Singapore Brand Finance Forum Singapore top 100 Brands

Transcription

1 Singapore Brand Finance Forum Singapore top 100 Brands Brand Finance plc, 16 th Auguts 2011

2 Introduction 1. The role of brands in business 2. The new standard on monetary brand valuation ISO The most valuable brands in the world 4. The importance and value of Nation branding

3 The role of brands in business 3

4 The role of brands External Stakeholders Brand perceptions effect their buying decisions and what they communicate to others affects the brand. Existing Customers Potential Customers Directors Middle Managers All Other Employees Internal Stakeholders The brand affects their actions and their actions affect the brand. Influencers e.g. Media brand Production Strategic Allies & Suppliers Financial Audiences These stakeholders are external and/or internal, depending on their relationship with the brand owning company. Trade Channels Strategic Allies & Suppliers Investors Debt providers Sales Higher profile brand can attract increased investment activity. Discount rate can be affected, reducing the cost of borrowing 4

5 The new standard on monetary brand valuation ISO

6 The most valuable brands in the world on 1 st January 2011? 6

7 2011 BrandFinance Global 500 Most Valuable Brands 1 (2) Internet 44,294 (+22%) AAA+ 2 (5) Software 42,805 (+27%) AAA+ 3 (1) Retail 36,220 (-12%) AA 4 (4) Computers 36,157 (+7%) AA+ 5 (7) Telecoms 30,674 (+6%) AAA+ 6 (12) Financial 30,619 (+18%) AAA- 7 (6) Misc. Manufac. 30,504 (-4%) AA+ 8 (20) Electronics 29,543 (+49%) AAA 9 (15) Financial 28,944 (+32%) AA+ 10 (11) Telecoms 28,884 (+9%) AA+ 7

8 Reporting brand performance? The results of our studies are used by leading global brands as a performance benchmark many including the results in annual financial and sustainability reporting to shareholders and other stakeholders. 8

9 Financial market interest? +4.2% +3.9% 9

10 Our brand strength continues to underpin our performance. It was noticeable that, at times of stress in many markets, HSBC was a beneficiary of funds flowing in. Recently, the HSBC brand as recognised as the number one brand in banking by Brand Finance. Stephen Green, Group Chairman, February

11 The most valuable brands in the world after the recent crisis? 11

12 The value of Nation Brands 12

13 Introduction to the Nation Brands valuation exercise Scope Born out of collaboration with Simon Anholt in 2007 High level valuation of nation brands using publicly available information Valuation Date: May 2011 Currency: USD$ Brand Value calculated using Royalty Relief method Countries included in scope of exercise determined by availability of financial and market data as well as consumer research 138 countries included in exercise previously 57 Data GDP used as a proxy for brand revenues Historic and forecast GDP sourced from IMD (World Competitiveness Yearbook) GDP was segmented into the following categories: Primary (Agricultural/ Forestry/ Fishing etc) Secondary (Manufacturing/ Industry etc) & Tertiary (Services/ Financial & Insurance etc) Individual royalty rate ranges determined for each of the three categories Discount rate calculated using WACC, data sourced from Bloomberg Brand Profiling Brand strength determined using IMD (World Competitiveness Yearbook) and World Economic Forum Global Competitiveness Index Brand strength analysis includes three macro categories consisting of: Infrastructure & Efficiency Brand Equity Economic Performance Brand strength tracking available for years 2001 to

14 Definition of Brand Value What is being valued? Definition 1: Nation Brand + Product & Corporate Brands Includes ALL Nation Branded IP including product & corporate brands - as per 2011 BrandFinance Nation Brands Definition 2: Nation Brand only Includes Nation word mark and trademark iconography i.e. South Africa Methodology 14

