Final Report - LABEL VIE

School of Business Administration
Project final report

FIN 5306
VALUATION OF LABEL VIE GROUP

1
Table of content
Company’s overview: 5
Introduction: 5
Mission: 7
2
Values: 7
Revenues: 8
Country Analysis : 10
PEST Analysis : 10
Economic factors: 10
Political factors: 12
Technological factors: 12
Social factors: 12
Industry Analysis : 13
Industry overview : 13
Porter’s five forces : 14
Threat of substitute- Low: 15
Threat of entry of new competitors- Low: 15
Intensity of competitive rivalry- High: 15
Bargaining power of buyers- Low: 15
Threat of suppliers- Low: 16
Competition : 16
BCG matrix : 18
SWOT analysis : 19
Risks: 20
Risks related to the economic environment : 20
Risks related to competition: 20
Risks related to the investment: 20
Risks related to management: 21
Legal risks: 21
Exchange risks: 21
Board of directors: 21
ZOUHAÏR BENNANI 22
RACHID HADNI 23
ADIL BENNANI 24
SAÏD ALJ 24
MEHDI ALJ 24
3
KAWTAR JOHRATI 25
RIAD LAISSAOUI 25
KARIM SOUAID 25
GILLES DE CLERCK 26
JAMILA DAHIB 26
Principle managers of the company: 27
The managers considered a key person: 31
Interaction with financial markets : 31
Social obligations: 32
Ratio analysis: 33
Liquidity ratios: 33
Activity ratios: 35
Solvency ratios: 38
Profitability ratios: 40
Valuation ratios: 43
Pro-format 5 years income forecast: 48
Free cash-flow: 54
Optimal capital structure: 57
Cost of equity: 58
Cost of debt: 59
Cost of capital: 59
Dividend policy: 60
Intrinsic value per share: 62
DDM – Dividend discount model : 62
RIM – Residual income model : 63
Final estimate: 64
Compare the intrinsic value to the current price: 64
List of financial ratios

Number Ratio Numerator Denominator
1 Current ratio Current assets Current liabilities
Cash + Short-term marketable
2 Quick ratio investments + Receivables Current liabilities
4
3 Asset turnover ratio Revenue Average total assets

Cost of sales or cost of goods
4 Inventory turnover ratio sold Average inventory
5 Days of inventory in hand (DOH) Number of days in period Inventory turnover
6 Receivables turnover Revenue Average receivables
7 Days of sales outstanding Number of days in period Receivables turnover
8 Long-term debt to equity Long-term debt Total equity
9 Total-debt to equity Total debt Total equity
10 Gross margin Gross profit Revenue
11 Operating margin Operating income Revenue
EBT (earnings before tax but
12 Pretax margin after interest) Revenue
13 Net profit margin Net income Revenue
14 Sales growth Sales t1 - Sales t0 Sales t0
15 Return on equity Net income Average total equity
16 Return on assets Net income Average total assets
17 Price to earnings Share price Earnings per share
18 Price to sales Share price Revenue
19 Revenues to share Revenue Share price
Net income - preferred Weighted average shares
20 Earnings per share dividends outstanding
COMPANY’S OVERVIEW:
INTRODUCTION:
LABEL VIE with 35 years of experience in the retail industry is the second larger player in
the supermarket segment in Morocco. It has developed more than 92 stores that account for
supermarkets, hypermarkets, and cash markets in different cities all over Morocco under both
LABEL VIE and Carrefour and Atacadão brands. Each brand targets different sets of
customers. It includes 870 employees (Label Vie, 2020).
In 2012, LABEL VIE Group announced a new brand change, opting for Atacadão, for three
“Metro” stores in Fez, Tangiers and Oujda, which was then converted to a hyper cash store.
Atacadão, as part of the LABEL VIE group, is currently established on a minimum area of
3,000 m² and offers a variety of products that are essential for both food and non-food
5
products. The Atacadão brand favors price over availability (Label Vie, 2020). This is
explained by the company’s strategy to offer only products with the lowest prices in the
market. This same strategy accounts for proposing to customers either a per-unit purchasing,
or mass purchasing offers to meet both the needs of individuals and professionals (that are
mainly small retailers). Atacadao's purchasing strategy is based on a day-to-day negotiation
and on purchasing in large quantities, thus enabling it to have the lowest prices (Label Vie,
2020).
LABEL VIE signed an exclusive franchise agreement for Morocco with the French retail
giant Carrefour, in order to use the brand on its hypermarkets introduction. The Carrefour
Brand is considered as a pioneer in the hypermarket sector, still, it is also present in the
supermarkets sector and seeks to satisfy the maximum of needs for its customers (Annual
Report, 2018). It is of prime importance to note that within LABEL VIE Group, the type of
the target market depends strongly on the location (e.g. city) of the store (Label Vie, 2020).
The following represents the history of LABEL VIE. According to the company’s website,
the company went through a series of mergers and acquisitions such as the case of acquisition
of Superdiplo Maroc in 2002 and the absorption of Supermarché Souissi (LABEL VIE,
2019). In order to increase its capital, the company has changed its name from Hyper S.A. to
LABEL VIE S.A. and went public in Casablanca Stock Exchange (CSE) offering its IPOs
first in 208 (LABEL VIE, 2019) (Figure 1). In addition to that, the introduction to the CSE
enabled the company to increase its capital by issuing 3 rounds of bonds in 2010, 2012, and
2014, with the values of 500 MMAD, 400MMAD, and 1 500MMAD, respectively. This
allowed the company to acquire big competitors, secure the purchase of its properties to avoid
leases and long-term debt, and diversify its long-term investment (LABEL VIE, 2019) (Figure
1).
6
Figure 1: History of Label’Vie Group. Source: Label Vie, 2019
LABEL VIE was able to reach a geographical distribution to 24 large cities in Morocco and
accounts for 73 supermarkets, 8 hypermarkets, 11 hyper cash markets with a sales area that
accounts for more than 187 398 sqm (Figure 2). The company is structured in a way that it
controls all the supermarkets and the group’s central office, and has 3 major sub-departments
that are HLV that manages the hypermarkets (95% owned by LABEL VIE), MLV that
manages Atacadao stores (95% owned by LABEL VIE), and SLV that manages the
company’s Afriquia Gas stations (100% owned by LABEL VIE) (LABEL VIE, 2019).
Figure 2: Geographical distribution of LABEL VIE stores in 2018

7
MISSION:
According to the company’s website (labelvie, 2020), the mission statement of LABEL VIE is
given such as:
“We are going to continue on this path to maintain our position as a
benchmark player in mass distribution in Morocco. Our goal is to continue to
improve the daily lives of our customers by offering them a better purchasing
power and a continuous improvement in the quality of our products and
services”.
VALUES:
The following section provides the list of the values of LABEL vie, which explains the
company philosophy. These values can be summarized such as:
● Culture of satisfaction: The first value that LABEL VIE focuses on is the satisfaction
of the customers. The company’s employees and staff work every day on improving
the experience of customers throughout making the services and the products offered
adapt as well as align with customers’ needs. In order to keep track of this value,
LABEL VIE tends to analyze and measure their customers’ satisfaction for continuous
improvement (Label Vie, 2020).
● Culture of overcoming challenges: This value consists of the constant improvement
of employees and staff skills and capabilities for the overall evolution of the group
(Label Vie, 2020). It is needed to have a state of mind that encourages challenges,
unfailing endurance and perseverance to write the history of the group and meet
challenges (Label Vie, 2020).
● Culture of transparency and trust: LABEL VIE believes that the key of success is
its employees. Therefore, the company is engaged in providing the best working
conditions as possible, while including its employees in the process of decision
making to create a sense of commitment as well as helping them in best accomplishing

8
their missions (Label Vie, 2020). The traceability of the products, the price guarantees,
the guaranteed freshness pact are instruments of trust and transparency value of the
company (Label Vie, 2020).
● Spirit of belonging: The company puts a lot of effort in creating a sense of belonging
for its employees by cultivating a culture of sharing, trust and sincerity within the
company’s teams (Labelvie, 2020).
REVENUES:
LABEL VIE can be considered as a very successful company that has achieved an important
growth demonstrated by its performance in the previous years. Between 2004 and 2018, the
company was able to have a 22 multiplier to its sale, and between 2008 and 2018 (since the
company’s introduction to CSE), the company was able to increase its sales by 8. This is to
reach a total sales revenue volume of 9 033 MMAD in 2018 (Label vie, 2019).
Figure 3: Evolution of sales revenue since 2004. Source: Label vie, 2019
While the figure above discusses LABEL VIE’s total sales in general, the remaining section
of this part focuses on providing the numbers that are specific for each branch of the
company. With regards to the company’s hypermarkets, this segment represented a share of
25% of the company’s total revenues in 2018. This consists of a growth rate that accounts for
9
13.4 % from the former year. which is due to the opening of new stores ‘’Tetouan’’ (annual
report, 2018).
Table 1: Evolution of sales in the hypermarkets segment of LABEL VIE in 2017 and 2018.
Source: https://www.labelvie.ma/wp-content/uploads/2019/08/Rapport-Labelvie-2018-VUK-1-1.pdf
Concerning the Hypercash Segment, it is represented by the Atacadao brand, which generated
in 2018 a share of 34% of the total LABEL VIE revenues (Table 2). This is a growth of 6.1%
from 2017 (annual report, 2018). Finally, and with regards to the LV sector, which relates to
the gas station branch of the company, it generated a 4% share of the total company’s
revenues. However, this specific branch showed a decrease of 8% compared to 2017, which
was due to the commercial boycott in 2018 (Annual Report, 2018). For the remaining share of
the revenues, it is represented by the supermarket segment of the company.
Table 2: Evolution of sales in the hyper cash segment of LABEL VIE in 2017 and 2018.
Source: https://www.labelvie.ma/wp-content/uploads/2019/08/Rapport-Labelvie-2018-VUK-1-1.pdf
10
COUNTRY ANALYSIS :
PEST ANALYSIS :
PEST stands for Political, Economic, Social, and Technological factors to study in order to
assess a country. it is a helpful analysis tool to base decisions on at a given point of time
(Economictimes, 2020).
ECONOMIC FACTORS:
Refer to the study of the macro environment factors as the interest rate, the economic growth,
inflation rate (Economictimes,2020).
● According to a study conducted by the American consulting firm AT Kearney,
specialized in strategy and management consulting; Morocco ranks 7th in the world
for the growth potential of its modern distribution sector.
● Morocco’s Global Retail Development Index (GRDI) score stands at 56.1, which
brings Morocco’s rank just behind the UAE which ranks as the first nation in the Arab
world and the 5th nation in the world.
● Morocco has been tackling the unemployment rates through the creation of Intelaka
initiative as a solution for youth entrepreneurship starting from february 2020. King
Mohammed VI has created a budget of $625 million trust fund to finance the initiative
(WorldBank, 2020).
● Morocco has closed its borders and prohibited all international flights, as a measure to
reduce social interaction facing the Covid-19 pandemic. However, it has caused a
negative impact on the economic environment of the country. King Mohammed VI
has ordered a fund of 10 Billion Dirham equivalent of $1Billion, for health
infrastructure and households’ support (WorldBank, 2020).
● In 2019, The Moroccan GDP growth has decreased from 3 in 2018 to 2.3 which is
explained by the contraction of the agricultural sector. While, consumption has created
11
most of the GDP growth; as a result of, the high salaries and the low inflation rate. the
weak competitiveness of the net exports that remained negative. Moreover, Inflation
has stayed low under 2% thanks to controlling the prices of imports (WorldBank,
2020).
● Due to the outbreak of Covid-19 the Moroccan economy is expected to suffer in the
medium-term. An expected recession for this year projected to cause and create
downside risks of worsening the pandemic (WorldBank, 2020).
● The projections for the near term is a gradual acceleration of the economic growth
caused by the secondary activities and tertiary activities (WorldBank, 2020). These
activities are related to manufacturing and services.
POLITICAL FACTORS:
Political factors are related to laws, policies, and regulations decided by the government such
as the study of taxes and employment laws (Economictimes, 2020).
● Morocco follows a monarchy system with a parliament constitution. After King
Mohammed VI, the head of the government is the Prime Minister and is the head of
the multi-party system.
● The strong growth potential of the modern distribution sector in Morocco is driven by
the political and economic stability that characterize the kingdom which has become
one of the leading tourist destinations and one of the most attractive countries for FDIs
(ivoryresearch, n.d). This is explained by the existence of a monarchy system that
allows the continuous stability and safety of the country.
TECHNOLOGICAL FACTORS:
This refers to the technological changes, and how both customers or companies are adapting
to the changes (Economictimes, 2020).

