The financial information overview page is the bread and butter when analyzing and presenting a company
to investors when working on major corporate transactions like M&A at IPO.
Or when developing corporate strategy and the related business plan here will illustrate how to present
financial information on a slide by using as an example the management discussion and analysis of the
2014 through 2016 historical financial performance of Nestle a business plan with projected financial
performance can be presented in a similar way but since our focus here is not on making financial forecasts
and building projections we will use historical financials regarding business plans.
We would like to mention just that it is important to remember that they reflect the value of the underlying
business and any kind of valuation work is based on them.
Therefore you are likely to have to present them on slides quite often if you work in investment banking
or corporate development.
Now let's get back to our example in the presentation technique.
We would like to show you.
So what's the best way to present.
Make sense of and explain financial information which is basically a bunch of numbers.
First of all we need to remember that these numbers are the main reason for anyone to be involved with
the business on the first place.
Revenues profitability cash flows and capital structure are key primary indicators of the condition
of any business they can describe its historical performance and its future outlook.
Therefore we need to have a clear layout highlighting what's important and explaining the underlying
reasons or logic behind the numbers.
So where do we start.
First we need to source the information for our slide.
For example we have used the annual financial reports of Nestle which are publicly available on the
Investor Relations section of its website.
In other cases for example if we have insider access by virtue of working for the company in an employee
or advisor capacity we can have almost perfect information and that would give us a lot of flexibility
on what and how to present other sources we can potentially use for listed companies are equity research
reports by analysts who follow the company also known as broker reports where we can find both historical
and projected financial information such broker reports are especially useful for building financial
projections.
If we need to make a business plan looking at the company from the outside typically broker consensus
estimates would be used by taking the average projected figures of a few different brokers.
Now let's focus on what numbers do we put on the page key financials to present would include as a minimum
the basic income statement also known as profit and loss statement and the cash flow items and to be
more specific.
The very basic and most fundamental income statement items are revenues or sales which is the top line
of the statement gross profit which is what is left after you take out the cost of sales operating profit
which is what is left after you also take out operating expenses regarding operating profit.
We can have several slightly different measures which also may depend on the type of business and industry.
The most common ones are Ebbitt or earnings before interest taxes depreciation and amortization also
known as gross operating profit and Ebbitt or earnings before interest and taxes also known as net operating
profit.
And finally we have net profit which is the bottom line after recept tracked all expenses including
financial items like interest expenses and taxes.
It's important to mention here that this is income statement format of a corporate type of business
like Nestle which operates in the consumer sector.
Many other sectors like industrial and so on would have a similar income statement format as well.
However an important exception would be a financial type of business like a bank.
In that case financial items like interest income and expenses would be in the top line.
As these are primary operating items driving the revenue of such business if we move on to the cash
flow statement the key item here is capital expenditures or cap ex for short.
Hopefully you're familiar with this item.
The reason that is in the cash flow statement and its link with depreciation and amortization and other
important cash flow item we can include is change in net working capital.
If you look again at the Nestle example here you will see some more detail on revenue and cost items
like for example that operating expenses or OpEx for short have been broken down to distribution costs
marketing and administrative costs research and development costs and other OpEx.
These are all useful details which help us understand the financial performance of the company.
You should also note the additional information provided by the revenue growth sales and profit margins
shown in the table.
This is another fundamental element to include when we present financial information.
So far we've managed to have a good look at the table with financials covering half of our sample slide.
The other key element we have on the slide is commentary about the evolution of some of the line items.
It's a good formatting practice to Mark clearly the line item and the respective bullet point discussing
it with the same number or letter label or to use connector lines to link them.
Now let's look at the commentary itself in our example we have commentary about four main parts of Nestle's
financials revenue evolution operating profit evolution net profit evolution and cash flow evolution.
The focus is on the 2015 through 2016 financial year which is the latest actual one the text gives important
information about the factors driving revenue growth which is broken down to organic and other growth
which includes M&A and FX impact Granik growth is analyzed in more detail by breaking it down to volume
and price growth.
Some innovative sales channels with meaningful contribution to growth like e-commerce are mentioned
as well.
This is a great example of how to discuss and analyze revenue evolution in the commentary part of the
slide moving down to operating profit evolution.
We can see commentary about the various OpEx items which had meaningful impact on profit and what's
driving them.
Again the logic behind the numbers is explained very well.
We have similar level of commentary about net profit and cash flow evolution.
Finally we have a comment about the management outlook for 2017 which is not linked to specific numbers
in the table but is still very important to mention now we have covered a classic structure for a financial
information overview slide which can present equally effectively historical financials or a business
plan featuring a table with numbers on half of the page and a text box with comments on the other half.
Please keep in mind that it is especially important to explain logically and credibly in the commentary
and a significant moves in revenue.
Profit margins or cash flow items based.
Now you know another important type of slide which you can use in company presentations at this advanced
stage we are going to show you how to do things in a highly professional way commensurate with investment
banking standards.
But you can use these skills in any job or situation to impress your audience.
We hope you keep enjoying the learning curve.
See you in the next lesson.