Table of Contents INTRODUCTION...........................................................................................................................3 Overview of Company.....................................................................................................................3 Vision...............................................................................................................................................4 Strategic Goals.................................................................................................................................4 Financial Performance of Go-Ahead Group Plc:.............................................................................5 A. Profitability Measurement:................................................................................................5 B. Liquidity Measures:...........................................................................................................6 C. Dividend Ratios Analysis:.................................................................................................7 Critical Reflection on Genus plc's portrayal in the news ..........................................................................................................................................................9 Evaluation of Corporate Governance at Go-Ahead plc:..................................................................9 Investment Appropriateness in context of Go-Ahead Group Plc:.................................................10 CONCLUSION..............................................................................................................................12 REFERENCES..............................................................................................................................13 APPENDIX....................................................................................................................................14
INTRODUCTION To achieve sustainable growth and enhance business performance, financial decision- making plays a major role. Financial decision making is a systematic process which starts with identification and analysis of opportunities. Further this process requires consideration of financial performance indicators and other financial and non-financial factors that affects business performance. These factors acts a early warning system for business organisation. Evaluation and analysis of these factors helps to develop a framework for financial decision making (Agarwal and Mazumder, 2013). This report provides an analysis of performance and different operations of Go Ahead Group Plc. It is UK's one of the top listed company in public transport sector and engaged in providing of passenger transport services in UK. Analysis of financial performance helps to asses the actual performance of company. It also helps the various internal and external stakeholders to take important decisions about whether to hold or sell the securities of company. Various stakeholder of company have great impact on decisions of company. Overview of Company Go Ahead is the leading public transport service in united kingdom with more than one billion journeys every year. Company's headquarter is situated atNewcastle upon Tyne, United Kingdom.On the London Stock Exchange it is listed on a FTSE 250 Index group. It started in February 1987 as a GO-Ahead Northern Limited on the privatisation of the National Bus Company, In North East England it started acquiring some certain small bus operator, in the same time it also became the National Express sub-contractor operating service in Midlands, North East, North West, and South West England (Ambuehl, Bernheim and Lusardi, 2014). In 1993 it began its first major acquisition of Brighton & Hove, in 1994 it acquired Oxford Bus Company and Wycombe bus company in march. In 1999 a large operator of London, Surrey and Sussex, Metrobus was acquired. During the privatisation of London Buses company purchased London Central in 1994, in the same year the company was listed on the London Stock Exchange. The second London Bus operator, London general was also acquired in 1996, during the same year company entered the rail market operating the Thames Trains franchise. Director
of Passenger Rail Franchising awarded Thames train franchise to Victory Rail Holdings. 65% shares in the Victory Rail Holding was owned by Go-Ahead, in 1998 remaining shares which they did not owned were bought by the company. VIA-GTI entered into a joint venture with Go- Ahead, taking 65% stake in Govia. Further the company diversified into Airport Services in 1998 after acquiring Gatwick Handling international, which provided the ground handling services at UK airport. The product and services offered by the company are the transport service including regional bus, London bus and rail services. In the South of England the commercial bus businesses is operated by the company's regional bus which they own 100% of the business. For the London bus, the company operate on a tendered contract basis for the Transport of London. It operate in around 167 routes from 17 depots, 85% of these depots are freehold. For the Department of Transport they operate rail franchises currently UK's two rail franchises GTR and South-eastern are operated by Go- Ahead with joint venture with Keolis. Currently Go-Ahead has the employed 28,000 employees having a 11.3% employee turnover, its employee engagement is 65% for bus and 67% for