ACCOUNTING, FINANCE

AND CONTROL
Prof E. Lettieri

Team work 2017/2018

Project Work 2017/18

Michele Maffeis 899735

Federico Montani 900971
Nicola Morandini 827679
Vincenzo Morelli 900117
Juliana Pesenti 828244

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THE SPORTS WORLD 3

EXTERNAL ANALYSIS 3

MACRO-ENVIRONMENTAL TRENDS 3

INTERNAL ANALYSIS 5

INDUSTRIAL PAST 5

A SPORTING GOODS COMPANY 5

FINANCIAL ANALYSIS 8

OPERATIVE RESULTS 10

PROFITABILITY ANALYSIS 11

FOCUS ON ROE AND LEVERAGE 14

LIQUIDITY and SOLVENCY ANALYSIS 16

PAYOUT RATIO 19

RELATIVE VALUATION 21

ASSET-SIDE 25

EQUITY-SIDE 27

METHODOLOGY 28

CRITICAL ANALYSIS 29

SUMMARIZING 31

FINANCIAL INDICATORS 32

SITOGRAPHY AND REFERENCES 33

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THE SPORTS WORLD
Nowaday, the boundaries between activewear, athleisure and sportswear reinterpreted to be
wearable even in everyday life are extremely vague. For this reason, also the people who practice
sports occasionally know more and more famous sports brands. Often the companies that own these
brands exploit the confidence in the performance of their equipment to also sell sports items for
everyday use. This generates a very articulated sector that is continuously growing and includes
apparel, equipment and accessories.
According to the findings of the Indian Sports Goods Export Promotion Council (SGEPC), the
global sports market has had an average annual growth rate in sales of 4.1% in recent years, rising
from 250 billion dollars in 2010 to 318 in 2016.
In our analysis we focused mainly on the four-product categories treated by the Finnish holding
company Amer Sports (sports equipment, apparel, footwear, and accessories) and we analyzed other
sectors only for selecting our comparables for the Relative Valuation.
In fact, the clothing and equipment sectors are the ones that drive the world sports market,
accounting for about 50% of total demand. The largest marketplace in the world for these items is
the US, which alone accounts for a third of the world market. In terms of growth, however, the
primacy belongs to Central and South Asia, Middle East and Central Europe.

EXTERNAL ANALYSIS
MACRO-ENVIRONMENTAL TRENDS
The sporting goods industry is a highly competitive field which includes many global, regional and
national companies. Some of these corporations have greater distribution, marketing and financial
resources compared to Amer Sports and an intense competition could put pressure on the price of
products affecting the company margins. Moreover, the industry consolidation that has occurred in
recent years, has increased this competition. Indeed, in their search for success, smaller companies
join bigger holding in order to enjoy benefits. However, Amer Sports has no competitors that
challenge it across all of its product categories, since its business is based on its broad portfolio of
sports products, with a presence in all major markets. Therefore Amer competes against a number
of companies in most of its product categories. For this reason, with the help of the STEEP analysis
below, we chose to evaluate this industry focusing only on macro-environmental trends that may
affect it, regardless of the specific segment the company is operating in.

3
Social
One current trend emphasizes both healthier lifestyles and a balance between work and leisure; this
should lead to opportunities for sporting goods companies to develop products that make accessing
healthier lifestyles easier and more enjoyable. In particular, outdoor activities have a huge
popularity, that will keep growing in the future.
Technological
Another remarkable trend is the growing preference of customers to shop online that has boosted
the online retail trade in the US, Europe and Asia. According to the US Department of Commerce,
the online retail sales in the US showed a compound annual growth rate of 15% from 2010 to 2015
and by 2019 the European online retail sector is forecast to have a value of USD 675.8 billion, with
an increase of 99.1% since 2014.
Economic
Growth opportunities in emerging markets are based on large and growing populations, whose
average disposable incomes and standards of living are expected to increase. As they enjoy a good
standard of living, people in developed markets are more likely to stay active longer and invest in
high-quality sporting goods. According to the National Bureau of Statistics of China, the total retail
sales of consumer goods in the country reached USD 402.3 billion in July 2016, which represents
an increase of 10.2% over the previous year. This is a very important issue, since Amer has a strong
presence in the Chinese market and this fact will enable the company to effectively exploit the
country growth.
Ecological
Fortunately the consumer’s awareness of environment problems is increasing. The consumer
purchasing choices are strongly influenced by the impact that products and production process have
on the environment. This trend drives companies to be more transparent regarding their
environmental impact, adopting annual environmental reports. Amer is at the forefront in this field,
being part of the OMX GES Sustainability and of the Kempen SRI Universe. Many of its choices in
the last years have been subject to these ecological trends.
In assessing the effect of ecology on industry we have also considered the fact that global warming
has led to variations in seasonal cycles as well as in the demand for some outdoor products. This is
a problem for companies that supply winter sport products, that hence should diversify their
portfolio.

4
Political
Amer Sports operates in 34 countries and its key markets are the US and Europe. There has been a
rising of labor wages in recent years and this could increase the company's operating cost and affect
its margins. According to the US Department of Labor, the minimum wage rate in the US, which
had remained USD 5.15 per hour since 1998, has increased over time by as much as USD 7.25 per
hour in 2016. Similarly, the minimum wages in Europe have been rising steadily, growing by 1.7%
in the first quarter of 2016, compared to the same quarter of the previous year. Finally, sporting
goods companies are subject to increasingly restrictive legislative constraints as regards the safety
of their equipment and they are also subject to continuous changes in sports rules.

INTERNAL ANALYSIS
INDUSTRIAL PAST
Amer Group began its life as a tobacco manufacturer and distributor in 1950 and some years later it
acquired the right to produce and sell Philip Morris cigarettes in Finland. In the ‘60s and ‘70s the
profits were invested in the purchase of three commercial ships and in the acquisition of the Finnish
company Weilin-Goos. In 1977, the company was listed on the Helsinki Stock Exchange. In the
1980s, Amer moved into the vehicle import industry by acquiring the firm Korpivaara and with it
the exclusive rights to import and distribute such brands as Citroen and Toyota. The decade also
saw the company expand into the textile and plastic markets.
A SPORTING GOODS COMPANY
Amer entered the sports equipment market in 1974, when it bought the hockey gear maker Koho-
Tuote (sold in 1986). Some years later, with the acquisition of a majority stake in the golf
equipment maker MacGregor Golf, Amer established a sports division.
From then on, many of the business areas, no longer deemed to be core, were divested (in 2004 also
its tobacco business was sold back to Philip Morris), and acquisition by acquisition, Amer has
become a leading global sports equipment company, changing its name to Amer Sports Corporation
in 2005.
Today, the company business is balanced by its broad portfolio of sports and products and a
presence in all major markets, that Amer divided into: outdoor, ball-sport and fitness.
The Outdoor segment manufactures and markets winter sports equipment under the brand names
Salomon and Atomic; footwear and apparel under the Salomon and Arc'teryx brands; cycling
components under the Mavic brand; and sports instruments under the Suunto brand.