12
● The lack of skilled human resources as well as of training programs dedicated to the
modern distribution sector.
● The adoption by the Moroccan government of several measures that tend to favor the
growth of the sector; such as,Plan Rawaj, the regulation of mobile payments being in-
progress (ivoryresearch, n.d; Oxford Business Dictionary, 2020).
● The Moroccan government is working excessively on establishing a solid
infrastructure for large retailers. In addition to that, Morocco is encouraging large
retailers to expand their businesses.
SOCIAL FACTORS:
This relates to the social aspect of the country. This takes into consideration the demographics
and social behaviors (Economictimes, 2020). In the case of our analysis, focus was on the
social variables that are directly linked to our industry.
● Label’Vie Group has 30% market share. Large distribution retail has significant
growth potential in the Moroccan market as the penetration rate is just 15% (Oxford
Business Dictionary, 2020).
● A recent market study shows that a third of consumers have never set foot in a
hypermarket or supermarket. Around 20% of people visit a general merchandise store
(GMS) at least once a week, and this rises to 35% in larger centres like Casablanca
and Rabat (Oxford Business Dictionary, 2020).
● 12% of people visit a GMS at least once every two weeks and an additional 18% go
roughly once per month (Oxford Business Dictionary, 2020).
● The social factor shows that large retailers are still not part of the majority of
Moroccan’s culture, still, it has gradually become part of their lives.
INDUSTRY ANALYSIS :
INDUSTRY OVERVIEW :
13
The retail industry has taken part in the Moroccan government strategy since 2008. This
strategy intends to position Morocco as a commercial center with focus on the retail segment.
Currently, the Moroccan government seeks to further modernize the local commerce, and
encourage companies to establish retail activity zones. The aim is that the retail sector should
achieve a 15% value added to the GDP by 2020 while creating more than 450 000 job
positions (Oxford Business Dictionary, 2020).
One of the main challenges in Morocco relates to the boycott of customers to certain products.
This is because customers were upset by the monopolization practices and corruption. For this
reason, the Moroccan government put in place many laws such as Law 31-8 in addition to the
existing ones that concerns safety measures for consumers’ protection and safety. In addition
to that, the government is also regulating the prices of certain industries (Oxford Business
Dictionary, 2020). These following measures will play a significant role in regaining
customers and consumers trust and increase the demand in the retailing sector.
The hypermarket and supermarket sector in Morocco has noticed a significant transformation
due to LABEL VIE, Carrefour, and Atacadao to the extent that introduced hypercash markets.
Still, this sector is dominated by two major players that are Cofarma Group/Marjane with a
53% market share, and LABEL VIE with a market share of more than 3% (Oxford Business
Dictionary, 2020).
It is of prime importance to note that the large distribution retail sector has a very promising
growth potential, as the estimated penetration rate in this sector accounts for only 15%. Still,
it needs to be part of our culture since nearly 33% of consumers don’t go to hypermarkets or
supermarkets, 20% visit these places at least once per week (which rise to 35% in big cities),
12% go at least every two weeks, and 18% go at least 1 per month (Oxford Business
Dictionary, 2020).
14
There is still a lack of infrastructure, and the Moroccan government is working on including
better logistics platforms for large retailers. In addition to that, new regulations are discussed
in the parliament in order to minimize the unfair competition with the informal segment.
PORTER’S FIVE FORCES :
Porter’s five forces are named after Michael E.Porter the Harvard professor in business
school. It is a model that analyzes and studies the forces that affect the industry to make a
decision, judge the competition in that industry, and increase a company’s profitability
(investopedia, n.d)
THREAT OF SUBSTITUTE- LOW:
A low threat of substitute for grocery retail market of food and low to medium for the other
products provided by the supermarket. The substitute for the supermarket are convenience
stores. These small chains are low in Morocco, but increasing thoroughly (ivoryresearch, n.d).
In Morocco, there are few of these types of retailer; such as BIM. However, Label vie is
competing with its substitute through Atacadao stores.
THREAT OF ENTRY OF NEW COMPETITORS- LOW:
The threat of entry of new competitors into the retail industry is low (ivoryresearch, n.d). It
requires huge capital investments in order to be competitive and to establish a brand name
(ivoryresearch, n.d). Major brands that have already captured the food retail market are
Marjane, Carrefour, label’Vie. Therefore, new entrants have to produce something at an
exceptionally low price and or high quality to establish their market value (ivoryresearch,
n.d). Gaining planning authorization from local government takes a considerable amount of
time and resources to establish new supermarkets and this is therefore a considerable barrier
to new entrants (ivoryresearch, n.d).
INTENSITY OF COMPETITIVE RIVALRY- HIGH:

15
The intensity of competitive rivalry in the food and grocery retail industry is extremely high
(ivoryresearch, n.d). Label’ Vie intense competition from its direct competitors Marjane
through promotions intermittently and expansion. It should therefore be highlighted that
Cofarma Group/Marjane, with a market share of 53%; and Label’Vie Group with a 30%
market share (Global Agricultural Information Network, 2019). Large distribution retail has
significant growth potential in the Moroccan market as the penetration rate is just 15%
(oxford business group, 2020).
BARGAINING POWER OF BUYERS- LOW:
The bargaining power of buyers is low and almost existent. In cases where products have no
differentiation and are more standardised, the switching cost is very low and the buyers can
easily switch from one brand to another. However, the same products are sold with fixed
prices in all retailers which make the bargaining power of the customer low.
THREAT OF SUPPLIERS- LOW:
The bargaining power of suppliers is fairly low. It should be noted that the suppliers are
inclined towards major food and grocery retailers and dread losing their business contracts
with large supermarkets. Hence, the position of the retailers like Label’vie is further
strengthened and negotiations are positive in order to get the lowest possible price from the
suppliers (ivoryresearch, n.d).
COMPETITION :
The large-scale distribution landscape in Morocco has been maintained in recent years,
between the sustained growth of historical players and the installation of international players.
These are taking advantage of the boom in mass distribution in Morocco to develop through
different formats. The sector nevertheless remains dominated by two main groups, the
Cofarma group which holds 46.2% of the market share and the LabelVie group which holds
30.1% of the market share. the Group is the only one to develop the mini format with
16
a very ambitious development plan. At the end of 2019, the Group had 104 points of sale
including 11 hyper cash, 84 supermarkets and 9 hypermarket stores (Annual report, 2019).
Below, are presented the different players of the sector:
COFARMA: A subsidiary of Al Mada is a leader in the sector with 89 stores and 3 brands;
● Marjane is a 100% subsidiary of Al Mada, the brand has 40 points of sale in the major
cities of Morocco.
● Marjane Market, also a 100% subsidiary of Al Mada, the brand is present mainly in
large cities, and has been developing for several years in small and medium-sized
towns to reach a network of 45 points of sale.
● OTOP is a 100% subsidiary of Al Mada and the group's hard discount concept started
in 2017 with one point of sale, reaching 4 points of sale in 2019 (Annual report, 2019).
ASWAK ASSALAM: A subsidiary of the Chaâbi group (Ynna Holding), Aswak Assalam
has a market share of 8.3% and operates 14 hypermarkets in major cities. BIM MAROC
Leader in hard discount food distribution in Turkey, the brand has established itself in
Morocco and quickly established itself on the market thanks to a very aggressive development
and establishment strategy with competitive prices. It has 489 stores in 2019 (Annual report,
2019).
BIM MAROC: Leader in hard discount food distribution in Turkey, the brand has
established itself in Morocco in 2009 and quickly established itself on the market thanks to a
very good development and establishment strategy with competitive prices. It has 489 stores
in 2019 (Annual report, 2019).

17
Source: https://www.labelvie.ma/wp-content/uploads/2020/05/RA-LBV-2019-VDEF.pdf
Figure 3: Market shares of the different players in the sector as of 2019
BCG MATRIX :
The Boston Consulting group’s product portfolio matrix is intended to facilitate long-term
strategy development, to help a company examine opportunities for growth by evaluating its
portfolio of services and determine whether to grow, to discontinue or improve products. It's
also defined as the Growth/Share Matrix (Long Range Planning, p74-83).
The Matrix is broken into four sections depending on an overview of market growth and
relative market share:
· Stars: High market share products in high growth markets.
· Question marks: Low market share in high growth markets products.
· Cash cows: products with high market share in low growth markets.
· Dogs: Low-growth or market share products.

18
Figure 4: BCG matrix of Label Vie group
In the case of Label vie, it has three different business segments and has a competitive
advantage in providing differentiated sets of products available for the masses. The Atacadao
brand and Carrefour Market are the star category for having a rapid market growth and strong
competitive position. Whereas, Carrefour Hypermarket has a rapid market growth, but a
relatively weak competitive position.
SWOT ANALYSIS :
A SWOT analysis is a set of the strengths, weaknesses, opportunities and risks of your
organization. The primary goal of a SWOT study is to help companies gain a complete picture
of all the variables involved in making a business decision ( Business News Daily, 2019).
19
Strength Weakness Opportunity Threat

-Attractive Prices -Poor Quality on - Strong market demand -Informal smuggling
-Wide range of some product lines - Computerization of competition
products mass distribution - Entry of new foreign
- Informal smuggling operators
competition
- Entry of new foreign
RISKS:
RISKS RELATED TO THE ECONOMIC ENVIRONMENT :
Label’Vie is selling consumer products, thus the company’s profit depends on the consumers’
consumption which is depending on the economic situation of the country. The country’s
economic situation affects specifically the disposal income of individuals. Therefore, a
tightening in the economic growth of Morocco would cause the disposable income to decrease
and hence decrease the individual’s consumption. However, it must be noted that most
products Label Vie is providing are alimentary products which are necessity products.
RISKS RELATED TO COMPETITION:
Label’ Vie is facing the risk of losing its market share or loss of profit by competitors, either
the existing ones, like Marjane or new organised competitors. Fortunately, the barriers of
entry in this industry are actually high which makes Label’Vie competitive in today’s
industry. Many of the company’s rivals are controlling more their costs and competing to
provide the lowest prices on the market. As Label’Vie is following a differentiation strategy,
RISKS RELATED TO THE INVESTMENT:

