Morade ABSA Yahya AMEZIAN Salma AMRI Maher-Arnaud ASSI Adrien BESIREVIC Andrei COSTEA Omar LAKHDISSI
morade.absa@edhec.com yahya.amezian@edhec.com salma.amri@edhec.com maher-arnaud.assi@edhec.com adrien.besirevic@edhec.com andrei.costea@edhec.com omar.lakhdissi@edhec.com
CGGVeritas S.A. Financial Analysis Report 29 April 2010
Contents Executive Summary .......................................................................................................................... 1 1
2
The Geophysical Business ........................................................................................................ 2 1.1
Introduction ......................................................................................................................... 2
1.2
The Management and Shareholders .................................................................................. 2
1.3
The Strategy ....................................................................................................................... 2
Financial Statements ................................................................................................................. 3 2.1
Precautionary notes ............................................................................................................ 3
2.2
Income Statement .............................................................................................................. 3
2.3
Balance Sheet .................................................................................................................... 5
2.4
Cash Flow Statement ......................................................................................................... 6
2.5
Leverage and Operations ................................................................................................... 7
2.6
Managerial Balance Sheet, Returns and EVA .................................................................... 8
APPENDIX ...................................................................................................................................... 10
Financial Analysis Report on CGGVeritas
29 April 2010
Executive Summary CGGVeritas is the world’s largest pure-play provider of geophysical services and products, active in all major regions. Its highly pro-cyclical business has been severely affected by the worsened economic conditions through a reduction in its revenues by -14% in 2009, but still managed to continue its increase in market share to 45% and outperform its main competitors on average. In 2009, cost of goods sold have decreased to -1.1 billion € whilst operating expenses have increased by 41% to 0.5 billion € temporarily stimulated by a restructuring of the fleet, lay-offs and increased research expenses. Overall operational costs have remained unchanged at -1.6 billion € but combined with lower sales lead to negative operating- and net income. Positive economic outlook for 2010 and solid oil & gas prices should see sales increase again. Total assets have decreased but largely driven by asset write-downs from fleet restructuring and legacy multi-client library surveys from Veritas. The relative composition of the balance sheet has however stayed unchanged. The ongoing modernization of the fleet to highly competitive levels will see the company well positioned to benefit from future market growth and consolidate its position. In Q1 2010, the average vessel age reached a low of 11.1 years, vessel availability rate slightly decreased to 92% whilst the vessel productivity rate increased to 90%. Operating cash flow has decreased to 0.6 billion € in 2009 mainly due to the asset write-downs. The 2009 investing cash-flow has remained unchanged over 2008 at level of 0.5 billion € and is expected to stay so over the next years as the company will consolidate its competitive position. A significant portion of debt has fixed payments and is thus not subject to market interest rate movements, although the fixed interest rates paid on debt are much higher than the prevailing market rates. The financing cash flow has steadily stayed at 0.2 billion €. The leverage position is overall stable with the total-debt-to-equity and financial leverage ratios staying unchanged at 0.5 and 1.8 respectively over the last 4 years whilst cash piling up to 480 million € in 2009. At a total debt of 1.4 billion € and financial interest of 108 million € in 2009 the company is well positioned for continued strained financing times. The working-capital-to-assets ratio has slightly increased in 2009 to 0.2 and the current and quick ratios significantly improved to 2.1 and 1.6 respectively. The interest coverage ratio decreased to 6.1 in 2009 after reaching 11.1 in 2008, having a positive outlook though for 2010. Current ratings are unfair and should be adjusted to reflect real situation. Working capital in 2009 has slightly decreased to 873 million €, but is well beyond the almost inexistent short-term financing. Capital employed was reduced to 4.36 billion € in 2009. ROA, ROE and ROCE have been negative in 2009, at -2.9%, -9.1% and -4.5% respectively. At an unchanged financial leverage ratio and only slightly decreasing total asset turnover in 2009, the main impact on the decrease in the ROE has stemmed from the worsening net profit margin. The after-tax WACC has revolved around 9.5% over the last 3 years. EVA has decreased from 2007 to 2008 and been highly negative in 2009 at a level of almost 20% of total equity.
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Financial Analysis Report on CGGVeritas
29 April 2010
1 The Geophysical Business 1.1 Introduction CGGVeritas is the leading global international geophysical company delivering a wide range of technologies, services and equipment to a broad base of customers mainly throughout the global oil and gas industry. It is also the largest pure-play company in its field. Its operations are mainly split into geophysical services, including Marine Seismic, Land Seismic and Processing & Imaging, and geophysical equipment, served mainly by the Sercel subsidiary. The services division is highly capital intensive as it is backed by a large fleet of vessels for its marine activities and expensive highly specialized equipment. The clients of the Marine and Land subdivisions are of two categories: contract, receiving exclusive tailor-made services, and multi-client, buying rights to access a general survey library. The main objective of geophysical services is reservoir performance and reduced technical risk.
1.2 The Management and Shareholders Robert Brunck is Chairman and CEO and Stéphane-Paul Frydman the CFO. The company does not have a staggered board, with 8 out of 13 director terms expiring in 2013, which can pose a threat in case of a hostile tender offer. Major shareholders on 31 March 2010 were Jupiter Asset Management (3.87%) and Institut Français du Pétrole (4.23%) the rest (91.9%) being free-float. The company has an internationally spread organizational structure.
1.3 The Strategy CGGVeritas’ main strategy is to continue to strengthen its competitive position in the global geophysical services and equipment markets by capitalizing on growth opportunities resulting from both the application of new technologies, from exploration to production and reservoir management, and from a worldwide presence. It focuses on internal growth by: responding to current market environment (through rigorously reducing costs across the organization by adjusting manufacturing and crew costs in line with the market outlook), developing and providing integrated services (developing synergies between data processing and reservoir services, compiling and analyzing seismic data of existing reservoirs using high-resolution images and 4D seismic expertise to assist its clients in better characterizing and predicting the properties and dynamic behavior of their reservoirs). Another internal strategy is to develop and utilize innovative technologies: through R&D teams, totaling approximately 581 employees, CGGVeritas seeks to improve existing products and maintain an active new product development program in all segments of the geophysical equipment market (land, marine and ocean bottom). We believe that growth in demand for geophysical services will continue to be driven in part by the development of new technologies. The industry is increasingly demanding clearer seismic imaging and better visibility, particularly underneath salt layers. As for external growth strategies, CGGVeritas has been active on the M&A market by multiple acquisitions since 2007 like Vibtech, OHM, Metrolog, Quest Geo Solutions and Cybernetix in the seismic equipment sector, and in the geophysical seismic acquisition with Norfield and the most successful since the Veritas merger: Wavefield Inseis, a Norwegian marine geophysical company providing proprietary data acquisition services and seabed seismic equipment. Wavefield also offers a portfolio of non-exclusive multi-client data to global exploration clients, developed in partnership with oil companies and governments. Page | 2
Financial Analysis Report on CGGVeritas
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2 Financial Statements 2.1 Precautionary notes The time interval used in extracting the financials is 2006 to 2009. Due to the January 2007 merger between CGG and Veritas, prior financial statements are not fully comparable with post-merger statements. For 2006 a pro-forma income statement has been released by CGGVeritas accounting for the pre-merger income statement of Veritas, though no balance sheet or cash flow statement. Some balance sheet or cash flow items in this report will hence be adjusted with the respective Veritas items. For the conversion of the U.S. Dollar expressed statements of Veritas and competitors included in this report, the Euro / U.S. Dollar exchange rates published by the Federal Reserve Bank of New York were used (Exhibit A.1). The Operating Expenses were adjusted to exclude Depreciation and Amortization (less amortization for Goodwill already stated separately) and a new Income Statement line, after EBITDA, was introduced for this purpose. The Income Statement, Balance Sheet and Cash Flow Statement as well as their vertically and horizontally common-sized versions are attached to the appendix together with the Managerial Balance Sheet and the table with ratios and other performance figures.