5
The Ball sports segment offers instead golf, racquet sports and team sports equipment, under
Wilson, Louisville Slugger and DeMarini brands.
The Fitness segment of the company manufactures and supplies fitness equipment under Precor and
Queenax brands.
Distribution of Amer's Segment
In 2016, the three-segment reported revenues that
respectively amount to EUR 1608.1mln, 671.1mln and 13%

26%
61%
349.2mln, as shown in the pie chart 1.
Vision and Mission
Outdoor Ball Sports Fitness
Pie chart 1

Amer states that its vision is to be “the industry’s leading

sports company, fueled by authentic brands that inspire athletic achievement and enjoyment” and to
do that, its mission is to “provide everyone from first-time participants to professional athletes with
the world’s best sports and fitness equipment, footwear and apparel”.
Strategic Cornerstones
Amer Sports’ strategic goal is to further strengthen its position. Its strategy is based on three
cornerstones which will enable the company to achieve its ambitions and financial targets.
Clear portfolio roles and business strategy: every part of Amer Sports has a clear role within the
portfolio and a specific integration approach to drive synergies across brands and business units.
This portfolio positions the company as a full service supplier, allowing it to establish strong
business relationships with its trade customers and providing the company with a wide client base.
Moreover, an extensive product portfolio reduces the risk of seasonality and of overexposure to a
particular customer base.
Winning in go to market: Amer Sports focuses on expanding the distribution footprint in both
established and new markets while also achieving growth in its own retail and e-commerce. Since
2010, the company has reached considerable improvements in the quality and quantity of
distribution. The company sells its products to B2B customers (including sporting goods chains,
specialty retailers, mass merchants, fitness clubs and distributors) and directly to consumers through
brand stores, factory outlets, and e-commerce. At the end of 2016, the company had 287 branded
retail stores and 69 e-commerce stores.
Focus on Research & Development: The company has six R&D and design sites globally serving
different business areas. In 2016 it spent approximately 9.5% of all operating expenses on R&D,
especially in the fitness segment. These strong R&D capabilities provide the company with a
competitive advantage and help it launch new products onto the market faster, also enabling it to
expand its customer base.
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Manufacturing and sourcing
To gain operational efficiencies and achieve cost savings, Amer is constantly reviewing both its
make or buy strategy and the company’s global sourcing and production.
Today, Amer is heavily dependent on outsourced manufacturers for its production; the company
manufactures about 24% of its products on its own, approximately 13% is produced by partially
outsourced vendors and around 63% is completely outsourced.
Intellectual property
Amer Sports’ innovations are safeguarded by appropriate intellectual property protection for new
developments and for key items of existing intellectual property, as brands, proprietary technology
and know-how, that are core assets in the company business and represent great value. To protect
them, Amer uses patent, copyright, design, trade secret, trademark legislation and confidentiality
agreements. This portfolio of intellectual property provides significant support in achieving the
Group’s business objectives.
Targeted acceleration to 2020 and 2016 strategic change
On the Capital Markets Day in 2015, Amer set its 2020 financial targets:
Net sales: at least 3.5 billion EUR
Profit: Annual EBIT growth ahead of net sales growth;
Cash flow conversion: free cash flow/net profit at least 80%.
Amer predicted it would reach these targets through a combination of organic growth and
acquisitions.
During 2016 Amer confirms that it is on the glide path to deliver the 2020 financial targets
introduced in 2015 and that the acceleration priorities are unchanged, but these last are now
supported only by organic acceleration building blocks, while acquisitions remain firmly in the
toolbox and represent only further upside potential.
A Sustainable Growth Model
To support the acceleration, the company pursues continuous productivity improvement. It will
additionally start a targeted restructuring in order to cut operating expenses by approximately 20
million, which will be reallocated to finance the acceleration.
Restructuring expense will be about EUR 20-25 million, used mainly to open new brand stores and
new e-commerce shops, to build a bigger global cloud-based consumer database, to expand
warehouse capacity to face the significantly higher e-commerce volumes and to recruit key talents
to support the acceleration. These investments ensure that the company has the capability and

7
capacity for long-term growth and improvement, despite the profit’s impact in the short run. This is
what makes the Sustainable Growth Model sustainable.

In order to highlight all the strengths and weaknesses of Amer and all the opportunities and threats
issued from the external environment analysis, we created the following SWOT (table 1).

Table 1

FINANCIAL ANALYSIS
Once described the business area in which Amer operates, we started analysing the recent financial
reports. We decided to base our analysis on a time span of four years, from 2013 to 2016 since we
considered this period interesting, in terms of sales, investments and acquisitions. In order to have a
unit of measure of our data analysis, we chose some competitors to carry out a benchmark analysis.
Amer has a wide portfolio, distributed in many sports fields, therefore it has been difficult to find
direct competitors to perform a consistent analysis.
Initially, we selected Nike, Under Armour, HTM and Columbia Sportswear.
We started by analyzing some company drivers: size in terms of revenues, number of employees,
the market segments it operates in, the accounting standards and obviously the products they sell.

We decided not to consider Nike for the benchmarking because of its huge size. Even if it sells
sporting goods like Amer, it has revenues of 30.6 billion euros, equivalent to eleven times our
company.
Then, we excluded Under Armour. Although it sells most of its products in the United States (83%
of its 2016 revenues) we discarded it because of its recent foundation (1996) and its fast growth (the
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revenues of 2016 are 3,28 times those of 2011), which made it a less steady company than Amer.
We did not underestimate the competitive threat of Under Armour, but we did not exploit it because
it seems to be in a different phase of the company’s life cycle.

HTM is a holding that includes brands like Head, Tyrolia, and Mares. Head sells alpine skiing and
ball sports equipment, Tyrolia is a ski-equipment manufacturer and Mares produces diving
equipment. These three brands compete directly with Salomon, Atomic, Wilson and Suunto. Indeed,
even if it is a smaller group in terms of sales (2016 revenues are about 411 million euros), the
market branches where they compete (year 2016) are very similar to Amer’s: Winter Sports
(39.95%), Racquet Sports (40.13%), Diving (17.34%), Sportswear (2.58%).
HTM also allows us to understand the advantage or disadvantages that Amer could benefit thanks to
its bigger size.

Finally, the last company we chose is Columbia Sportswear, a holding operating under four
primary brands: Columbia, SOREL, Mountain Hardwear and prAna, which competes only with
outdoor branch. This company is very similar to Amer for revenues (2.1 billion USD in 2016), and
number of employees (6 thousand in 2016 against the 8 thousand of Amer). Although Columbia is
listed in US NASDAQ and adopts the Gaap standards, it operates in the same geographical market
of Amer, as shown in the following Pie Charts (2,3).

Sales percentage of Amer Sports in 2016 Sales percentage of Columbia in 2016

14% 7% 11%
19%
43%

43%
63%

EMEA Americas Asia Pacific EMEA United States Latin America, Asia, Pacific Canada

Pie Chart 2 Pie Chart 3

Columbia is known as one of the largest outdoor and active lifestyle apparel and footwear
companies of the world for quality and innovation. Its strategy yet is different if compared to
Amer’s one: Columbia is vertically integrated and has a lower outsourcing of operations. So, this
company has been selected also in order to compare its vertical integration of the production to the
Amer’s diversification policy.
Some corrections have been necessary to evaluate the disclosures of Columbia since Amer adopted
the International Financial Reporting Standard, while Columbia adopted the GAAP standard.
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OPERATIVE RESULTS
To begin with, we started studying the operating results of the three holdings. We hoped that with
the constant growth of the global sporting good market, the turnover of all companies would make
the market scenery interesting. Through a horizontal analysis based on revenues since 2013 we
noticed some outliers.