20
Investment risk refers to the risk of not achieving the expected returns within the time and
budget planned. This risk is minimised for LAbel’Vie, as it has a significant experience in this
industry, it has Vecteur Label'Vie (VLV), the subsidiary specializing in rental real estate of
the group, with the merger with Petra as the largest OPCI (Organisme de placement collectif
en immobilier) in Morocco. VLV has a huge expertise in land management.
The investment risk is also related to the risk of real estate prices. However , as the population
grows, urbanization, and access to credit, the probability of real estate to decrease is very low.
RISKS RELATED TO MANAGEMENT:
Label’Vie provides a wide range of food products as well as non-food products. The food
category creates a risk of theft, fraud, poisoning. For this risk the company is engaged in a
liability assurance. This engagement would protect the company from judicial suits, however,
would not protect its image or brand reputation. Such risks could cause a decrease in the
market share, market growth, and can even cause boycotting the company.
LEGAL RISKS:
Legal regulations related to food products can suddenly change in both the favor or
disadvantage of Label’Vie. Such changes could affect the company’s costs, revenues, and
environment.
EXCHANGE RISKS:
Label’Vie imports several products from abroad Morocco. As any company involved in
international Trade, it is expected to be affected by the exchange rate.
BOARD OF DIRECTORS:
21
Diversity of profiles, skills and experience characterize the structure of the Board of Directors
in accordance with the actions and the strategy of development of the company: it is reflected
by both genders, and also a large number of independent directors.(Annual report, 2019)
Only two members of the board that are the founders are on top management, so the board of
directors is approximately 80% independant. However, the position of CEO and Chairman are
combined and both held by the same person.
According to the Cadbury Report, in order to have balance of power and influence inside the
board of directors, it suggests splitting the roles of CEO and Chairman, since a mix of the
both will lead to a significant excess of decision-making power (Cadbury Committee 1992:
4.9). But, if the company wishes to merge both roles, the Cadbury Committee suggests having
an independent member within the board to whom they should express their concerns.
(Cadbury Committee 1992: 4.5). And according to one author, in order to have independent
thinking and less biased practices within the company, It often uses independents as board
directors and CEOs. The concept behind getting skilled outsiders is to prevent corruption and
improve productivity , but it might be interesting to point out too that using the combination
of outsiders and insiders at the same time may be advantageous.(International Journal of
Sciences, 2015). In the case of Label Vie group the board of directors is a mixture of insiders
and outsiders that may be playing to their benefit.
ZOUHAÏR BENNANI
Zouhaïr Bennani, the founder of Label Vie SA, is at this stage the Chairman and CEO of Best
Financière, a holding company who manages the LabelVie Group, as well as many other
retail companies. He received his bachelor's degree in computer science in 1982 and
graduated from the University of the Sorbonne in 1984 with a graduate certificate in
Management and Human Resources. He launched LabelVie Group in 1985 after obtaining
early experience in France

22
with IBM and Xerox. In addition, Mr. Zouhaïr Bennani is chairperson of (Annual report,
2018):
● BEST FINANCIERE S.A.
● RETAIL HOLDING (Carrefour, Carrefour Market, Atacadao, Virgin
Megastore, Kiabi, Burger King)
● ARADEI CAPITAL
● BEST HEALTH
● CDCI
● MUTANDIS
And also:
● Director of SCRIM
● Director of CMB PLASTIC
● Director of CFG BANK
● Director of UNIMER S.A
● Member of the Advisory Board Amethis Finance
● Honorary Chairman of the Union Régionale CGEM Centre
● Vice-Chairman of the Moroccan Distribution Association (AMDM)
● Member of the Board of Directors of the National Agency for the Promotion of
Small and Medium Enterprises (ANPME) and Private Sector Representative
RACHID HADNI
Rachid Hadni is an engineer in computer science, holds a strong reputation in Morocco in the
corporate world and interacts in the associative world on a regular basis. Mr. Hadni has also
followed several training courses in distribution marketing and has accumulated proven
professional experience in the field of large distribution. Since 1985, Rachid Hadni has been
the cofounder, reference shareholder and director of LabelVie Group. In addition to his shares
23
and roles in BEST FINANCIERE S.A., Mr. Hadni is a part of many boards of directors
(Annual report, 2018):
• RETAIL HOLDING Director and Reference Shareholder
• BEST HEALTH Director and Reference Shareholder
• CDCI Director.
ADIL BENNANI
Adil Bennani earned a master ’s degree in business management from the University of Paris
Sud Orsay, which he received in 1989. Mr. Bennani began his career at ALCATEL between
1989 and 1992 as a telecom systems engineer, later he was the Managing Director at SCRIM
before being named, in 2005 the Managing Director of BEST HEALTH. Finally, he became a
member of the board of directors at Label vie group in 2007 (Annual report, 2018).
SAÏD ALJ
Said Alj is a businessman from Morocco and a degree holder of Paris' École des Dirigeants et
des Créateurs d'Entreprise. He is the founding chairman of the SAHAM HOLDING group,
which operates in a variety of fields of businesses, including the food sector, the distribution
of technological equipment, the distribution of consumer products, tourism, cinema,
commercial property, financial services. In Morocco and abroad, the company operates in
more than 65 affiliates (England, Spain , France, Peru, USA, China). Saïd Alj has a range of
executive positions in different firms, including: SANAM HOLDING, STOKVIS NORTH
AFRICA, SAHAM ASSURANCE, RADEI CAPITAL, RETAIL HOLDING and LabelVie
Group (Annual report, 2018).
MEHDI ALJ
Graduate from Paris' Ecole des Dirigeants et Créateurs d'Entreprises, Mehdi Alj is the
Chairman of SANAM AGRO, the SANAM group's agriculture-food holding company with
thirty branches in Morocco and internationally, and one of the world's leading manufacturers
of pelagic fish like sardines, anchovies and mackerel with a current employment of 6,000
24
people. Mr. Alj is indeed the director of a number of Moroccan holding firms, including
RETAIL HOLDING and SANAM HOLDING, which is a major player in the food sector,
distribution, tourism, cinema, commercial property, financial services sectors and also has 4
listed companies on the Casablanca Stock Exchange (Annual report, 2018).
KAWTAR JOHRATI
Ms. Johrati, a graduate of the standard and higher management cycle of ISCAE, held the
position of Head of Equity Management at WAFA GESTION in 1998. She entered CNIA
ASSURANCE in 2003 in the position of Head of Treasury and Investment. Ms. Johrati was
named Chief Executive Officer of the investment management subsidiary of the company in
2010. Kawtar Joharati, serving as SAHAM ASSURANCE Maroc 's representative since 2014,
is a member on the boards of directors of the those companies: Labelvie Group, Unimer,
Stokvis, Khalladi, Tcapital, Salafin, Fond 3P Fund, Fonds PME Croissance, Fonds XPansion
2, Mif, ACAMSA, SOGEPIB, and Partenariat Capital Maroc. Kawtar Johrati sits also on the
JFC V, Kalladi, 3P Fund, PME Croissance, Unimer, Sotckvis, LabelVie Group and Salafin
audit committees. She has been a member of the board of directors since 2008 (Annual report,
2018).
RIAD LAISSAOUI
Riad Laissaoui, a certified public accountant, has been RETAIL HOLDING's director since
2015. He was Deputy Managing Director of LabelVie Group for eight years before being
assigned to this role, and worked before during six years as Chief Financial Officer. Riad
Laissaoui began his path at PRICEWATERHOUSECOOPERS before joining the group,
where he was responsible for managing many business audits but also organizational and
management consultancy contracts, within Morocco and internationally. Mr. Laissaoui is the
director of a number of businesses operated by BEST FINANCIERE S.A (Annual report,
2018).
KARIM SOUAID
25
Mr. Souaid started his career with a law firm specializing in corporate finance before joining
HSBC Bank as a graduate of the Jesuit School of Law at St. Joseph University in Lebanon,
and with an Undergraduate degree of Law from Harvard Law School and an Executive
Program Diploma from Harvard Business School. Mr Souaid held the title of chief executive
of GLOBAL INVESTMENT BANKING between 2000 and 2006. Also, he was involved in
many development and M&A activities in the MENA region. Karim Souaid has been the
founder and chief executive of GROWTHGATE PARTNERS since 2008, with an estimated
USD 1.9 billion in assets within his direction. He joined the board of directors in 2017
(Annual report, 2018).
GILLES DE CLERCK
In 1988, Gilles de Clerck obtained his degree from McGill University and, in 1994, from
ESSEC business school. Mister de Clerck launched his journey as a regional manager at
L'OREAL in Dubai until occupying a variety of roles, primarily as an associate at BOOZ
ALLEN & HAMILTON, in which he was responsible for monitoring and working in a variety
of Middle East restructuring and development operations between 1995 and 2000. Gilles de
Clerck entered WEBRASKA MOBILE TECHNOLOGIES both as founding partner and chief
executive between 2000 and 2001. Later, he joined VERTONE as Senior Manager. Mister de
Clerck has been an Executive Partner of the equity EUROMENA FUNDS, targeting the
African countries since 2004. Gilles de Clerck is a member of the board of directors of Label
vie since 2017 (Annual report, 2018).
JAMILA DAHIB
Jamila Dahib obtained her diploma from the Hassan II University of Legal and Economic
Sciences in Casablanca with a degree in Private Law and holds a master's degree in
Management and a Business Law Certificate. She received the Certificate of Aptitude for the
Lawyer's Career in 2009. Before entering Centrale DANONE group, she started her career at
AL MADA Group, in which she served the position of director in charge of the legal and
26
enforcement parts of the group's projects and activities. Later on, Jamila Dahib took the role
of Chief Legal Officer at Shell Morocco, in which she was a member of the executive board,
as well as the supervisory board and the Morals and Integrity board. As a counsellor and
member of the management committee, Dahib joined Label Vie Group in 2014. Currently,
she is the legal manager of RETAIL HOLDING and gives legal services to the BEST
FINANCIERE S.A. Group and its affiliates for all operations and investments (Annual report,
2018).
PRINCIPLE MANAGERS OF THE COMPANY:
In accordance with article 22 of the Statutes of Label ‘Vie S.A, the Board of Directors sets the
remuneration of directors responsible for assisting them :
For the 2018 financial year, the compensation awarded to the main managers amounted to
21.2 MAD (gross). (Document de reference, 2018).

