Accounting Financial Analysis: Report

Accounting financial analysis report

EXECUTIVE SUMMARY
On the basis of reformatted financial statement, the present report is based on the prospective
analysis of SEEK Limited. The report initially conducts forecasting of future sales and
performance of SEEK Limited, wherein five ratios will be considered; sales growth ratio,
profit margin ratio, asset turnover ratio, dividend payout ratio and after-tax cost of debt. After
the calculation, report moves to valuation analysis which covers four models inclusive of
Discounted Dividend Model (DDM), Residual Income Model (RIM), Residual Operating
Income Model (ROIM) and Free Cash Flow Model (FCFM). Further, the report after
valuation conducts sensitivity analysis which identifies how the interdependent variable value
impacts a specified dependent variable value. Hence, the report draws recommendation and
appropriate remedies while offering opportunism for the improvement areas, and stating the
challenges experienced by the company alongside. By considering the overall findings and
analysis of report it can be said that SEEK Limited is striving to earn long-term success in the
market by improvising their financial structure and by delivering good returns to the
shareholders.

1.0 INTRODUCTION
SEEK limited and SEEK Group (subsidiary corporate) aims on facilitating the suitability
amongst job-demanders and employment opportunities while helping recruiters to look for
applicants for the most suitable roles (SEEK Limited, 2018). The present study focuses on the
prospective analysis and the application of the same for SEEK limited, wherein forecasting,
valuation and sensitivity analysis will be done. The study also advices the corporation by
feasible remedies and provides opportunities for development with warning about challenges
that would be faced by companies in near future.
2.0 FORECASTING FINANCIAL FUTURE OF SEEK LIMITED
Forecasting is referred to the process of making future predictions on the basis of past as well
as present information by analyzing trends. This section aims to forecast the performance and
progress based on future of Seek Limited while providing fundamental concepts to managers
to ease decision-making process for the future corporate activities (Hajek, Olej and Myskova,
2014). This part is based on analyzing the sales growth rate. Asset turnover, profit margin,
dividend pay-out ratio as well as new after debt cost to predict the future outcomes of Seek
Ltd. Forecasting means using past data to identify the direction of trends based on future.
Business makes use of forecasting to identify the allocation of budgets or plan for estimated
expenses for the future. Reliable and relevant forecasts allows companies in making better
business decisions and forecast short as well as long term performance. Further, firms can
base their predictions on historic data, economic trends and industry-extent comparison. This
will help in providing information source that enables firms to maintain all business aspects
from planning to budgeting while it also assist in gaining a competitive edge.
2.1 Sales growth rate
The sales growth of a business is said to be the rate by which it is increasing its sales on
yearly basis. It is executed by initially deducting present sales of the month from the
preceding month’s total sales (Bollerslev, Patton and Quaedvlieg, 2016). Next, the outcome is
divided with the past month’s total sales and is multiplied by the outcomes with 100 to reach
at the fall or rise in the percentage of sales. Sales growth rate reveals the increase in overall
sales on a specified period of time, it is considered as vital because firm is able to know the
demand for its products and service, as well as their future growth. The sales growth rate of

company is the precise indicator of their own strength in the market; it is used to identify the
corporate value, stock value for the upcoming financial outlook. Sales growth rate reveals the
improvement of business over a particular time, and the same shows the rise and fall in the
business activity.
2016 2017 2018 2019 2020 2021 2022 2023
0
500
1000
1500
2000
2500
950 1036 1160.32 1299.56 1455.51 1630.17
1858.39
2118.56
REVENUE ( AUD MIL)
Figure 1: Graph showing forecasted sales
The sales of SEEK Limited have gone through a slight decrease with an average growth of 15
growth rate in 2016. Along with this, it has shown a dramatic increase in the 2022-2028 with
14% due to the extension of the operational activities of the group. In this situation, on the
basis of sales growth rate in upcoming four years which is 12% and the, the assumption based
on the upcoming 6 years is set as 14% according to the forecasting.
2.2 Profit margin
Profit margin is considered as the profitability ratio computed as net income which is divided
by the overall revenue or profit and the same is further divided by sales. This is generally
referred as the revenue percentage held after the deduction of costs, tax, depreciation, interest
and other expenditures (Coad, Segarra and Teruel, 2016). Companies generally establish
financial targets to attain long-term financial objectives, and the profit sales ratio is the core
financial target to conduct the same. If a company boosts sales growth but expenditure is
done more administration and marketing then the profit ratio will decrease.

2016 2017 2018 2019 2020 2021 2022 2023
0
100
200
300
400
500
600
700
800
361 341.88 382.91 428.85 480.32
537.95
631.85
720.31
NOPAT
Figure 2: Graph showing forecasted profits
2016 2017 2018 2019 2020 2021 2022 2023
30%
31%
32%
33%
34%
35%
36%
37%
38%
39%
38%
33% 33% 33% 33% 33%
34% 34%
PROJECTED PM
Figure 3: Graph showing forecasted profit margin
For the SEEK limited, the profitability margin is computed by making use of a formula of net
operating profit after tax/NOPAT which is further divided to sales. On the basis of past data,
it is been forecasted for the next four years that the profit margin will hit upto 33% from
2018-2021, and the next 6 years would be 34% from 2022-2028.
2.3 Asset turnover ratio
Asset turnover ratio analyzes and evaluates the corporate sales or profit value derived
comparative to the asset’s value. Asset turnover ratio is related to the sales amount derived
from each unit of asset. A lower ATO states the ineffective utilization of assets of company
whereas higher ATO states the effective utilization of company’s assets. The assets turnover

ratio can generally be placed as a sign of efficiency by which a company deploy its assets
while producing revenue (Ferrando and Mulier, 2015).
2016 2017 2018 2019 2020 2021 2022 2023
0.26
0.27
0.28
0.29
0.3
0.31
0.32
0.33
0.34
0.29
0.3
0.32 0.32 0.32 0.32
0.33 0.33
PROJECTED ATO
Figure 4: Graph showing forecasted Asset turnover ratio
For the SEEK limited, the average assets during the time period of 2012 to 2017 is .30, while
considering the past data, the ATO assumptions in the coming four years from 2018-2021
is .32 and following to the next six years from 2022 to 2028 is .33.
2.4 Dividend pay-out ratio
The dividend payout ratio is said to be the total amount of dividend payable to stockholders
related with the amount of the total income generated by the company. Further, the amount
that is not payable in terms of dividends to stockholders is kept by the company for future
growth (Gamayuni, 2015). The dividend payout ratio is said to be a financial term
implemented to evaluate the new income percentage that a firm has to provide payment to
shareholders in terms of dividends. This ratio is significant as it provides facts to investors in
how much of the profits are distributed to shareholders. The amount which is held by the
company is known as retained earnings. Based on the forecasting and data, the dividend
growth in the next four years will rise from 5% from 2018-2021, and from 2022-2028 it will
increase by 6% in the next 6 years.