 2% growth rates and teams profit margin, which gives us a fairly similar multiple.

So it seems there does seem to be some consistency in terms of how prices in this, in terms of how companies in this marketplace are being priced.

There are some outliers.

ANOVA is a bit of a weird one because that's from the Kellogg's kind of carve out, towards the end of last year to form into two companies, the the US side and then the global side as well.

So that growth rate is just because this is from what was Kellogg's now into a smaller bit.

So it's a bit weird, but it doesn't help with our analysis. But these sort of corporate actions do sometimes happen that throw us off a little bit.

Hopefully you can see from this though, that even if you find companies in the similar sector that are doing a similar sort of generating a similar sort of product, then these don't tell us one story. They don't all have a multiple that is exactly 10 or exactly 10.3.

There's a bit of variation between them and that might give us some potential benefits from investing and it might give some challenges in terms of valuing companies, but at least allows us to stay within a certain range.

We can have some confidence in terms of how we'd apply a multiple or maybe a range of multiples to our company to get our valuation.

What we're gonna spend some time doing through the rest of this session is trying to think about how do we actually get to this number, okay? Because getting to this number, we've done it all for you in Felix, but you probably want to be able to do it for yourself.

Firstly, if you've got Felix, you can jump into these numbers, but you might want to be able to actually say, well what if there's a company that I wanna have a look at that maybe we haven't got this data for you front and center, or you wanna approve the number as well.

So that's what we're gonna do.

What we're gonna try and do is for graph Heinz, we're gonna calculate their enterprise value to EBITDA multiple, but we won't do it on a forward looking basis.

This CY one basis, we're gonna do it on a historical basis.

So looking back at last year's, looking back at last year's numbers to see what they're telling us.

Okay, so we're gonna use, and this is totally fine, you can pick whichever profit metric you like as your value driver.

It could be historical profits, it could be future forecast profits.

You can use those. But as long as you're being consistent, again, if you are using the historical profits to calculate the multiples for those comparable companies, then you need to apply that multiple to your companies historical profits.

If you're using forward estimates of profits, then totally fine use those forward estimates to get the multiples for all these other companies giving you that multiple.

And then when you have the multiple, you need to apply it to your company's forward estimates of what their profits are gonna be next year.

So again, it's just a matter of being consistent.

We're only ever gonna be using one year's profit metric.

So, that doesn't tell us everything about what the company might do once you acquire them.

The benefit of using the historical data point are they known, but they're not gonna tell us what you would get if you bought the company. You're only gonna get the profits in the future, whereas the future profits are good because that's what you'll get as you bought the company future profits they're gonna be generating when you become the owner of the business.

But there are only estimates and maybe you might have some question marks about how reliable they are.

So excuse me, those are the sort of considerations we've gotta think about when we're picking either historical or maybe forward-looking metrics here in terms of that value driving.

So what we're gonna try and do is calculate the uh, enterprise value to EBITDA multiple for craft Heinz, but using last year's profit metrics or, or at least the most recent year's profit number.

So if we open up the Excel file that you've got that goes along with this session what you'll start with is this welcome tab.

There's a number of different tabs that we've got, but what I would like you to do for this session is to add another tab at the end.

So if you just click on the plus button here and add another tab at the end, what we're gonna try and do is calculate for ourselves a number that's similar to this.

Okay? We're gonna be calculating for Kraft Heinz company, we're gonna be calculating their enterprise value to the most recent 12 months of reported profit.

We've referred to that as the last 12 months ebitda, so LTM stands for last 12 months.

So we're trying to figure out how much profit they've made most recently using their most recent year's worth 12 months worth of data.

Okay? So we're gonna go through these in two stages. We've gotta calculate the enterprise value for craft Heinz first.

We then need to also calculate the ebitda.

It needs to be adjusted.

So cleaned up for those one-off items.

It also needs to cover the most recent 12 months of reported data.

So there's a few bits and pieces we've gotta do to get through this number, but the first thing we're gonna need to calculate is the enterprise value Warcraft.

Okay? So if we just jump back to the slides for a second.