27
Rachid HADNI (59 years old): Co-founder and Managing Director of Label ‘Vie S.A.
Philippe ALLEAUME (58 years old): Deputy general manager in charge of the Carrefour
business unit. Mister Alleaume holds a technician diploma in oenology and he started his
career at Carrefour France where he spent more than 28 years. Philippe Alleaume occupied
the roles of Buyer, hypermarket Director, Regional Director at Carrefour France before
moving to Korea, then in Brazil
and in Argentina as a regional hypermarket director. In 2011, he returned to France to take up
the post of Operational Director. He joined the Casino group in Brazil as Multi-Brand Sales
Director in 2014 and he stayed there for 2 years before joining the Label ‘Life Group in
august 2016. (Document de reference, 2018)
Hafid HADNI (49 years old): Deputy General Manager in charge of the Carrefour market
business unit (supermarkets). Graduate of Lincoln International Business School of Paris,
Hadni Hafid has an MBA in Finance that he received from the Graham School of
Management in Chicago. He started his career at ARBOR for 3 years, then he held the post of
Maghreb Purchasing Manager within UNILEVER MAGHREB for 4 years. Later on, he
entered Label ‘Vie S.A in 2002 as Chief Operating Officer, a position he held
during 10 years before being appointed in 2011 as a Deputy General Manager. (Document de
reference, 2018)
Hicham EL YACOUBI (49 years old): Deputy General Manager in charge of the Atacadao
business unit. Graduate from the University of Rennes with a degree in Accounting and
Finance, Mr. Yacoubi began his career as a company manager then moved to Purchasing
Manager at Cieme Morocco, to subsequently integrate Aswak Assalam as a Non Food buyer.
He joined Label ‘Vie S.A in 2002 as Purchasing Manager, then evolved into the position of
head of the purchasing Department before being appointed to the position of

28
Purchasing Director in 2009. Finally, in 2011 he was appointed Deputy General Manager in
charge of the Atacadao business unit. (Document de reference, 2018)
Nawal BENAMAR (42 years old): Deputy General Director in charge of the Purchasing and
Logistics. Has an ENSAM Master in Logistics and Project Management, BENAMAR began
her professional career as a junior buyer inside Peugeot Citroën France and stayed 2 years
there just before entering in 2002 Procter and Gamble to work there as Purchasing Manager
and Category Manager for more than 16 years to grow after as an Account Director, Business
Strategy and Planning. Until joining Label'Vie Company in 2018, she worked as Sales
Associate Director for 2 years in 2016. (Document de reference, 2018)
Ahmed ABBOU (54 years old): Director of human resources. Mr. Abbou graduated with a
master degree in electronics, a management degree and he also holds a master's degree in
ISCAE of human resources. Until joining Label 'Vie group in 2005 as Human Resources
director, he worked in different positions of responsibility in many companies like; SGS
THOMSON, Richbond. He worked as a Director of Human Resources within EUREST
Morocco too since 1989. (Document de reference, 2018)
Rachid BELGHITI (55 years old): Expansion director. Rachid BELGHITI graduated with a
degree in engineering concentrating in the wood field. He started his professional career as a
manager of projects within the Négoce Group ROBEL Bois, later on he evolved at
Contreplaques-CEMA as marketing director & Industrial Development. With over 20 years of
expertise, Belghiti entered Label'Vie group as the Director of Expansions in 2008. (Document
de reference, 2018)
Mohammed Amine BENNIS (44 years old): Administrative & Financial Director.
Amine BENNIS began his path with the audit firm Arthur Andersen for a five - year period
then he was named SAP Project Manager during 2 years with Maroc Telecom. In 2005, he
entered Label' Vie group as project manager and was later in 2006 named Administrative and
Financial Director. (Document de reference, 2018)

29
Meryem DASSOULI (39 years old): Director in charge of the mission to the Director
General. Ms. DASSOULI, who earned a degree in corporate finance from the Toulouse
Business School, has spent most of her career time as a manager at Valyans Consulting. In
2011 she joined the Label 'Vie group. (Document de reference, 2018)
Mohammed HALLOUM (44 years old): Organization & Information Systems Director.
Mohammed HALLOUM earned a State Degree in Engineering from the Grenoble National
School of Computer Science and Applied Mathematics (ENSIMAG) and a Master of
Advanced Study in Machine Design from Grenoble's Joseph Fourier University.He started
his career at Lydec in 1999. Until joining Label 'Vie S.A in 2007 as Director of Information
Systems, he held several leadership positions within Finance.com, TeamLog-2IC, Omnidata,
SQLI and Atos Root. (Document de reference, 2018)
Chrystele RONCERAY (47 years old): Deputy General Director in charge of Marketing,
Development and Communication. RONCERAY, a graduate from Sciences Po Paris, has 16
years of significant experience at UNILEVER. She occupied the position of Marketing
Manager in Condiments Europe within UNILEVER EUROPE from 2007 to 2011. Before,
Chrystele RONCERAY occupied different roles at UNILEVER in London as Senior Global
Product Manager for the brand Snuggle , Senior Europe Product Manager for the brand
Vaseline, European Operational Marketing Manager. Product Manager Innovation Europe
for the brand Vaseline .and European Operational Marketing Manager for Detergents
category. (Document de reference, 2018)
Mohamed KHOMSI (52 years old): Audit, Quality & Safety Director. A Graduate from
IAE Lille with an accounting and finance master's degree (IAE Lille) and also an electrical
engineer. Mohamed KHOMSI has an experience of 15 years in different companies including
ALSTOM, CHAABI Group and STMicroelectronics. As Audit, Quality and Safety Manager,
he became part of the Label Vie company in 2005. Later on, he was the general manager in
30
the Ivory Coast affiliate until going back to the Moroccan head offices in 2015 to re-occupy
the position of Audit, Quality and Safety Director. (Document de reference, 2018)
Hicham KITTANE (39 years old): Logistics Director. Hicham KITTAN has a degree in
Industrial Engineering from Ecole Centrale de Lyon. He began his career for a year at L'Oréal
as Organization Manager, then went on to the consultancy sector as Senior Consultant, after
that he became Manager, then Senior Manager, he held these roles for 10 years at various
companies within France and Morocco. He joined the Label Vie group in 2005. (Document de
reference, 2018)
THE MANAGERS CONSIDERED A KEY PERSON:
The two top managers that will affect the firm if they ever leave are the founders, Zouhaïr
BENNANI and Rachid HADNI respectively, Chairman of the Board of Directors and Chief
executive of Label ‘Vie S.A. As CEOs founders they have a higher level of commitment to
the company than the other professional management and since its creation 35 years ago they
have innovated and developed the first supermarket to Label Vie group that became a retailer
in Morocco. Also, because of their expertise, the large network and connections they have
either in Morocco or internationally that they acquired during the years leaving will have a
huge impact on the Group.
We can conclude that there is no separation between management and ownership in Label Vie
S.A as the management of the group is under the responsibility of its two founders.
INTERACTION WITH FINANCIAL MARKETS :
LabelVie Group adopts transparency with their suppliers, partners and service providers. It
holds long-lasting partnerships with its partners and suppliers that are ethical and balanced. In
addition, LabelVie group analyzes each month the situation of its suppliers to enable the
Group to keep good relationships with its partners. (Annual report, 2019)
Besides the fact that the Group is listed on Casablanca stock exchange which contains
information about the company’s stocks, markets can access information about the company
31
via ; Annual reports, News releases that are available to the public. In addition, the Company
website contains ; Current news and past news releases, annual reports, quarterly statements,
Speeches and presentations by executives and analysts’ reports and so on available to the
public. For example, the Label’Vie group achieved a turnover of 2.88 billion DH in the first
quarter, up 26% year-on-year. During confinement (four weeks on horseback between March
and April), the latter exploded by 300%, according to the group. The increase in turnover
affected all of the group's business segments, Label’Vie announced (L'Economiste, 2020).
Also, it intends to borrow 600 million DH, a new loan for Label'Vie. The group's General
Assembly will authorize at its next annual meeting, scheduled for May 5, a bond loan by way
of private placement of a maximum amount of DH 600 million. This loan may consist of
several installments and will be spread over a period of 5 years. It may be depreciable and / or
ultimately refundable (L'Economiste, 2020).
SOCIAL OBLIGATIONS:
As well as the position as corporate citizens of the company, for many years they have
become conscious of their social and environmental obligations. Economic and social
vocations have always been part of the Label'Vie Group. Committed individuals, an
organisation that is adjusted, a proactive attitude and the philosophy of corporate citizenship
has made it possible for the group to pursue a variety of social and environmental measures to
bring ethics into effect. A strong belief is embedded in the DNA of the company: to succeed
in the developmental economic challenge, the key social element must be inclusive.
At the beginning of the year 2018, The instructions were released to set up a target of being
branded CGEM in 2019, the organized CSR strategy. In addition, the group hired a specialist
company to track their strategy in order to meet the CSR standards Also,a Steering
Committee is formed to meet every month in order to keep track of the development. The
target of the company is to reach 7,000 workers that have a positive influence on the world
through their training (Annual report, 2019).

32
RATIO ANALYSIS:
The ratio analysis is a financial tool that enables assessing a given company’s financial health
(e.g. liquidity and profitability). However, a single value does not enable managers or
financial analysts to draw conclusions. For this reason, ratios need to be compared to their
historical values, to competitors, or to industry averages. Concerning the comparison between
actual ratios and their historical values, it enables the company to check its progress, and to
check its progress. But concerning the cross-comparison of ratios with industry averages or
competitors, it enables the company to understand better its positioning in the market.
(Institute, 2016, pp. 317–32)
This section assesses the ratio analysis of the company LABEL VIE while taking into
accounts both historical and cross sectional comparison. The data used derives from both the
financial statements of the company as well as the public data available in investing.com
platform. The ratios of interest are the most common ones and can be categorized as: liquidity
ratios, activity ratios, solvency ratios, profitability ratios, and valuation ratios.
LIQUIDITY RATIOS:
Concerning the liquidity ratios, they measure the company’s ability to meet their short-term
obligations, more specifically, the extent at which the company can convert its short-term
assets to cash in order to pay their short-term obligations. It is of prime importance to note
that the level of liquidity that the company needs to maintain is industry specific (Institute,
2016, pp. 339). Yet, further explanation for each ratio will be presented accordingly.
In the following section, two main ratios will be analyzed and are: the current ratio and the
quick ratio. Concerning the first ratio, it measures the company’s ability to pay its short term
obligations using all of its short-term assets (Formula 1 – List of formulas) (Institute, 2016,
pp. 344-347). The only issue related to this ratio is that it accounts for all short-term assets,
33
even those that do not have a high liquidity (e.g. Inventory). But concerning the quick ratio, it
measures the company’s ability to pay its short-term obligations using only the most liquid
assets (e.g. cash and marketable securities) in addition to the account receivables (Formula 2 –
List of formulas) (Institute, 2016, pp. 344-347).
According to figure 1, LABEL VIE had increased its current ratio from the value of 0.88 to a
value of 1 between 2016 and 2019. This indicates that the company can easily pay its short-
term obligations if it is able to convert all of its short term assets to cash quickly. But
concerning the quick ratio, the company has maintained a level of at least 0.55 since 2016.
This indicates that in case the company has to pay all of its short-term obligations, the highly
liquid assets cannot satisfy it. However, the nature of the business is known by delayed
payment to suppliers, and to some extent, paying the suppliers after selling the inventory.
Liquidity ratios - LABEL VIE

