Financial Analysis of Fleetwood Corporation: A Comprehensive Report

The report provides a comprehensive analysis of the financial risks and contingency plans for Fleetwood Corporation, an Australian Recreational Vehicle manufacturer. The most significant financial risks faced by the company include credit risk and liquidity risk. To mitigate these risks, the company is recommended to ensure sufficient cash flow, minimize credit days to customers, and maintain liquid assets. Additionally, the report recommends that Fleetwood take a bank loan and short-term borrowings from financial institutions to finance its business for the next three years. Overall, the growing demand for Recreational Vehicles in Australia presents an opportunity for Fleetwood to increase its sales volume and recover losses made in 2018.

Running Head: Financial Analysis
FINANCIAL ANALYSIS

Financial Analysis 2
Table of Contents
Introduction......................................................................................................................................3
Discussion........................................................................................................................................3
Section 1 – Assessment of client needs.......................................................................................3
Section 2 – Analysis of data.........................................................................................................7
Section 3 – Formulation of financial and performance advice....................................................9
Conclusion.....................................................................................................................................11
Reference List................................................................................................................................12
Appendices....................................................................................................................................14

Financial Analysis 3
Introduction
The current report is drafted with the aim of providing financial recommendations to
Fleetwood Corporation Limited of Australia by considering its current business status.
Fleetwood Corporation delivers accommodation solutions, accessories, and parts. The different
segments of the company include Modular Accommodation, Parts and Accessories, Village
Operations and Unallocated. The segment titled Parts and Accessories uses to manufacture and
distribute accessories and parts for commercial and recreational vehicle (RV). Modular
Accommodation business segment of Fleetwood is involved in designing, manufacturing, and
selling of accommodation for education, housing, mining industries, and corrections. The third
business segment i.e. Village Operations includes village accommodation operations in Searipple
of Karratha, and Osprey of South Hedland. The subsidiaries it current having are Camec Pty Ltd,
Camec (NZ) Limited, and Fleetwood Pty Ltd. It was established in the year 1964 and became
listed on ASX (Australian Securities Exchange) in 1987. Over the years, Fleetwood becomes a
leader of the industry and in markets such as Modular Accommodation, Parts and Services, and
Village Operations in Australia as well as in New Zealand (reuters.com, 2019).
Discussion
Section 1 – Assessment of client needs
PESTL Analysis of Fleetwood Corporation
Political: Australia’s political factors impact Fleetwood Corporation profitability and
financial performance. Political factors that positively influence business operations of
Fleetwood are the degree of Australia's political stability, the integrity of Australia's politicians.
Moreover, the business related laws that Australia enforces like contract law provides direction
to Fleetwood Corporation regarding what it is allowed to do and what not. Low minimum wages
policy of the country assists the company to increase its profit which ultimately helps it to ensure
long-term survival. On the other hand, trade barriers, and high tax rate are the two major factors
that create a negative impact on Fleetwood's business and financial performance.

Financial Analysis 4
Economic: Economic factors make Fleetwood Corporation act sensitively before
investing and making financial decisions. Australia’s GDP growth rate affects how fast the
company is expected to improve its financial performance in the coming future. If GDP declines
then the financial performance of Fleetwood also falls and vice versa. Currently, Australia's GDP
growth slightly reduces which influences Fleetwood's financial performance in a negative
manner. The country's interest rate influences its borrowing and lending decisions, exchange rate
impacts its profitability. A high rate of unemployment ensures greater supply labour at a lower
wage which lower Fleetwood Corporation's cost in relation to labour and increases profitability.
Figure 1: GDP Growth of Australia
(Source: tradingeconomics.com, 2019)
Social: The multiculturalism social structure and multiracial practices of Australia
supports Fleetwood to expand its business by meeting demand of different customer segments.
Distribution of social class assist Fleetwood in target marketing and promoting its premium
products after setting a most suitable customer segment to who could become the actual
customers of the company. The moderate income level, career attitudes, positive and increasing
buying behaviour, hardworking nature, forward-looking and positive mind of Australians creates
a positive business environment for Fleetwood (Gupta, 2013).