The way that we calculate our, I've got a few slides that we'll come back to, I'll mention as we go through in order to calculate an enterprise value. So I've gone through to slide 12, then we're looking at these other companies, other companies that are listed that have a share price.

What we want to understand is their enterprise value, what the business is effectively worth if they had no debt.

Now we don't know what that enterprise value is.

All we can see for companies that are listed on a stock exchange is what their current share price is.

So this diluted market capitalization we can also really refer to as the equity value.

And we can see that because companies that are listed on an exchange will have a share price and we can as a result calculate that share price.

Now the good thing about that is that it's gonna be right up to date.

If we take a share price as of now or maybe yesterday's close, then we can calculate the company's equity value today.

Then what we need to do in this calculation is to say, okay, well what would this company be worth if it had no debt? Well, equity is effectively a source of financing for the company.

People who are owed money out of the business where it could be shut down.

And there's a whole lot of other people who are provided financ for the business who would be owed money if it were to be shut down.

We've got these non-con controlling interests.

So that's shareholders in subsidiaries in the group.

So not the parent company shareholders, other shareholders in subsidiaries in the group got preference shares, maybe preferred stock.

They would be owed money if the company is wound up.

And we've also got our debt numbers as well.

So money that we have borrowed as a business, if we'd to shut the business down, we would owe those people money back first before there's money left over for their shareholders.

So that's all of our sources of financing on the left hand side there.

On the right hand side, what we've got is everything the business owns, okay? So the business is gonna have some cash.

We typically say that's not part of the enterprise.

The enterprise you can almost think about as the operations of the business and the cash is just sitting there in the bank.

It's not really doing anything.

And also we know what it's worth.

$1 of cash in the bank is worth $1. So there's no question marks about its valuation.

There might also be some other things that the business owns that aren't really part of its day-to-Day operations for Kraft Heinz, making those snacks and selling 'em to customers.

We might have some short-term investments.

We might have some other assets that we own as a business that aren't really core to that, uh, business operation.

And the idea is that we're trying to make a comparison between enterprise values of these different businesses that is as clean as possible.

So if Kraft Heinz have got a little bit spuriously, but if they've got a museum maybe well then some of the value of that museum, other companies in this sector won't have that museum and therefore wouldn't be an asset of their business.

We're trying to make as clear a comparison as we can between the actual operations, the kind of food manufacturing process.

So we're gonna add everything up on the right hand side, take everything off on the left hand side, which will effectively derive for us or the enterprise value of this business is given what the share price is at the moment.

Okay, if that's all okay with everybody, what we're gonna do and is dive in and calculate this for craft Heinz.

And if we go back to Felix, first of all, what we're also gonna do is type this into our Excel file here. So we're just gonna go through that same process.

So starting on the bottom right hand side of the diagram that we looked at, we want to calculate first of all the equity value.

So if I'm trying to calculate the equity value, what I'm gonna need to get is our share price, okay? And if you go further up in the Felix page, you can see we've got the share price for RAF Heinz. This is yesterday's close. Okay? So that share price as at yesterday's close, $37 and 26 cents.

So $37 26 cents. Okay? What we then need to do, sorry, let's be crystal clear, that's our share price.

What we then need to do with that share price is multiply it by how many shares there are in the business and loads of different places you can find this. But the place we want to look, and again, we have our calculation here for us, but I'm just gonna show you where this data comes from, how you can find this data in Felix.

This basic number of shares outstanding.

This calculation is telling us that Heinz Craft has got essentially 1.2 billion shares. The numbers here are all in millions, but what you can do is actually click on this number to go to its source.

So if I click on this number, it'll jump you out into another tab, but it'll take you into the page in the most recent filing, from Graph Heinz.

So their most recent filing, which for their Q3 results, so to the end of September of 2023.

And at the bottom of that first page, it tells you how many shares were in issued on the date when this document was filed.

So that's as at the 28th of October of last year.

So let's grab that number.

And again, what we can do in Felix, if you just double click on the number just highlighted for us there and hit copy link, what that will do for us is then give us the ability to just go into Excel, hit control and V for paste and it'll give us that number.

Now that doesn't look very nice, but that's because it's the absolute value. If I go up into the formula bar at the top and divide it by 1 million, then it'll give us the 1226.5 that we're looking for before.