AMER
Revenues HTM Revenues Columbia Revenues
3.000,00 € 430,00 € 2.500,00 € 10,74%
24,66% 2,12%
MILIONI

MILIONI

MILIONI
13,72% 3,46% 420,00 € 11,12%
2.500,00 € 4,32%
410,00 € -1,47% 2.000,00 €
400,00 €
2.000,00 €
390,00 € 1.500,00 €
1.500,00 € 380,00 €
4,49%
370,00 € 1.000,00 €
1.000,00 €
360,00 €
350,00 € 500,00 €
500,00 €
340,00 €
0,00 € 330,00 € 0,00 €
2013 2014 2015 2016 2013 2014 2015 2016 2013 2014 2015 2016

Revenues Revenues Revenues

Ebit Ebit Ebit

250,00 € 300,00 €

MILIONI
40,00 €
MILIONI

78,88% 0,34% 25,59%

MILIONI

142,73% 250,00 € 2,72%

200,00 € 35,00 €
30,00 € -14,05% 200,00 € 50,87%
150,00 € -26,34% 25,00 €
150,00 €
20,00 €
100,00 €
15,00 € 15,59%
100,00 €
50,00 € 10,00 €
50,00 €
5,00 €
0,00 € 0,00 €
0,00 €
2013 2014 2015 2016 2013 2014 2015 2016
2013 2014 2015 2016
Ebit Ebit Ebit

Graph 1

Amer’s sales are constantly growing and nothing seems to leap out. Regarding EBIT instead, we
noticed a huge fluctuation in EBIT’s trend (from a decrease in 2013/14 of -26,34% to an increase of
78,88% in the following year). This is the beginning point of our analysis below.
Thanks to a vertical analysis of P&L on revenues, an increase of “other operating expenses” is
evident in a more than proportional way compared to the other years. According to the financial
report this increase in costs is due to the unusual expense of € 54.2 millions, necessary to finance a
new restructuring program in July 2014. The primary objectives of the investment were to reignite
profitable growth in Ball Sports and to further accelerate Amer's growth towards 2020 especially in
Apparel and Footwear, Business to Consumer and digital products and services. In order to make
indicators comparable, given the huge impact of these restructuring costs, in some cases we have
adjusted operating costs by eliminating them from the P&L and using adjusted values.

We also underlined a big leap up in Columbia’s revenues between 2013 and 2014: this happened
because the company exploited its brand in China and expanded its market share in North America
and Europe.

10
In fact, Columbia was the first large U.S. outdoor brand to enter the Chinese market more than a
decade ago through an exclusive distribution arrangement with Swire Resources Ltd and now it is
benefiting from this advantage.
In addition, SOREL's sales growth was about 29%, so 2014 was an extraordinary year for Columbia
that could increase the value of its sales by 24,66%, reaching the size of Amer and leading
Columbia to be a real competitor of Amer.
As already said, HTM is a smaller company compared to the previous two. Trends regarding its
revenues and EBIT are a bit fluctuating because HTM is sustaining an internal corporate
restructuring program with the aim of accelerating its growth.

PROFITABILITY ANALYSIS
With the aim of analyzing the profitability and efficiency of the company and to understand if Amer
is on the right path to achieve its objective to increase EBIT ahead sales, we decided to focus on the
analysis of Operating Profit Margin (OPM), Net Profit Margin (NPM) and Return On Assets
(ROA).
For the calculation of these three indicators we used our adjusted EBIT for the year 2014.

OPM is calculated as the ratio between EBIT and Revenues. This index has been stable at around
7.5% in recent years and without any significant signs of improvement. NPM, calculated as the ratio
between Net Profit and Revenues, also shows a certain stability in the same years, with a lower
value, around 4.5%.

Operating Profit Margin Net Profit Margin

10,74% 10,79% 8,35%
7,73%
9,47%
6,75%
7,82% 8,05% 7,81%
5,56%
7,55%
7,25% 4,80% 4,84%
4,23% 4,24%

2013 2014 2015 2016 2013 2014 2015 2016

Amer Columbia Amer Columbia

Graph 2 Graph 3

Combining these indices in a "stand-alone" analysis, we realize how the company's business seems
to be healthy, as revenues permit to cover all operating costs as well as non-operational and
financial ones. However, it is easy to see that our ratios have not improved since 2015.
For this part of the analysis we focused mainly on the benchmarking with Columbia, since HTM
shows too fluctuating results of OPM and NPM that are anyway worse than Amer’s one. Columbia
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has a growing OPM over the years, with better results than Amer. Its values were 7.82% in 2013
and 10.79% in 2016. NPM has followed the same trend: it passed from 5.56% in 2013 to 8.35% of
2016.

According to P&L of the two companies and analyzing their cost structures, it is notable that the
two companies differ mainly by the different impact of operating costs on the turnover; these affect
Amer’s revenues by around 92% and Columbia by 89%. This 3% may seem a little difference but it
represents the totality of the difference between OPM and NPM of the two companies. There are
indeed no particular differences regarding expenses or income due to financial and non-operating
activities, which are 1% of revenues for both companies (this means also that the two companies
depend only on their operations). We identify three main causes that could explain why Amer's
operating costs were greater than those of Columbia in proportion to turnovers.

First of all Amer does not operate only in markets in which also Columbia is, but also in ones where
the products require higher engineering and have higher production costs, lowering the company’s
margins. An example could be the fitness segment, in which Amer operates through the subsidiary
Precor to which are allocated most of total expenditure in research and development, that
accounting for about 9.5% of all operating expenses of the group.

Focusing instead on the sportswear section where both companies compete, we found the second
cause: the different strategies adopted by the holdings. Amer aims at a steady expansion and
diversification in the sporting goods market, with high flexibility of production. One of the
company's strategic cornerstone is indeed the "winning in go to market" and it outsources about
63% of the total production, which brings to higher variable costs if compared to Columbia.
Columbia instead follows efficiency-oriented strategy by a more integrated production process, as
declared in the financial statement. TOTAL TANGIBLE ASSETS
The data in the balance sheet display how Columbia Amer Columbia
291687
291563

279650
279373

owns an even greater amount of tangible assets,

226000
206700

despite having sales volume significantly lower than

174000
168300

those of Amer (graph 4).

2013 2014 2015 2016

Graph 4

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The third consideration concerns the costs related to depreciation and amortization. In fact it might
be wrongly supposed that Columbia’s cost of D&A was higher than Amer’s, when really Amer
balances all these costs because of the amortization related to its intangible assets with a finite
useful life (such as brands and patents). However, we think that these costs are very difficult to cut.
Indeed, even though these assets do not help to improve operational efficiency, they grant numerous
advantages mainly linked to the company’s future.
The graph 5 shows that depreciation
D&A/EBITDA
and amortization of Amer have a higher
Amer Columbia
25,84%

impact on EBITDA than the ones of

23,85%

22,39%
21,57%

21,78%

19,99%

19,01%
18,52%

Columbia, with exception of 2013.

Summarizing, OPM and NPM show

how Amer operates less efficiently than
2013 2014 2015 2016

Graph 5

a vertically and more integrated competitor. Outsourcing increases the flexibility of production but
it penalizes the company’s profitability reducing its ability of pursuing economies of scale and this
could be one of the main reasons why the company this year was not able to reach its financial
targets of increasing EBIT ahead net sales growth. We think that investing to improve production
capacity, to expand storage capacity and to open new brand stores, as stated in Amer’s sustainable
growth model, could be a good solution to this problem as long as sales continue to rise. However,
it’s important to bear in mind that the maintenance of the production capacity, the stores and the
employees in retail create higher fixed costs than outsourcing and distribution. If Amer Sports fails
in executing its growth plan, it could have a negative impact on the company’s profitability.

Let's proceed now with some Composition of non-current assets

(avg 2013-2016)
considerations on the ROA index.
Even if the tangible assets of Columbia
are higher than those of Amer, thanks to 582475

its significant amount of intangible assets, 84032

285568
the total non-current assets are even 193750 10687
51812
Amer HTM Columbia
greater than those of Columbia (graph 6).
Tangible Intangible

These intangible assets are composed by

Graph 6 (data in million EUR)
52.9% Goodwill and 37.5% Intangible

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Rights. The goodwill is a direct consequence of the Merger & Acquisition policy, while the second
one is the intellectual property portfolio owned by the company.
It is meaningless to assume that the company is able or not to make profitable assets such as
goodwill. For this reason we deleted intangible assets from ROA calculation to conduct a more
detailed analysis of the capacity of the company to enhance their available means.
The two graphs (7,8) show the trend of ROA and that of ROTA (Return On Tangible Assets) of the
three companies in the considered period.