Financial Analysis 5
Technological: Australia’s enormous technological growth has led Fleetwood to witnessed
technical growth. In 2018, technology purchase of the country is grown $63 billion and it is
expected to grow further and become $65 billion in 2019. Computers, equipment, artificial
intelligence, software, tech-consultancy services, and cloud have driven such technological
investments which resulted in improvement of innovations and designs of companies like
Fleetwood (Chen et al. 2014).
Legal: Australia’s government rules, regulations, and laws which help Fleetwood to control
its business operations in a socially responsible and ethical manner. The government’s Fair Work
Act 2009, consumer laws, and competition laws protect companies and customers. Likewise,
privacy laws and Intellectual Property rights as established in Australia help businesses to handle
their business related data and information which is highly required for smooth and hassle-free
business operations that led a company (here, Fleetwood) to enhance its financial performance.
Financial proposal to Fleetwood RV sector with KPIs in relation to financial performance
The below stated financial proposal is prepared by aligning with the objectives of
Fleetwood Corporation that details this company needs to achieve in the coming year to increase
it's business's economy. In order to improve current financial performance of Fleetwood, the
company needs monetary support from banks and other financial institutions. The financial
support this company needs from internal and external sources is stated below:
2019 2020 2021
Particulars Amount
($) Amount ($) Amount
($)
Bank Loan 90000 90000 90000
Retained Earnings 0 10000 15000
Short-term
Borrowings 75000 70000 60000
Funding Projections 165000 170000 195000

Financial Analysis 6
The financial KPIs (key performance indicators) Fleetwood Corporation is required to
achieve in the coming financial year to witness profit from business are –
 Increasing gross profit margin by 25%
 Ensure net profit by recovering net loss of 2018
 Achieving net profit margin by 20%
 Improving current ratio and make it within 1.5% to 3%
 Improving quick ratio to improve its ability to pay the short-term financial
obligations immediately (quickbooks.intuit.com, 2019)
 Recovering accounts receivable by 65% of the total accounts receiving.
Review of Fleetwood Corporation’s financial performance
According to the annual report for the year 2018, it is seen that the financial performance
of Fleetwood Corporation is bad because the company has faced a huge loss in 2018 than the
previous financial year. In 2018, Fleetwood has increased its sales revenue and other income
both but due to its failure to control operating costs it has witnessed declination in EBITDA
(earnings before interest, tax, depreciation, and amortisation). The main reason behind the
company's negative profit in 2018 is the loss it has made from its discontinued operation. Due to
the negative profit i.e. net loss, EPS (earnings per share) of the company becomes -22 cents
which are an alarming sign for the company along with its existing and intended investors both.
Total liabilities (current and non-current) of the company declined but its total assets (current and
non-current assets) declined severely which indicates the company’s inability to pay off its
financial obligations immediately. The only good sign for Fleetwood is the availability of cash
and cash equivalent in hand at the end of 2018 which is increased by $1,189,000
(fleetwoodcorporation.com.au, 2019).
Section 2 – Analysis of data
Analysis of RV (Recreational Vehicle) Business

Financial Analysis 7
In Australia, the operators of the RV (Recreational Vehicle) Manufacturing industry use
to produce a large range of product to enable customers in making holiday plans and to travel
and in remote locations economically and comfortably. In order to enjoy this industry’s benefits
attached to its products fully, consumers require adequate funds and time. Consequently, RV
Business industry of Australia becomes one of the most lucrative markets. Over the last five
years, this industry has experienced slow but steady growth, despite its target market which is
comprised of aged Australians and growing older. A key driver of this industry is the real
household discretionary income which reflects the volume of money Australian are capable to
spend for availing luxury and discretionary items like recreational vehicles (RVs). Currently,
there are 148 RV businesses in Australia which provide 3005 employment. The industry has
generated $956 million revenue in 2018. It is currently facing tough competition from some
other holiday alternatives which will remain as a serious threat during the coming five years
though it is expected to be benefited by the increasing aging population of Australia
(ibisworld.com.au, 2019).
Analysis of financial statement with listed applicable organisational procedures, statutory
requirements, and AASB standards
Profitability ratio
Year Net Profit
($ millions)
Revenue ($
millions)
Net Profit
Margin
2018 -13,461 266,816 -5.04
2017 8,995 262,301 3.45
Liquidity ratio
Year
Current
Assets ($
millions)
Current
Liabilities
($ millions)
Current Ratio
2018 115213 55402 2.08