2.2 Income Statement Exhibit 2: Market share and Total market sales in billion €
Exhibit 1: Total sales, in billion € 2.6 2.4
2.5 2
6.1
6.0
3
5.2
5.0
2.2
2.0
8% 16%
9% 16%
8% 18%
6% 19%
38%
36%
32%
30%
38%
40%
43%
45%
1.5 1 0.5 0 2006
2007
2008
2009
2006
2007 CGV
Source: Company 20-F Reports; ow n computations
SLB
2008 PGS
IOB
2009 Total Market Sales
Source: Company 20-F and Annual Reports; ow n computations
Total sales, of which operating revenues are more than 99.5%, have steadily increased up to 2008, but decreased in 2009 at the same pace due to lower industrial activity globally. CGGVeritas has outperformed its competitors during both the expansion phase, CAGR 14.3% compared to 8%, as well as during 2009, -14% compared to -18%. Estimated market includes top players by sales, i.e. Exhibit 3: Total market sales breakdown by region, in billion € and % CGGVeritas, Westerngeco, PGS and ION Geophysical.1 Since 2006 CGGVeritas has surpassed Westerngeco as the market leader and Asia Pacific America 1.2 continuously gained market share whilst its main 1.7 25% 33% competitor has significantly reduced its share. CGGVeritas’ leading position is not threatened on the medium term, unless a market consolidation occurs (e.g. between Westerngeco and PGS). EMEA 2.1 42% Source: Company 20-F and Annual Reports; ow n computations
1
CGGVeritas global sales distribution is very similar to that of the overall market, with EMEA being the main market followed by the Americas
Westerngeco is the geophysical division of Schlumberger. In 2009, PGS sold its land division; sales from this division are excluded for prior years. Westerngeco and ION have the same revenue streams as CGGVeritas, except Processing; PGS only operates a marine division.
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Financial Analysis Report on CGGVeritas
29 April 2010
and Asia Pacific (see Exhibits 3, 4). The main currency for contract bidding prices is the U.S. Dollar. Hence, 80% of CGGVeritas’ operating revenues are in USD whilst 2/3 of its operating expenses are in currencies other than the Euro, in which its financial statements are consolidated. Exhibit 4: Total sales breakdown by region, in billion € A EUR/USD variance of 10% would 0.1 approximately affect operating income by $10 0.6 0.6 0.6 0.4 million. The company does not provide the yearly 0.1 currency impacts for its assets and cash flows. 0.4 0.8 1.0 Estimating these would be very subjective due to 1.0 revenue and expense seasonality. 0.4 1.0
The most important revenue stream is marine seismic services followed by geophysical 2006 2007 2008 2009 equipment (mainly through the Sercel subsidiary). America America Veritas EMEA EMEA Veritas Asia Pacific Asia Pacific Veritas Land seismic services had a descending trend Source: Company 20-F and 10-K Reports since 2006 whilst equipment sales have increased Note: 2006 sales breakdow n adjusted to include pre-merger Veritas sales during economic expansion and decreased in 2009. Processing and Imaging have stayed almost unchanged. Sales from contract clients have strongly risen over the past 4 years and represented almost 75% of total sales in 2009. 0.9
0.5
0.7
Exhibit 5: Total sales breakdown by business, in billion €
0.5 0.1
Exhibit 6: Total sales breakdown by clients, in billion €
0.7
0.8
0.6
0.3
0.3
0.3
1.0
1.1
1.1
0.3 0.6
0.5
0.4
1.1
1.0
2008
2009
0.2
Services
0.4 0.4
0.5
0.9 0.4
0.2 0.1 2006 Land
Land Veritas
Marine
0.5
0.5
0.3
2007
2008
2009
Marine Veritas
Processing & Imaging
2006
Geophysical Equipment
Source: Company 20-F and 10-K Reports Note: 2006 sales breakdow n adjusted to include pre-merger Veritas sales
2007 Contract
Contract Veritas
Multi-client
Multi-client Veritas
Source: Company 20-F and 10-K Reports Note: 2006 sales breakdow n adjusted to include pre-merger Veritas sales
Sales in the geophysical sector are highly cyclical (Exhibit 7). From 2006 to 2008 the CAGR of world GDP was 5% and that of total sales 37%, whilst in 2009 GDP decreased by -2.6% and total sales by -14%. Since Q4 2008 the correlation between the share price and the spot price of Brent Crude has dramatically increased, 0.7 compared to 0.3 prior to Q4 2008. IMF projects a 2.9% increase in global GDP for 2010 which combined with potentially higher oil prices would positively affect CGGVeritas’ revenues. Exhibit 8: CGGVeritas vs. Brent Crude Spot, weekly in €
Exhibit 7: Total sales growth vs. world GDP growth, yoy % 50%
350
40%
300 250
30%
200
20%
150 10% 2.9%
0%
100 50
-10%
0
-14.0%
-20% 2006
2007 Total Sales
2008
2009 World GDP
Source: Company 20-F Reports; IMF; ow n computations Note: 2005 sales adjusted to include pre-merger Veritas sales
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2010f CGGVeritas
Brent Crude Spot
Source: Reuters; U.S. Energy Information Administration; ow n computations
Financial Analysis Report on CGGVeritas
29 April 2010
Exhibit 9: COGS and OPEX, in billion € 2006
Exhibit 10: Operating income breakdown by business, in billion €
2007
2008
2009
0
(0.2)
(0.3)
(0.3)
-0.5
(0.5)
-1 (1.1)
(1.1)
(1.2)
(1.2)
0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 -0.1 -0.2 -0.3 -0.4
not adjusted 0.17
COGS
0.35
0.30 0.15
0.13 -0.26
2006
-1.5
0.27
0.27
2007
2008
Servives OI
OPEX
2009
Equipment OI
Source: Company 20-F and 10-K Reports Note: 2006 OI breakdow n is not adjusted to include pre-merger Veritas OI
Source: Company 20-F Reports
Operational expenses have strongly increased in 2009 compared with prior years to -0.5 billion €, whilst the costs of goods sold remained in the usual -1.1 to -1.2 billion € range. The 2009 increase in operational expenses was mainly due to lay-off costs of 300 persons and decommissioning costs of 9 seismic vessels, which were replaced with high-end streamer vessels due to competitive pressures on this segment. Higher research costs, attributable to the business consolidation with Wavefield and higher R&D expenses for the equipment division, also played a role. Overall, 2009 costs have stayed unchanged at -1.6 billion €. Whilst operating income attributable to equipment has halved in 2009, services have entered negative territory leading overall operating income to a negative -161 million € (Exhibit 10), mainly due to the restructuring costs of the fleet. Relative to Westerngeco and PGS, CGGVeritas has usually had lower net incomes, whilst in 2009 it suffered a negative net income. On average, CGGVeritas has been priced at lower P/E ratios compared to its rivals. The industry overall P/E ratio stays fairly around 20, reflecting investors’ relatively high expectations for growth.
