Financial Resources Management

This study evaluates the performance and current status of Balfour Beatty PLC and Polypipe Group PLC in the construction sector in the UK. It analyzes their profitability, liquidity position, and performance from an equity shareholder's perspective. The study also provides an overview of the companies and their financial statements.

Financial Resources
Management

Table of Contents
INTRODUCTION...........................................................................................................................3
PART 1............................................................................................................................................3
An evaluation of profitability:.....................................................................................................3
Short-term Liquidity Position and Long term Liquidity Position:..............................................4
Performance from an equity shareholders perspective...............................................................6
Overall performance and position of the business......................................................................7
PART 2............................................................................................................................................9
Valuation for a company using Forecast dividend growth model..............................................9
CONCLUSION .............................................................................................................................12
REFERENCES .............................................................................................................................13

INTRODUCTION
Financial resource management implies to systematised planning, effective managing,
providing directions and establishing controlling over enterprise's financial resources like
collection and arrangement of funds as well as efficient utilisation of fiscal resources within
enterprise (Gibbert, Hoegl and Valikangas, 2014). This involves throughout and detailed analysis
or evaluation of financial resources to manage financial resources.
This study consists of evaluation of performance and current status of corporations
named Balfour Beatty PLC and Polypipe Group PLC. Both companies belongs to construction
sector in UK. Study analyse these companies performance for last five consecutive years by
applying ratio analysis and vertical/horizontal analysis.
Overview of Companies:
Balfour Beatty PLC:
Balfour Beatty is top multinational group of transportation firms. Company finance,
create, build and sustain creative and productive infrastructure underpinning daily life,
strengthening communities and promoting economic growth. With nearly 110 years of expertise
in providing extremely complicated infrastructure mechanisms via projects at heart of regional
communities, company operate with highest standards of quality, security and technological
competence, embed with clients and domestic supply chains, as well as supporting local groups.
Poly-pipe Group PLC:
Polypipe Plc is top manufacturer and construction company of UK. Company is engaged
in manufacture of plastic piping structures for residential, industrial, and infrastructure industry.
Company is engaged in developing piping systems that are primarily utilized and applied in
drainage system, water supply, plumbing, water management, heating, cable management and
ventilation. Company is leading supplier of piping systems in construction sector.
PART 1
An evaluation of profitability:
Gross Profit Ratio:
Balfour Beatty PLC
Year 2018 Year 2017 Year 2016 Year 2015 Year 2014

Gross Profit 371.00 311.00 284 157 131
Revenues 6634.00 6916.00 6923 6955 7264
Gross Profit Margin 5.59% 4.50% 4.10% 2.26% 1.80%
Polypipe Group PLC
Year 2018 Year 2017 Year 2016 Year 2015 Year 2014
Gross Profit 181.00 173.00 180 143 125
Revenues 433.00 412.00 437 353 327
Gross Profit Margin 41.80% 41.99% 41.19% 40.51% 38.23%
Net Profit Ratio:
Balfour Beatty PLC
Year 2018 Year 2017 Year 2016 Year 2015 Year 2014
Net Profits 135 162 24 -206 -60
Revenues 6634 6916 6923 6955 7264
Net Profit Margin 2.03% 2.34% 0.35% -2.96% -0.83%
Polypipe Group PLC
Year 2018 Year 2017 Year 2016 Year 2015 Year 2014
Net Profits 49 34 44 34 14
Revenues 433 412 437 353 327
Net Profit Margin 11.32% 8.25% 10.07% 9.63% 4.28%
From the above calculated gross profit and net profit ratio it has been determined that
both companies have shown a positive growth in last 5 years. Net profit margin ratio suggests
that if the percentage is high then company is capable of generating greater profits than the other
(Khalo, 2014). This also represents the company's sound financial status. This ratio helps to
define the net profitability situation of an organization in specific time frame. Such as the
Balfour Beatty PLC was able to increase gross profit and net profit by controlling operating cost

