Market Research Essay, Research Paper
Part A 1. Directors AJ lane, WJ Locke, JF Kelly, JR Cadwaallader, DG Lane, HA Lynch, IA Pollard, RC Milne 2. Total Sales = $475,264,000 (1997) (Before Abnormal items) 3. Sales revenue for the consolidated entity, for the year ended 30 June 1996, was $449745000. 4. Equity method used when company has significance influence but not control of investee company OPSM use consolidation method which means it has control over other investee. 5. Total interest expenses for the consolidated entity for the year was $3819000. The total interest paid in cash by the consolidated entity during the year was $4113000. During the year ended 30 June 1997, The company also paid off some interest payable incurred in previous year. This is why the figure for the interest expenses in the year is different from the figure for the interest paid in cash in the year. 6. Contigent liabilities are liabilities, which are contigent on particular event occurring that has not yet happened. They do not meet the criteria for the recognition of liabilities so they are not on the balance sheet, however they are disclosed on the notes. 7. The total sales revenue of the Protectors Safety Supply group for the year ended 30 June 1997 was $158900000. 8. Cash items in balance sheet only include CAB plus on hand plus bank deposits, whereas, for the CFS, cash includes CAB plus on hand plus bank deposits, net of bank overdrafts.i.e. from balance sheet. CAB plus on hand 6454 Bank deposits 13701 20155 Less: bank overdrafts 1053 Balance of statement of cash flows 19102 9. Profit after tax (after abnormal items) for 1994 is $21434000. 10. The consolidated entity received $1106000 how the sale of non-current assets during the year. 11. The number of members holding ordinary shares in the company was 13298. 12. Because they use cost method. 13 Number of ordinary shares = 143373876. 14 Work wear and safety system 15 Price water house plus the partner R.Ward. 16 The consolidated operating profit before income tax for the year ended 30 June 1996 and 30 June 1997 is 34629000 and 43526000. Part B Executive Summary OPSM Protector Limited is a consolidated entity consisting of three operating groups, OPSM, Protector Safety Supply and Protector Technologies. The purpose of this report is to provide an evaluation of the trend in performance of OPSM Protectors Limited as a consolidated entity in 1996 to 1997, though the analysis of the company’s 1997 Annual Report, especially its financial statements. Financial ratios have been employed in this report as the predominant measure of the company’s performance, and each will be discussed in turn. A table of financial ratios with its calculations and definitions can be found in the appendix to this report. Limitations to this analysis will also be discussed. The basic finding concerning OPSM performance from 1996 are as follows:+ With regard to financial stability, risk in this area is quite low as OPSM is not heavily in debt financing and can cover its interest payment very well.+ The company is reasonably liquid, evident by the current ratio 1.74.+ Record profit after tax and abnormals up 30% to %28.8 million.+ Record sales revenue up 6% to $475.3 million.+ Dividend up 11% to 15 cents per share fully franked.+ Cash flow up 150% to $41.8 million.+ Debt to equity ratio down from 20% to 9.6%.+ Change process continued, with increased productivity and customer focus.+ Business of Dunlop Industrial Footwear acquired. Liquidity The current ratio is a stock measure of whether the company has enough short term assets to cover its short term debts and thus remain solvent. As a rule of thumb that the current ratio should be at least be 1.5:1. OPSM operator current ratio does not look too bad. In 1996 it was 1.70 and in 1997 it was 1.70 and in 1997 it was 1.74. This indicates that throughout the period, current assets were sufficient to cover current liabilities. Financial Stability The trend of the equity ratio shows that the percentage of asset provided by shareholders is inclining (increase by 2.5%). However the company is slightly in equity relative to its debit. The ratio of 0.82 indicates the company rely on equity were then on debit and that its relative rely on equity rather than debit is slightly decreasing during 1997(debit is increased by 10.1% and equity increased by 7.6%). Increase in reliance on debit to finance asset was shown in debit to equity ratio which is slightly increased from 44.5% to 45.1%. This is result of a smaller increase in total asset relation to its liability. Since there is an increase in receivable, it is offset by a decrease in cash (see common size balance sheet). Cash Flow There is great increase in net cash flows from operating activities by $30866000, this is because of the great decrease in income taxes. However, the company’s net cash flows from investing activities decreases by $1157000, because the company purchased businesses and they spent $10755000 for that. Similarly, the company’s net cash flows from financing activities decreases by $16601000. The reason is the decrease in repayment of borrowing. Therefore, due to the great increase in net cash flows from operating activities, eventhough the amount of net cash flows from investing activities and financing activities decrease, the cash at the end of the year increased by $7220000. Limitations A major limitation which arises from this analysis is that the figures for the two years given in the statements does not allow us to compare it with previous years’ figures and in turn limits us from drawing a meaningful trend. We are only able to compare changes between the two years (1996&1997) and provide reasons behind those changes : however we cannot look accurately into the future depending on just the one annual report. We need to know the Director’s plans for the company in the future, its current circumstances. We cannot compare OPSM’s performance with that of others in the same sector, as there is no qualitative data. This limits a meaningful interpretation of the ratios to allow or to provide a frame of reference. We cannot determine whether the company’s performance and position is above, below or on average compared to other companies with the information provided.