ROA ROTA
15,24%

13,53% 14,16%
12,74%
12,59%
11,09%
10,59%
10,03% 9,88% 10,19%
8,21%
7,61% 8,48%

4,45% 4,76% 4,67%

2013 2014 2015 2016

Amer Columbia
2013 2014 2015 2016

Amer Columbia

Graph 7 (the data of 2014 take into account the adjustment) Graph 8 (the data of 2014 take into account the adjustment)

ROTA compared to ROA shows how in reality the gap between Columbia and Amer is significantly
reduced and that this index of Amer is always higher than the one of HTM. However, both ratios
show that the capability of Amer to generate value from its assets is less than its main competitor’s
one. Therefore, we first of all believe that it is necessary an increase of the EBIT, and so that the
organic growth forecast for 2020 has to lead an increase in sales more than proportional to the
increase in costs. Moreover, given the divergence between ROA and ROTA, we also believe that the
choice to stop M&A activities and therefore to stop the continuous increase in goodwill is the first
step towards improving ROA.

FOCUS ON ROE AND LEVERAGE

One of the most important indices of the shareholder's perspective is ROE: it assesses how
profitable it is to invest in a company. If the Return On Equity (= Net Profit / Equity) is high, the
company's appetibility for shareholders will be too. To complete the analysis of the company's
profitability, we decided to analyze this index in depth.
Considering benchmarking with HTM and Columbia, Amer's ROE is always higher than the
competitors’ (2013-2016), except in 2014.

14
The values of this index tell us that shareholders equity is growing steadily (about 10% per year),
while the Net Profit declines in 2014 also because of restructuring investment.

Despite the decreasing ROE of 2014 that should make the company less attractive, we see that
equity increases anyway in the following year. Probably the merit is due to the management that has
been able to clearly communicate the company's intentions to pursue a model of continuous
sustainable growth up to 2020, justifying these significant investments.

Since ROE takes into account the operational, financial and extraordinary management of the
company, it was useful to break down this index through the leverage formula to highlight its
components.

ROE
! = [ROI + D /E * (ROI − r)] * s
2016 2015 2014 2013

s 73,35% 72,38% 71,95% 71,50%

r 3,66% 4,70% 5,69% 4,21%

ROI 10,70% 11,72% 7,60% 10,61%

E* 1003,1 949,6 842,8 761,3

D* 899,9 791,7 659,3 698,8

D*/E* 0,9 0,83 0,78 0,92

ROI-r 7,10% 7,02% 1,91% 6,40%

ROE 12,65% 12,81% 6,57% 11,86%

Table 2 (*=value in million EUR)

First of all, we considered the ROI-r component which allows us to understand if the company can
take advantages from third parties borrowings. Return on Investment [ROI=EBIT/(Total Assets-Non
financial debts)] in fact vindicates how much investing resources in Amer is profitable, while
"r" (Financial Expenses / Financial Debts) indicates the cost of the loans granted to Amer. Given the
recent trend of decreasing rates in the European corporate bond market and considering that Amer
finances itself mainly on this market (as can be seen from the graph 9) we can expect a marked
improvement in this spread (ROI-r) which will have a positive effect on ROE. The company has
already demonstrated its ability to manage this spread by reducing debt exposure in the single year
in which the ROI-r difference
reached limit levels such that the repayment of part of the debt became necessary.
The capital structure D / E, defined leverage ratio, never exceeds the value 1 and this means that the
company counts more on the capital given by shareholders, rather than loans. The Debt-to-Equity

15
ratio has been growing since
Financial Debt Composition
2014, as the company
increasingly resorts to third- 6%
2% 20%
15% 26%
2% 41%
party financing with the 10% 0%
8%
0%
12%
percentages shown in the 78%
67% 66%
47%
chart. In particular bonds
are preferred for the reasons 2016 2015 2014 2013

Current interest-bearing liabilities (such as Lease Obligations)

we set out above. Non current interest-bearing liabilities (such as Lease Obligations)
Loans from financial institutions

The index “s” considers the Graph 9

Bonds

incidence of taxes (t) and of

the discontinued operations (d). In the period taken into consideration, the impact of discontinued
costs and revenues was null. Therefore "d", calculated as d=Net result from continuing operations/
net result after discontinuous, has always been 1. The impact of taxes, calculated as the net result /
EBT, is fairly stable at around 72% per year. This value undergoes slight fluctuations depending on
the geographical dispersion in sales on our main markets: Europe, USA and Asia.
In conclusion, we can state that Amer exploits the leverage effect of financial debts to benefit a
positive ROE. In line with what has happened in the last recent years, we can expect an increase in
financial debts (for new investments) and ROE, favored by the lowering in bond rates. Despite this,
doubts may be expressed on this vision considering that the cost of debt, the “r” index, results
slightly higher of the average of the sector suggested by Damoderan. According to his forecasts, in
fact, the cost of the average debt in the "Recreation" sector to which Amer belongs, is around 3.6%,
while the “r” index of our company always exceeds this value.

LIQUIDITY and SOLVENCY ANALYSIS

Amer’s Net Financial Position [" = Ca sh . a n d . Ca sh Equivalents − Fin a ncial Debts] is
negative, because the holding is not able to extinguish at this instant all the financial debts with the
cash at its disposal. On the contrary, Columbia shows a positive NFP over the four years and could
extinguish all current financial debts with the only cash available.
But this is true only in general terms. In fact, a company's NFP considers both current and non-
current debts, so a negative NFP like ours indicates that Amer group is using the debts it has
contracted. In fact, the NFP does not give us a useful indication of the ability to fulfill the
company's commitments.

16
Therefore, we conducted a liquidity analysis with the following ratios in order to go deeper and to
understand the ability of Amer to meet its short-term financial obligations.

2016 2015 2014 2013

Short Term Debt Ratio 2,80 1,35 0,39 0,47

Current Ratio 2,30 1,91 1,63 1,85

Acid Test Ratio 1,59 1,33 1,14 1,33

Inventory Turnover Ratio 5,11 5,26 5,39 6,02

Avg Collection of Total Receivables 109,4 112,2 116,2 110,9

Table 3

We started from the Short Term Debt Ratio calculated as Cash Flow From Operating activities/
Short term debts. It allows to know if the company is able to meet the current debts with the
liquidity produced by its core business.
From this index it emerged that the situation is encouraging in 2015 and 2016 financial years,
during which STD ratio is 1.35 and 2.80 respectively. Although CFFO has significantly reduced
(-29%) current payables have suffered a more than proportional decrease up to about one
third(-66%). This means that Amer can count on the cash it generates to pay off short-term debts. In
fact, Amer seems to greatly reduce the use of current interest-bearing liabilities, preferring to
increase non-current financial liabilities, such as Bonds and Loans from financial institutions, as it
is growing and has targets to be achieved in 2020.
However, cash flows from operations have not always been sufficient to meet the debts of the year.
During 2013, 2014, the STD ratio values were lower than 1. In those years, therefore, the Cash
Flow generated by the core activities of Amer was not sufficient to cover short-term financial debts.
This may seem like a problem, but we know that the company can rely on other current assets such
as inventory and current receivable.

To go further in the analysis, we analyzed the Current Ratio: current assets on current liabilities.
from benchmarking we have noticed that for all our companies the value of this indicator is higher
than 2. For Columbia in particular it is about 4, while Amer has a similar value to HTM in recent
years, so we considered ourselves in line with the market.
Evaluating both active and passive items, we noticed that Columbia has a very low value of current
debts. It is zero on 31/12/2016, as Columbia includes a credit line that is often not exploited.