and other additional expenses which reduce the profitability. In the context of Polypipe Group
PLC company was already in a good situation in 2014 and they keep on delivering best services
to customer which increase the overall profit margin throughout these years. Moreover these
ratio are always beneficial for the investor to make a valid investment decision.
Short-term Liquidity Position and Long term Liquidity Position:
Current Ratio
Balfour Beatty PLC
Year 2018 Year 2017 Year 2016 Year 2015 Year 2014
Current Assets 2032 2361 2325 2079 2499
Current Liabilities 2124 2567 2568 2364 2513
Current Ratio 0.96 0.92 0.91 0.88 0.99
Polypipe Group PLC
Year 2018 Year 2017 Year 2016 Year 2015 Year 2014
Current Assets 142 148 120 100 104
Current Liabilities 109 109 105 87 70
Current Ratio 1.3 1.36 1.14 1.15 1.49
Quick Ratio
Balfour Beatty PLC
Year 2018 Year 2017 Year 2016 Year 2015 Year 2014
Quick Assets 1869 2219 2188 1865 2211
Current Liabilities 2124 2567 2568 2364 2513
Current Ratio 0.88 0.86 0.85 0.79 0.88
Polypipe Group PLC
Year 2018 Year 2017 Year 2016 Year 2015 Year 2014

Quick Assets 77 71 67 52 64
Current Liabilities 109 109 105 87 70
Current Ratio 0.71 0.65 0.64 0.6 0.91
The above calculated long term and short term liquidity ratio clearly defines that Balfour
Beatty PLC have weaker liquidity as compared to Polypipe Group PLC. Current and quick ratio
leaves effects on ratio tests that are not reliable as the adjustments are overlooked because of no
of flexibility (Karltorp, 2016). This is because BBY used to hold most of its amount in fixed
assets that help to meet the future need of business but sometime business also need cash
equivalent in short term. On the other side PLP have higher current assets than liabilities which
enables them to meet any future sudden contingency. In year 2014 Polypipe Group PLC have the
highest proportion of current assets such as 1.49 and quick assets that is 0.91 on its liabilities
which enables to meet the increasing level of contingency in nearby future.
Performance from an equity shareholders perspective.
Debt Equity Ratio:
Balfour Beatty PLC
Year 2018 Year 2017 Year 2016 Year 2015 Year 2014
Debt 570 662 726 833 938
Equity 1231 1056 757 826 1227
Debt Equity Ratio 0.46 0.63 0.96 1.01 0.76
Polypipe Group PLC
Year 2018 Year 2017 Year 2016 Year 2015 Year 2014
Debt 210 184 191 216 118
Equity 331 302 287 261 238
Debt Equity Ratio 0.63 0.61 0.67 0.83 0.5
This proportion basically calculated by comparing the overall liabilities of a company by
equities of shareholder. The respective ratio is calculated to determine the company financial
leverage and is consider to one of the valuable metric that also measure the level at which

operation are operated through debt as compared to own funds (Hasan and Habib, 2017). From
the above calculation it is determined that debt to equity ratio for Balfour Beatty PLC is
decreasing year by year which means that they are using more debts in order to operate the
internal and external operation. On the other side it is identified that level of debt to equity is
increasing for Polypipe Group PLC that defines that operation and business task are more
depended upon self resources and level of debts are reducing.
Return on Equity:
Balfour Beatty PLC:
Year 2018 Year 2017 Year 2016 Year 2015 Year 2014
Shareholder's Equity 1231 1056 757 826 1227
Net Profits 135 162 24 -206 -60
Return on Equity 10.97% 15.34% 3.17% -24.94% -4.89%
Polypipe Group PLC
Year 2018 Year 2017 Year 2016 Year 2015 Year 2014
Shareholder's Equity 331 302 287 261 238
Net Profits 49 34 44 34 14
Return on Equity 14.80% 11.26% 15.33% 13.03% 5.88%
The above described ratio help to describe the actual return on equity, the higher the
percentage the better are the results in a respective time period. Such as in case of Balfour Beatty
PLC there is positive results in last few years as company have invested in right equity that
support to provide value return in present time (Abdelhak, Grostick and Hanken, 2014). Such as
in year 2014 and 2015 the rate of return on equity was -4.89% and -24.94% that means that
results are not favourable and company is not getting equivalent amount to the investment made
in these year. In context to Polypipe Group PLC there have been positive return on equity from
last 5 years. The main reason for good return is because of investment made in the appropriate
portfolio. Return on equity shows uneven trend as sometime there might be chances of other
variable affective the return on investment made in different market.

