Kion Model - Segments Corporate
- 02:38
How to consolidate segment revenues for an industrial company, Kion.
Glossary
backlog cycle length IndustrialsTranscript
We've worked out the revenue and EBITDA for the segments ITS and SCS.
We now would like to unify that into total revenue, and we're going to have to deal with a tricky area of reporting.
What's happening within Keon is that the segments are reporting revenue, but some of that revenue will be to other segments.
So for example, ITS might be supplying trucks to SCS to provide as part of their contract, they might be registering that as revenue, despite it being revenue within the group.
That revenue has now inflated the overall view of revenue because it's intragroup revenue I sale from one part of the business to another.
What will happen is we will then have some of the revenue, which is not real from the point of view of an external investor, and it needs to be eliminated.
We also have perhaps some services being bought from headquarters.
Perhaps there's a charge for it or other support functions, which also needs to be eliminated.
We'll also need to do the same thing for costs down here, but we won't be able to do that yet because we can't get to EBIT.
So for the moment, let's do the eliminations for corporate, for revenue.
The way we're going to do it is we're going to find the overall revenue of both segments.
Here's ITS and we're going to add SCS.
That means overall we have this revenue here, and we're going to say that historically the eliminations represented about 0.1%.
That's the forecast that we're going to roll forwards, and we're going to say that we're going to eliminate, not 0.1%, and that leads to total revenue with careful summing of the following.
What we've now got is nice clean revenue that's all to external third parties and has eliminated any interactions within the group parts of the business that are selling to each other.
That's all we can do for the time being on this tab, and that's because to do EBIT and other items like this, we're going to need to finish the model so that we can get overall depreciation.