1.20
1.00
0.80
0.60
0.40
0.20
0.00
2016 2017 2018 2019
Current ratio Quick ratio
Figure 1: Liquidity ratios historical comparison for LABEL VIE between 2016 and 2019
Figure 2 shows a cross comparison of liquidity ratios of LABEL VIE and industry averages.
This graph shows that the company is maintaining safer liquidity measures compared to its
peer competitors. While the company’s quick ratio value is equal to the industry’s quick ratio
(0.58), LABEL VIE has a higher current ratio compared to most of its peer competitors (1
versus 0.89).
34
Comparison of LABEL VIE liquidity ratios to

industry average in 2019
1.2
1
LABEL VIE
0.8 Industry average
0.6
0.4
0.2
0
Current ratio Quick ratio
Figure 2: Comparison of LABEL VIE liquidity ratios to industry average in 2019
It is important to note that the company maintains a current ratio with a value of 1, which
implies that the company is maintaining their short term assets efficiently. This is because
having higher values of this ratio indicates that the company is misallocating its most liquid
resources.
ACTIVITY RATIOS:
Activity ratios measure the extent at which the company is efficient in terms of using its
assets. For this, this part of the analysis combines accounts from both the balance sheet and
the income statement (Institute, 2016, pp. 339). This section will assess three main ratios that
are mainly: asset turnover ratio, inventory turnover, and receivables turnover.
Concerning the first ratio, which is the asset turnover ratio, it measures the level or in other
terms the ability of a company to generate revenues using its assets (Formula 3 – List of
formulas) (Institute, 2016, pp. 339-344). The interpretation of this ratio can be summarized as
the total revenues generated for each MAD deployed (in the Moroccan context). Second, the
inventory ratio assesses the management effectiveness to manage the company’s inventory
35
(Formula 4 – List of formulas) (Institute, 2016, pp. 339-344). Yet, this ratio cannot easily be
interpreted until it is converted to another ratio that is referred to as days of inventory in hands
(or DOH) (Formula 5 – List of formulas) (Institute, 2016, pp. 339-344). A higher value
resulting in the inventory turnover indicates a low value of the days of inventory on hands,
which implies that the company quickly replaces its inventory stocks. Based on this previous
information, and while comparing the DOH to the industry average, one can conclude that
lower DOH represents a competitive advantage over its competitors. Finally, and with regards
to the receivables turnover, it measures the management effectiveness in managing their
account receivables. This turnover provides a proxy measure about the cash collection
procedure of the company (Formula 6 – List of formulas) (Institute, 2016, pp. 339-344).
Similar to the inventory turnover, this ratio cannot be interpreted easily until it is converted to
the days of sales outstanding, or DSO (Formula 7 – List of formulas). A higher receivables
turnover is a good indicator, as the company collects its payments from customers very
quickly (Institute, 2016, pp. 339-344).
In the case of LABEL VIE, the company has kept its inventory level at a steady level between
the values 5.03 and 5.70 between 2016 and 2019. This means that LABEL VIE’s days of
inventory in hand was not highly variant, with the last value of 65.53 days to replace the
inventory. This value will further be explained when compared to the industry average. But
for the asset turnover, the company was able to increase the level of this ratio from a value of
0.81 to a value of 1.26. This means that for each 1 MAD invested, the company is able to
generate 1.26 MAD. Finally, the receivables turnover has increased drastically from a value
of 4.81 in 2016 to a value of 12.08. This corresponds to a decrease in the days of sales
outstanding from a value of approximately 76 days to 30 days. The following results indicate
that LABEL VIE was working massively on changing its payment procedures and policy with
its customers.
36
Activity ratios - LABEL VIE

14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00
2016 2017 2018 2019
Asset Turnover Inventory Turnover

Receivable Turnover
Figure 3: Activity ratios historical comparison for LABEL VIE between 2016 and 2019
When comparing the activity ratios to the industry averages, it is noticeable that LABEL VIE
is managing its assets more effectively than the majority of its competitors. This is because
the asset turnover ratio is higher by a value of 0.30 compared to the industry average. But for
the inventory turnover, the company is doing similar to the market average. For the company
to gain a competitive advantage, it should increase its sales during a given year. Finally,
concerning the receivables turnover, LABEL VIE is outperforming the different players in the
industry, as it is able to collect cash payments from customers in an average period of 30 days
rather than 49 days.

37
Comparison of LABEL VIE activity ratios to

14
12
10
8
6
4
2
0
Asset Turnover Inventory Turnover Receivable Turnover
LABEL VIE Industry average
Figure 4: Comparison of LABEL VIE activity ratios to industry average in 2019
SOLVENCY RATIOS:
Concerning the solvency ratio, they enable the management of a company to measure the
extent at which the company is able to finance its debt (Institute, 2016, pp. 339). In the case of
LABEL VIE, the main interest is focused on understanding the capital structure of the
company through analyzing two ratios that are: long-term debt to equity and total debt to
equity.
With regards to the long-term debt to equity (Formula 8 – List of formulas) (Institute, 2016,
pp. 351-355), it measures the long term debt capital relative to the contribution of
shareholders. But for the total debt to equity, which is also referred to as the capital structure,
it has a similar definition as the previous ratio except that it also takes into account the short
term debt (Formula 9 – List of formulas) (Institute, 2016, pp. 351-355). The two cited before
ratios can be interpreted such as a value of 1 indicates equal financing of debt and equity.
38
Furthermore, a higher value than 1 indicates that the majority of the company’s assets are
financed in debt, while the opposite indicates that the majority of the company’s assets are
financed using equity (Institute, 2016, pp. 351-355).
In the case of LABEL VIE, the LT debt to equity has decreased from a value of 2.14 in 2016
to a value of 0.61 in 2019. This indicates that the company has moved from financing part of
its assets from debt more than equity, to the opposite. However, this ratio alone does not
capture the full capital structure of the company. This is noticeable while analyzing the total
debt to equity ratio. This ratio actually has a higher value compared to the long term debt in
2016 (5.98 versus 2.14). These values can be explained by the nature of the industry, and the
nature of modality payments between LABEL VIE and the suppliers that allows purchasing
using the account payables excessively. Yet, during the most recent years, the accounts
payables were reduced drastically, which enabled the company to have a capital structure that
tends towards financing the company’s assets and operations via equity. This also can be
explained by raising capital throughout the Moroccan capital market.
Solvency ratios - LABEL VIE

7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
2016 2017 2018 2019
LT Debt to Equity Total Debt to Equity
Figure 5: Solvency ratios historical comparison for LABEL VIE between 2016 and 2019
39
In addition to that, the values of both the long-term debt to equity and the total debt to equity
in the case of LABEL VIE are lower compared to the values resulted from the industry
average. This means that LABEL VIE has a lower capital cost compared to its competitors (as
usually the equity cost is lower than the debt cost), which is a good sign for the company.
Comparison of LABEL VIE solvency ratios to

1.80
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
LT Debt to Equity Total Debt to Equity
Figure 6: Comparison of LABEL VIE solvency ratios to industry average in 2019
PROFITABILITY RATIOS:
Generating profit from the capital invested is what determines the real value of companies,
and more importantly, is what determines the market value of its securities. Concerning the
profitability ratio, they measure the company’s ability to generate profit based on nominators
and denominators from both the balance sheet and the income statement (Institute, 2016, pp.
339). In the case of this project, the main ratios that are used relate to the gross margin,
operating margin, pretax margin, net profit margin, return on equity, return on assets, and
sales growth.
For the gross margin (Formula 10 – List of formulas) (Institute, 2016, pp. 356-359), it
indicates the revenues available to cover the operating expenses or costs as well as other
expenses. Increasing values for this ratio indicates that the company is better monitoring their
40
day-to-day operations. For the operating margin (Formula 11 – List of formulas), it measures
the percentage of money resources available to cover investing and financing expenses
(Institute, 2016, pp. 356-359). Concerning the pretax margin (Formula 12 – List of formulas),
it measures the percentage of revenues that will be taxed. Decreasing values of this ratio
might be explained by the decreasing efficiency of monitoring the company’s expenses
(Institute, 2016, pp. 356-359). With regards to the net profit margin (Formula 13 – List of
formulas), it measures the percentage of revenues that will be distributed to shareholders or
the percentage of revenues that will be reinvested (retained earnings) within the company
(Institute, 2016, pp. 356-359). For the sales growth (Formula 14 – List of formulas), it
measures the percentage increase of decrease in sales in terms of monetary values. Finally, for
the return on equity (Formula 15 – List of formulas) and return on assets (Formula 16 – List
of formulas), they measure the efficiency of the management in generating profit using
shareholders’ investment and assets, accordingly (Institute, 2016, pp. 356-359).
As figure 7 displays, LABEL VIE noticed an increasing trend in terms of the gross profit
margin, pretax margin, net profit margin, return on equity, return on assets, and sales growth.
This is a good indicator as the company is proven to monitor better and more efficiently its
operating, investing, and financing expenses. In addition to that, LABEL VIE is also
maximizing the use of its assets and shareholders’ equity throughout the time.
41
Profitability ratios - LABEL VIE

20.00%
18.00%
16.00%
14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
2016 2017 2018 2019
Gross margin Operating margin Pretax margin

Net Profit margin Return on Equity Return on Assets
Figure 7: Profitability ratios historical comparison for LABEL VIE between 2016 and
2019
Compared to the industry average, it is noticeable that LABEL VIE is an outperformer in the
market. This is because the gross profit margin is higher by 5.63%, the operating margin is
higher by 0.49%, the pretax margin is higher by 1.74%, the net profit margin is higher by
1.44%, the return on equity is higher by 8.32%, the return on assets is higher by 2.31%, the
return on investment is higher by 4.25%, and the sales growth are higher by 8.41% compared
to the average of its competitors.

42
Comparison of LABEL VIE profitability ratios to

18.00%
16.00%
14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
ts
gin
ty
go
gin
gin
gin
t
en
se
ui
.A
ar
ar
ar
ar
stm
As
Eq
m
Yr
on
on
ve
fit
ng
ss
ax
1
o
TM
ro
In
et
ati
rn
rn
Gr
Pr
tP
n
tu
tu
er
sT
o
Re
Re
Ne
Op
rn
)v
tu
TM
Re
(T
les
Sa
Figure 8: Comparison of LABEL VIE profitability ratios to industry average in 2019
VALUATION RATIOS:
The last part of the ratio analysis consists of the valuation ratios. This type of ratios is mainly
used in investment decision making, and they measure the link between the actual value of the
company’s securities and elements from the cash flow statement, balance sheet, income
statement, as well as other types of financial statements (Institute, 2016, pp. 339). In the case
of this report, the valuation ratios that will be used are: the price to earnings, the price to sales,
the revenues to share, basic earnings per share (Basic EPS), EPS growth, dividend yield, and
dividend growth rate.

43
Concerning the price to earnings ratio (Formula 17 – List of formulas), it refers to the link
between the current value of the share price and the attributable EPS to a single share. This
ratio indicates the amount of investment spent (in terms of 1 MAD in the case of our
company) per earning (Institute, 2016, pp. 339). But for the price to sales ratio (Formula 18 –
List of formulas), similar to the P/E ratio, it indicates the amount per 1 MAD per sale
(Institute, 2016, pp. 339). For the revenues to share ratio (Formula 19 – List of formulas), it
indicates the revenues attributable to a single share. Concerning the EPS (Formula 20 – List
of formulas), it simply divides the number of earnings to become attributable to a single share.
With regards to both EPS and dividend growth rates, they simply measure the percentage
growth or decline of each corresponding variable compared to its value in the former year
(Institute, 2016, pp. 339).
In the case of LABEL VIE, the P/E ratio has been varying and has an increased value in the
most recent year. This indicates that for each 1 MAD of earning in a single share, the investor
pays 26.84 MAD. While decreasing values of this ratio is a good sign, in the case of this
company, it does not mean that it is a bad sign. This is mainly because the company has been
decreasing their debt and increasing their shareholders’ equity. Concerning the price to sales,
they also noticed an increase, which has the same explanation as the former ratio, except that
in this case, it relates to the sales per share. Concerning the EPS, they noticed increased
values, which is very promising for existing investors and potential ones. This can be
confirmed with the positive rates of their growth throughout the previous years (Not a single
decline). The dividend yield noticed a decline between 2016 and 2017, however, starting
2017, it has been positive. But for the dividend growth rate, it declined during 2017, and has
been positive in 2018 and 2019. The explanation behind the values of these two previous
ratios is the fact that no dividends were distributed in 2017.