17
The values of HTM and Amer, instead, indicate that both the companies exploit debt by the
stakeholders. Their current ratio has been always higher than 1.5 since 2013, indicating us a large
capacity to meet the short-term commitments.
Moreover, we noticed that the most worrying value of the current ratio among all companies is the
Amer’s in 2014.
For this reason we decided to evaluate the liquidity of Amer more strictly by estimating its Acid
test ratio"[ = (Cur rent Assets − Inventor y)/Cur rentLia bilit ies]. It allows to know how
well the company can meet its short-term debt obligations under the assumption not to sell any parts
of the inventory.
We eliminated the Inventory since it is the least liquid of all the current assets, since you must find a
buyer if you want to transform it into liquidity.
In 2014 the percentage of Amer's inventory on current assets was around 30% and gives an Acid
Test ratio of 1.14. Here our analysis confirmed that even when the current ratio was low, Amer was
able to meet current Liabilities with Cash, Short Term Investments and Receivables.
On the other hand, to understand how many times the inventory is turned, we have considered the
value of the Inventory Turnover Ratio [" = Re venu es /Inventor y].
Amer's one is higher than the two competitors, with percentage values around 5.5 for Amer and 4
for other companies. This indicates that our company is effective and quick in selling its goods and
confirms its healthy situation.

One last indicator that we analysed about the liquidity of Amer for current obligations is the
Average Collection of Total Receivable, calculated as [Total
" Receiva ble * 365/Re venu es] .
The calculation shows that the average current receivables are collected within 110 days, i.e. within
the first quarter of the year. This could represent a commercial policy more favourable to debtors in
delaying payments, compared to companies like Columbia that have a value of 60 days, decreasing
over the years. However, this is not a positive aspects for Amer: it could suggest us that the
company has a low bargaining power in negotiating with customers and it is obliged to grant delays
in payments in order to be competitive. This long postponement in the collection of receivables
could lead Amer in lowering is cash available, reducing also its competitiveness.
We suppose that also thanks to its policy, Columbia needs fewer current financial debts than Amer
and it is therefore able to get a better Net Financial Position.

As regards the solvency capability of Amer, we have already talked about the leverage index.

18
We have also analysed the Interest Coverage Ratio [" = EBI T /Fin a n cial Ex pen ses] , which
indicates the number of times the operating result covers the net interest expenses.

2016 2015 2014 2013

Interest Coverage Ratio 6,22 5,49 3,04 5,27

Table 4

The higher the rate of interest coverage is, the more easily the company can meet its debt costs.
We know that an interest coverage rate lower than 1.5 could be questionable and lenders would
probably refuse to lend more money to the company, as the risk of default of the company would
be too high. In 2014 HTM had an interest coverage ratio of around 1.62, index of a low company
trust. The lack of trust could be attributed to its small size.
This ratio for Amer is always more than 5 in the years under consideration, except for 2014 which is
3.04. As already pointed out, in this year EBIT had an abnormal drop justified by the restructuring
investment in Ball Sports programme. Such a high relative index denotes the company's ability to
cope with its financial interests thanks to its operational management, which allows Amer to access
further credit and indicates good financial health.

PAYOUT RATIO
Looking at the dividend policy, we noticed that Amer has a very high payout ratio
["PR = Divi den d s /NetProf it (t − 1), where t=analyzed year].
In the 4 years taken into consideration, the company returns more than 50% of profits to investors
with a peak of 95% in 2015. The peak of 2015 is due to the fact that Amer follows a policy of
increasing dividends year after year. In 2014, as a result of the investment, the net profit suffered a
great decrease (almost halving) and dividends continued to grow. This happened because the
company pursues a dividend smoothing policy: the value of the shares also depends on the amount
of dividends distributed through the formula:
["V = Divi den d /(Ke − Su stain a bleGro wth Rate)]; this means that if the dividends had
fluctuating values, it would create a kind of volatility in the value of the shares that is generally seen
by shareholders as a weak point for the company.
Columbia on the contrary, has a dividend policy proportional to profits. In their report they stated:
“Our current dividend policy is dependent on our earnings, capital requirements, financial

19
condition, restrictions imposed by our credit agreements, and other factors considered relevant by
our Board of Directors”.
Therefore, the dividend shares in Columbia are decided by the board, but they are always
proportional to profit: in fact, if we look at the payout ratio over the years, we can see that it is
always between 25 and 40%.

Here below are reported the yahoo finance’s graph regarding the value of the shares of the two
companies in recent years:

Graph 10

Graph 11

As we can see the value of Amer’s stock (table 10,11) is much more stable than the one of
Columbia (n.d.r. notice that the scale on ordinates axis is different, smaller in Amer’s one). In
particular, there aren’t negative peaks in Amer values between the conclusion of one year and the
beginning of the other. Columbia instead have a big loss at the beginning of 2016: this is due to the
decision to unfollow the growing trend of dividends year by year.
20
In conclusion the solidity of Amer’s share value compared to Columbia’s ones, is a point of strength
of the company which can assure to its shareholders a constancy of their shares value.

Then we wondered if Amer was not exposed to an excessive risk with the decision to unbalance
itself to the point of distributing 95% of profit as dividends without reinvesting them. Therefore we
analyzed the sustainable growth rate.
The SGR [ROE
" * (1 − Pa youtRat io)] is a measure of how large and how quickly a firm can
grow without borrowing more money from other institutions. Amer has a stable SGR of around
4-5% in recent years, with a big decrease in 2015 to 1% due to the fact that EBIT in 2014 had a
collapse caused by the same investments in ball sports segment and as we said it was decided to
keep very high dividends. This fact could erroneously suggest that Amer has exceeded with the
distribution of dividends, finding itself with little liquidity to face the expenses of growth for the
following year. This does not actually happen because the investment turned out to be so much at
positive value that the SGR in 2016 jumped almost to 6%, indicating that the decision to distribute
high dividends did not damage the company: the retained earnings invested were sufficient for the
growth desired by the company.

RELATIVE VALUATION
We drafted a Relative Valuation analysis through multiples to define the Enterprise Value and then
the Equity value of Amer, assuming that the value of the company on the market is not known. The
aim of this method is to estimate a multiple based on the comparable companies parameter and then
apply it to estimate the target company value.
First step for this analysis is the identification of the comparable companies. To identify them we
started by analysing the non-financial aspects, trying to look at all the companies that are taking
advantage of the growth of the sports market, regardless of the type of product or service provided.
Initially we took into account our direct competitors, companies that sell Amer’s same product
categories. Among these, we found the following:

VF Corporation: a US clothing holding with a turnover of 12 billion USD in 2016; as Amer, VFC
addresses the outdoor segment with brands like Timberland, Eastpak, The North Face, Vans and
Napapijri;

Under Armour: already mentioned in the selection of competitors for the benchmarking analysis, it
is a young American company and pioneer of the "Performance Apparel": a sportswear growing

21
segment. Its mission is the same as Amer’s, that is: "make all athletes better through the passion,
design and relentless pursuit of innovation”;

Garmin: a US company that develops aviation and commercial technologies for GPS with sales of
USD 3019 million in 2016. It is a direct competitor of Suunto for the production of smartwatches,
devices and sports compasses;

Technogym: an Italian company with a turnover of EUR 555 million in 2016, that produces
equipment for gyms and is in direct competition with Precor.

Secondly, in order to conduct a more heterogeneous analysis, we have broadened our research,
trying “to think outside the box of competitors”. In particular we looked for companies that shared
with us one of the most strategic aspects: the vision. We selected companies that like us address to
"principiant participants and professional athletes" by offering them products or services, although
completely different from ours, "that inspire athletic achievement and enjoyment". These are:

Monster Beverage: an American company that produces energy drinks known as "Java Monster",
"Monster Rehab" and "Muscle Monster", with a turnover of USD 2246 million in 2016;

Haw Par Corporation: a Singapore-based holding with revenues of USD 222 million in 2016. It is
known for the production of "tiger balm", an ointment used by many sportsmen after physical
activities to prevent muscle pain;

GoPro: a Californian brand that represents "wearable" cameras mainly used in extreme sports. It
has had a strong and fast growth in recent years, reaching a 1.6 billion USD turnover in 2016;

GNC Holding: General Nutrition Center is an American company that sells products related to the
health and nutrition of athletes, aiming at improving their performances. In 2016 it had a USD 668
million turnover.

