Hesketh Motorcycles Limited

Statement of Financial Position

As of 31st December
Current Assets (Motorcycle Parts)
FA(book cost 13004)
Investment in non-motorcycle subsidiary
Deffered research and development exp.
Total assets
Share capital
Rev. deficiency
Loan from ultimate holding company
Total liabilities

30-Jun-80 30-Jun-81 30-Jun-82 30-Jun-83

4,385
10,365
2
494,681
509,433
90
(21,419)
530,762
509,433

Hesketh Motorcycles Limited

(a)Sales of superbikes as a proportion of all motorcycle sales
Europe(excluding Italy)
Year

No.of motorcycles

1975
1976
1977
1978
1979
1979(1st H)
1980

497,444
594,295
621,863
511,750
534,000

No. of superbikes
12,500
18,812
25,000
35,000
53,375

(b)
M.country

Pincipal
Manufacturers

japan

Honda,Suzuki,Kaw
asaki,Yamaha

6600

Germany

BMW

2270

Italy

Motoguzzi,Ducati,
Laverda,benelli

1200

USA
UK

Harley davidson
triumph

No. of superbikes sold

200

UK only
No. of Motorcycles

No. of superbikes

174,751
188,627
176,031
174,095
206,812
94,742
112,645

3,800
4,800
5,002
6,995
10,270
6,041
6,912

Hesketh Motorcycles Limited

Price Inflation in Industry
Model
Honda CBX 1000
laverda 100 jota
Kawasaki Z1300
BMW R100RS

Mar-80
2,899
3,199
3,199
3,199

Jan-81
3,150
3,500
3,500
3,700

%
8.66%
9.41%
9.41%
15.66%

Hesketh V1000

3,750

3,950

5.33%

Harley Davidson FX5-80

Harley DavidsonFLH-80
Harley Davidson FLH-80(low rider)
Harley Davidson FTL-80

3,939
4,279
4,369
4,759

4,300
4,700
4,800
5,200

9.16%
9.84%
9.86%
9.27%

8,500
12,500

9,200
13,500

8.24%
8.00%

Munch(west Germany)
Van Veen(Holland)

Hesketh Motorcycles Limited

Statement of Comprehensive Income
Year ended 31st March
Inflation
000'
Particulars
Recommended Retail Sales Price
VAT and Dealers Margin
Net Sales Revenue from Motor Bikes
Revenue from Spare Parts
Total Sales Revenue
Materials:
Engine and Gear Box
Frame and Running Gear
Assembly Materials
Total materials
Direct labour
Total Prime Cost
Gross Margin
Overheads:
Indirect Labour
General Overheads
Research and Developments
Marketing expense
Warranty
Total Overheads
Net Lease Expenses
Depreciation
Operating Profit before Exceptional Item
Amortization of 495000 deferred R&D
expenditure
Operating Profit after Exceptional Item
but before Tax
Corporate Taxes
Net Profit after Tax
NPAT Growth
EPS
Nof Of Shares Outstanding (000')

Base Case
1,000 Units Per
Annum
Units of Sales
3,950
1,114
2,836

0%
Without Inflation Adjustment
1981E

1982E

1,000
3,950
1,114
2,836
425
3,261

1,700
6,715
1,894
4,821
723
5,544

1,100
800
40
1,940
116
2,056
780

1,100
800
40
1,940
17
1,957
879

1,870
1,360
68
3,298
30
3,328
1,494

110
130
100
100
30
470

110
130
100
100
30
470
36.2
100

187
221
170
170
51
799
36.2
100

310

272

558

60

60

60

250

212

498

106
106

249
249
135%
2.5
100

100

1.1
100

0%

flation Adjustment
1983E
2,000
7,900
2,228
5,672
851
6,523

15%

2,200
1,600
80
3,880
35
3,915
1,757

39%
28%
1%

220
260
200
200
60
940
36.2
100

4%
5%
4%
4%
1%

4%

20%

681
60
621
311
311
25%
3.1
100

50%

Average Case Optimistic

1 500 Units Per 2,000 Units
Annum
Per Annum
000'
000'
5925
7900
1671
2228
4254
5672

500
700

1050

90

120

610

930

Hesketh Motorcycles Limited

Statement of Financial Position
As of 31st March
Without Inflation Adjustment
000'
Total Sales Revenue
3,261
5,544
6,523
Particulars
1981E
1982E
1983E
Cash
326
554
652
Accounts Receivable
489
832
978
Inventory
815
1,386
1,631
Investment in Short Term Securities
565
115
183
Total Current Assets
2,195
2,887
3,444
Non-current Assets
Accumulated Depreciation
Net Non-current Assets
Total Assets
Accounts Payable
Notes Payable
Total Current Liabilities
Long Term Liabilities
Total Liabilities
Share Capital
Retained Earnings
Total Owners' Equity
Total Liabilities and Owners' Equity
Excess Fund Need or Surplus (Short -term)
Net Working Capital
in Net Working Capital
ROE

500

500

500

100
400
2,595
489
489
489
2,000
106
2,106
2,595

200
300
3,187
832
832
832
2,000
355
2,355
3,187

300
200
3,644
978
978
978
2,000
666
2,666
3,644

565
TRUE
1,141
1,141
5%

115
TRUE
1,941
799
11%

183
TRUE
2,283
342
12%

10%
15%
25%

15%

Without Inflation Adjustment

Workings

1,631

2,772

3,261

400
2,031

300
3,072

200
3,461

489

832

978

489

832

978

2,106
2,595

2,355
3,187

2,666
3,644

565

115

183

Hesketh Motorcycles Limited

FCF Valuation
Without Inflation Adjustment

000'

Particulars

1981E

Net Operating Profit after Tax (NOPAT)

Depreciation
Increase in Non-current Liabilities
Capital Expenditure
in Net Working Capital
FCF to Firm

106
100
(500)
(1,141)
(1,435)

1983E

249
100
(799)
(450)

311
100
(342)
68

25 x

Terminal Value at the End of Year 1983

Total FCF over Projected Years
PV of FCF (Discount Rate =(14%+16%)/2+5%)=20%)
Discount Rate
Firm Value
Debt

(1,435)
(1,196)
20.0%
3,023
Avg
3,023
100

Equity Value
Estimated Number of Shares (000')

Value of Per Share or Offer Price (FCF Method)

1982E

30

(450)
(312)

7,763
7,831
4,532

Max
3,325
100

Min
2,721
100

33

27

(Face Value Per Sahre of 10)

000'
2,000

Fund to be Raised through Equity Issue

Flotation Cost
No of Shares to be Issued (Face Value Per Sahre of 10)
Offer Price Per Share (Minimum)
Lord Hesketh will Hold (at least):
Value of Per Share or Offer Price (FCF Method)
Number of Shares
Stock Value
Original Investment by Mr. Alexander Hesketh
Estimated Return for Mr. Lord Hesketh

000'

5%
73.51

per share

27
000'

000'

27
26

44%

721
500
221