DCF Studio

    BRBY.L · LSE · Consumer Cyclical

    Burberry Group plc

    Also onConsensus Drift

    Implied value per share

    GBp 539.26

    Market price

    GBp 996.00

    Implied upside

    -45.9%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedReported capital expenditure averages 5.94% of revenue against depreciation of 12.39%. A business cannot depreciate more than it invests indefinitely. Capex has been set to 12.39% of revenue so the forecast is not handed free growth. Override it if the reported figure is right.
    NoteRisk-free rate is an assumption: GBP assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    GBp 539.26-45.9%
    Exit multiple
    GBp 673.14-32.4%
    Market price
    GBp 996.00

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (GBP). Outflows negative.

    0m121m242mFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayGBP
    LineFY27FY28FY29FY30FY31CAGR
    RevenueGBP 2.2bnGBP 2.1bnGBP 1.9bnGBP 1.7bnGBP 1.6bn-7.9%
    EBITGBP 235.7mGBP 217.1mGBP 200.0mGBP 184.3mGBP 169.8m-7.9%
    NOPATGBP 176.7mGBP 162.8mGBP 150.0mGBP 138.2mGBP 127.4m-7.9%
    Add depreciation & amortisationGBP 313.1mGBP 288.5mGBP 265.8mGBP 244.9mGBP 225.6m-7.9%
    Less capital expenditureGBP -276.2mGBP -254.4mGBP -234.4mGBP -216.0mGBP -199.0m-7.9%
    Less increase in working capitalGBP 28.2mGBP 25.9mGBP 23.9mGBP 22.0mGBP 20.3m+7.9%
    Free cashflow to firmGBP 241.8mGBP 222.8mGBP 205.3mGBP 189.1mGBP 174.3m-7.9%
    Discount factor0.96550.90000.83900.78210.7291-
    Present valueGBP 233.5mGBP 200.5mGBP 172.2mGBP 147.9mGBP 127.1m-14.1%
    Present Value Of The ForecastGBP 881.2m

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate4.50%GBP assumption - no free live source available for this market (assumption)
    Equity risk premium5.50%Market assumption
    Beta0.792Reported 0.689, pulled toward 1.0 (Blume)
    Cost of equity8.85%Risk-free + beta x equity risk premium
    Cost of debt4.76%Interest expense / average total debt
    Market capitalisationGBP 3.6bn70.1% of capital
    Total debtGBP 1.5bn29.9% of capital, book value as a proxy
    Tax rate25.0%Effective, capped at statutory
    WACC7.27%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareGBP 5.39

    68% of EV

    Forecast FCFF, final year
    GBP 174.3m
    Capex at depreciation, working capital in reinvestment
    GBP 147.3m
    Less reinvestment at g/ROIC (17.5% of NOPAT)
    GBP -25.8m
    Capitalised
    GBP 121.5m
    ROIC (reported)
    14.3%
    Terminal value, undiscounted
    GBP 2.6bn
    Terminal value, discounted
    GBP 1.9bn
    Enterprise value
    GBP 2.8bn
    Less net debt
    GBP 852.0m
    Equity value
    GBP 1.9bn

    Exit at 8.3x EBITDA

    Value per shareGBP 6.73

    73% of EV

    Terminal value, undiscounted
    GBP 3.3bn
    Terminal value, discounted
    GBP 2.4bn
    Enterprise value
    GBP 3.3bn
    Less net debt
    GBP 852.0m
    Equity value
    GBP 2.4bn

    Spread between methods: 22%.

    Sensitivity

    Value per share (GBP) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    5.27%8.048.9310.1411.8714.56
    6.27%6.096.557.147.918.94
    7.27%4.805.075.395.796.29
    8.27%3.894.054.244.474.74
    9.27%3.213.313.433.563.72

    Outlined: this model. Green text: above today's price of 9.96. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year-7.9%3.5%+11.3pp
    EBIT margin10.6%18.1%+7.6pp
    Discount rate7.3%5.3%-2.0pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.