It is interesting to see how the common aspects of all these companies, direct or indirect
competitors, are the focus on quality, innovation, sustainability, expansion of the e-commerce
channel and brand awareness.
We further selected these companies basing our choice on their financial data (found on the annual
reports of the companies and sites like "Guru Focus" and “Infront Analytics”) in order to make our
analysis more reliable. We assessed companies from the point of view of size, growth, cash flow
and risk, since these aspects could represent similar future expectations for investors.

22
The first dimension we considered is the size of these companies, knowing that it has a lot of
influence on the operative efficiency and on lenders’ trust. In particular we chose both the absolute
values of 2016 assets and revenues as an appropriate proxy.

As concerns growth, we tried to compare the growth rate of revenues and assets in the last year.
However, such a short time lapse has shown too fluctuating and different results for all companies.
Then we adjusted the analysis focusing on the Compound Annual Growth Rate from 2013 to 2016
of the revenues, calculated as:

" [CAGR(2013,2016) = (Re venu es 2016/Re venu es 2013)t − 1, where t" = 1/(2016 − 2013)]

We selected the growth of revenues, since our company's strategy is mainly focused on expanding
sales.

Regarding the valuation of cash flow we decided to use a relative index, EBITDA Margin
[" = EBI T DA /Re venu es], rather than the absolute value of Operating Cash Flow and EBITDA
since the companies differ a lot in terms of size.
Finally, we took into account the annual beta coefficient (ß) as a proxy for the market risk.

SIZE GROWTH CASH FLOW RISK

Revenues Assets 2016 CAGR Rev. EBITDA Margin Beta (from

2016 13-16 Infront
Analytics)
Amer Sports 2622 2715 7,1% 10,10% 0,45

VF Corp. 10859 8799 1,7% 14,81% 0,22

Garmin 2728 4088 4,7% 23,53% 0,08
Technogym 555 458 10,6% 18,01% 0,68

Monster 2755 3752 10,7% 36,61% 0,52

Beverage
Haw Par 182 2382 12,60% 69,50% 0,07
Corp.
GNC Holding 2295 1869 -1,20% -4,45% 0,44
Under Armour 4360 3293 19,3% 11,65% 1,80

GoPro 1071 430 6,32% -16,27% 0,11

Accepted Value of
Refused Value of
Accepted Value of
Refused Value of

Accepted Comparable Accepted Comparable Refused Comparable Refused Comparable

Table 5

After choosing the drivers, we reported the data of each company and we assessed them in order to
accept the most similar firms to draft the Relative Valuation. In terms of size, we considered as

23
"acceptable" those companies that had both assets and revenues in a range of [-70%, + 70%]
compared to Amer’s.

VF Corporation has risk value and EBITDA Margin similar to Amer’s. Despite this, its size in
terms of assets and sales is excessive and not even its growth reflects Amer's performance in
recent years.

Garmin is in line with all chosen drivers, except for risk. Although its strategy of "vertical
integration" is in contrast with Amer’s, Garmin covers the same geographical areas: in 2016
sales were 50% in America, 45% in Europe and 5% in the remaining part of the world. So we
took it on board.

Technogym does not respect the size constraints that we defined. However, we decided to take it
since its growth is similar to Amer’s, as well as its cash flow and risk. We also found strong
similarities between the strategies of the two companies, as the main pillars of Technogym are
"global presence in the different market segments", "brand development" and "omni-channel
distribution”.

Monster Beverage meets the size, growth and risk criteria. Regarding the cash flow, the
EBITDA margin is much higher than Amer’s. We decided to accept it in spite of its high
EBITDA value, which is probably due to the selling of products that are totally different from
ours.

Haw Par Corporation shows values that are too divergent compared to Amer’s. Moreover it
operates in sectors that are very different from Amer’s and its main distribution market is Asia.
For these reasons we discarded it.

GNC Holding, despite having Amer’s same size, presents very different values of growth and
EBITDA Margin (which is even negative). Furthermore, the company's sales are exclusively
concentrated in America. We concluded not to consider it.

Under Armour has drivers aligned to Amer except for CAGR and beta. But we decided to accept
it among our chosen company peers because it shows many strong similarities in strategic
terms.

GoPro shows negative values of EBIT and Net Profit in 2016. This has greatly affected the
EBITDA Margin driver, which results negative. Furthermore, this company diverges also in
terms of size and risk, so we discarded it.

24
Summing-up, the companies considered for the analysis are: Garmin, Technogym, Monster
Beverage and Under Armour.

We then proceeded with the choice of multiples both for the asset-side and for the equity side.

ASSET-SIDE
The objective of the asset-side approach is to find the Enterprise Value of the company, that is the
sum of the discounted future cash flows.
Considering to operate in a manufacturing sector and being aware of the importance of innovation
for Amer Sports, we decided to adopt the multiple EV / EBITDAR&D in order to make companies
with different R&D costs comparable.
Because of the lack of data, we could not find the R & D expenses of all chosen companies. In fact,
these do not always appear among the period costs in the P&L.
We think this is due to the difficulty that a company has in determining which part of the costs
actually corresponds to research and development rather than, for instance, to marketing. Or else,
because in some States, companies capitalize expenses of R & D in the balance sheet and depreciate
them annually.
For this reason, we decided to adopt the most commonly used EV multiples EV/EBITDA. It is a
multiple little influenced by accounting or tax policies and that more than others is able to express
the capacity of the management to generate cash. We adopted it also because we were dealing with
stable industrial companies.
EV* EBITDA EV/EBITDA

Amer Sports 3334 265

Garmin 9478 642 14,76

Technogym 1710 100 17,11

Monster Beverage 31080 1008 30,82

Under Armor 5846 508 11,51

Table 6 (data collected from GuruFocus)

EV/EBITDA (AVG) 18,55

EV TARGET 4912

Table 7

The average EV / EBITDA calculated is 18.55, bringing an EV of Amer of EUR 4912 mln, which is
about 47.3% more than the EV of EUR 3334 mln found on "GuruFocus".

25
We believe that the overestimation occurred because the companies taken into account have an
average growth (equal to 11,3%) higher than Amer’s one that is 7.1%. In addition, also the cash
flows of the chosen peers (suggested by the EBITDA margin) are all higher than Amer’s.
Finally, we believe that the values presented by Monster Beverage have negatively influenced the
reliability of our analysis, being too far from Amer’s and the other comparables.
Although the definition of “comparable company” allows to select also firms from completely
different markets, we have noted how this choice had negatively affected our analysis.
To deal with these problems and make the analysis more reliable, from this point on we decided to
exclude Monster Beverage and to give greater weight to companies that have drivers with closer
values to those of Amer, following this procedure:
1.We calculated the percent deviations of each driver for all the comparables: deviation%
[ = (dr iverA MER − dr iver COMPA R A BL E )/dr iverA MER]%;
2. We calculated the average deviations of each comparable;
3. We divided the sum of all the average deviations (calculated on point 2.) with the single average
deviation of each comparable in order to obtain the “Corrected Average” that allowed us to give a
weight inversely proportional to the deviation.
4. Weights were then calculated dividing each “Corrected Average” by the Sum of corrected
averages.
The following table (8) shows the data obtained
Garmin Technogym Under Armor

Turnover 4,03% 78,83% 66,27%

Asset 50,58% 83,13% 21,28%
CAGR 33,78% 50,02% 173,67%
EBITDA Margin 132,95% 78,29% 15,37%
Beta 82,22% 51,11% 300,00%
SUM

AVG DEVIATION 0,607 0,683 1,153 2,443

CORRECTED AVG 4,024 3,578 2,119 9,721

WEIGHTS 41,40% 36,81% 21,79% 100%

EV/EBITDA 14,76 17,11 11,51

WEIGHTED 6,11 6,30 2,51 14,92

EV/EBITDA

Table 8

26
After the correction, it is notable that the Enterprise Values estimated through multiples (EUR
3950mln) is much more aligned to the analysts’ consensus. Indeed, the deviation from the real value
decreased to 18.5%.