So this is our basic number of shares outstanding.

Next problem we've got is that listed companies will often have shares that they've said are gonna be issued but haven't been issued yet.

Okay, this is our dilution adjustment and again, we've got 12.5 million of these things.

So if we click on this link, there are no stock options which is helpful for us. But there are these RSUs, these are effectively stock grants.

So where the company said we are gonna give 12.48 million shares to employees, but they've gotta work for the company for let's say a three year investing period and they haven't worked that long yet.

So we are gonna give these out, we are gonna have to as a company, create these shares and give them out to those shareholders.

We just haven't done it yet. Okay? Now, as a investor in the business, I know that these shares might be created in the future, so I want to include those in my calculation as well.

So again, click on the link.

It's giving us that 12.476 million shares.

Again, it's coming from the the, in this instance annual results.

That's from the 2021 year end.

Think should be between two year end.

So that's what we've got in terms of the most UpToDate information.

So let's just take that and again drop that in.

Again, it's the absolute number, so we're gonna have to divide it by a million to get it back to the 12.5 that we're looking for.

And this is our dilution.

These shares don't exist yet, but they might exist in the future.

So I'm gonna include that in my calculation of the fully diluted shares outstanding.

I'm just gonna add those two together.

And then from that, that's how many shares exist now or will exist in the future.

Therefore to get my equity value and then gonna need to multiply the share price as at yesterday's close by this 1.239 billion shares to give us the equity value as at the end of yesterday.

Lemme just put some formatting on this.

Okay, so the blue colors are hard coded, typed in numbers and the black ones are gonna be calculations.

I'll just put the formulas in there so you can see where those numbers are all coming.

Okay, so that's our equity value and if you go back to Felix, you can see that this is replicating the number that we've got here as well.

So 46.2 billion, 46,165.7 million

of value for this craft.

Nestle Heinz, excuse me.

Okay, if we then go back to the slide here, we then gotta, having now identified this equity value, we now want to think about everything else that is providing finance that has a claim on the operations of the business.

And the first one we've got here is non-controlling interest.

And if we go back to Felix, you can see that we do have a non-controlling interest element.

These are people who own a small number of shares in some of the subsidiaries in the group.

And again, if we click on that link, it'll take us through the appropriate place in Felix.

Again, the most recent quarterly results.

And you can see that on the face of the balance sheets, that's the face of our balance sheet. We've got the non-controlling interest for $158 million.

Again, hover over it, click that link, we can then just come and paste it straight in, do it in the right place. That'd be helpful. And that's our non-controlling interest.

The fact that these are all underline means they're all hyperlinks. You can click on it, it will take you straight back into the appropriate page in Felix.

Also, if you're doing this work and then sharing with the manager that doesn't have Felix access, they can still click on these links and it will take them through to essentially your page in Felix where you made that link.

Okay? So this is something that you can use as an auditing tool to calculate these values. Send to a manager and they can review them and see the sources just by clicking on these hyperlinks. They don't need a Felix account to be able to access these hyperlinks.

Okay, so what else have we got then? In terms of this enterprise value equity, enterprise value bridge, we've got any preference shares or if we go and have a look on the Felix page, there's no preference shares there.

Also, if we were to have a look at the balance sheet, again, you'd see there's no preference shares here as well.

We do have, yeah, so there's no, there's these redeemable, non-control interest that's not treated as part of the non controlling interest number. Argue you argue.

So no preference shares down here in the equity section.

So nothing to worry about on that. What we do have is debts.

So in terms of our debt numbers, we do have again a breakdown of this $19.8 billion of debt.

If you click on that link again, it says that we've got no short-term debt.

We've got some current portion, long-term debt and also some long-term debt.

Alternatively, if you're already looking at the filing here in Felix, then you can just go straight to that current portion of long-term debt and come over to this six oh eights copy the link and again, when you go back into Excel, just paste it straight in.

Okay, so that's the current portion of long-term debts.

And then for the long-term debt, again it's already highlighted here for us, we can just click on that link.

You might be able to double click on it.

If you wanna highlight and create a link for yourself, just double click on it, that will then select the whole number.

Then just click save. Okay? So that'll create that link for you.