Exhibit 11: Net income (loss), in billion € 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 -0.1 -0.2 -0.3 -0.4
Exhibit 12: P/Es of CGV and competitors 60
0.6 0.5
50
0.5 0.3
0.3
0.3
40
0.3
0.2
0.2
0.1
30 0.1
0.0
0.0
20
20
17
10 -0.1
-0.2 (0.3) 2006
2007 CGV
2008 SLB
PGS
IOB
Source: Company 20-F Reports and Annual Reports
2009
0 -10
-5
-7
-20 2006
2007 CGV
2008 SLB
PGS
2009
IOB
Source: Company 20-F and Annual Reports; Google Finance; ow n computations
2.3 Balance Sheet Total assets in 2009 have declined to 4.9 billion € just above the 2007 level after reaching a peak in 2008, whilst the composition of the balance sheet has stayed almost unchanged from 2006 to 2009 in relative terms. The 2009 decrease is mainly attributed to the restructuring of the fleet and amortizations of intangible assets (on legacy multi-client surveys inherited from Veritas) and goodwill. Lower accounts receivable and inventories are another cause. Assets attributed to services, primarily hit by the former impact, are much higher those attributed to equipment since they represent heavy machinery, i.e. fleet of 18 vessels. Page | 5
Financial Analysis Report on CGGVeritas
29 April 2010
Exhibit 13: Total assets, in billion € 6 5
Exhibit 14: Balance sheet breakdown by main items, in billion € not adjusted
Goodwill Adjustment Bookvalue Adjustment
5.6 4.9
4.6
4 1.7 3
0.9
2.4
3.0
2.7
0.5
1.6
1.6
1.5
0.4
0.7
1.0
0.7
3.4
3.9
3.5
1.2
1.7
1.4
2007
2008
2009
1.0 0.9
2 1.8
0.8
1
2006
0 2006
2007
2008
2009
Current Assets
Exhibit 15: Identifiable assets breakdown by business, in billion € not adjusted 0.7
0.8
0.7
4.0
4.6
3.9
2007
2008
2009
0.6
1.1
Geophysical Servives
Geophysical Equipment
Source: Company 20-F and 10-K Reports Note: 2006 assets breakdow n are not adjusted to include pre-merger Veritas assets
Exhibit 16: Key business indicators 20
95% 17.7
16
93%
92% 15
12
92% 90%
89%
88%
11.1
12 8
Current Liabilities
Non-current Liabilities
Total Equity
Source: Company 20-F Reports Note: 2006 figures are not adjusted w ith pre-merger Veritas data
Source: Company 20-F Reports; ow n computations
2006
Non-current Assets
90%
85%
83% 80%
4
CGGVeritas has taken the opportunity in 2009 to restructure its fleet by decommissioning older ships, hereby reducing its average fleet age considerably (Exhibit 16), and equipping or updating existing ones with the latest technology (mainly from its Sercel subsidiary). This has had a negative impact on the asset structure and cash flows but will pay off in the following years as the company has improved its already competitive position. This initiative will continue through 2010 and 2011 as it wall 2 industry benchmark vessels. Although the vessel availability rate (i.e. average capability of vessel to meet demand) has decreased in Q1 2010 to 90%, after a slight increase in 2009, the vessel production rate (i.e. effective utilization of vessel once available) has steadily increased over the last 4 years to reach 92% in Q1 2010.
75%
0 2007 Average vessel age
2008
2009 Vessel availability rate
Source: Company 20-F Reports and Q4 2009 presentation
2.4 Cash Flow Statement
2010 Vessel production rate
Exhibit 17: Operating, investing and financing cash flows, in billion € 1.5 1.0
0.6 After a sustained increase up to 2008, the not adjusted 0.5 operating cash flow has decreased to 600 0.0 million € in 2009 mainly due to the major asset (0.2) -0.5 (0.5) write-downs. The 2009 investing cash-flow has -1.0 remained unchanged over 2008 at a fairly high -1.5 level of 500 million € and is expected to stay so -2.0 over the next years as the company will 2006 2007 2008 2009 continue to invest in its fleet and multi-client Operating CF Investing CF Financing CF Total cash flow survey library. The 1.5 billion € level in 2007 Source: Company 20-F Reports has been extraordinary due to a seasoned Note: 2006 figures are not adjusted w ith pre-merger Veritas data equity offering aimed at financing the acquisition of Veritas. The services division consumes more than 92% of total capital investments (Exhibit 18). Usually the company has managed to offset its principal payments with new issuance of debt. The unusually high and positive financing cash flow of 2007 is due to the debt raising for the Veritas merger. A significant portion of the company’s debt
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Financial Analysis Report on CGGVeritas
29 April 2010
has a fixed payment schedule and is thus not subject to market interest rate movements, although the rates it pays are much higher than the prevailing market rates. Exhibit 18: CAPEX breakdown by business, in billion € not adjusted 0.03
0.03
0.03
Exhibit 19: D-E ratios and Cash of CGGVeritas and its main competitors 3.0
0.03
0.7
0.7
adjusted
2.6
2.5
0.5
0.6 0.5
2.0
0.4 0.20
0.61
0.50
1.5
0.42
0.3
0.3
1.1 0.9
1.0
0.2
0.6 0.5 0.2
0.5 0.3
0.5
0.1 0.0
0.0 2006
2007 Geophysical Servives
2008
2006
2009
Geophysical Equipment
CGV
Source: Company 20-F and 10-K Reports Note: 2006 CAPEX breakdow n is not adjusted to include pre-merger Veritas CAPEX
2007
2008
SLB
PGS
2009 IBO
CGV Cash
Source: Company 20-F and Annual Reports; ow n computations Note: 2006 figures adjusted w ith pre-merger Veritas data
2.5 Leverage and Operations The company has an overall stable leverage position with the total-debt-to-equity and financial leverage ratios staying unchanged at 0.5 and 1.8 respectively over the last 4 years whilst cash and cash equivalents almost doubling over the same period to 480 million € in 2009. At a total debt of 1.4 billion € and financial interest of 108 million € in 2009 the company is well positioned for continued strained financing times. Also, the working-capital-to-assets ratio has slightly increased in 2009 to 0.2 and the current and quick ratios significantly improved to 2.1 and 1.6 respectively showing that the company is not facing problems in meeting its short-term obligations. A negative sign however comes from the interest coverage ratio which decreased to 6.1 in 2009 after reaching 11.1 in 2008, but given the positive prospectus for 2010 this situation should again improve. Exhibit 20: Other leverage ratios
Exhibit 21: Current, Quick and WC-to-Assets ratios are at good levels…
12
2.5 11.1
10 8 6
2.1
2.0
1.6
1.5 adjusted
6.1 1.0
4 2
1.8
0
0.5
Veritas did not operate on inventories 0.2
0.0 2006
2007 Times-interest-earned
2008 Financial Leverage Ratio
Source: Company 20-F Reports; ow n computations Note: 2006 figures adjusted to include pre-merger Veritas data
2009
2006
2007 Current Ratio
2008 Quick Ratio
2009 WC-to-Assets Ratio
Source: Company 20-F Reports; ow n computations Note: 2006 figures adjusted w ith pre-merger Veritas data
The decrease in the interval measure, caused by a 41% increase in operating expenses and -17% decrease in liquid current assets, may as well be worrying, but since the 2009 increase in operating costs was only temporary the measure should improve in 2010. Operationally, the company should lower its steadily increasing cash conversion cycle and reduce the continuing negative mismatch between the duration of receivables and that of payables. We hence believe that the debt ratings (Exhibit A.12) situated just below investment grade are not funded and should be adjusted in the range of A to BBB according to the rating criteria of S&P.