The second multiple we used for evaluation is EV / Sales, for two main reasons:

• revenues are by their nature more stable than other measures, since they are low linked to
accounting choices;
• the considered peers are customer oriented so they focus the attention on the sales policy.

Considering still valid the previous choice about Monster Beverage, we tried to estimate the EV,
first without weighing the deviations and then using the previously calculated weights.
EV (million €) SALES EV/SALES WEIGHTED
MULTIPLES

Amer Sports 3334 2622 / /

Garmin 9478 2728 3,47 1,44

Technogym 1710 555 3,08 1,13

Under Armor 5846 4360 1,34 0,29

Table 9 (data collected from GuruFocus)

AVG 2,63 2,86

EV TARGET 6902 7511

Table 10

It is evident that this time our correction makes the estimate of the real value worse because it
attributes too much weight to Garmin, whose multiple is the highest.

We concluded that the EV / EBITDA is the most suitable multiple for our asset-side valuation and
we can use it to calculate the Equity value as:
[Net Financial Position = (long-term + short-term debts)-available cash=
(846.2+53.7)-364=535.9 mln€]
[Equity value = EV target - Net Financial Position = 3950 - 535.9 =3414.1
mln€ ]

EQUITY-SIDE
We adopted then the equity-side approach aiming at assessing directly the value of the Equity. For
this assessment we decided to adopt the P/E multiple: the ratio between the price of the stock and
the Earning Per Share (EPS). In order to implement the formula of the valuation, we took the ratios
27
P/E given by the site Gurufocus. However, the EPS of Amer on the Finnish market (OHEL:
AMEAS) was not available on this site, so we were forced to collect the one from Amer’s financial
report of 2016. The EPS was calculated as ratios between the Net Result and the average number of
shares. Then we calculated the multiple P/E as follows:
Garmin Technogym Under Armor AVG CORRECTED
AVG

P/E 16,9 30,8 43,5 30,4 28,1

Table 11

Market Price EPS Market Price Corrected

(GuruFocus 31/12/2016) (Report Amer 2016) From Multiple Market Price

Amer Sports 25,28 € 1,07 € 32,52 € 30,04 €

Table 12

Making the same considerations as above, we have calculated the market prices using both the
weighted and unweighted values. We then compared the resulting values with the market price on
31 December 2016, since the volatility of the action was not excessive in this year [stock values
were between 23€ and 27€ per share during 2016].
Although the final result with our correction is closer compared to the unweighted, it is still very far
from the real value (+31% overestimated). We think that happened because we have not considered
all the necessary key drivers to make a proper adjustment. We probably should have adopted more
than one proxy for each dimension (e.g. we used only beta for risk). Moreover, we are aware that
for a more reliable valuation, the peer sample must be much bigger.
In both cases we obtained overestimated values for the reasons already highlighted.

However, taking the Relative Valuation made considering the weights as correct, we obtained a
market price that is higher than the one given by the market. This could lead to assume that the
market is underestimating Amer’s shares and consequently investors would be inclined to buy them,
always considering all the limitations previously exposed.

METHODOLOGY
After reading Amer's financial statements, we immediately worked on a plan that would allow us to
draft the project work efficiently and stay abreast of the lessons while writing the respective parts.
First of all we wrote a brief description of the analyzed company and of the market’s trends with
which Amer cohabits. Then we focused on its strategy and its 2020 declared targets. While

28
developing the project, we reviewed this introductive section eliminating information that was
unnecessary for the financial analysis and the relative valuation.
After that, we collaborated to carry out the sections of strategy, financial analysis and relative
valuation. We used Excel for the phase of data collection and indices calculation. Regarding the
draft of the paperwork we decided to adopt Google Drive in order to work on the same files all
together. This choice allowed us to be always aware of our teammates’ work and check the
consistency of our paper at any time.
As regards the most critical points of our project work, such as the comprehension of the ratios, we
brainstormed in order to share emerging deductions. In the end we tried to summarise the most
important aspects to draft the critical analysis.

Since the technical proceedings have been widely discussed in our document, this paragraph
focuses on the adjustment which we haven’t explained exhaustively, yet. We used it to rectify the
impact of the extraordinary expenses related to investment in 2014, which influenced the trends of
all our financial ratios. We removed the "other operating expenses", consequently the EBIT, the
EBT, the payable taxes and the net profit have obviously changed. Hence, we worked on balancing
the BS items in order to obtain coherent results:
• We subtracted “other operating costs” from the P&L, thus increasing both EBIT and taxes to be
paid.
• Then, changes have been reported in the “Net profit of the year” item in Equity.
• We incremented the “cash” item of Current Assets by the amount of removed “other operating
expenses” minus the increasing of the taxes amount because we found that the investment had
been financed by available cash.
The last thing we would like to explain is the exchange rate to convert Dollars into Euros: we
adopted the annual index of 0,9035 that we found on the Central Bank site. The currency
exchange has been useful to compare the absolutes values of Columbia Sportswear in the
benchmarking and those of American comparable peers in the relative evaluation paragraph.

CRITICAL ANALYSIS
While drafting the report we had two main problems, one deriving from Amer's strong
diversification and the other concerning the difficulty to find reliable data.

Amer's diversification: As previously explained, Amer is a highly diversified holding that

incorporates many subsidiaries, which produce goods for different branches of the sports world. Its

29
strong diversification has become a problem for our team since we were not able to find specific
competitors in all product categories for our benchmarking. Furthermore, we could not develop a
"sector analysis" and study the single branches since the financial statements of each of the
subsidiaries were not available.
Nevertheless, we believe that our financial analysis supported by the benchmarking tool is valid,
because we compared the companies from different points of view.

Data collection: We found some difficulties in the on- and off-line researches of the indices
concerning the Financial Analysis and the Relative Valuation. We proceeded in a different way for
each part. As for the financial analysis we decided not to limit ourselves by using only the indices
provided by the Amer reports. We instead calculated the indicators following the formulas and
methodologies seen in the classroom in order to understand the composition of each indicator.
Regarding the data of the Relative Valuation (value of ß, EPS and EV), we had to do some online
research. One problem was that these data change from website to website. This is due to the fact
that each source used its own calculation procedures and these were not very transparent: all the
components of the calculation formulas were often not explained properly. We eventually used
www.gurufocus.com for multiples and www.infrontanalytics.com for the beta.

The setting up of this project through data research, the application of the theory and the group
collaboration have given us several benefits. Most of all the practicality we have developed by
analyzing a financial report.
For the first time in our academic career, we were able to understand the financial reality of a
company, applying the theory to a real context. This was not easy for us, in the world of finance
there are no absolutely right decisions, nor a pre-established procedure to achieve successful results.
Indeed, it is difficult to find a single cause for specific values. They are usually the result of the
twist of several factors. This type of approach differs a lot from our engineering mindset, therefore
this analysis has been a useful training.

In conclusion, we are aware that our paper may have some imperfections due to the limited amount
of time we had for writing the report and the short span of years taken into consideration. Anyway,
we are sure that what we wrote has great reliability as we started from the most objective data, the
indices, and then proceeded through demonstrable deductions. As regards, for instance, the analysis
of OPM, NPM and ROA we preferred not to pursue the benchmarking with HTM. In fact it showed
too fluctuating results that might lead to unfounded conclusions.

30
Our work consisted in digging deeply to find the causes of certain data. We tried to verify in the
financial analysis how the strategy of the company is concretized numerically in the public balance
sheets. Regarding the relative valuation we tried to implement a methodology that is often used to
evaluate unlisted companies in order to evaluate their enterprise and equity values.