And then once you just click save or click copy link, you can just come and control V and paste it straight into Excel.

And that'll be our non-current or just long term there.

Okay, excellent.

We then go back to the bridge. We've gone up the right hand side entirely up the right hand side there. What we now wanna do is go down the left hand side.

So we need to see what cash we've got on the balance sheet.

And again, maybe not a huge surprise that you can see that on the face of this bridge there's cash down here, there's no investments, there is some cash down here that's just over $1 billion.

But if you are already in the document in the most recent quarterly results, that's the most recent published data by Heinz Craft, they haven't published their full year results for the 31st of December yet you can see the cache number here. Double click on the number and then click save.

It'll create the link for you and then again just paste it into Excel.

So nice and quickly, you can see this in terms of the numbers on the face of Felix, but also it's pretty easy once you've got the most recent filing up to actually create it for yourselves to be able to actually get to a point where we have the enterprise value of craft being the equity value plus the non-controlling interest plus the current portion long-term debt. And then non-current portion, long-term debt. That's all our sources of financing.

But then the business also owns $1 billion of cash, which we need to deduct to derive or imply what the enterprise value must be.

And we're gonna get 65.1, 65.2 billion bucks, Which is exactly what we've got on the face here of Felix Forest.

So two things from that, hopefully one you can rely on. Felix, these calculations are pretty robust in most instances.

If you find in some they're not, please out and let us know. We'll definitely put those fixes through.

We're have the ability to adjust those nice and quickly for you.

And the second thing is that, hopefully we've demonstrated that you can do it yourselves pretty quickly as well.

If we have the most recent filing up, you can create links nice and quickly for yourself and get 'em into Excel and create this bridge form.

The next thing that we're gonna look at doing is calculating our EBITDA number.

And the problem we've got with our EBITDA number is that we're looking for the last 12 months of published data.

And if we just think about this in terms of a uh, diagram for us what we might be able to say is that, okay, well if we think about a timeline, we're standing here in late January of 2024.

Okay? So we can sit here, this is December of 22, this is December of 23 and we're standing over here somewhere, okay? There's no results that have been released for the full year of 2023.

And what we want is the most recent 12 months of published data.

Now what we can see is that craft has their full year results for 2022 already.

Okay? You go into your Felix page, you can see at the very top here that the most recent annual results, the 10 k is for the financial year, full year 2022.

So we do have that available.

We're gonna look at that in a second.

We also can see that we do have the results for the first nine months of 2023.

We do have those Q3 results for 2023.

We've got the results up to Q3.

Now these do have the results for Q3 in isolation, but also for the year to date.

So for the first nine months of 2023.

So we do have those data points, but what we're actually most interested in what we wanna know is the most recent 12 months of published data.

So our LTM data is gonna be covering sort of this period, this will be the last 12 months of published data, which will take us from the end of September of 22, excuse me, through to the end of September 23.

That's the most recent 12 months where there is published and available data for us.

So we've got a bit of a problem here. Well how are we gonna get that numbers? The published results that we've got at the moment don't cover that same time period.

And we also don't want to just say, well let's just take a quarter of the full year results for 2022 because maybe Heinz doesn't o earn their revenue profits evenly through the year.

Maybe they make a whole lot of sales before the festive period.

And as a result their Q4 results may be higher than what you get in the rest of the year.

There is a solution for us though, not only when they publish the Q3 results for 2023, they also have comparable data, but the same nine month period up to September of 22.

So what we do to get to the last 12 months of reported profits, we'll take the full year results.

We'll then deduct from that the first nine months that will leave us with just the last three months of the full year, 2022 results financial year 22 results.

And then we're gonna add to that the first nine months of 2023.

So that's how we get to this LTM number.

We deduct the representative old quarter number and then add on the new quarters numbers too.

Okay? So let's put that into practice in relation to craft for us.

So what we're gonna need to do is down here, I'm gonna now calculate my LTM EBITDA.

So what I'm gonna get, hopefully if we can see it in their reported data, I'm gonna get my reported ebitda, okay? Now they might give me the results for the financial year 22.

I then want to deduct from that or refer to as the old quarter.