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Financial Analysis Report on CGGVeritas
29 April 2010
Exhibit 22: …whilst the Interval Measure is decreasing, in days
Exhibit 23: Efficiency ratios, in days
2,500
120
107
100
2,000
Negative mismatch
80 1,500
60
1346
40
1,000 816
20
500
0 2007
2008
2009
0 2006
2007
2008
DIO
2009
Source: Company 20-F Reports; ow n computations Note: 2006 figures adjusted w ith pre-merger Veritas data
DRO
DPO
CCC
Source: Company 20-F Reports; ow n computations
2.6 Managerial Balance Sheet, Returns and EVA The company had steadily increasing positive working capital between 2006 and 2008 with a slight decrease to 873 million € in 2009, but well beyond its almost inexistent short-term financing. The significant decrease of 523 million € in capital employed to 4.36 billion € in 2009 was mainly caused by asset write-downs.
Exhibit 24: Managerial balance sheet, in billion € 6.0 5.0 4.0 3.0 not adjusted 2.0 1.0 0.0 2006 Short-term Financing
2007 Long-term Financing
2008
2009
Working Capital
Non-current Assets
ROA, ROE and ROCE have all seen a major improve in 2007 due to the Veritas acquisition, an
Source: Company 20-F Reports; ow n computations Note: 2006 figures are not adjusted w ith pre-merger Veritas data
unchanged level in 2008 and a sudden slide into negative territory in 2009. At an unchanged financial leverage ratio and only slightly decreasing total asset turnover in 2009, the main impact on the decrease in the ROE has stemmed from the worsening net profit margin. This is a sign of the intense competition in the sector and the 2009 economic downturn.
Exhibit 25: ROA, ROE and ROCE, adjusted for 2006 and 2007 15% 10% 5% 0% -2.9% -4.1%
-5% pre-merger post-merger
-9.5%
-10% -15% 2006
2007 ROA
The cost of equity of 13% is based on a bootstrapped empirically estimated beta of the share returns against the world MSCI returns (1.7 in 2009, Exhibit A.13), a historical global risk-free rate of 4.7% and a historical global equity risk premium of 5%.2 The cost of debt is estimated from the interest payments. Using the effective tax rate, the after-tax WACC has revolved around 9.5% over the last 3 years. The difference between the ROCE and after-tax WACC is multiplied with the capital employed to obtain the economic value added. EVA has decreased from 2007 to 2008 and been highly negative in 2009 at a level of almost 20% of total equity. 2
2008 ROE
2009
ROCE
Source: Company 20-F Reports; ow n computations Note: 2005/2006/2007 figures are adjusted w ith the respective pre-merger items
Exhibit 26: Trial DuPont analysis for ROE 2.5
60% 50%
2.0
40% 30%
1.5
20% 1.0
10% 0%
0.5 -9.5%
-10%
0.0
-20% 2007 Net profit margin
2008 Total asset turnover
2009 ROE
Financial leverage ratio
Source: Company 20-F Reports; ow n computations Note: 2006/2007 figures are adjusted w ith the respective pre-merger items
Global data was used to reflect firm global activity. The Worldwide Equity Premium: A Smaller Puzzle, 2006, Dimson, Marsh, Staunton
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Financial Analysis Report on CGGVeritas
29 April 2010 Exhibit 28: …whilst EVA has decreased, in billion €
Exhibit 27: After-tax WACC has increased…. 40%
200
35%
100
30%
0
25%
-100
20%
126.6
86.3
-200
15%
-300 10.7%
10%
-400
5% -500
0% 2007 Cost of debt
2008 Effective tax rate
2009 Cost of equity
Source: Company 20-F Reports; IMF; ow n computations
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after-tax WACC
(530.6)
-600 2007
2008
Source: Company 20-F Reports; IMF; ow n computations
2009
Financial Analysis Report on CGGVeritas
29 April 2010
APPENDIX
Exhibit A.2: Income Statement
2006
2007
2008
2009
in million € Operating revenues Other income from ordinary activities Total Incom e from ordinary activities Cost of operations (-) * Gross Profit Research and development expenses — net (-) Selling, general and administrative expenses (-) Other revenues (expenses) — net (-) Operating Expenses EBITDA Depreciation and amortization (-) * Reduction of goodw ill (-) EBIT Expenses related to financial debt (-) Income provided by cash and cash equivalents Cost of financial debt, net Derivative and other expenses on convertible bonds (-) Other financial income (loss) EBT of consolidated com panies Income Tax Expense (-) Net Incom e (Loss) of consolidated com panies Equity in income of affiliates Net Incom e (Loss) Attributable to Shareholders Attributable to Minority Interests * Cost of operations w ere adjusted to exclude depreciation and amortization; a new line after EBITDA w as added to this respect
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1,990.2 1.9 1,992.1 (1,202.6) 789.5 (57.0) (195.7) 4.2 (248.5) 541.0 (186.6) 354.4 (137.7) 19.0 (118.7) (23.0) (10.2) 202.5 (96.4) 106.1 10.1 116.2 114.6 1.6
2,374.1 1.2 2,375.3 (1,134.7) 1,240.6 (51.3) (231.0) 18.4 (263.9) 976.7 (487.6) 489.1 (121.7) 12.6 (109.1) (5.2) 374.8 (129.4) 245.4 4.2 249.6 245.5 4.1
2,602.5 1.7 2,604.2 (1,233.0) 1,371.2 (43.8) (256.1) (36.4) (336.3) 1,034.9 (489.5) (4.8) 540.6 (93.0) 9.2 (83.8) (11.5) 445.3 (108.3) 337.0 3.0 340.0 332.8 7.2
2,233.2 7.5 2,240.7 (1,115.8) 1,124.9 (62.1) (243.3) (167.8) (473.2) 651.7 (594.7) (217.6) (160.6) (107.7) 2.5 (105.2) (11.2) (277.0) 9.8 (267.2) 8.3 (258.9) (264.3) (5.4)
Financial Analysis Report on CGGVeritas
29 April 2010
Exhibit A.3: 2006
2007
2008
2009
251.8 301.1 188.7 18.0 63.1 0.4 823.1 43.4 19.2 46.2 455.2 127.6 267.4 959.0 1,782.1
254.3 601.9 240.2 34.6 89.6 1,220.6 81.4 32.0 44.5 660.0 680.5 1,928.0 3,426.4 4,647.0
516.9 712.3 287.9 102.2 101.5 7.6 1,728.4 109.2 26.2 72.9 822.4 820.0 2,055.1 3,905.8 5,634.2
480.3 564.1 223.8 66.3 89.5 13.3 1,437.3 74.3 35.9 99.0 677.7 728.9 1,868.1 3,483.9 4,921.2
