The LVMH (Moet Hennessy Luis Vuitton SA) luxury brand has the following shareholder capital structure described in Figure 1-1 below. The main shareholders are the Group Arnault with 47% shares in personal property. 28% of the shares are held by foreign institutional
investors and 17% are held by French institutional investors. 5% of shares are held by individuals and 2% are treasury stock.
The Arnault Group has, due to the 47.6% of its shares of LVMH, a shareholder voting right of 63.64% of the total votes (LVMH, 2009). Due to this fact LVMH can be controlled with majority votes by the Arnault Group without dissension by other shareholder. Arnault focuses on long-term investment to create new values by investing money. On the other side, the minority shareholders are interested in high returns of investment by rising value of shares and high dividends. This perspective has a short term focus with a high profitability.
Because of the different perspectives of company behavior, the investment of money by Arnaults makes no sense, because he would support the passive minority shareholders in earning a higher profit without own investment. Further the position with majority vote by the Arnault Group can lead to a missing objectivity and transparency in control of LVMH by Arnaults interests. At the other side, the minority shareholder have no own majority to achieve their aims against the Arnault Group's opinion (Hanson, 2010).
[...] Moreover with an IRR of 15,61% the project seems pretty interesting as well and exceeds 13 Financial policy Table 4-1 Financial Policy of LVMH Should Investors invest in this project in working capital if turnover without taxes Capital resource costs year t Sales Volume Sales Revenues Variable Costs Other Costs EBITDA Depreciation EBIT Taxes + Depreciation Change in Net Working Capital Cash Flow from Operations + Cash Flow from Investments Working Capital Free Cash Flow to the Firm FCFF in Final Value of Free Cash Flow to the Firm in t=10 Net Present Value IRR Internationalisation 5 Internationalisation LVMH is a group composed of firms that operate in very diverse business sectors and in numerous geographic zones. [...]
[...] The PPR group as for him has a financial rentability around equal to the one of the LVMH group, it reaches in Financial performance 3.2 Study of the stock-exchange performance of LVMH: evolution of the price of stock exchange with comparison to a reference indication of the CAC40 and to one rival companies The stock-exchange performance of the group LVMH is rather good, in spite of a significant decline of the share over the year 2008 (Figure 3-1). Figure 3-1 Share comparison of LVMH to CAC 40 The collapse of the share (48 in 2009 is directly connected to the subprime mortgage crisis begun in the middle of year 2008. [...]
[...] The capital cost of LVHM for this activity is = WACC = Weighted average cost In that case: Company value - Annual Value = 95- 7 Financial performance Financial performance Growth, margins, profitability and interpretation of the data in comparison to the performances of the rival companies We notice a significant increase of turnover of LVMH between 2008 and 2007. After this, as the group undergoes the crisis in 2009, a disappointing performance is recorded in this year. (Table On the other hand the company was still pretty good off as PPR fell to between 2008 and 2009. [...]
[...] As a result, the performances of LVMH are even more dependent on the consumption of the customers, which is connected to the situation. Because of a very important leadership crisis of purchasing, during the last 3 years (from 2007 till 2009), the sales volume of the spirit" fell of This last one adapted to the situation what resulted in lower consumption of wines and spirit of the customer of LVMH. On the other hand, the activity "mode (fashion) and leather store (craft)" benefited from the influence of carrier in the activity while for the same sum invested in the 11 Financial performance markets: the Asian markets. [...]
[...] An appearing problem by the analysis of the board of the director shows some meanderings to the AFEP-MEDEF standards (AFEP-MEDEF, 2010). The of AFEP-MEDEF code requires at least 50% of independent directors. The LVMH board has only a quote of 33,3%. Further problems is the 6.3 with a women fraction of at least 20%. In the board are only 16,6% represented. Finally the board members have to be independent of the company interests to ensure certain objectivity for a correct monitoring and controlling of LVMH (LVMH, 2010). [...]
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