rail, in the past year they spent approx £21.1m for the training and development of the employees.In 2018 company has reported revenue amounting GBP 3462 millions and net profit of GBP 89 millions. Company's overall net profit margin is 2.57%(Annual Report of Go-Ahead Group Plc, 2018). Vision Go-Ahead vision is clear, company want to reach in FTSE 100 companies' list. Company also has a vision to expand their business outside the UK. For this, company is continuously working on creation of brand value in stock exchange and trying to improve their services to knock the doors of global market. Strategic Goals Company is presently struggling with local issues like strikes of staff, decreasing rail routes, dealing with tenders and regulatory changes. So first priority of company is to resolve them by developing a dynamic strategy. Beside these company is facing competition by multinational companies in same sector like First Group Plc to gain competitive advantages company is following sustainability strategy while improving their services. So main strategic
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goal of company in present scenario is to overcome these local threats and make expansion to reduce competition by improving quality of services. Financial Performance of Go-Ahead Group Plc: Financialperformancereferstocriticalanalysisofanorganisation'sprofitability, liquidity, and dividend policy. Such analysis is generally done through accounting ratios which assist to assess financial performance and health of organisation (Lusardi, 2012). Accounting ratios are classified as profitability, liquidity and valuation. By performance analysis Go-Ahead can identify variance in their current performance level and expectations of consumers. In this context in Go-Ahead Plc during the last year overall revenue and net income has been decreased. In year 2018 company has reported turnover of USD 3462 millions which was USD 3481 millions in 2017, indicating a downward trend of approx 0.55% in revenue. This decrease in revenue is due to dispute and strike of railway staff but this is temporary. Company has earned a net income of approx USD 89 millions in year 2018 and 2017 which showing null or 0% growth in Net Profit. However from the year 2014 to 2017 company has reported remarkable growth every year.Company is following sustainability strategy under which company improves its exercisers to sustain their growth. Performance analysis focuses on gap between the consumers expectation on the importance and judgement on performance of specific attribute of service consumed. For comparison First Group Plc which is competitor of Go-Ahead Plc, is taken for performance analysis. A. Profitability Measurement: Profitability measurement defines the ability of an organization to generate its profits as well as helps in measuring the performance of an organization. There are various ratios such as gross profit margin, net profit margin which helps in measuring the profitability. Gross profit margin:Gross profit margin helps to access the company's business model and financial health by showing the amount left over from the sales after the deduction of the cost of goods sold from the net sales (WEBSTER, 2014). Year20142015201620172018 Go Ahead Group Plc72.3474.5874.9676.8176.37 First Group Plc34.1534.1531.4931.5932.64
Company has attained gross profit margin of 76.4% and 76.8% in the year 2018 and 2017 respectively. Doing much better than its competitors which marked the gross profit margin at 32.64 in the year 2018. It represents company's efficiency to provide income on its securities is decreased, but this is temporary due to strike of Railway Staff.Industry's average gross profit ratio is approx 70% and company has reported more then it which indicates that company is efficient to generate gross profit. Net Margin:Net profit margin or net margin helps the company to find out its ratio of net profits to revenues. It shows the amount of revenue collected is converted into net profit. Year20142015201620172018 Go Ahead Group Plc2.61.622.072.562.57 First Group Plc0.81.241.721.98-4.63 Go-Aheadhas achieved highest profitability in the year 2017 but there is minor decrease reported in year 2018. Company has reported 2.57% net margin in 2018 which was 2.56% in 2017. Whereas its competitors has reported -4.63% net margin. Average of five year net margin of Go-Ahead is 2.28 whereas net margin of its competitor is 0.23.Industry's average net margin is approx 4% and company's growth indicating that company can achieve this benchmark. B. Liquidity Measures: Liquidity measures are the ratios which helps in reviewing the company's abilities to repay its short term expenses. It is generally used by the creditors or lenders to determines at which extent credit or debt are repaid by the organization. Such measures helps in disclosing the cash level of company to pay its liabilities (Hirshleifer, Jian and Zhang, 2016). Higher liquidity ratios defines that a company has to improve its liquidity. Following are the major liquidity ratio in the context of Go-Ahead Plc, as discussed below: Current Ratio:It helps to evaluate company's efficiency to utilise its current assets for payment of current obligations and liabilities. This ratio exhibits actual liquidity position of firm and important to asses actualfinancial condition of a business organisation. Current ratio is calculated by dividing company's total current liabilities to current assets.