Bank overdrafts Current portion of financial debt Trade accounts and notes payables Accrued payroll costs Income taxes payable Advance billings to customers Provisions — current portion Other current liabilities Current Liabilities Deferred tax liabilities Provisions — non-current portion Financial debt Other non-current liabilities Non-current Liabilities Total Debt TOTAL LIABILITIES
6.5 38.1 161.2 74.4 37.7 45.9 10.4 31.3 405.5 66.5 25.5 361.0 23.7 476.7 405.6 882.2
17.5 44.7 256.4 113.2 59.1 51.9 9.6 109.0 661.4 157.7 76.5 1,298.8 27.0 1,560.0 1,361.0 2,221.4
8.2 241.5 286.2 144.3 85.5 43.5 20.7 173.3 1,003.2 223.8 82.4 1,296.3 29.9 1,632.4 1,546.0 2,635.6
2.7 113.5 179.8 118.5 42.5 23.8 40.2 158.7 679.7 120.7 104.6 1,282.8 31.9 1,540.0 1,399.0 2,219.7
Common stock Additional paid-in capital Retained earnings Treasury shares Net income (loss) for the period — Attributable to the Group Income and expense recognized directly in equity Cumulative translation adjustment Total Equity Minority interests TOTAL EQUITY AND MINORITY INTERESTS
35.2 394.9 320.6 3.0 157.1 4.8 (38.6) 877.0 22.9 899.9
54.9 1,820.0 538.6 (3.9) 245.5 (5.1) (248.4) 2,401.6 24.0 2,425.6
60.2 1,964.7 799.4 (18.1) 332.8 (2.5) (176.4) 2,960.1 38.5 2,998.6
60.5 1,965.9 1,136.0 (13.5) (264.3) 0.9 (224.2) 2,661.3 40.2 2,701.5
Balance Sheet in million € Cash and cash equivalents Trade accounts and notes receivable, net Inventories and w ork-in-progress, net Income tax assets Other current assets, net Assets held for sale, net Current Assets Deferred tax assets Investments and other financial assets, net Investments in companies under equity method Property, plant and equipment, net Intangible assets, net Goodw ill, net Non-current Assets TOTAL ASSETS
Page | 11
Financial Analysis Report on CGGVeritas
29 April 2010
Exhibit A.4: Cash Flow Statement
2006
2007
2008
2009
in million € Net income (loss) Depreciation and amortization Multi-client surveys amortization Variance on provisions Stock based compensation expenses Net gain (loss) on disposal of fixed assets Share in profits of affiliates Dividends received from affiliates Other non-cash items Net cash including net cost of financial debt and incom e tax Less net cost of financial debt Less income tax expense Net cash excluding net cost of financial debt and incom e tax Income tax paid Net cash before changes in w orking capital — change in trade accounts and notes receivables — change in inventories and w ork-in-progress — change in other current assets — change in trade accounts and notes payable — change in other current liabilities Impact of changes in exchange rate on financial items Net Cash from Operating Activities Total capital expenditures (including variation of fixed assets suppliers, excluding multi-client surveys) Investments in multi-client surveys Proceeds from disposals of tangible & intangible assets Total net proceeds from financial assets Acquisition of investments, net of cash & cash equivalents acquired Impact of changes in consolidation scope Variation in loans granted Variation in subsidies for capital expenditures Variation in other non-current financial assets Net Cash from Investing Activities Repayment of long-term debt Total issuance of long-term debt Lease repayments Change in short-term loans Financial expenses paid Net proceeds from capital increase: — from shareholders — from minority interest of integrated companies Dividends paid and share capital reimbursements: — to shareholders — to minority interest of integrated companies Acquisition/disposal from treasury shares Net Cash from Financing Activities Effect of exchange rates on cash Net increase (decrease) in cash and cash equivalents Cash & Cash Equivalents - Beginning of Year Cash & Cash Equivalents - End of Period
Page | 12
158.7 106.0 80.6 4.6 7.4 (5.3) (10.1) 4.3 31.5 377.7 25.4 83.2 486.3 (80.4) 405.9 (18.8) (40.0) (5.8) 5.0 20.1 (19.0) 347.4
249.6 179.1 308.5 2.0 20.6 (0.3) (4.2) 5.3 (9.2) 751.4 109.1 129.4 989.9 (144.1) 845.8 (133.0) (41.4) (12.8) (13.3) 22.5 (20.5) 647.3
340.0 233.5 260.8 2.8 23.8 2.0 (3.0) 1.4 4.4 865.7 83.8 108.3 1,057.8 (137.5) 920.3 (39.7) (26.6) 9.7 (17.5) 30.8 8.6 885.6
(258.9) 523.0 289.3 27.2 10.7 (0.3) (8.3) 0.7 (4.0) 579.4 105.2 (9.8) 674.8 (74.2) 600.6 95.7 59.4 22.4 (121.5) (33.5) (6.3) 616.8
(149.2) (61.5) 6.1 16.8 (48.3)
(230.5) (371.4) 27.4 2.8 (1,019.1)
(155.4) (343.4) 1.5 8.8 (6.0)
(0.2) (0.2) (6.9) (243.4) (131.9) 208.3 (19.6) (2.4) (23.8)
(0.2) (0.1) 18.0 (1,573.1) (622.8) 1,698.3 (10.0) 12.0 (123.5)
(7.6) (0.1) (1.3) (503.5) (64.7) 39.2 (7.2) (9.7) (82.9)
(170.1) (229.3) 7.4 (84.2) (1.7) (0.5) (0.1) (1.2) (479.7) (266.9) 244.9 (36.2) (5.6) (106.7)
12.4 (0.3) 4.1 46.8 (11.4) 139.4 112.4 251.8
9.1 (6.0) (6.9) 950.2 (21.9) 2.5 251.8 254.3
1.9 (1.4) (14.1) (138.9) 19.4 262.6 254.3 516.9
1.5 (2.6) 4.6 (167.0) (6.7) (36.6) 516.9 480.3
Financial Analysis Report on CGGVeritas Exhibit A.5: Vertically Common-sized Income Statement Operating revenues Other income from ordinary activities Total Incom e from ordinary activities Cost of operations (-) Gross Profit Research and development expenses — net (-) Selling, general and administrative expenses (-) Other revenues (expenses) — net (-) Operating Expenses EBITDA Depreciation and amortization (-) * Reduction of goodw ill (-) EBIT Expenses related to financial debt (-) Income provided by cash and cash equivalents Cost of financial debt, net Derivative and other expenses on convertible bonds (-) Other financial income (loss) EBT of consolidated com panies Income Tax Expense (-) Net Incom e (Loss) of consolidated com panies Equity in income of affiliates Net Incom e (Loss) Net Income (Loss) attributable to shareholders Net Income (Loss) attributable to minority interests
Page | 13
29 April 2010
2006 100% 0% 100% -60% 40% -3% -10% 0% -12% 27% -9% 0% 18% -7% 1% -6% -1% -1% 10% -5% 5% 1% 6% 6% 0%
