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Upcoming EBC Meetings PowerPoint Presentation
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Upcoming EBC Meetings

Upcoming EBC Meetings

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Upcoming EBC Meetings

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  1. EBC Seminar Series on Running Your Business Successfully: Financial Profitability: Forecasting Environmental Industry Trends with Paul Zofnass

  2. Upcoming EBC Meetings Nov 8 - Ira Leighton USEPA Update in RI Nov 14 - EPA VOC Control/Stack Testing Workshop at EPA Lab in Chelmsford Nov 15 - Tour of PSNH Wood Burner Nov 28 - Risk Assessment/Risk Mgmt Program Nov 30 - An Evening with CT DEP Commissioner Gina McCarthy Dec 6 – Winter Garden Party in Boston

  3. EBC Mission Statement The mission of the Environmental Business Council of New England, Inc. is to advance and promote the environmental and energy services and technology businesses in New England. • Provides programs on current legislative, regulatory, and technology developments that shape the future of the environmental/energy industry • Provides direct access to regulators and industry leaders to discuss developing issues • Offers networking and business development opportunities for its members • Supports and promotes sustainable environmental policies and practices for business and government • Fosters the development of future generations of the industry through academic partnerships and mentoring and training opportunities • Provides access to market research

  4. EBC Seminar Series on Running Your Business SuccessfullyLiz LevinPresident, Liz Levin & Company

  5. Paul ZofnassPresident, The Environmental Financial Consulting Group, Inc.

  6. Presentation to Environmental Business Council of New EnglandBy Paul Zofnass, President of Environmental Financial Consulting Group November 6, 2006 18 E 48th Street, New York, NY 10017 (212) 752-2203

  7. Participants in the 2006 EFCG Survey

  8. Ownership of E/C Firms

  9. Revenue Distribution By Firm Size

  10. 2006 Gross Revenues of $48 Billion by Business Distribution

  11. Makeup of $10 Billion“Traditional Environmental” Revenues

  12. 2006 Gross Revenues:by Functional Distribution

  13. 2006 Gross Revenues:by Customer Sector

  14. 2006 Gross Revenues:by Geographic Sector International ($15.3 Bil) Domestic ($32.5 Bil)

  15. Overall Performance 2005-2007

  16. Growth (Internal) Historical Perspective

  17. Profitability (EBIBT/Net Revs) Historical Perspective

  18. “Happiness Quotient” “Happiest” year on record!

  19. Growth & Profitability:By Size(%)

  20. Growth & Profitability:By Sector(%)

  21. Productivity Analysis Historical Perspective For All Firms Productivity has never been better!

  22. Overhead FactorsHistorical Perspective For All Firms(% of Net Revenues)

  23. Employee Turnover Analysis(By Sub-Groups)

  24. Estimated Employee Turnover Cost($000)(Per Employee “Turned Over”)(from April 2006 EFCG CFO Conference)

  25. Employee Turnover Cost(from April 2006 EFCG CFO Conference) So, all costs considered, is the true cost of employee turnover closer to $50,000?

  26. Hot & Cold Analysis(by # of Votes)

  27. Sector Analysis:Annual Growth Rates(expected for the next few years)

  28. Geographic Performance

  29. CEO Priorities • Ownership Transition (25/ was 15): • Leadership Development (25/ was 12): • Transitioning (8) • Develop (21) • Acquisitions (20/ was 13): • Making/finding acquisitions (15) • Integrating acquisitions (5) • Cultural Issues (20/ was 0): • e.g. maintain culture with growth (8) • Transition culture • Work sharing/ team work • Integration • Balance Sheet Management (15/ was 5) • Asset Management (5) • “Cash Flow” (5) • Capital Enhance (5) • QC + Client Service (10/ was 10): • Clients (5) • ISO 4001 (1) • Risk Mgmt (10/ was 10) • Globalization (3/ was 10) • Growth (110/ was 60): • Growth (100) • Diversification (10) • Geography (8) • “Managing Growth” (5) • “Maintaining Quality during” (5) • “Quality Growth” (5) • Personnel (80/ was 60): • Recruit/Retain (37) • Recruit (33) • Retain (10) • Training (5) • Profitability (40/ was 42): • Profitability (30) • Growth and Profitability (5) • Manage Growth (5) • Overhead Mgt (8) • Increase Efficiency (5) • Organizing/Strategic (40/ was 10): • Strategic Plan (level or implementation) (18) • Diversification (9)