Financial Analysis 8
2017 153767 70006 2.2
Efficiency ratio
Year Net Sales ($
millions)
Total
Assets ($
millions)
Total Assets
Turnover Ratio
2018 266,816 240070 1.11
2017 262,301 267472 0.98
Stability ratio
Year
Total
Liabilities
($
millions)
Shareholder'
s Equity ($
millions)
Debt to Equity
2018 60051 196428 0.30
2017 71557 195371 0.37
From the above calculations, it is clearly visible that net profit margin ratio, liquidity ratio
i.e. current ratio, and stability ratio i.e. debt to equity (D/E) ratio of Fleetwood is declined in
2018 than 2017. Such declination reflects its downward financial performance. Only the total
assets turnover ratio i.e. efficiency ratio shows slight growth and indicates that the company has
improved its ability to generate sales by using its total assets. A good D/E ratio is considered in
between 1 - 1.5 but Fleetwood’s D/E ratio is much lesser than the 1 which indicates that the
company has used very small credit finance (bank loans) for funding its business compared to
investors (shareholders) finance (Babalola & Abiola, 2013). [Refer to Appendix 1]
Fleetwood Corporations acts in accordance with the Corporations Act 2001 and has set
out general principles related to its auditor independence by following the Code of Conduct
APES 110 Code of Ethics for Professional Accountants. The company acts in compliance with

Financial Analysis 9
the accounting standards to give a true and fair view of its financial position as well as
performance to its stakeholders. The accounting policies of Fleetwood are consistent with
Australian Accounting Standards and International Financial Reporting Standards
(fleetwoodcorporation.com.au, 2019).
Recommendations
In order to assist Fleetwood RV business to improve its financial performance of in
relation to its profitability, efficiency, and stability, following recommendations are made –
 Fleetwood needs to increase its sales and reduce its operating expenses to improve
profitability
 In order to enhance its efficiency it must enhance its ability to utilise total assets
in generating sales revenue at fullest
 The company is recommended to take loans from banks and other financial
institutions to finance its business more than financing it with shareholders funds
to improve its stability
Section 3 – Formulation of financial and performance advice
Financial forecast and impacts of taxation on Fleetwood RV business for 2019-2021
Financial Forecast
According to the projected growth of the RVs industry of Australia, and by applying
causal methods of financial forecast following financial forecast is prepared for Fleetwood
Corporations:
2019 2020 2021
Particulars Amoun
t ($)
Amoun
t ($)
Amoun
t ($)

Financial Analysis 10
Sales Revenue 295,000 310,000 325,000
Other income 350 400 400
Operating Expenses 10325 10850 11375
Other business related expenses 6500 7000 8000
Income Tax Expenses 6000 6500 6500
Finance Cost 1200 1100 1100
Cash and Cash Equivalent at the end of the year 7800 8500 8900
Taxation impacts
Taxation policies of Australia affect Fleetwood’s business costs. For instance, a sharp rise
in the rate of corporation tax, applied on the business profits, puts the same effect on the
profitability of Fleetwood as the increase in operating costs. Taxation puts an obvious negative
impact on the company by eating up its profit though it includes upside as taxes paid by the
company for roads, schools, police, and developing infrastructure educate workforce and create
opportunities for businesses to flourish.
Comprehensive analysis of financial risks and contingency plan for such risks
For a company (here, Fleetwood) financial risks are expected to arise from market, and
when it went to finance its business through external finance like bank loans. The most common
financial risks Fleetwood might face include credit risk and liquidity risk. Credit risk arises if it
extends credit to its customers. This risk arises more severely when there is a huge possibility of
a customer's default on dues prevails. Moreover, if Fleetwood becomes unable to repay the loan
it is recommended to take from banks, then it will definitely face huge credit risk
(wallstreetmojo.com, 2019).
Name of financial risk Contingency plan
Credit Risk  Ensuring sufficient cash flow to pay off