2007 100% 0% 100% -48% 52% -2% -10% 1% -11% 41% -21% 0% 21% -5% 1% -5% 0% 0% 16% -5% 10% 0% 11% 10% 0%
2008 100% 0% 100% -47% 53% -2% -10% -1% -13% 40% -19% 0% 21% -4% 0% -3% 0% 0% 17% -4% 13% 0% 13% 13% 0%
2009 100% 0% 100% -50% 50% -3% -11% -7% -21% 29% -27% -10% -7% -5% 0% -5% 0% 0% -12% 0% -12% 0% -12% -12% 0%
Financial Analysis Report on CGGVeritas Exhibit A.6: Vertically Common-sized Balance Sheet Cash and cash equivalents Trade accounts and notes receivable, net Inventories and w ork-in-progress, net Income tax assets Other current assets, net Assets held for sale, net Current Assets Deferred tax assets Investments and other financial assets, net Investments in companies under equity method Property, plant and equipment, net Intangible assets, net Goodw ill, net Non-current Assets TOTAL ASSETS
29 April 2010
2006
2007
2008
2009
14% 17% 11% 1% 4% 0% 46% 2% 1% 3% 26% 7% 15% 54% 100%
5% 13% 5% 1% 2% 0% 26% 2% 1% 1% 14% 15% 41% 74% 100%
9% 13% 5% 2% 2% 0% 31% 2% 0% 1% 15% 15% 36% 69% 100%
10% 11% 5% 1% 2% 0% 29% 2% 1% 2% 14% 15% 38% 71% 100%
Bank overdrafts Current portion of financial debt Trade accounts and notes payables Accrued payroll costs Income taxes payable Advance billings to customers Provisions — current portion Other current liabilities Current Liabilities Deferred tax liabilities Provisions — non-current portion Financial debt Other non-current liabilities Non-current Liabilities Total Debt TOTAL LIABILITIES
0% 2% 9% 4% 2% 3% 1% 2% 23% 4% 1% 20% 1% 27% 23% 50%
0% 1% 6% 2% 1% 1% 0% 2% 14% 3% 2% 28% 1% 34% 29% 48%
0% 4% 5% 3% 2% 1% 0% 3% 18% 4% 1% 23% 1% 29% 27% 47%
0% 2% 4% 2% 1% 0% 1% 3% 14% 2% 2% 26% 1% 31% 28% 45%
Common stock Additional paid-in capital Retained earnings Treasury shares Net income (loss) for the period — Attributable to the Group Income and expense recognized directly in equity Cumulative translation adjustment Total Equity Minority interests TOTAL EQUITY AND MINORITY INTERESTS
2% 22% 18% 0% 9% 0% -2% 49% 1% 50%
1% 39% 12% 0% 5% 0% -5% 52% 1% 52%
1% 35% 14% 0% 6% 0% -3% 53% 1% 53%
1% 40% 23% 0% -5% 0% -5% 54% 1% 55%
Page | 14
Financial Analysis Report on CGGVeritas Exhibit A.7: Vertically Common-sized Cash Flow Statement Net income (loss) Depreciation and amortization Multi-client surveys amortization Variance on provisions Stock based compensation expenses Net gain (loss) on disposal of fixed assets Share in profits of affiliates Dividends received from affiliates Other non-cash items Net cash including net cost of financial debt and incom e tax Less net cost of financial debt Less income tax expense Net cash excluding net cost of financial debt and incom e tax Income tax paid Net cash before changes in w orking capital — change in trade accounts and notes receivables — change in inventories and w ork-in-progress — change in other current assets — change in trade accounts and notes payable — change in other current liabilities Impact of changes in exchange rate on financial items Net Cash from Operating Activities Total capital expenditures (including variation of fixed assets suppliers, excluding multi-client surveys) Investments in multi-client surveys Proceeds from disposals of tangible & intangible assets Total net proceeds from financial assets Acquisition of investments, net of cash & cash equivalents acquired Impact of changes in consolidation scope Variation in loans granted Variation in subsidies for capital expenditures Variation in other non-current financial assets Net Cash from Investing Activities Repayment of long-term debt Total issuance of long-term debt Lease repayments Change in short-term loans Financial expenses paid Net proceeds from capital increase: — from shareholders — from minority interest of integrated companies Dividends paid and share capital reimbursements: — to shareholders — to minority interest of integrated companies Acquisition/disposal from treasury shares Net Cash from Financing Activities Effect of exchange rates on cash Net increase (decrease) in cash and cash equivalents Cash & Cash Equivalents - Beginning of Year Cash & Cash Equivalents - End of Period
Page | 15
29 April 2010
2006
2007
2008
2009
63% 42% 32% 2% 3% -2% -4% 2% 13% 150% 10% 33% 193% -32% 161% -7% -16% -2% 2% 8% -8% 138%
98% 70% 121% 1% 8% 0% -2% 2% -4% 295% 43% 51% 389% -57% 333% -52% -16% -5% -5% 9% -8% 255%
66% 45% 50% 1% 5% 0% -1% 0% 1% 167% 16% 21% 205% -27% 178% -8% -5% 2% -3% 6% 2% 171%
-54% 109% 60% 6% 2% 0% -2% 0% -1% 121% 22% -2% 140% -15% 125% 20% 12% 5% -25% -7% -1% 128%
-59% -24% 2% 7% -19% 0% 0% 0% -3% -97% -52% 83% -8% -1% -9% 0% 5% 0% 0% 0% 0% 2% 19% -5% 55% 45% 100%
-91% -146% 11% 1% -401% 0% 0% 0% 7% -619% -245% 668% -4% 5% -49% 0% 4% 0% 0% 0% -2% -3% 374% -9% 1% 99% 100%
-30% -66% 0% 2% -1% 0% -1% 0% 0% -97% -13% 8% -1% -2% -16% 0% 0% 0% 0% 0% 0% -3% -27% 4% 51% 49% 100%
-35% -48% 2% 0% -18% 0% 0% 0% 0% -100% -56% 51% -8% -1% -22% 0% 0% 0% 0% 0% -1% 1% -35% -1% -8% 108% 100%
Financial Analysis Report on CGGVeritas Exhibit A.8: Horizontally Common-sized Income Statement Operating revenues Other income from ordinary activities Total Incom e from ordinary activities Cost of operations (-) Gross Profit Research and development expenses — net (-) Selling, general and administrative expenses (-) Other revenues (expenses) — net (-) Operating Expenses EBITDA Depreciation and amortization (-) * Reduction of goodw ill (-) EBIT Expenses related to financial debt (-) Income provided by cash and cash equivalents Cost of financial debt, net Derivative and other expenses on convertible bonds (-) Other financial income (loss) EBT of consolidated com panies Income Tax Expense (-) Net Incom e (Loss) of consolidated com panies Equity in income of affiliates Net Incom e (Loss) Attributable to Shareholders Attributable to Minority Interests