Another limitation of the analysis is that we cannot determine exactly how much of the company’s performance is really due to management and how much of it depends on other factors, such as economic trends, product changes, union pressure, and even pure luck. In other words, we cannot measure the quality of the manager’s performance nor evaluate the manager’s efforts. Conclusion This financial analysis of OPSM Protector Limited has proven overall, the company’s performance has increased and the company is very stable with regards to risk. It has increasing trends in almost all aspects. There has been an increase in investing activities in a drop in the level of cash in the company. The dividend payout has increased over there part years. The existence of a good current ratio indicates that turn out the period, current assets were sufficient to cover current liabilities and there were no problems in paying debt as they fall due. Judging on past records, it seems OPSM Protector Limited is a financially stable enterprise. Appendix OPSM Common Size Balance Sheets 1997 1996Current Assets Cash 7.57 5.54 R/C 20.51 19.80 Investment 28.06 28.30 Others 1.45 1.1357.58 54.17 Non-current Asset R/C 0.09 0.11 Investment 0.76 0.82 Property, plant and equipment 25.78 26.87 Intangibles 12.18 12.48 Others 3.61 4.95 Total non-current asset 47.42 45.23 Total assets 100.00 100.00 Current Liabilities A/P 17.51 16.26 Borrowings 2.70 5.99 Provisions 12.90 9.92 Total current liabilities 33.11 32.17 Non-current liabilities Borrowings 10.25 10.75 Provisions 1.73 1.59 Total non-current liabilities 11.98 12.34 Total liabilities 45.09 44.51 Shareholders equity Share capital 26.91 29.15 Reserves 13.96 14.04 Retained profits 14.04 12.30 Total SE 54.91 55.49 OPSM Common Size Profit and Loss Account Operating profit before abnormal items and income tax 100 100Abnormal items before income tax – (13.08) —— ——–Operating profit before income tax 100 86.92Income tax attributable to operating profit (33.80) (31.36) ——- ——–Operating profit after income tax 66.20 55.56 Ratios Return on assets (ROA) = EBIT/Total Asset 1997 1996 =( 43526+3819)/266411 =(39839+3709)/2445094 = 17.77% =17.76% Return on equity (ROE) = OPAT/Total Equity = 28815/146294 = 22134/135998 = 19.70% = 16.28% Asset turnover =Sales/Total Asset =475264/266411 =449745/245094 =1.78 =1.83 Profit margin = EBIT/Sales =47345/475264 =43548/449745 =9.96% =9.68% Return on Shareholders’ equity = Net Profit/ Equity = 43526/146294 =39839/135998 = 29.75% =29.29% Debtor’s turnover = Sales(credit)/Account Receivable =475264/(231+54627) =449745/(48531+266) =866.35% =921.67% Leverage = Total Asset/ Shareholders’ Equity =266411/146294 =245094/135998 =182.11% =180.22% Debt/Equity = Total liabilities/ Total Shareholders’ equity =120117/146294 =109096/135998 =82.11% =80.22% Interest Coverage = EBIT/ interest =47345/3819 =43548/3709 =1239.72% =1174.12% Dividend payout = Dividend declared per share/ EPS = 15/20.1 = 13.5/18.1 = 74.63 = 74.59 Assignment OPSM Protector Limited YOO-MIN KANG(2226558) Tutor : Linda Chan Tutorial : Friday 9-11 Performance The return on equity indicates the efficiency with which a company employs its equity capital and it’s thus directly linked to earning per share. ROE for OPSM Limited increased from 16.28% in 1996 to 19.70% in 1997, as operating profit, after tax (OPAT) increased by 30.18% and equity increased by 7.56%. The increase in operating profit before tax of $43526000 (an improvement of 25.69%) from the previous year resulted as there is no abnormal charge in 1997. Return on Asset stays constant (17.8% for both 1996&1997). This is resulted by the change in EBIT and change in total asset (change in EBIT = 8.7%, change in total asset = 8.7%). There is an increase in profit margin due to increase in OPAT and Dividend payout ratio stays nearly constant (1996:74.59% and 1997: 74.63). The Total Asset Turnover ratio decreased (1996:1.83 to 1997: 1.78) during 1997 which was most probably the result of the increasing total assets.