SUMMARIZING
Hereafter we sum up the conclusions we have reached from our analysis and some ideas to increase
the performances of the holding:

• The company is solid, keeps growing in terms of turnover since 2009 and pursues well-defined
growth targets.
• As for profitability, the company is profitable because it is well managed and has achieved
positive EBITs and Net results for many years.
• Dividends have been continuously distributed for years.
• In term of solvency and liquidity the company could be considered reliable.
• Amer does not excel in terms of efficiency. The weakness highlighted in SWOT about the
outsourcing seems to be a real problem. Therefore, focusing on internal cost efficiency more than
expanding the sales could be an improving choice that could be pursued by integrating the
production of some parts.
• Debt-to-Equity is high and we focused only on the advantages deriving from it. However, we are
aware that a high value of this ratio could have also negative consequences: it could lower the
trust from the banks. Consequently the future lenders would claim a higher interest rate on the
borrowings they grant.

We can then conclude that Amer Sports is a healthy and growing company, however we believe that
its growth rate is not enough to reach the targets set for 2020.
Despite the stated changes in its long term orientation, Amer has reviewed its objectives during
2017. Recently, Amer’s managers have admitted that exceeding the 3.5 billion euro turnover
threshold in 2020 is a too ambitious target.

31
FINANCIAL INDICATORS

AMER HTM COLUMBIA

2016 2015 2014 2013 2016 2015 2014 2013 2016 2015 2014 2013
ROE
[ N e t P r o f i t /E q u i t y ]
12,7% 12,8% 6,6% 11,9% 7,06% 11,11% 1,89% 3,05% 12,6% 12,7% 10,5% 7,5%
Net Profit Margin
[ N e t P r o f i t /R e v e n u e s ]
4,8% 4,8% 2,5% 4,2% 3,22% 4,64% 0,76% 1,48% 8,4% 7,7% 6,8% 5,6%
Payout Ratio
[ D i v i d e n d s / N e t P r o f i t (t − 1)]
53,2% 95,3% 52,3% 71,3% 26,7% 30,7% 42,5% 31,3%
Sustainable Growth Rate
[ R O E * (1 − P a y o u t R a t i o )]
6,0% 1,0% 3,0% 3,0% the company did not pay dividends 9,0% 9,0% 6,0% 5,0%
Earnings Per Share
1,07 € 1,03 € 0,47 € 0,76 € 0,17 € 0,25 € 0,04 € 0,07 € 2,85 € 2,58 € 2,04 € 1,34 €
ROA
[E B I T / T o t a l A s s e t s ]
7,5% 8,0% 5,3% 7,6% 5,90% 7,90% 3,53% 2,96% 12,7% 13,5% 11,1% 8,2%
ROI
[E B I T /(T o t a l A s s e t s − N o n F i n a n c i a l L i a b i l i t i e s )]

10,8% 11,7% 7,6% 10,6% 7,40% 10,65% 4,71% 3,81% 16,1% 17,4% 14,5% 10,5%
ROCE
[E B I T /(E q u i t y + L o n g T e r m D e b t s )]
10,3% 11,8% 8,5% 11,6% 7,83% 11,36% 5,03% 4,10% 15,5% 16,9% 14,0% 10,1%
ROS
[E B I T /R e v e n u e s ]
7,8% 8,1% 5,1% 7,3% 7,07% 8,10% 3,71% 3,36% 10,8% 10,7% 9,5% 7,8%
EBITDA Margin
[E B I T D A /R e v e n u e s ]
10,2% 10,1% 7,8% 9,2% 9,61% 10,47% 6,17% 5,91% 13,3% 13,1% 11,8% 10,2%
Asset Turnover Ratio
[R e v e n u e s /T o t a l A s s e t s ]
96,6% 99,2% 102,5% 105,3% 83,40% 97,46% 95,00% 87,93% 118,0% 126,0%117,2% 105,0%
D/E
[ L i a b i l i t i e s /E q u i t y ]
1,71 1,69 1,58 1,67 1,63 1,45 1,62 1,35 0,27 0,30 0,32 0,28
Interest Coverage Ratio financial expenses and incore are not
[E B I T /I n t e r e s t E x p e n s e ]
6,22 5,49 3,04 5,27 3,750 3,560 1,620 2,360 separated
Cost Of Debt
[ I n t e r e s t E x p e n s e /F i n a n c i a l D e b t s ]
3,7% 4,7% 5,7% 4,2% 3,77% 6,65% 5,94% 3,58% 7,4% 6,5% 6,7% 0,0%
Effective Tax Rate
[T a x e s /P r e T a x e s P r o f i t ]
26,7% 27,6% 28,1% 28,5% 42,19% 21,34% 49,72% 31,26% 22,8% 27,3% 28,5% 28,8%
Current Ratio
[C u r r e n t A s s e t s /C u r r e n t L i a b i l i t i e s ]
2,3 1,9 1,6 1,8 3,0 2,3 2,2 2,5 3,9 3,4 3,4 4,2
Quick Ratio
[(C a s h + S T I n v e s t m e n t s ) /(R e c e i v a b l e s + C u r r e n t L i a b i l i t i e s )]

1,6 1,3 1,1 1,3 2,1 1,4 1,4 1,8 2,5 2,1 2,4 3,1
Inventory Turnover Ratio
[(R e v e n u e s /I n v e n t o r i e s ) * 365]
5,1 5,3 5,4 6,0 3,9 3,9 3,8 4,3 4,9 4,9 5,5 5,1
Average Collection Time of
Trade Receivables
[(R e c e i v a b l e s /R e v e n u e s ) * 365]
109,4 112,2 116,2 110,9 123,9 120,9 124,7 120,9 51,2 58,4 59,8 66,5
Cash-Flow-To-Debt
[C F F O /F i n a n c i a l D e b t ]
0,2 0,3 0,2 0,1 0,1 0,2 0,0 0,0 19,6 5,6 11,8 /
S/T Debt Coverage
[C F F O /C u r r e n t F i n a n c i a l D e b t ]
2,8 1,3 0,4 0,5 0,4 0,7 -0,1 0,1 / 49,0 / /
CAPEX Coverage
[C F F O /C A P E X ]
-1,6 -2,7 -2,0 -1,9 -1,7 -2,9 0,3 -0,6 -5,5 -1,4 -3,1 -4,0
Economic Margin
[(C F F O /I n v e s t e d C a p i y a l ) − K ]
7,90% 12,15% 6,98% 5,98% 0,85% 2,33% -6,84% -1,98% 9,84% 0,16% 6,86% 21,89%
Residual Income
[E B I T − K * I n v e s t e d C a p i t a l ]
135,2 122,3 28,7 93,3 14,25827 12,71107 -3,63866 0,74367 136,20 155,30 105,74 131,79
EVA
[E B I T * (1 − E T R ) − K * I n v e s t e d C a p i t a l ]
88,08 66,54 -6,58 38,41 1,99 5,49 -10,57 -3,03 77,83 87,18 48,98 93,87
Cash EVA
[C F F O − K * I n v e s t e d C a p i t a l ]
88,15 130,31 16,12 14,96 3,33 7,41 -2,03 -6,27 154,86 0,69 92,68 274,28

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SITOGRAPHY AND REFERENCES
• Amer Sports financial reviews: www.amersports.com/investors/reports-and-presentations/financial-
reviews/
• Amer Sports corporate website: www.amersports.com
• www.ecb.europa.eu/stats/policy_and_exchange_rates/euro_reference_exchange_rates/html/eurofxref-
graph-usd.en.html
• https://it.finance.yahoo.com/
• www.gurufocus.com
• www.infrontanalytics.com
• http://www.ilsole24ore.com/art/moda/2016-09-29/la-moda-sport-cresce-4percento-e-punta-
raggiungere-16-miliardi-dollari-2020-183503.shtml?uuid=ADFsAiSB
• https://www.bloomberg.com/news/articles/2017-07-28/it-s-a-cruel-summer-for-europe-s-corporate-bond-
market
• Data set by Damoderan: http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datacurrent.html
• European Corporate Bond Market: (references:www.bloomberg.com/news/articles/2017-07-28/it-s-

a-cruel-summer-for-europe-s-corporate-bond-market)

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