Energy: old business model, great player.

The first company we are ready to talk about is E.ON AG. The German based energy supplier is one of the European leaders of Energy production and Gas distribution for industrial and retail market .
A long success history during last years, with increasing revenues and stock values, mixed with an extremely good balance sheet and a forward-looking management makes this company the must-have for Value Finance, till things will stay as now, of course.
Let’s start our analysis on financial data.

<- Stock price evolution during last years.

Tangibles data

Balance sheet: Looking at current assets and current liabilities, we can see that there should not be any cash problems in next future. In long terms analysis the amounts of total assets is increased of 10 bil euro last year, mainly for new plants building. Interesting indicators: Total Debt/Total Equity: 0,45 and Total Debt/Total Capital 0,31, both these indicators show a good financial situation.
Cash flow: the total cash from operation (which indicates the money amount generated by the compnay's core business) is increasing from 7,2 to 8,7 billion over last year. E.On AG has invested about 8,8 billions over last years in new plants and market development. It’s good to see that the amount of cash form operation and investing are almost the same, that means that investment could be almost all covered with Operations cash. Cash from financing is positive, 1,8 billion, mainly coming by a Debts issuing (bonds) to cover the investments. Good news by the buy-back of stocks (that’s makes shareholders more important adding value to single stock) and high level of paid dividends (one of the highest of German stock exchange).
Income statements: Looking at last years data there is a continuous strong Revenues and Net Income after tax growth; On long term, taking into account data from 2004 with forecast to 2009, the Average Growth rate has been of +13.24%.

Other key figures are: P/E : 14.01 (good in comparison to other competitors such as EDF 20 or Iberdrola 15.18)
Dividend yield 3.19%
Return on Equity: 11.93%
Renevue (5yr Growth Rate) 16.47% much more higher than Edf (4.28) Enel (8.44) and better than Iberdrola (13.38).

Intangible assets & Management

E.On is the market leader in central Europe with a strong position in UK and Italy too. Furthermore links between E.ON and Gazprom (i.e., Bergmann Burckhard, E.On Board Member, is Gazprom board member too) put E.On in a great advantage for Gas deal and distribution business. The management is extremely open to governance matters and HR management: E.On has been awarded as one of the Best Place to Work in Europe for several years, and employees productivity is one of the highest in this sector: revenue/employee of 893k euro, second only to Iberdrola with 928k euro. That means that E.On people are happy to work there and they produce well, this is very important in order to have a winner team. Management’s long term looks and sensitivity to the crucial problem of CO2 emission is extremely strong too and they have challenged the company to reach the 50% free CO2 energy in 2030.

These keys factors have induced me to put this company into Value Finance and it is worth 15% of the total portfolio’s assets. Entering date into portfolio: 31 jan 08
Last month performance :