Financial Evaluation and Forecasting of Blackmore's Company

Running head: BUSINESS EVALUATION AND ANALYSIS
Blackmore’s Financial Evaluation
Name of the Student:
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1BLACMORE’S FINANCIAL ANALYSIS

2BLACMORE’S FINANCIAL ANALYSIS

3BLACMORE’S FINANCIAL ANALYSIS
Executive Summary
The aim for the project is to conduct a financial analysis on the Blackmore’s Company and
forecasting the financials of the company. The financial statement for the company and how the
company will perform is well elaborated in the report. The financial forecast of the company was
done for the year 2019-2023. The four commonly valuation method was used in forecasting the future
financial performance of the company. The valuation models were applied in order to assess and
value the price of the share. The use of risk assessment in the company was done by the use of the
Sensitivity Analysis and the various scenarios and the effect on the sales growth rate, Asset Turnover
Ratio, Profit Margin Ratio and other various ratio impact in the changing business and macro-
economic conditions were assessed. The financial analysis and the forecasting of the Blackmore’s
Company has helped review the crucial part of the financial statement for the company.

4BLACMORE’S FINANCIAL ANALYSIS
Table of Contents
Introduction..............................................................................................................................................6
Discussion................................................................................................................................................6
Forecasting of the Financial Data........................................................................................................6
Growth Rate in Revenue..................................................................................................................7
Asset Turnover Ratio.......................................................................................................................7
Profit Margin Ratio (Net Operating Profit after Tax (NOPAT)/Net Operating Revenue)..............8
Net Dividend Pay-out Ratio.............................................................................................................9
Net Borrowing Cost (NBC)...........................................................................................................10
Cost of Equity................................................................................................................................11
Valuation Model................................................................................................................................11
Dividend Discount Model..............................................................................................................12
Residual Income Model.................................................................................................................13
Free Cash Flow Model...................................................................................................................13
Sensitivity Analysis...........................................................................................................................13
Growth Rate of Sales.....................................................................................................................14
Asset Turnover Ratio.....................................................................................................................14
Profit Margin..................................................................................................................................15
Net Dividend Pay-out Ratio...........................................................................................................15
Cost of Debt...................................................................................................................................15
Cost of Equity................................................................................................................................16
Management Consulting Advice.......................................................................................................17
Diversity in Product Portfolio........................................................................................................17

5BLACMORE’S FINANCIAL ANALYSIS
Terms with the Suppliers of the Company....................................................................................17
Inorganic Growth...........................................................................................................................18
Data Analytics................................................................................................................................19
Increasing Customer Base.............................................................................................................20
Key Challenges and Risks.............................................................................................................20
Conclusion.............................................................................................................................................21
Reference...............................................................................................................................................22
Appendix................................................................................................................................................26

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Introduction
The Blackmore’s Company is an Australian Health Supplementary Company that operates in
the global level in an all around the country with its presence in more than 17 Countries. The home
based Australian Company is a listed company in the Australian Stock Exchange and is having a
market capitalisation of 2 billion dollars. The company was founded in the year 1930, which started as
a health food company in Brisbane to leading health Company operating globally, which marks the
key success and growth of the company. The peculiar feature for the company is the type of products
and the type of the services delivered by the company and the key differentiating way by which it
caters to its customers (Yohn, 2015).
The financial analysis and evaluation conducted was based on the fact that the forecasting for
the company will be done for the period 2019-2023 and the financial evaluation for the company will
be done in order to review the performance of the company. The share price and valuation for the
company based on four commonly used valuation models giving us a key idea about the current
situation of the company (Sridharan, 2015). The valuation and the pricing of the company plays an
important role in the financial evaluation for a company, There should be certain risk assessment tool
like the scenario analysis tool which is been used in our report for understanding and analysing the
various impact of the business outcome under different scenarios.
Discussion
Forecasting of the Financial Data
The Blackmore’s Company has followed different growth approaches for the expansion of the
undertaken business and for the creation of wealth of shareholders. The key factors considered while
forecasting of the financial statement for the company was the growth and the past performance of the
company and replication of the same in the future as per the business conditions (Brigham et al.
2016). The Company has followed inorganic growth strategy by acquiring other potential company in
the same business and industry and the company performed organic growth strategy by acquiring new
plants and investing in better investment activities available to the company (Chen, 2016).

7BLACMORE’S FINANCIAL ANALYSIS
Growth Rate in Revenue
The growth of the revenue is a key factor for every company and is the primary factor
determinant for the overall sustainability of the company in the long-term period. Revenue Analysis
was done on the based on the historical performance for the company. The historical data analysed for
the company was for the term period 2012-2018 (Froud et al. 2014). The performance for the
company has shown a consistent growth and the same was expected to continue grow further. The
forecasting for the sales for the period was done on the basis of average revenue growth from the
period 2012-2018 and thus simulating the same into the forecasting. Certain other factors like the
business environment and the macro environment factors plays an important condition in determining
the future of revenue growth for the company. The forecasting was done for the period 2019-2023,
which helped us asses the possible scenario of revenue. The primary business area for the Blackmore
Company is the Chinese Economy and the Australian Economy where the macro-economic
conditions were forecasted and the same had been incorporated in the forecasting skills for the
revenue for the company.
Political changes and technological changes, taste and preferences of the customers may harm
and influence the forecast of the revenue and the same should be carefully analysed. The Chinese
Economy GDP is expected to decline which may affect the growth of the revenue. The other
opportunity for the Blackmore’s company is by taking advantage and use of the data analytics in the
due course for analysing in the changing customer’s preferences and taste. The Blackmore’s company
invests heavily in the research and development expenses so this could bring out a turnaround in the
company internally by some of the methods of internal controlling tools. The Blackmore’s should also
explore out places and factors that should bring out changes and chances for the growth in the
company. The inflation factor also plays an important role in determining the importance of the
overall growth of the company. Since the annual inflation forecast for the Australian Economy is
expected to decline, the forecast for the revenue growth and the input cost for the company will
remain in favour of the Blackmore’s Company (Haltiwanger et al. 2016).