Overall performance and position of the business
Form the different financial statements statements actual proficiency and performance of
companies are be identified. These financial document gives authentic and clear picture about the
overall growth, sales, revenue, equity, cash inflows and outflows during a year.
Balance sheet: This is a useful report that clearly define the overall financial position of
a business in particular year (Daley, 2012). Balance sheet describe the assets, liabilities, equity
and long term loans of a business in accounting year and make easier to manager to form better
policies. Form the balance sheet of Polypipe Group PLC, it is determined that value of current
assets have increased year by year and in 2018 the value was 662 GBP in Million. The main
factor of increase in figure of assets is due to expansion of company in these year and value of
gross property, plant and other equipment is 226 GBP in Million. Similarly the liability side
shows increase in shareholder equity as in year 2014 it was 238 GBP in Million which increases
to 331 GBP in Million in year 2018. this states that external parties have shown a good interest in
the performance of PLP in last few years and they are continuously investing suitable amount to
get better return in accounting period (About Polypipe Group PLC, 2020).
On the other side the balance sheet of Balfour Beatty PLC demonstrate that there have
large amount of total assets and liabilities which keeps on decreasing year by year due to many
reasons. Such the worth of total assets in 2014 was 5244 GBP in Million that tends to diminish
and in year 2018 the value was 4567 GBP in Million. There are several reason for reducing value
such as sale of property, plant and other fixed assets, increasing tax payments, deferred income
taxes. Moreover the liabilities side of BBY also gets diminish because of increasing deferred
taxes liabilities and more importantly decreasing stockholder equity. Main reason for reduction
on the shareholder equity is diminishing return on investment which forces stakeholders to make
out their money and move to other option that can deliver satisfactory results.
Income statements: This is consider as one of the important document which define the
overall net income and losses for a company in a particular accounting year (Zafar, Ko and Osei-
Bryson, 2012). Income statements shows the total revenues and total expenses made by company
on various operation so that actual net profit can be calculated. From the annual cash flow
statements of Polypipe Group PLC it is determined that net revenue is increasing year to year
like in year 2014 it was 327 GBP in Million which increase up to 446 GBP in Million in year
2018. It is also observed that net profit for company has also increases in these year as there are

various steps are taken to control the operating expenses. Such as in year 2018 the sales revenue
is 433 GBP in Million, cost of good sold 252 GBP in Million and the value of gross profit is 181.
The total operating expenses for the year was 113 GBP in Million and operating income was 68
GBP in Million, income before taxes was 58 and net profit after income tax which is available
for shareholder was 49 GBP in Million.
The income statements of Balfour Beatty PLC clearly states that revenues from sales in
decreasing year to year in recent time due to which gross profit shows the diminishing results. In
year 2014 and 2015 the net income available after tax and depreciation for the shareholder is (60)
and (206) which means that company is not able to control operating expenses for the period.
Form the above discussion it is clearly stated that Polypipe Group PLC is a better option
for investment for potential investors (About Balfour Beatty PLC, 2020). As they can get better
results on their investment that can help to increase the overall profit margin. There can be
various types of investment assessment methods can be used for this intent, that are useful in
identifying the most successful option in future return. That enables a investor is able to get the
detailed and accurate information about proposals such as time period and actual amount
recovered.
PART 2
Valuation for a company using Forecast dividend growth model.
In accounting term, the valuation model which is used to calculate the actual value of
stock pretending that the growth of dividend is at always on a stable rate in permanency or even
at the assorted rate during the specific period (Dividend growth model, 2020). This framework is
valuable to identify weather a stock is undervalued or overvalued assuming that anticipated
dividend grow (G) at specific point that is needed to be mins from RRR. The clear purpose of
analysis of the earnings growth method would be to measure an investor's fair market value. It
help company valuable operation being easily executed in order to gain the favourable output.
This process aid manager to properly distribute the required funds to run specific task and
remove any kind of complexities. When that market value is measured, stakeholders can equate
the fair market value with the present share or cost per unit to evaluate if a specific debt is under-
priced or overvalued. Depending on this measure, investors will determine which stocks to
purchase or dispose to maximize the annual returns of their investments. In addition, the