Page | 16
29 April 2010
2007 19% -37% 19% -6% 57% -10% 18% 338% 6% 81% 161% N/A 38% -12% -34% -8% -100% -49% 85% 34% 131% -58% 115% 114% 156%
2008 10% 42% 10% 9% 11% -15% 11% -298% 27% 6% 0% N/A 11% -24% -27% -23% N/A 121% 19% -16% 37% -29% 36% 36% 76%
2009 -14% 341% -14% -10% -18% 42% -5% 361% 41% -37% 21% 4433% -130% 16% -73% 26% N/A -3% -162% -109% -179% 177% -176% -179% -175%
Financial Analysis Report on CGGVeritas Exhibit A.9: Horizontally Common-sized Balance Sheet Cash and cash equivalents Trade accounts and notes receivable, net Inventories and w ork-in-progress, net Income tax assets Other current assets, net Assets held for sale, net Current Assets Deferred tax assets Investments and other financial assets, net Investments in companies under equity method Property, plant and equipment, net Intangible assets, net Goodw ill, net Non-current Assets TOTAL ASSETS Bank overdrafts Current portion of financial debt Trade accounts and notes payables Accrued payroll costs Income taxes payable Advance billings to customers Provisions — current portion Other current liabilities Current Liabilities Deferred tax liabilities Provisions — non-current portion Financial debt Other non-current liabilities Non-current Liabilities Total Debt TOTAL LIABILITIES Common stock Additional paid-in capital Retained earnings Treasury shares Net income (loss) for the period — Attributable to the Group Income and expense recognized directly in equity Cumulative translation adjustment Total Equity Minority interests TOTAL EQUITY AND MINORITY INTERESTS
Page | 17
29 April 2010
2007
2008
2009
1% 100% 27% 92% 42% -100% 48% 88% 67% -4% 45% 433% 621% 257% 161%
103% 18% 20% 195% 13% N/A 42% 34% -18% 64% 25% 20% 7% 14% 21%
-7% -21% -22% -35% -12% 75% -17% -32% 37% 36% -18% -11% -9% -11% -13%
169% 17% 59% 52% 57% 13% -8% 248% 63% 137% 200% 260% 14% 227% 236% 152%
-53% 440% 12% 27% 45% -16% 116% 59% 52% 42% 8% 0% 11% 5% 14% 19%
-67% -53% -37% -18% -50% -45% 94% -8% -32% -46% 27% -1% 7% -6% -10% -16%
56% 361% 68% -230% 56% -206% 544% 174% 5% 170%
10% 8% 48% 364% 36% -51% -29% 23% 60% 24%
0% 0% 42% -25% -179% -136% 27% -10% 4% -10%
Financial Analysis Report on CGGVeritas Exhibit A.10: Horizontally Common-sized Cash Flow Statement Net income (loss) Depreciation and amortization Multi-client surveys amortization Variance on provisions Stock based compensation expenses Net gain (loss) on disposal of fixed assets Share in profits of affiliates Dividends received from affiliates Other non-cash items Net cash including net cost of financial debt and incom e tax Less net cost of financial debt Less income tax expense Net cash excluding net cost of financial debt and incom e tax Income tax paid Net cash before changes in w orking capital — change in trade accounts and notes receivables — change in inventories and w ork-in-progress — change in other current assets — change in trade accounts and notes payable — change in other current liabilities Impact of changes in exchange rate on financial items Net Cash from Operating Activities Total capital expenditures (including variation of fixed assets suppliers, excluding multi-client surveys) Investments in multi-client surveys Proceeds from disposals of tangible & intangible assets Total net proceeds from financial assets Acquisition of investments, net of cash & cash equivalents acquired Variation in loans granted Variation in subsidies for capital expenditures Variation in other non-current financial assets Net Cash from Investing Activities Repayment of long-term debt Total issuance of long-term debt Lease repayments Change in short-term loans Financial expenses paid Net proceeds from capital increase: — from shareholders — from minority interest of integrated companies Dividends paid and share capital reimbursements: — to shareholders — to minority interest of integrated companies Acquisition/disposal from treasury shares Net Cash from Financing Activities Effect of exchange rates on cash Net increase (decrease) in cash and cash equivalents Cash & Cash Equivalents - Beginning of Year Cash & Cash Equivalents - End of Period
Page | 18
29 April 2010
2007
2008
2009
57% 69% 283% -57% 178% -94% -58% 23% -129% 99% 330% 56% 104% 79% 108% 607% 3% 121% -366% 12% 8% 86%
36% 30% -15% 40% 16% -767% -29% -74% -148% 15% -23% -16% 7% -5% 9% -70% -36% -176% 32% 37% -142% 37%
-176% 124% 11% 871% -55% -115% 177% -50% -191% -33% 26% -109% -36% -46% -35% -341% -323% 131% 594% -209% -173% -30%
54% 504% 349% -83% 2010% 0% -50% -361% 546% 372% 715% -49% -600% 419% N/A -27% N/A N/A N/A 1900% -268% 1930% 92% -98% 124% 1%
-33% -8% -95% 214% -99% 3700% 0% -107% -68% -90% -98% -28% -181% -33% N/A -79% N/A N/A N/A -77% 104% -115% -189% 10404% 1% 103%
9% -33% 393% -100% 1303% -93% 0% -8% -5% 313% 525% 403% -42% 29% N/A -21% N/A N/A N/A 86% -133% 20% -135% -114% 103% -7%
Financial Analysis Report on CGGVeritas
29 April 2010
Exhibit A.11: 2006
2007
2008
2009
Cash and Cash Equivalents Inventories Receivables Other current assets Operating Assets Payables (-) Other current liabilities (-) Operating Liabilities (-) Working Capital Non-current Assets INVESTED CAPITAL
251.8 188.7 301.1 81.5 823.1 (273.3) (87.6) (360.9) 462.2 959.0 1,421.2
254.3 240.2 601.9 124.2 1,220.6 (428.7) (170.5) (599.2) 621.4 3,426.4 4,047.8
516.9 287.9 712.3 211.3 1,728.4 (516.0) (237.5) (753.5) 974.9 3,905.8 4,880.7
480.3 223.8 564.1 169.1 1,437.3 (340.8) (222.7) (563.5) 873.8 3,483.9 4,357.7
Short-term Debt Short-term Financing Non-current Liabilities Total Equity Long-term Financing CAPITAL EMPLOYED
44.6 44.6 476.7 899.9 1,376.6 1,421.2
62.2 62.2 1,560.0 2,425.6 3,985.6 4,047.8
249.7 249.7 1,632.4 2,998.6 4,631.0 4,880.7
116.2 116.2 1,540.0 2,701.5 4,241.5 4,357.7
Managerial Balance Sheet in million €