Financial Analysis 11
its bills on accounts payable on-time
 Minimise the credit (days) to customers
Liquidity Risk  Keeping enough liquid assets to cover
short-term financial obligations which
will allow to sell long-term investments
when their value increase
 Minimising credit risks by ensuring
recovery of account receivables and
making payment on accounts payable
bills, loans on time (Brigham &
Houston, 2012).
Recommendations on the recent 3 year’s financing options
Fleetwood Corporations is recommended to take a bank loan to finance its business for
the next three financial years (from 2019 to 2021). Along with this, the company is also
recommended to take short-term borrowings from financial institutions to meet its finance need.
Here, the company is advised to take long-term bank loans at a moderate interest rate to
eliminate the risk of default.
Conclusion
At the end of this study, it is quite relevant to state that the growing demand for
Recreational Vehicles by Australians creates a huge opportunity for Fleetwood Corporations to
increase its sales volume. The more it will able to increase its sales the great it becomes able to
increase its profit and to recover the loss it has made in 2018.

Financial Analysis 12
Reference List
Babalola, Y. A., & Abiola, F. R. (2013). Financial ratio analysis of firms: A tool for decision
making. International journal of management sciences, 1(4), 132-137.
Brigham, E. F., & Houston, J. F. (2012). Fundamentals of financial management. Cengage
Learning.
Chen, Y., Wang, Y., Nevo, S., Jin, J., Wang, L., & Chow, W. S. (2014). IT capability and
organizational performance: the roles of business process agility and environmental
factors. European Journal of Information Systems, 23(3), 326-342.
Fleetwood Corporation Limited. (2019). Annual Report 2018. Retrieved on 15th March 2019
from https://fleetwoodcorporation.com.au/wp-content/uploads/2019/02/2018-Annual-
Report-Final-26-October-2018-1.pdf
Fleetwood Corporation Limited. (2019). Interim Financial Report Half Year Ended 31
December 2017. Retrieved on 15th March 2019 from
https://fleetwoodcorporation.com.au/wp-content/uploads/pdf/financial-reports/ASX
%20Announcement%20-%20Interim%20Financial%20Report%202018%2023-2-18.pdf
Gupta, A. (2013). Environment & PEST analysis: an approach to the external business
environment. International Journal of Modern Social Sciences, 2(1), 34-43.
Ibisworld.com.au. (2019). Recreational Vehicle Manufacturing - Australia Market Research
Report. Retrieved on 15th March 2019 from https://www.ibisworld.com.au/industry-
trends/specialised-market-research-reports/consumer-goods-services/recreational-vehicle-
manufacturing.html
Quickbooks.intuit.com. (2019). Eight financial KPIs to help measure your business’s
performance. Retrieved on 15th March 2019 from
https://quickbooks.intuit.com/r/financial-management/5-financial-kpis-gauge-business-
health/

Financial Analysis 13
Reuters.com. (2019). Fleetwood Corp Ltd (FWD.AX). Retrieved on 15th March 2019 from
https://www.reuters.com/finance/stocks/company-profile/FWD.AX
Tradingeconomics.com. (2019). Australia GDP Growth Rate. Retrieved on 15th January 2019
from https://tradingeconomics.com/australia/gdp-growth
Wallstreetmojo.com. (2019). Financial Risk | Top 3 Types of Financial Risk. Retrieved on 15th
March 2019 from https://www.wallstreetmojo.com/financial-risk/

Financial Analysis 14
Appendices
Appendix 1
(Source: https://fleetwoodcorporation.com.au/wp-content/uploads/2019/02/2018-Annual-Report-
Final-26-October-2018-1.pdf)