44
Profitability ratios - LABEL VIE (Part I)

120.00
100.00
80.00
60.00
40.00
20.00
0.00
2016 2017 2018 2019
P/E Ratio Price to Sales Basic EPS
Figure 9: Valuation ratios historical comparison for LABEL VIE between 2016 and
2019 (Part I)
Profitability ratios - LABEL VIE (Part II)

60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
2016 2017 2018 2019
EPS(TTM) vs TTM 1 Yr. Ago Dividend Yield
2019 (Part II)
45
Profitability ratios - LABEL VIE (Part III)

4000.00
3500.00
3000.00
2500.00
2000.00
1500.00
1000.00
500.00
0.00
2016 2017 2018 2019
Revenue/Share
2019 (Part III)
When comparing LABEL VIE to the industry average, the company’s basic EPS, diluted EPS
are higher, which is a good sign for investors. For the remaining ratios, the company is doing
below the industry average. This is mainly because the company was going throughout a
change in their capital structure, and increasing their retained earnings.
Comparison of LABEL VIE valuation ratios to

industry average in 2019 (Part I)
250
200
150
100
50
0
P/E Ratio Price to Sales Basic EPS Diluted EPS Cash Flow/Share
Figure 12: Comparison of LABEL VIE valuation ratios to industry average in 2019
(Part I)
46

industry average in 2019 (Part II)
4000
3500
3000
2500
2000
1500
1000
500
0
Revenue/Share
(PART II)

industry average in 2019 (Part III)
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
-5.00% Dividend Yield Dividend Growth Rate
-10.00%
-15.00%
-20.00%
-25.00%
(Part III)
Overall, it is very noticeable that LABEL VIE is doing very good in its financial health and
financial positioning in the market. This company is very profitable compared to most of its
competitors and shows promising results that provide a proxy for the efficiency of its
management style, management team, and its future performance. While this section is related
to the financial ratio analysis, the next section will provide a pro-forma 5-years income
forecast.
47
PRO-FORMAT 5 YEARS INCOME FORECAST:
The following section forecasts the pro-forma income statement of LABEL VIE. Appendix A
shows the pro-forma income statement that covers the years between 2016 and 2019. This
income statement represents the basis of the forecast.
The following table represents the annual growth of the company’s income statement
accounts. According to the average percent growth of each income statement account,
LABEL VIE was able to generate an average annual growth in sales that account for 11.25%.
Concerning the COGS, or cost of goods sold, they increased with an average percentage
9.66%. This is a good indicator, since their average growth is lower compared to the average
growth of the total revenues. This means that the company is becoming efficient in
monitoring their COGS. This is not the case for the operating expenses, as they have
increased with an average annual growth of 11.38%. This is mainly due to the excessive
increase in the selling, general, and administrative expenses. Concerning the operating income
and net income yearly growth rates, they have been positive during the previous years. This is
a good indicator for the company, as this shows that the company is profitable and can attract
investors (Table x).
The forecast of the pro-format income statement cannot be based on the industry average
growth rates or macro-economic variables. This is because the company is considered as a
wholesaler that sells products from different industries (food and non-food products). For this,
the forecasts will be based on the average of the yearly growth rates of total revenues (11.25%
with 2.72% standard deviation) given in table x. According to the different scenarios
included, they are based on the 68%-95%-99% rule, which states that for each corresponding
rate, the 1, 2, or 3 standard deviations are able to capture all the observations. Another
assumptions of the provided forecast are the use of plus or minus 3 standard deviations to
capture 99.7% of the future expected growth (decline) rates for each account, and linearity.
48
The three scenarios provided are realistic, pessimistic, and optimistic. Finally, for the unusual
expense (income) account, gain (loss) on sale of assets, they have abnormal growth (decline)
rates. For this reason, the forecast will use their historical average balance.
Table x: Annual growth of the income statement accounts of LABEL VIE between 2017
and 2019
Average Standard
2017 2018 2019 2016-2019 Deviation
Total Revenue 9.49% 9.17% 15.09% 11.25% 2.72%
Cost of Revenue, Total 11.58% 1.44% 15.96% 9.66% 6.08%
Gross Profit -4.33% 68.61% 11.06% 25.12% 31.39%
Total Operating Expenses -5.94% 104.01% 8.66% 35.58% 48.75%
Selling / General / Admin. Expenses, Total -2.42% 130.14% 9.44% 45.72% 59.89%
Depreciation / Amortization -24.32% 11.22% 16.61% 1.17% 18.16%
Interest Expense (Income) - Net Operating
Unusual Expense (Income) -100.61% -50512.50% -81.65% -16898.25% 23768.86%
Other Operating Expenses, Total -42.93% 16.46% 2.37% -8.03% 25.34%
Operating Income -1.49% 9.01% 18.63% 8.72% 8.22%
Interest Income (Expenses), Net Non-Operating -69.28% -21.42% -5.98% -32.23% 26.95%
Gain (Loss) on Sale of Asset -4433.33% -2883.08% -98.81% -2471.74% 1793.31%
Other, Net 35.33% -24.63% -43.98% -11.09% 33.76%
Net Income Before Taxes 36.03% 23.51% 8.84% 22.79% 11.11%
Provision for Income Taxes 12.47% 34.72% 5.09% 17.42% 12.59%
Net income 46.38% 19.73% 10.27% 25.46% 15.29%
The following table (Table x – x) shows the resulting pro-format 5-years forecast for income
statements with an average constant growth rate of 11.25% with a standard deviation of
2.72%. Results show that the company’s forecasted total revenues can reach a value of 18 342
million MAD with an estimated total income of 399 million MAD. On the other hand the
lowest values of sales can reach a value of 8 800 million mad with a corresponding net
income value of 191 million MAD.

49
Table x: Pro-format 5-year LABEL VIE’s income statement forecast – Realistic
scenario:
2019 2020 2021 2022 2023 2024

Total Revenue 7557.35 8407.38 9353.01 10405.01 11575.34 12877.30
Cost of Revenue, Total 6562.95 7301.13 8122.34 9035.92 10052.25 11182.89
Gross Profit 994.40 1106.25 1230.67 1369.10 1523.09 1694.40
Total Operating Expenses 634.60 705.98 785.38 873.72 972.00 1081.32
Selling / General / Admin. Expenses, Total 446.49 496.71 552.58 614.73 683.87 760.79
Depreciation / Amortization 330.47 367.64 408.99 454.99 506.17 563.10
Unusual Expense (Income) 13.16 14.64 16.29 18.12 20.16 22.42
Other Operating Expenses, Total -155.52 -173.01 -192.47 -214.12 -238.20 -265.00
Operating Income 359.80 400.27 445.29 495.38 551.09 613.08
Interest Income (Expenses), Net Non-Operating -129.50 -144.07 -160.27 -178.30 -198.35 -220.66
Gain (Loss) on Sale of Asset 0.03 0.03 0.04 0.04 0.05 0.05
Other, Net 6.51 7.24 8.06 8.96 9.97 11.09
Net Income Before Taxes 236.84 263.48 293.11 326.08 362.76 403.56
Provision for Income Taxes 72.28 80.41 89.45 99.52 110.71 123.16
Net income 164.56 183.07 203.66 226.57 252.05 280.40
Table x: Pro-format 5-year LABEL VIE’s income statement forecast – Optimistic

scenario:
2019 2020 2021 2022 2023 2024

Total Revenue 7557.35 9023.68 10774.52 12865.07 15361.24 18341.73
Gross Profit 994.40 1187.34 1417.72 1692.79 2021.24 2413.41
Other, Net 6.51 7.77 9.28 11.08 13.23 15.80
Net income 164.56 196.49 234.61 280.13 334.49 399.39
50
Table x: Pro-format 5-year LABEL VIE’s income statement forecast – Pessimistic

scenario:
2019 2020 2021 2022 2023 2024

Total Revenue 7557.35 7791.08 8032.03 8280.43 8536.52 8800.53
Gross Profit 994.40 1025.15 1056.86 1089.54 1123.24 1157.98
Other, Net 6.51 6.71 6.92 7.13 7.35 7.58
Net income 164.56 169.65 174.90 180.31 185.88 191.63
Given the above forecasted income statements, the remaining part of this section will allocate
the probability of occurrence of each scenario. While many sectors in Morocco are
performing very badly in the current pandemic situation, LABEL VIE responded aggressively
and was able to increase its sales. First, the demand for nearly all products sold in our
company increased exponentially due to people’s reaction to the virus. LABEL VIE prepared
all its stores and took all the necessary measures to keep its operations (Média24, 2020). Since
51
the company is among the industries that are performing better under these circumstances, it
is assumed that there is a 50% chance that the company’s forecasted sales will fall under the
optimistic scenario, 40% will fall under the realistic scenario, and 10% will fall under the
pessimistic scenario. This will be the case for the years 2020, 2021, and 2022. According to a
McKinsey (2020) Report, this pandemic will end during 2022, and the probability that the
current situation will stay still until 2023 is very low. For this reason, it is assumed that for the
years 2023, and 2024, the company’s forecasted sales will fall 75% under the realistic
scenario, 15% under the optimistic scenario, and 10% under the pessimistic scenario. Taking
all of these scenarios into consideration, the resulted weighted pro-format 5-year income
statement is given such as:
Table x: Pro-format 5-year LABEL VIE’s income statement forecast – Weighted

average:
2019 2020 2021 2022 2023 2024

Total Revenue 7557.35 8653.90 9931.67 11422.58 11839.34 13289.28
Gross Profit 994.40 1138.68 1306.81 1502.99 1557.83 1748.61
Interest Expense (Income) - Net Operating 0.00 0.00 0.00 0.00 0.00
Other, Net 6.51 7.45 8.56 9.84 10.20 11.45
Net income 164.56 188.44 216.26 248.72 257.80 289.37
Appendix A: Pro-format income statement of LABEL VIE for the period between 2016 and 2019
52
Table A.1: Pro-format income statement of LABEL VIE for the period between 2016 and 2019 in Million
MAD
Average
2016-
2016 2017 2018 2019 2019
Total Revenue 7557.35 8274.58 9032.96 10395.80 8815.17
Cost of Revenue, Total 6562.95 7323.22 7428.83 8614.21 7482.30
Gross Profit 994.40 951.36 1604.13 1781.59 1332.87
Total Operating Expenses 7197.55 7920.14 8646.60 9937.47 8425.44
Selling / General / Admin. Expenses, Total 446.49 435.67 1002.66 1097.33 745.54
Depreciation / Amortization 330.47 250.09 278.15 324.34 295.76
Unusual Expense (Income) 13.16 -0.08 40.33 7.40 15.20
Other Operating Expenses, Total -155.52 -88.76 -103.37 -105.82 -113.37
Operating Income 359.80 354.43 386.36 458.34 389.73
Interest Income (Expenses), Net Non-Operating -129.50 -39.78 -31.26 -29.39 -57.48
Gain (Loss) on Sale of Asset 0.03 -1.30 36.18 0.43 8.84
Other, Net 6.51 8.81 6.64 3.72 6.42
Net Income Before Taxes 236.85 322.16 397.91 433.09 347.50
Provision for Income Taxes 72.28 81.29 109.51 115.08 94.54
Net income 164.58 240.87 288.40 318.01 252.97
FREE CASH-FLOW:
As its name indicates, the cash flow is very important to any organization as it has its own
corresponding part among the company’s financial statements. While the cash flow statement
shows the aggregate data of all cash inflows and cash outflows, Jensen (1986) came up with
the free cash flow concept in the context of agency conflict. According to Brigham and
Houston (2016, p.75), Free Cash Flow (FCF) is defined as the amount or portion of cash that
can be withdrawn from the company without damaging the company’s ability to produce
future cash flows. In other words, it is the distributable cash flow to shareholders. It is
considered as a very important concept in finance and has many uses in different fields such
as: companies’ valuations (Awasthi et.al., 2013; Shefrin, 2014), portfolio performance
(Hackel, 1994; Krueger and Wrosland, 2013), capital structure (Buus, 2015), and many other
53
fields. In the context of this report, the FCF for LABEL VIE will be calculated for the purpose
of providing a proxy valuation of this company.
In order to calculate the FCF, the following formula is used:
FCF = EBIT – Taxes + Depreciation – Capital Spending – Increases in Net Working Capital
In the case of LABEL VIE, the plug variables are calculated for the years between 2020 and
2024, and the terminal value of the company will be given for the year 2024:
● Concerning the EBIT, taxes, and depreciation expense, they are derived from the
forecasted pro-format income statement.
● For the capital spending, they represent the net amount spent on acquiring fixed assets,
and are calculated by subtracting the beginning value of net fixed assets from the
ending value of net fixed assets while adding the depreciation (Wallstreetmojo, 2020).
● For the increases or decreases in net working capital, they are based on the current
assets minus the current liabilities for the year.
The following table summarizes the resulting cash flows for LABEL VIE between the years
2019 and 2024.
Table : Free Cash Flow for LABEL VIE between 2019 and 2024
2019 2020 2021 2022 2023 2024