  30. Why are times so good? Good Economy (45) Talent Shortage (16) - Federal Spending (17) - Ample Opportunities (4) - Better Pricing (4) - Real Estate Boom /Land Development (14) - Able to passCosts to clients (4) - Stronger Focus (3) - Great Overall Demand (21) - Low Interest Rates (5) - Supply Constraints (5) - Rising Commodity Prices (4) - Population Growth (7) - Baby Boomers (4) - SelectiveExpansion ToHot Markets (10) - Private Investment (4) • China/India (5) - State Funding (5)(i.e. highway bill) - Put off for too long (14) - Disaster Response (7) Times are what?? (5) - Water Shortage (6) - Energy/Power needs (6) - Not For Us! Aging/Demand forInfrastructure (10) - Tough for small Biz

  31. Ownership Transition

  32. Risk Management –What Factors Have Increased Risk?(in recent years) • Increased use of Fixed Price Contracts (30) • Litigation Costs (15): • Increased willingness/atmosphere to litigate • Increased costs of litigation • Frivolous lawsuits; “too many lawyers” • Contract Terms (15): • Tougher more complex/stringent contract terms; e.g.“standard of care”; “fitness for purpose” clauses; elim of “limitations of liability” • Higher expects by more sophisticated clients • Penalties for short comings(e.g. on time) • More focus on liab/risk transfer to E/C firm • Restrictions on # of people staffing project • Rate caps • Alternative Delivery Methods (15): • More complex design, approval process, regulation requirements • Innovative designs add risk • Ratio of engineering costs to construction costs • Expansion of Business (10): • International (5) • Acquisitions (3) • Geographic Expansion. • Insurance (10): • Higher costs (5) • Less Coverage (5) • More required by client (5) • No Increase in Risk(10) Source: 2005 EFCG CEO Survey

  33. ESOP Analysis

  34. % of Retirement Plan Invested in Company StockHow Much is Appropriate?

  35. Valuation Approaches

  36. Pricing Approaches*(%)

  37. Common-Sized Balance SheetTypical for Employee-Owned E/C Firms(Gross Revenues = 100)

  38. Public Market Stock Price:EFCG E/C Stock Price Index vs. S&P 500as of June 30, 2006 6/06

  39. Public Market Valuation Multiples:EFCG Index vs. S&P 500as of June 30, 2006 6/06

  40. Growth & Profitability(Average 2005-2007) (Distribution Relative to the Median) Profitability Low High Total 35 62 97 High "Outperformers" "Risk Takers" Growth + 62 35 97 Low "Underperformers" "Cash Cows" Total 97 + 97 = 194

  41. Impact of an Unanticipated 5% Revenue Shortfall • Assumptions: $100 expected revenue 10% operating margin • Calculation: ExpectedActual Revenue 100 95 - Expenses9090 = Profit 10 5 • Conclusion: An unanticipated revenue shortfall of 5% can lead to a profit shortfall of 50%!!!!!

  42. Which has a greater Impact on Cash? • Improve Profitability by 10%? • Reduce Capital Expenditures by 10%? • Improve A/R Turnover by 10%?

  43. Which has a greater Impact on Cash? • Improve Profitability by 10%: If typical profit margin is 7% of Gross Revenues (GR) (which is 10% of Net Revenues), less interest of 1%= 6% pre tax x 0.6 after tax= 3.6 x 10% increase= .36% of GR • Reduce Capital Expenditures by 10%: Typical capital expenditures run 1% of Net Revenues which equals 1% x .7=.7% of GR, a 10% reduction would save 10% x .7%= .07% of GR • Improve A/R Turnover by 10% If A/R run @ 100 days=100/365 x Gross Revenues =27% x Gross Revenues, 27% x 10% improvement=2.7 % of GR Conclusion: Improving A/R Turnover by 10% generates 7x more cash than increasing profitability by 10%!!!!

  44. Acquisition Analysis

  45. Thanks to our Keynote Speaker Paul Zofnassand Special Thanks to our Sponsors