Exhibit A.12: Ratings Standard & Poors
Moody's
Negative BB BB BB+
Stable Ba2 Ba3 Ba2
Outlook Debt Rating Senior Unsecured Debt Recovery Rating Source: Company w eb site
Exhibit A.13: CGGVeritas returns vs. iShares MSCI World returns, weekly 60% 50% 40% 30% 20% 10%
y = 1.6619x + 0.0035 R² = 0.3119
0% -25%
-20%
-15%
-10%
-5%-10% 0% -20% -30% -40%
Source: Reuters; Yahoo! Finance; ow n computations
Page | 19
5%
10%
15%
Financial Analysis Report on CGGVeritas Exhibit A.14: Ratio and Performance Analysis Figures: Working capital, in mil. € Net debt, in mil. € Capital employed, in mil. € Enterprise value, in mil. € Net operating profit after taxes (NOPAT), in mil. € Number of shares outstanding, in mil. Dividend per share, in € Price per share (period average), in € Price per share (end of period), in € Average number of employees Sales per employee, in € Average salary per employee, in €
cash & cash equivalents + inventories + receivables - short term debt - payables total debt - cash & cash equivalents net debt + total equity market value + non-current liabilities + minority interest + preferred shares - cash & cash equivalents EBIT x (1 - effective tax rate)
29 April 2010 2006
2007
2008
2009
365
365
366
365
423.7 153.8 1,030.8
605.5 1,106.7 3,508.3
751.4 1,029.1 3,989.2
811.2 918.7 3,580.0
185.7 26.998 25.3 24.0
320.2 134.567 36.0 38.3
409.1 137.910 24.9 11.6
(154.9) 150.864 12.7 14.9
N/A
N/A
N/A
N/A
Average social security cost per employee, in € Leverage ratios: Long-term-debt-to-capital ratio Total-debt-to-capital ratio Long-term-debt-to-equity ratio Total-debt-to-equity ratio Long-term-liabilities-to-equity ratio Total-liabilities-to-equity ratio Financial leverage ratio
(long-term debt + leases) / (long-term debt + leases + total equity) (total debt + leases) / (total debt + leases + total equity) (long-term debt + leases) / total equity (total debt + leases) / total equity non-current liabilities / total equity (total liabilities + provisions + deferred income) / total equity total assets / total equity
0.3 0.3 0.4 0.5 0.5 1.0 2.0
0.4 0.4 0.5 0.6 0.6 0.9 1.9
0.3 0.3 0.4 0.5 0.6 0.9 1.9
0.3 0.3 0.5 0.5 0.6 0.8 1.8
Times-interest-earned
EBITDA / interest expense
3.9
8.0
11.1
6.1
Liquidity ratios: Working-capital-to-total-assets ratio Current ratio Quick ratio Cash ratio Interval measure, in days
w orking capital / total assets current assets / current liabilities (cash + short-term securities + receivables) / current liabilities (cash + short-term securities) / current liabilities (cash + short-term securities + receivables) / (operational expenses / total days)
0.2 2.0 1.4 0.6 813
0.1 1.8 1.3 0.4 1,184
0.1 1.7 1.2 0.5 1,346
0.2 2.1 1.6 0.7 816
Efficiency ratios: Fixed asset turnover* Total asset turnover* Working capital turnover* Inventory turnover* Receivables turnover* Payables turnover* Days Inventory Outstanding (DIO) Days Receivable Outstanding (DRO) Days Payable Outstanding (DPO)
sales / average fixed assets sales / average total assets sales / average w orking capital cost of goods sold / average inventory sales / average receivables (cost of goods sold + ending inventories - beginning inventories) / average payables average inventory / (cost of goods sold / total days) average receivables / (sales / total days) average payables / ((cost of goods sold + ending inventories - beginning inventories) / total days)
N/A N/A N/A N/A N/A N/A N/A N/A N/A
426% 74% 462% 529% 526% 568% 69 69 64
351% 51% 384% 467% 396% 472% 78 92 78
299% 42% 287% 436% 351% 451% 84 104 81
Cash Conversion Cycle (CCC)
DIO + DRO - DPO
N/A
74
93
107
Profitability ratios: Gross profit margin EBITDA margin Operating profit margin EBT margin Net profit margin Return on Assets (ROA)* Operating ROA* Operating return on total capital* Return on capital employed (ROCE)* Return on Equity (ROE)* Return on common equity*
gross profit / sales EBITDA / sales EBIT / sales EBT / sales net profit / sales (net profit + interest expense) / average total assets EBIT / average total assets EBIT / (average total debt + average total equity) NOPAT / average capital employed net profit / average total equity (net profit - preferred dividends ) / average common equity
39.6% 27.2% 17.8% 10.2% 5.8% N/A N/A N/A N/A N/A
52.2% 41.1% 20.6% 15.8% 10.5% 11.6% 15.2% 19.4% 14.1% 15.0%
52.7% 39.7% 20.8% 17.1% 13.1% 8.4% 10.5% 13.1% 10.9% 12.6%
50.2% 29.1% -7.2% -12.4% -11.6% -2.9% -3.0% -3.7% -4.1% -9.5%
Payout ratio
dividend per share / earnings per share
0.0%
0.0%
0.0%
0.0%
Market-Value ratios: Earnings per share (EPS), in € Price-earnings ratio (P/E) Price-sales ratio (P/S) Dividend yield
net profit / number of shares outstanding average share price / earnings per share average share price / sales per share dividend per share / share price
4.2 6.0 0.3 0.0%
1.8 19.7 2.0 0.0%
2.4 10.3 1.3 0.0%
(1.8) -7.3 0.9 0.0%
Market-to-book ratio
share price / book value per share
0.7
2.1
0.5
0.8
DuPont Analysis: Net profit margin Total asset turnover
net profit / sales sales / average total assets
5% N/A
10% 74%
13% 51%
-12% 42%
Financial leverage ratio (averaged)
average total assets / average total equity
N/A
2.0
1.9
1.9
4.7% 0.9 5.0% 9.1% N/A 47.6% N/A N/A
4.7% 1.2 5.0% 10.9% 13.8% 34.5% 11.5% 10.5%
4.7% 1.6 5.0% 12.5% 6.4% 24.3% 9.5% 8.8%
4.7% 1.7 5.0% 13.0% 7.3% 3.5% 10.8% 10.7%
N/A
126.6
86.3
(530.6)
Performance Analysis: Risk-free interest rate Systemic risk of equity (BetaE) Equity risk premium Cost of equity Cost of debt Effective tax rate pre-tax WACC after-tax WACC Economic value added (EVA)
interest expense / average total debt income tax expense / EBT
(ROCE - after tax WACC) x capital employed
* balance sheet item in the denominator is averaged over current and last year due to income statement item in the numerator
Page | 20