That's how it's often referred to. That's the first nine months in our instance.

And then I want to add on to that, the new quarterly data and that will then get me through to the LTM numbers, okay? But if we go back to what we were looking at on our first slide, what we wanna look at is not just the numbers on the face of the income statements.

What we want to get is if we go back to the very first slide, we want to get our normalized numbers, the adjusted numbers, okay? So we wanna remove any non-recurring, any one-off items.

So we've got the profits this company makes independent of these one-off items.

Now the good news is that these numbers are often given to us and often they are in the press release.

Now this is referred to as an 8 K.

So it's a press release that the company has to submit to the SEC for any US listed companies along with the financial results, the 10 Q or 10 K.

So if we click on that press release, what it'll give us is some summary data that is not the same as the numbers that need to be reported in the income statement or balance sheet.

And what you can see straight away is that there's this adjusted EBITDA that is referenced in this page.

Okay? Now if you just scroll down, it's a little bit, but page 13, that's some short pages in there. If you go onto page 13, what you'll see and numbers there, because I've already done this, what you'll see for us is that at the top here, there is an a reconciliation of the net income.

So that's the number in the income statement to an adjusted EBITDA.

Okay? So what we get already, we don't have to do the work ourselves.

We've got an EBITDA number that is reported to us by Heim.

So for the full year result, they're saying sure, although there might have been the full year result of profit for the shareholders 2.3 billion and operating profits, that's effectively before tax and interest.

That's $3.6 billion.

Actually that's the number that we're forced to show in the income statements because of all the accounting rules.

But actually we made a whole lot of one one-off items as well.

So there is some other adjustments here.

Firstly, adding back depreciation.

So that gets us from effectively kind of EBIT here to EBITDA, adding back depreciation, that's good, want that done already.

And then the other adjustments, if you wanna check them to make sure they're the adjustments that you would wanna make, these are what the company says gets us through to an adjusted EBITDA.

But you might think about, well what do I think their numbers should be? Do they all make sense? They all sound like they're one off items and absolutely divestitures don't happen all the time.

So restructuring, same idea, buying other companies. Deals don't happen all the time.

Losses on the hedges, again, impairments unlikely to recur all of the time. So they all sound like one-off items.

The only exception here I would suggest is this equity award compensation expense.

Now what companies often do is that they make an adjustment for these equity awards.

What you're required to do under accounting rules is show an expense equivalent to the value of the shares or stock options that you're giving to your employees as part of their stock-based compensation.

If you're doing that at all, there's no cash payment here, but it's the effective value that you're giving to them.

Companies often add this back to say that, okay, well we're adding back depreciation amortization and it's not a cash expense.

So let's do the same with other non-cash expenses.

The accounting rules require us to do it, but uh, we don't really think we should.

That's not, I don't think, we don't think with financial that's the right way of doing it because there is a consequence of making these stock options to your shareholders in that there are more shareholders, there's dilution in terms of how much of the business is owned by your existing shareholders.

There is a genuine cost here. It's not a non-cash item.

And as you said earlier on, EBITDA is useful when there's differences in accounting policies, when there are differences in terms of acquisition policies between companies and the sector.

Not because it's a non-cash item.

So I don't think that is a good adjustment to make.

So what I would do is say, well this is the number that RAF Heinz have told us, but I want to make an adjustment for the stock-based compensation that they've adjusted for. They've added back to say what it shouldn't be there, but I think it actually should be.

So double click on the number then it save or copy link and then paste it in.

And then again, this 148 stock-based compensation, they've added it back because they said it shouldn't have been in there because it was a non-cash expense. But I'm saying no actually it really should be.

It should be deducted.

It's a genuine cost of the business of running the business, providing compensation to your employees that goes away from your current shareholders, goes to the employees specifically and that will get me to what I think is a better adjusted EBITDA number.

Okay? So I'm gonna take the reported adjusted ebitda, that's the management adjusted EBITDA and get through to what I think is a better adjusted EBITDA number.

I'm going to deduct the stock-based compensation to make it actually be deducted.

Okay? So it's in the income statements.

Kraft Heinz added it back to say it's non-cash. We shouldn't have had it there at all from our perspective, I'm saying no, it really shouldn't been.