Earnings Before Interest
Taxes 236.84 271.20 311.25 357.97 371.03 416.47

Taxes 72.28 82.77 94.99 109.25 113.23 127.10
Earnings After Taxes 164.56 188.44 216.26 248.72 257.80 289.37
Depreciation 330.47 378.42 434.29 499.49 517.71 581.12
Net capital spending 953.64 979.56 1006.19 1033.54 1061.64 1090.50
Increases in Net Working
Capital -18.23 -18.73 -19.23 -19.76 -20.29 -20.85

54
FCF -440.38 -393.98 -336.4 -265.57 -265.83 -199.16
In the case of LABEL VIE, all the resulting free cash flows are negative. It is of prime
importance to note that historically (e.g. 2018), the free cash flow was also negative. In
addition to that, the resulting free cash flow for LABEL VIE in 2019 is -350 million MAD.
This is mainly because of the use of different formulas and methodologies to calculate it. In
the paper of Bhandari and Adams (2017), 7 ways of calculating the FCF were provided.
While a negative cash flow usually indicates a warning sign that the company’s management
is inefficient using the assets in generating revenues, this is not the case for LABEL VIE. The
company has increasing profits and increasing assets. Having a negative FCF in this case
means that the company is in a position of strength, and indicates that the company is
expanding at a drastically increasing rate. The negative FCF can further be explained by the
company’s increase in its fixed assets. For instance, LABEL VIE spent more than 1 billion
MAD in its cash from investing activities.
The negative cash flows do not enable valuing the company based on this value. In addition to
that, the terminal value cannot be calculated in this case. This means that there is a need to
evaluate further evaluation methods to calculate the company’s valuation.
OPTIMAL CAPITAL STRUCTURE:
As it was stated in the company’s introduction, LABEL VIE introduced the capital market in
2008. The company uses two major types of financing that are common shares and bonds.
During 2010, LABEL raised its 1st bonds issued of 500MMAD. In 2012, the company raised
its 2nd bond issue that accounts for 400 MMAD. Finally, in 2014, the company raised its 3rd
bond issue that accounts for 1 500 MMAD (LABEL VIE, 2019). The company also uses its
own cash, or retained earnings to finance new projects. In addition to that, the company relies
55
also on issuing new common shares such as the case of 2017, where the company issued 293
685 shares to raise a capital of 396 474 750 MAD (Casablanca-bourse, 2017). The company
currently has a total of 2 838 962 shares outstanding with a total market capitalization of 8
559 470 430 (Casablanca-bourse, 2019). Other methods used rely on commercial papers, bank
loans, and others.
According to the total debt to equity, the company had an initial value of 5.98 in 2016, and a
value of 0.61 in 2019. This indicates that the capital structure of the company was restructured
from 85.67% debt and 14.33% equity in 2016 to 37.89% debt and 62.11% equity in 2019.
This is explained by the expiration of the 5-years maturity bonds issued in 2014, and the
repurchase of some current bonds by the company (LABEL VIE, 2019).
Referring again to the cross-comparison ratio analysis between LABEL VIE and the industry
average, LABEL VIE had a total debt to equity ratio of 0.61 in 2019 compared to a value of
1.63 for the industry. This means that most of competitors are expected to be financed more
with debt (62% debt and 38% equity). There is a need to point that there is no recommended
debt ratio in the industry. Yet, LABEL VIE has already changed its capital structure, which
provided the company with an advantage over its competitors. This advantage is translated by
having more freedom to issue bonds compared to its competitors.
Most of the LABEL VIE bonds are near their maturity. This means that the company’s long
term debt will further decrease in the coming years. For this, there is no need to retire debt or
buy back stocks. However, for future growth, the company can finance its future projects
using the current capital structure, meaning using excess cash to finance the equity portion
and bonds to finance the debt portion.
COST OF EQUITY:
56
In the case of this report of Label Vie group, the cost of equity will be calculated using the
capital asset pricing model that is given by the following formula:
r e =r f + β (r m −r f )
Where r e is the cost of equity, r f is the risk free, and r m is the return of the market.
The beta is simply the coefficient or the slope resulted from a simple linear regression
between the stocks return and the MASI index. In the case of LABEL VIE, it resulted in a
value of 0.34. Concerning the risk free rate, it is given as 1.5% (Tradingeconomics, 2020).
The return of the market is calculated based on annualized average daily MASI returns. This
expected return has a value of 12.95%.
The levered beta on the other hand has a value of 0.65 (Analytics, 2020) By applying the
formula we get :
r e =0.015+ 0.65∗(0.1295−0.015) = 8.94%
The resulting cost of equity is a value 8.94%.
COST OF DEBT:
Concerning the cost of debt, it is calculated using the following formula:

Interest expense
rc=
Longterm debt
Using the input from the company’s income statement and balance sheet, it has resulted in a
value of 2.86% for 2019, 2.08% for 2018, 2.65% for 2017, and 4.52% for 2016.
134864900
0.0286=r c 2019=
4702799268
The reason behind not using the bonds’ yield to maturity is the fact that LABEL VIE uses
different types of bonds. The first type has an annually revisable rate (Tranche A), and the
second type has a fixed rate (Tranche B). For instance, and with regards to the first type, the
57
initial rate was linked to the yield curve of the secondary market for treasury bills as
published by Bank Al Maghrib in addition to a risk premium of 110pbs (LABEL VIE,
2019b). For this, the average cost of debt of the previous 4 years is calculated, and has a value
of 2.92%. This latter value is lower than the historical cost of debt between 2011 and 2015,
which was 3.86% (LABEL VIE, 2015).
COST OF CAPITAL:
Concerning the WACC, it is calculated using the following formula:
E D
WACC=r e + rd (1−t)
D+ E D+ E
Where r e is the cost of equity, r d is the cost of debt, E is the total equity, D is the total debt,
and t is the tax rate.
Assuming a 31% tax rate, a 2.92% cost of debt, 5.44% cost of equity, 62% weight of equity,
and 38% weight of debt we calculate as following :
0.62 0.38
WACC=0.0544 +0.0292 (1−0.31)=0.04138
0.38+ 0.62 0.38+0.62
The resulting WACC is 4.14%. This rate is considered as the minimum required rate of
return by the company.
DIVIDEND POLICY:
Even if the company had negative FCF, it has managed to distribute dividends to its
shareholders. In 2020 it had paid 56.36 MAD per share, in 2019 and in 2017,2018 it had paid
52.84 MAD per share, and in 2016 and 2015 it had paid 31.43 MAD per share as dividends to
its shareholders (Investing, 2020).The company is clearly maintaining its dividend policy as
they are stating by the distribution of dividends once per year. Label vie group is distributing
cash to its shareholders using dividends while simultaneously trying to increase the value of
58
the shares. On the other hand, the company does not use other strategies such as buying back
stocks or spun off assets.
As it was mentioned before, the company has a negative FCF, which forces the company to
have low yields related to the dividends (e.g. 1.87% yield in 2020, 1.74% yield in 2019, and
2.16% yield in 2018) (Investing, 2020). Still the stock value of LABEL VIE has continually
increased by the management of the company throughout expanding in Morocco.
In the case where the company has excess cash, we recommend that it returns the cash either
via special dividends or through share buy-backs. An amount of special dividends were
distributed from 2004 to 2007, when HSBC Malta acquired excess cash on its balance
sheet.This contributed to strengthening investors sentiment regarding the bank since investors
decided to increase their shares in HSBC in order to benefit from high shareholder's return
through dividends. This resulted in a significant rise to record rates in the share price (Time of
Malta, 2011).
Undertaking share buy-backs, a common method used by various multinational companies to
return surplus cash to shareholders, is buying back the shares that are then canceled. It ensures
that the income of a company is distributed among a less number of shares. Through time, it
also increases the value of earnings per share. Higher earnings per share will potentially
convert into a higher share price. A real benefit of a share buy-back is that it helps a firm to
take advantage of the cash surplus without paying the dividend. Certain companies are
hesitant to establish a payout dividend that could not be maintained in the future, so
businesses prefer to buy back shares instead of raising a dividend. (Time of Malta, 2011).
Usually, Label vie group was rather focusing on maintaining as well as increasing its market
share over the past years as it has a negative FCF. In the context of our company, the
company was not required to pay dividends each year, and could have paid dividends at most
59
one per three years. Still the company maintained the payment of its dividends in the previous
6 years.
The company can gather its shareholders for a general meeting in order to check their priority.
If shareholders agree to increase the value of the firm, the focus should be on increasing its
assets rather than distributing dividends. A Suggestion could be to focus on increasing the
company’s market share, fixed assets (mostly locations) all over Morocco, and distribute less
dividends in the next 5 years. This is mainly because the large retail sector is in its full
expansion phase, and LABEL VIE should take advantage from this opportunity.
The competitors of Label Vie group are not listed on the Casablanca stock exchange, no
information or public source about their dividends policy is available therefore we are not
able to compare Label Vie’s dividend policy to its peer group. But, from the information we
gathered previously we can say that on the overall the dividend distribution policy of the
group is correct compared to the rest of the market.
INTRINSIC VALUE PER SHARE:
DDM – DIVIDEND DISCOUNT MODEL :
The following section will use the dividend discount model in order to calculate the intrinsic
value per share for LABEL VIE. This model provides an estimation for an explicit expected
return for the stock market and enables investors to compare between the calculated value and
the actual value (Farrell, 1985). The dividend discount model is given using the following
formula (Chen, 2020):

60
Where:
EDPS: is the expected dividend per share of the next year
r: is the cost of capital
g: is the growth rate of the dividends
In the case of LABEL VIE, the growth rate cannot be calculated using all the historical prices
as some dividends were not paid. For this reason, the growth rate will be calculated based on
the historical data of dividend only with focus on the most recent three years throughout the
following formula:
Where:
Dn: refers to the last dividends paid
D0: refers to the first considered dividends
And n: refers to the number of years
Applying this formula results in a growth rate of 2.17%. In addition to that, the cost of capital
was calculated in previous sections, which is the WACC, and is equal to a value of 4.14%.
Applying the DDM, the intrinsic value of LABEL VIE’s stock is equal to MAD 2927.51.
61
RIM – RESIDUAL INCOME MODEL :
With regards to the residual income model, it is an equity valuation method that is an
alternative for the DDM for companies that do not pay dividends (CFI, 2019). This model
assumes that the residual income accounts for the earnings generated by the company
excluding the true cost of capital, which is referred to as the equity charge. This former
concept can be calculated using the following formula (CFI, 2019):
This formula enables calculating the residual income that is given such as (CFI, 2019):
The calculated residual income enables valuing the stock price using the following formula
that is given such as (CFI, 2019):
Where:
B0: is the company’s book value of equity per share at t = 0
EPS0: are the earnings per share for the company at t = 0
g: is the growth rate
and k: is the cost of capital
Applying this formula results in a value of MAD 2969,50.