Formula of Current Ratio: Year20142015201620172018 GoAhead Group Plc 0.8611.060.851.09 FirstGroup Plc 0.940.880.820.890.83 Industry's average current ratio is 2:1 whereas Go-Ahead Group's current ratio is 1.09 and 0.85 in the year 2018 and 2017 respectively. Which is lower than industry standard, which indicate that company's ability to use it current assets to pay its current obligation is not so good butimproved in 2018. Company's current ratio is above the First Group current ratio which indicates that Go- Ahead' s liquidity position is better in industry. Quick Ratio:This is similar to current ratio but it is calculated by using more liquid assets or quick assets. It is also known as Acid Test ratio. Its shows instant capacity of company to pay its current obligations using quick assets. Quick Assets includes trade receivables, marketable securities and cash or cash equivalents. In this ratio current liabilities are compared to company's quick assets (Baker, H.K. and Ricciardi, V., 2014). Year20142015201620172018 GoAhead Group Plc 0.770.920.950.740.88 FirstGroup Plc 0.530.580.540.60.52 Industry's average quick ratio is 1:1. Go-Ahead has reported quick ratio of 0.88 and 0.74 in year 2018 and 2017 respectively which is below the standards but still showing scope of improvement in coming year. Also company has better quick ratio as compare to its competitor First Group. C. Dividend Ratios Analysis: Dividend Ratios are calculated by corporates to asses their performance capacity to provide return in form of dividends to its shareholder. Analysis of dividend ratio helps to
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evaluate company's growth in future by analysing trends of dividend payment (Hoffmann and Post, 2014). These are the key ratios involved in dividend analysis are analysed below in the context of Go-Ahead and its competitor First Group Plc: Dividend Payout Ratio:This ratio is used to measure company's efficiency to pay dividends to its shareholders out of its net earning or income after all expenses. It helps the investors and shareholders to evaluate risk related to receiving dividends from company. Regular and timely payment of dividend by company to its shareholder provide a framework for attracting new or potential investors or shareholders. Year20142015201620172018 GoAhead Group Plc 54.20%54.50%67.10%62.00%47.40% First Group Plc91.30%---- In Go-Ahead dividend payout ratio is dropped in the year 2017 and 2018 as compare to 2016. In 2018 company's payout was 47.40% which was 62.00% in year 2017 whereas company's achieved highest payout ratio in 2016 of 67.10%. On other hand company's top competitor First Group, after 2014 not paid any dividend. A decrease in payout ratio of company does not mean that company is loss making or have downward growth but its depends on company's budget and strategy to obtain its objectives.Industry's average dividend pay out is approx 45% and company is paying above this benchmark which indicates that company is able to provide return on securities in term of dividend in industry. DPS Growth Rate: It is significant to analyse per year increase in dividend per share of company. This acts as trend analysis to know company's performance. It provide per share dividend and per year increase dividend. It simply exhibits increasing and decreasing trend in dividend per share. Year20142015201620172018 Go Ahead Group Plc -4.94%8.23%6.52%4.08% First Group Plc-15.77%----
There is positive growth in DPS of Go-Ahead, however in year 2018 and 2017 growth rate is decreased but DPS in increased in both year as compare to previous years. Whereas in First Group there was a negative growth reported by company in year 2014. Industry's average DPS growth rate is approx 5% and company's rate is decreased below industry's average in 2018 but it is temporary.
Critical Reflection on Genus plc's portrayal in the news
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Media coverage with respect to performance and growth of Go Ahead plc mainly concerned with elements such as latest income, estimated or potential actions or steps, product development and innovation and litigation matters. Company's earning through Bus operating is GBP 91.4 million and through rail operating is GBP 44.5 million in 4thquarter of year 2018 which indicates that company made a good progress in its core segments. In South-eastern rail franchises extended to April, 2019 and shortlisted for replacement franchises. Recently company has launched UK's Largest demand responsive bus transport service. Company has maintained dividend of 102.08p during full year. Overall, it seems that the media’s most positive perception and portrayal of Go Ahead is linked to its good performance (BBC latest Updates, 2019). Evaluation of Corporate Governance at Go-Ahead plc: Good corporate governance is required by the company to see that they do their business with all fairness and integrity and being transparent, making all the necessary decisions and disclosure, and the accountability in front of shareholdersBoard of company has strong belief in good governance and put their effort to make it crucial in order to effective delivery various strategic objectives. Directors main motive is to implement best practice and participate in various debates and discusses on various matters as per their importance in company's business andsubsidiaries.Corporategovernanceincompanyprovideaclearsegregationof responsibilities for members of board and provide supports in development of good governance practices throughout the Group. Day-to-day management of company and implementation of strategies accepted by Board have been delegated to the executive directors.To make and support the crucial decision the board should be of the experienced, skilled and knowledge personnel (Carlin, Gervais and Manso, 2013). Evaluation of Go-Ahead plc's Board Go-Ahead has eight members as their board of directors, each expert in his area of knowledge with experience to handle the most crucial situation in an organisation. Members of board are elected by the shareholders, all the directors has to their nomination for the re election of the board member in the Annual General Meeting. At every Annual General Meeting board consider the succession planing of the new directors and senior management, while doing this it