15 Determining a nation s brand strength To conduct the valuation, it is necessary to determine the strength of the nation brand against other nation brands under review. Brand Strength Index (100%) Infrast. & Effic. 33.3% Brand Equity 33.3% Econ. Perform. 33.3% Productivity 1.8% Image Abroad 8% GDP 2.4% Brain Drain 1.8% Quality of life 8% GDP Growth 2.4% Attracting talent 1.8% Customer Satisfaction 8% National Debt 2.4% Worker Motivation 1.8% National Culture 8% Resiliance of Economy 2.4% Adaptability of Companies 1.8% Exports of Goods 2.4% Ethical Practices 1.8% Exports of Services 2.4% Social responsibility 1.8% Trade to GDP Ratio 2.4% Health Concerns 1.8% Tourism Reciepts 2.4% Globalization 1.8% Imports of G&S 2.4% Flexability 1.8% Employment 2.4% Value System 1.8% Consumer Price Inflation 2.4% Corporate Values 1.8% Cost of Living 2.4% Internet Users 1.8% Investment Risk 2.4% Tech Funding 1.8% Fin risk factor 2.4% Pollution 1.8% Health Expenditure 1.8% Sustainable Development 1.8% This chart summarises the conceptual approach of measuring brand strength within a single index. Our BSI incorporates a range of measures covering Infrastructure & Efficiency, Brand Equity ( BE ) and Economic related to the nation brand relative to competitor nation brands. The chart demonstrates that brand equity is only one macro level component (derived from various micro level attributes) of brand strength. Brand strength therefore measures both quality and size: i. Quality - the equity the brand has with users of the brand; ii. Size - the physical presence of the brand in the global market. & Brand strength is considered a snapshot of the brand s performance at a given point in time. BE is considered to be a leading indicator of the brand s future performance. Illiteracy 1.8% 15

16 Example brand strength analysis - South Africa 58 rank: 38 IN: 60 BE: 55 EP: rank: 36 IN: 61 BE: 60 EP: rank: 44 IN: 51 BE: 46 EP: 55 rank: 36 IN: 50 BE: 60 EP: 55 rank: 41 IN: 49 (44) BE: 56 (42) EP: 57 (37) KEY IN: Infrastructure & Efficiency BE: Brand Equity EP: Economic Performance

17 How does brand strength affect the brand valuation? Forecast Revenue In addition to using historic trends to determine forecast revenue, brand equity one of the components of the BSI is used to determine forecast market share. Royalty Rate By a review of third party license agreements across sectors, Brand Finance has identified royalty ranges for use of the brand. The BSI is used to determine the applicable rate within the range based on the brand s strength in each market. Discount Rate The discount rate is used to discount royalty earnings back to a net present value. The BSI allows us to adjust the discount rate for each nation a stronger brand would allow higher gearing and a lower credit risk premium and vice versa for a weaker brand. 17

18 europe 41 nations US$ 14,647bn 35% BV north america 13 nations US$ 14,740bn 35% of global BV asia 32 nations US$ 9,136bn 22% BV south america 11 nations US$ 1,600bn 4% BV africa 36 nations US$ 545bn 1% BV australia 5 nations US$ 1,305bn 3% BV 2011 BrandFinance Nation Brands 18

19 europe 63 BSI 35% BV 33% GDP north america 72 ave BSI 35% of global BV 29% of global GDP asia 60 BSI 22% BV 27% GDP south america 56 BSI 4% BV 5% GDP africa 47 BSI 1% BV 2% GDP australia 68 BSI 3% BV 4% GDP 2011 BrandFinance Nation Brands 19

20 The world s most valuable Nation Brands 1 (1) United States 12,576 (+5%) AA 2 (2) Germany 3,146 (+1%) AA 3 (4) China 3,001 (+40%) A+ 4 (3) Japan 1,940 (-26%) A 5 (5) United Kingdom 1,849 (-5%) AA- 6 (7) France 1,673 (+2%) A 7 (6) Italy 1,515 (-12%) A- 8 (8) Canada 1,309 (+3%) AA 9 (9) India 1,266 (+32%) A+ 10 (12) Brazil 959 (+21%) A 20

21 Smaller nations often have high brand strength 1 Sweden 471 AA+ 2 Australia 702 AA 3 USA 12,576 AA 40 France 1,673 A 41 South Africa A- 42 Portugal 120 A- 49 Italy 1,515 A- 56 Russia 752 BB 21

22 The dimensions of Nation Brand strength Immigration People Trade/Investment/ Export Promotion Nation Brand Culture & Heritage Tourism Promotion (Destination Branding) Governance/Policy/ Public Diplomacy & Communications 22

23 Example - South Africa: How is it doing? Anholt Gfk Nation Brand Index

24 How is Singapore doing leveraging its Nation brand equity? 24

25 David Haigh Chief Executive Brand Finance plc rd Floor, Finland House, 56 Haymarket, London SW1Y 4RN Brand Finance plc is the world s leading independent brand valuation consultancy. Brand Finance has a global footprint with offices in more than 16 countries. For more information please refer to our website: 25