62
In the case of LABEL VIE, no peer group companies are listed in the Casablanca stock
exchange, which does not enable having price multiples, EV/EBITDA multiples, or any other
comparable to calculate the value of the stock based on any market-based approach.
FINAL ESTIMATE:
The intrinsic value of the company was calculated based on two models that are the DDM and
the RIM. These two models resulted in values that are approximately equal. For this reason,
the average of these two models is given. This value equals to MAD 2948.50.
COMPARE THE INTRINSIC VALUE TO THE CURRENT PRICE:
The estimations of the share price were based on the data of the year 2019. For this purpose,
the comparison will be based on the stock prices of the year 2019 and the current stock price.
In 2019, the average stock price was MAD 2416.52. For this reason, and based on the
resulting intrinsic value calculated, the stock price was a good buy. As a supporting argument,
and by the end of the year 2019, the stock value increased to reach a maximum closing price
of MAD 2990. But when comparing the estimated intrinsic value of the current share price, it
will be considered as a strong sell. This is because the stock price has the value of MAD 3600
as of the 25th, Dec, 2020.
References:
● Tesco Supermarket: SWOT, PESTEL, Porter's Five. (n.d.). Retrieved October 25,
2020, from:
https://www.ivoryresearch.com/samples/business-essay-example-tesco-swot-
pestel-porter-five-forces-and-value-chain-analysis/
● https://www.labelvie.ma/wp-content/uploads/2020/05/RA-LBV-2019-VDEF.pdf
● Morocco's retail sector driven by urbanisation and rising household consumption.

(2020, April 24). Retrieved October 25, 2020, from:
63
https://oxfordbusinessgroup.com/overview/large-scale-development-
urbanisation-and-increases-household-consumption-result-prolonged-period
● Label'Vie Annual Report 2017 (Rep.). (n.d.). doi:https://www.labelvie.ma/wp-

content/uploads/2019/03/Annuel-Report-2017.pdf
● https://www.labelvie.ma/wp-content/uploads/2019/08/Rapport-Labelvie-2018-VUK-
1-1.pdf
● Haas, M. (2018). Morocco: Retail Foods 2018 (Rep. No. MO1823).

doi:https://apps.fas.usda.gov/newgainapi/api/report/downloadreportbyfilename?
filename=Retail%20Foods_Rabat_Morocco_6-1-2018.pdf
● Summary of information prospectus Commercial Papers Issuance Program (Rep. No.

VI/EM/001/2017). (n.d.). doi:https://www.labelvie.ma/wp-
content/uploads/2019/03/LBV_BTs_2015-en.pdf
● Institute, C. (2016). 2017 CFA Level I Volume 3 Financial Reporting and Analysis.
[VitalSource Bookshelf]. Retrieved from
https://bookshelf.vitalsource.com/#/books/9781942471905/
● McKinsey. (2020, September 28). When will the COVID-19 pandemic end? Retrieved
from
https://www.mckinsey.com/industries/healthcare-systems-and-services/our-
insights/when-will-the-covid-19-pandemic-end
● Média24. (2020, March 18). Covid-19 : Le groupe Label'Vie fait don de 50 millions
de dirhams. Retrieved from
https://www.medias24.com/covid-19-le-groupe-label-vie-fait-don-de-50-
millions-de-dirhams-8511.html
64
● Oxford Business Group. (2020, April 24). Morocco's retail sector driven by
urbanisation and rising household consumption. Retrieved from :
https://oxfordbusinessgroup.com/overview/large-scale-development-
urbanisation-and-increases-household-consumption-result-prolonged-period
● Label vie 2019, https://www.labelvie.ma/wp-content/uploads/2019/10/LBV-Investor-

Presentation-Oct-2019.pdf
● Bhandari, S. B., & Adams, M. T. (2017). On the definition, measurement, and use of
the free cash flow concept in financial reporting and analysis: a review and
recommendations. Journal of Accounting and Finance, 17(1).
● LABEL VIE. (2015). LABEL’VIE SA NOTE D’INFORMATION. Retrieved from

https://www.labelvie.ma/wp-content/uploads/2019/03/Augmentation-de-Capital-
novembre-2011.pdf
● LABEL VIE. (2019b). SUMMARY PROSPECTUS ISSUANCE OF ORDINARY

BONDS. Retrieved from https://www.labelvie.ma/wp-
content/uploads/2019/11/Prospectus-Summary-EN-LBV-EO-.pdf
● Tradingeconomics. (2020). Morocco Interest Rate 1995-2020 Data: 2021-2022

Forecast: Calendar: Historical. Retrieved from
https://tradingeconomics.com/morocco/interest-rate
● Buus, T. (2015). A General Free Cash Flow Theory of Capital Structure. Journal of
Business Economics & Management, 16, (3), 675-695.
● Krueger, T. M. & Wrolstad, M. A. (2013). Portfolio Allocation Using Free Cash

Flows and Other Methods. Journal of Financial Issues, 11, (2), 58-67.
● Hackel, K. S., Livnat, J. & Rai, A. (1994). The Free Cash Flow/Small-Cap Anomaly.
Financial Analysts Journal, 50, (5), 33-42.
● Jensen, M. C. (1986) Agency Cost of Free Cash Flow, Corporate Finance, and
Takeovers. American Economic Review, 76, (2), 323-29.
65
● Brigham, E. F. & Houston, J. F. (2016). Fundamentals of Financial Management, 14th
Ed. Boston, MA: Cengage Learning.
● Awasthi, V., Chipalkatti, N. & De Mello e Souza, C. (2013). Connecting Free Cash
Flow Metrics to What Matters for Investors: Accuracy, Bias and Ability to Predict
Value. Journal of Applied Finance, 23, (2), 104-119.
● Shefrin, H. (2014). Free cash Flow, Valuation and Growth Opportunities Bias.
Journal of Investment Management, 12, (4), 4-26.
● Investing. (2020). Label Vie Dividend History (LBV). Retrieved from

https://www.investing.com/equities/label-vie-dividends
● Wallstreetmojo. (2020, August 15). Net Capital Spending (Formula, Example): How
to Calculate? Retrieved from https://www.wallstreetmojo.com/net-capital-spending/
● Casablanca-bourse. (2017). SUMMARY PROSPECTUS CAPITAL INCREASE BY

CASH CONTRIBUTION. Retrieved from http://www.casablanca-
bourse.com/bourseweb/Documents/LBV/en/LBV_ni_aug_en_en.pdf
● Casablanca-bourse. (2019). LABEL VIE Quotes. Retrieved from

http://www.casablanca-bourse.com/bourseweb/en/Company.aspx?codeValeur=11100
● Analytics, I. (2020). Label'Vie SA (Formerly Hyper SA). Retrieved November 13,

2020, from https://www.infrontanalytics.com/fe-FR/30077KM/Label-Vie-SA/Beta
● https://timesofmalta.com/articles/view/Returning-excess-cash-to-shareholders.388011
● Chen, J. (2020, August 28). Dividend Discount Model – DDM. Retrieved from
https://www.investopedia.com/terms/d/ddm.asp
● CFI. (2019, May 06). Residual Income Valuation - Overview, Benefits, How to
Calculate. Retrieved from
https://corporatefinanceinstitute.com/resources/knowledge/valuation/residual-income-
valuation/
66
● Farrell Jr, J. L. (1985). The dividend discount model: A primer. Financial Analysts
Journal, 41(6), 16-25.

Final Report - LABEL VIE

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Final Report - LABEL VIE

Uploaded by

Copyright:

Available Formats

School of Business Administration

Project final report

VALUATION OF LABEL VIE GROUP

Porter’s five forces : 14

Threat of substitute- Low: 15

Threat of entry of new competitors- Low: 15

Intensity of competitive rivalry- High: 15

Bargaining power of buyers- Low: 15

Threat of suppliers- Low: 16

Risks related to the economic environment : 20

Risks related to competition: 20

Risks related to the investment: 20

Risks related to management: 21

Principle managers of the company: 27

The managers considered a key person: 31

Interaction with financial markets : 31

Pro-format 5 years income forecast: 48

Optimal capital structure: 57

Intrinsic value per share: 62

DDM – Dividend discount model : 62

RIM – Residual income model : 63

Compare the intrinsic value to the current price: 64

List of financial ratios

3 Asset turnover ratio Revenue Average total assets

customers. It includes 870 employees (Label Vie, 2020).

mainly small retailers). Atacadao's purchasing strategy is based on a day-to-day negotiation

Figure 1: History of Label’Vie Group. Source: Label Vie, 2019

Figure 2: Geographical distribution of LABEL VIE stores in 2018

given such as:

“We are going to continue on this path to maintain our position as a

benchmark player in mass distribution in Morocco. Our goal is to continue to

power and a continuous improvement in the quality of our products and

company philosophy. These values can be summarized such as:

improvement (Label Vie, 2020).

● Culture of overcoming challenges: This value consists of the constant improvement

(Label Vie, 2020). It is needed to have a state of mind that encourages challenges,

challenges (Label Vie, 2020).

conditions as possible, while including its employees in the process of decision

making to create a sense of commitment as well as helping them in best accomplishing

company (Label Vie, 2020).

company’s teams (Labelvie, 2020).

the revenues, it is represented by the supermarket segment of the company.

inflation rate (Economictimes,2020).

● According to a study conducted by the American consulting firm AT Kearney,

for the growth potential of its modern distribution sector.

world and the 5th nation in the world.

negative impact on the economic environment of the country. King Mohammed VI

has ordered a fund of 10 Billion Dirham equivalent of $1Billion, for health

infrastructure and households’ support (WorldBank, 2020).

has stayed low under 2% thanks to controlling the prices of imports (WorldBank,

downside risks of worsening the pandemic (WorldBank, 2020).

activities are related to manufacturing and services.

as the study of taxes and employment laws (Economictimes, 2020).

● Morocco follows a monarchy system with a parliament constitution. After King

the multi-party system.

(ivoryresearch, n.d). This is explained by the existence of a monarchy system that

allows the continuous stability and safety of the country.

to the changes (Economictimes, 2020).

modern distribution sector.

progress (ivoryresearch, n.d; Oxford Business Dictionary, 2020).

● The Moroccan government is working excessively on establishing a solid

infrastructure for large retailers. In addition to that, Morocco is encouraging large

retailers to expand their businesses.