Okay. So that's the full year results that gets us the 12 months to the end of December, 2022.

But what I want is the LTM number.

So I need to find the nine months for the first nine months of 2022 and the first nine months of 2023 as well.

And the good news here is that when you go to Felix on that homepage of Felix, we do have the latest quarterly results for you.

And again, in the press release we have this nice reconciliation for us.

Craft times has been really helpful for us here.

They've actually followed exactly the same format.

So if you go down to page 13, you'll see exactly the same table and exactly the same place.

And the good news here is that not only do we have the nine months up until September of 2023, but also the comparable nine months from the previous year.

So the old quarter is the previous year. That's the 4260.

So if we copy that link, we can get that straight into Excel.

That's the first nine months of 2022.

I'm trying to dig deduct, I'm gonna be deducting that.

I also wanna get the stock based compensation for that period.

That's the 107.

If you double click on the number, it will select it straight away. The whole number, you haven't gotta select with your mouse the number, just double click it.

And then for the most recent nine months, that's the new quarter, the first nine months of 2023.

And also the adjustment for stock-based compensation.

I can just take the formula that I've got for the full year, I can then just copy it to the right.

Okay. So that we have the same formula being applied for each period.

We we're deducting the stock based compensation in each row, each column rather.

And then for the LTM number, all I've gotta do, we can do it for all three rows. We can just do it in the bottom if you want.

So gonna take the full year for 2022.

I'm gonna deduct from that the old quarter first nine months of 2022.

I'm gonna add on to this, the better numbers for the first nine months of 2023 to give me the LTM reported adjusted EBITDA.

If you like the management EBITDA, if I just copy that formula and put it down here, then you can see that I think a better adjusted normalized EBITDA is this 62 49.

You wanna be consistent across all of the companies that you're looking at in terms of the adjustments that you are making to draw up that comparable set.

But once we've done that, we've now got an EBITDA number in the most recent nine months of reported data, which is this 6249.

And from that I can now get an enterprise value to last 12 months.

EBITDA multiple for Kraft Heinz, which is simply gonna be the enterprise value that we calculated divided by the LTM adjusted my adjusted EBITDA number.

If you just hit ALT HJ and put a multiple style on it, put x after if you want Alt HJ, that cell styles.

And this is telling us that the enterprise value for Kraft Heinz is 10.4 times as big as the most recent reported 12 months of profit.

Okay? This is gonna be pretty similar to what we've got as the number reported here.

10.1, it's not exactly the same.

Because the denominator's not the same.

This is the forward number, the 2024 profit. Effectively we're using basically a lot of 23 but a bit of 22 profit as well.

Generally profits rise, that's the denominator going up.

And the high denominator means a lower multiple.

So the fact that the multiple is lower here, 10.1 when you're using next year's profits is entirely what you'd expect.

Okay, so no worries about this all, it doesn't tell us that this company is gonna fall in value, it's just we're using a different denominator, either denominator or further into the future. You're using the profit figure, the lower the multiple is gonna be. It doesn't make any difference for valuation as long as you're consistent about which time periods profit you are using in getting the comparable numbers from the comparable companies and then applying it to the same time period as profits for the company that you are trying to value.

So we're getting 10.4 times here, which is entirely we'd expect to see.

Okay, hopefully that's been useful for you in terms of understanding what comparable valuation approaches look like, where you get the underlying data for them.

Some of the challenges in getting the underlying data, but also how you can use Felix to pretty quickly come up with your own multiples as well.

And you haven't gotta rely on any other sort of data providers to do that.

You can get it for yourself from the source, from the actual reported filings, the 10 Ks and 10 Qs for US companies.

All of it's there in Felix.

Getting the numbers into Excel is nice and quick as well. Just double click the number and then paste it into Excel.

Hyperlinks back that can be audited by anybody.

If you save the file that you've been working on and send it to a manager for review, they can click on those hyperlinks that will take them into Felix.

They don't need a license.

They'll be able to see the source of that data as well.

Hope that's been useful. If you've got any questions, please to drop me into the chat function.

Otherwise, I'll hopefully see you again on another one of these sessions in the future.

Thanks very much.