26 Singapore Brand Finance Forum Singapore top 100 Brands Brand Finance plc, 16 th Auguts 2011

27 ISO How it was promulgated by Germany 2. How it was produced - by Consensus 3. Key steps in an ISO compliant valuation 4. Conclusions and future developments 27

28 Intangible asset valuations - many interested parties

29 Intangible assets - International Valuation Standards Discussion Paper issued July 2007 Determination of Fair Value of Intangible Assets for IFRS Reporting Purposes Exposure Drafts issued January 2009 Revised International Valuation Guidance Note No. 4, Valuation of Intangible Assets Proposed New International Valuation Guidance Note No. 16, Valuation of Intangible Assets for IFRS Reporting Purposes Final Guidance Notes published in Q

30 The purpose of ISO The purpose of the ISO Standard is: To create a universal standard for all applications in all territories. To create an accepted, transparent methodology which is reproducible. To ensure that all important analysis should be included in a brand valuation exercise. To certify reputable brand valuation practitioners. 30

31 ISO : Introduction ISO Standard Introduction Intangible assets are recognized as highly valued properties. Arguably the most valuable but least understood intangible assets are brands. However, reliable values need to be placed on brands. This standard provides a consistent, reliable approach to brand valuation including financial, behavioral and legal aspects. 34

32 ISO Standard process is divided into 3 elements: 1. Legal analysis to identify the brand assets to be valued 2. Behavioural analysis to identify the market research and brand equity data to be used in the brand valuation 3. Financial analysis and techniques to be used to determine the valuation opinion ISO : 3 stage process 35

33 ISO New Global Brand Valuation standard ISO-compliant Brand Valuation Legal Analysis Behavioural Analysis Financial Analysis Trademark and Legal IP analysis Market Research analysis Valuation modelling and analysis This requires a detailed internal audit of all IP supporting the brand This involves a detailed review of all desk, tracking and bespoke research This involves forecasting and analysis of financial data and cost of capital 36

34 Issue 1: Granular Segmentation (Lawyers) Geography Product Customer 37

35 Issue 2: Brand Equity (Researchers) Market Trends Consumer Trends Methods Attributes Which measures Correlation to financials 38

36 Issue 3: Purpose of Valuation (Valuers) Accounting Tax Regulation Borrowing Securitization Share sales Asset sales Insolvency Litigation Arbitration Licensing Joint venturing Commercial deals Resource allocation Portfolio decisions Brand architecture 39

37 Issue 4: Approach to Valuation (Valuers) Valuation Approaches Market Approach Cost Approach Income Approach Value estimate based on multiples or prices from market transactions involving the sale of comparable assets Value estimate reproduction/ replacement cost-adjusted for depreciation and obsolescence Value estimate present value of earnings attributable to the asset or costs avoided as a result of owning the asset 40

38 Brand Value is the expression of future earnings Net Present Value Discounted at cost of capital Yr. 5 Future Value Today FUTURE CASH FLOWS OVER PLANNING PERIOD PERPETUITY Time Base Business Value Uplift Brand Value 41

39 The Brand Finance approach Market Research Brand Equity Analysis Scenario Modelling Brand Audit Brand Valuation Brand Value Maximization Business Data Brand Value Mapping Brand Dashboard Continuous feedback 42

40 The Brand Finance approach Market Attractiveness Brand Equity Index Market Share A&P Brand Value Brand 1 - Segment % $ Brand 1 - Segment % $ Brand 1 - Segment % $ Brand 2 -Segment % $ Brand 2 - Segment % $ Brand 2 - Segment % $ 43

41 Issue 5: Valuation reporting requirements position and status of the appraiser; purpose of valuation; identification of the subject brand; brand-related assets valued; addressed audience/addressees; premise of value; approach and methods used; valuation date; value date; data sources used; key assumptions and sensitivities; limitations. 44

42 ISO 10668: The need for independence ISO Standard Independence The appraiser shall use care and professional judgment to maintain independence and objectivity in reaching the valuation opinion. 45

43 ISO 10668: The need for practitioner certification 46

44 The future of brand valuation as a management discipline? 47

45 David Haigh Chief Executive Brand Finance plc rd Floor, Finland House, 56 Haymarket, London SW1Y 4RN Brand Finance plc is the world s leading independent brand valuation consultancy. Brand Finance has a global footprint with offices in more than 16 countries. For more information please refer to our website: 48