consider the opportunities and experience which is to be required by the board in the future. To deal with the specific aspects of the Group's affair the board establishes the audit, nomination and remuneration committees. To enhance the work of the board different remuneration are given to the whole team so that they do their work with more efficiently with maximum efficiency. Board of directors have significance influence in the organisation which helps them to grow and do well in this competitive environment. In a year the company hold nine scheduled meeting, which includes the meeting which are held to review the group's strategy. Investment Appropriateness in context of Go-Ahead Group Plc: Investors are always concern about investment made by them in company because they are holding stake in form of return from funds invested by them. These vital decisions are taken by them through analysis of some important ratio that provide a quick analysis of investment appropriateness of concerned company (Nga and Ken Yien, 2013).These are the significant ratio that will help to evaluate investment appropriateness of Go-Ahead Group Plc: Asset Value per Share This ratio helps to compute aggregate total assets in an organisation contribution to its total number of outstanding share. It provide a groundwork for comparative analysis of performance of resources with industry's standard. 20142015201620172018 Asset Value per share 1.191.513.984.76.7
From analysis of Asset value per share it has been analysed that there is increasing trend inGo-AheadGroup'snetassetpervalue.Theseincreasingtrenddescribescompany's performance in terms of investment appropriateness and also company is able is able to provide return in near future. Current Share Price: Year20142015201620172018 0 1 2 3 4 5 6 7 Column C
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(Source:Performance chart of Go-Ahead Group Plc, 2018)
From above displayed graph it is analysed that currently there is improvement in share price of company however is there was boom in share price during year 2015-2016. In public transport service sector this current growth is favourable although downward trend in share price of company is due to inflation factors, strikes of staff, Change in Government policy regarding transportation services etc (Michalski, 2013). Overall scenario of company in market indicates that making investment in Go-Ahead is viable. CONCLUSION From above it has been articulated that analysis of financial performance is essential to create a framework to achieve strategic goals and vision.Various accounting tools like ratio analysis is helpful to analyse various financial and non-financial aspects of an organisation's performance. Company's profitability, liquidity and investment appropriateness is key factors to attain their predetermined goals and in financial decision-making.In the context of Go Ahead Plc it is clear that company's overall position is good and company is enjoying profitability position presently. As per discussion done in report it has been analysed that company will achieve sustainability in growth in near future.
REFERENCES Books and Journals: Hoffmann, A.O. and Post, T., 2014. Self-attribution bias in consumer financial decision-making: How investment returns affect individuals’ belief in skill.Journal of Behavioral and Experimental Economics. 52. pp. 23-28. Agarwal, S. and Mazumder, B., 2013. Cognitive abilities and household financial decision making.American Economic Journal: Applied Economics.5(1). pp.193-207. Lusardi, A., 2012. Financial literacy and financial decision-making in older adults.Generations. 36(2). pp.25-32. Ambuehl, S., Bernheim, B.D. and Lusardi, A., 2014.Effect of Financial Education on the Quality of Decision Making(pp. 5-6). National Bureau of Economic Research. Baker, H.K. and Ricciardi, V., 2014.Investor behavior: The psychology of financial planning and investing. John Wiley & Sons. WEBSTER, A., 2014.Financial decision making under uncertainty. Academic Press. Hirshleifer,D.,Jian,M.andZhang,H.,2016.Superstitionandfinancialdecision making.Management Science. 64(1). pp.235-252. Carlin, B.I., Gervais, S. and Manso, G., 2013. Libertarian paternalism, information production, and financial decision making.The Review of Financial Studies.26(9). pp.2204-2228. Nga, J.K. and Ken Yien, L., 2013. The influence of personality trait and demographics on financial decision making among Generation Y.Young Consumers. 14(3). pp.230-243. Michalski, G., 2013. Portfolio management approach in trade credit decision making.arXiv preprint arXiv:1301.3823. Online: Annual Report of Go-Ahead Group Plc, 2018. (Online). Available through<https://www.go- ahead.com/content/dam/go-ahead/corporate/documents/FY17/Finalised_documents/ GO129_AnnualReport_Final_170919.pdf> PerformancechartofGo-AheadGroupPlc,2018.(Online).Available through<https://www.londonstockexchange.com/exchange/prices-and-markets/stocks/ summary/company-summary/GB0003753778GBGBXSTMM.html> BBClatestUpdates,2019.(Online).Available through<https://www.bbc.com/news/topics/cnegp9gn1zdt/go-ahead-group>
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APPENDIX The Go-Ahead Group Plc 20182017201620152014 Current Assets938942992882552 Current Liabilities8631098934882641 Current Ratio= Current Assets/Current Liabilities1.090.861.061.000.86 Quick Assets759812886811493 Quick Ratio= Quick Assets/Current Liabilities0.880.740.950.920.77 Net Dividend42.1955.1846.9728.3437.94 Net Profit8989705270 Div. Payout Ratio= Dividend / Net Profit47.40%62.00%67.10%54.50%54.20% DPS1.020.980.920.850.81 Debt to Equity Ratio= Total Debts/ Total Equity4.086.528.244.940.00 Total Revenue34623481336132152702 Gross Profit26442674252023981955 GP Margin Ratio=Gross profit/ Total Revenue*10076.37%76.82%74.98%74.59%72.35% Net Profit8989705270 NP Margin Ratio= Net profit/ Total2.57%2.56%2.08%1.62%2.59%