appropriate rate of return calculates the total yield expected by shareholders for the degree of risk
involved with a given investment. Business financing utilizes the return calculation needed to
define viable ventures and business investments. Likewise the required rate of return have
number of crucial uses, thus the lower rate of return shows the minimum sum which is received
from an investment which a stakeholders take a situation in a specific equity (Sahi, Arora and
Dhameja, 2013). For ascertaining the equity value with the help of dividend growth model
specific formula is used that is shown below:
P = D1 / ( k-g )
P= fair value price per share of the equity
D= expected dividend per share one year from the present time
g= expected dividend growth rate
k= required rate of return
Advantages of dividend growth model
 Constructive model of valuation: The dividend rate of growth for different stock that is
calculated cannot be greater than the return, otherwise the results would no be favourable.
As the particular model is used to estimate the future dividend value considering the
present values of dividend.
 Provides option to expand value of stock: With the support of this method best place to
make an investment is determined as company know to maintain the value. Moreover,
this also help to grow the entire portfolio value by the income received through
dividends. So more amount can be invested in various stock in different companies
operating in various industries (Steiss and Nwagwu, 2019.). Includes margin of safety: This is the main benefit of using this model for valuation
because it includes margin of safety from the beginning. Thus, dividend growth model
make manager to identify the value at which stock stand so that proper place of
investment can be assigned according to the budget. This gives actual worth of
investment and the total return which is going to be earned in the future.
Disadvantages of dividend growth model
Work on stock which pay dividend: In smaller business it is easy to perform comparison
of small cap and large cap stock in long period of time. As many small companies are not in the
condition to pay dividend so they can not use dividend growth model to recognise actual value of

stock. In case if investor focus on this method then they are going to miss various other
important opportunities that can add value to their stock portfolio (Purce, 2014).
Does not consider non dividend factors: There have been various variables like
Customer retention, brand loyalty, and even intangible asset ownership which can impact the
value of stock in specific time period. Thus, if rate of dividend growth is fixed and determined
than non dividend factor can vary the valuation of company. Therefore, it is stated that results
calculated under valuation method may are not appropriate.
Ignore the effect of a stock buybacks: The buyback of stock might have a large impact
on the stock value to stock holder at the time of return. There have been different actions that can
impact the last value of stock within a specific time frame. Under this method investor make
assumption that buyback of share would not effect any history of the business that leads to wrong
results.
As discussed in the above part that Polypipe Group PLC is a better option for investors
because in the last four year company have shown a successful growth. In the context of
dividend forecasted growth model effective comparison have been made with the estimated
value and the current market value (Ayob, Ramlee and Rahman, 2015).
Forecasted Dividend Growth Model:
Quarter Ending Dividend Per Share Growth
2018-09-30 £0.11 5.7%
2018-12-31 0.11 5.7%
2019-03-31 0.12 4.5%
2019-06-30 0.12 4.5%
The tables below summarizes Polypipe’s performance over the last four quarters:
Quarter Ending Dividend Per Share Growth
2018-09-30 £0.11 5.7%
2018-12-31 0.11 5.7%
2019-03-31 0.12 4.5%

Quarter Ending Dividend Per Share Growth
2019-06-30 0.12 4.5%
Dividend Payout Ratio =
Dividends per Share
( Jun. 2019 ) / EPS without NRI (Jun. 2019 )
= 0.079 / 0.127
= 0.62
Polypipe Group Recent Full-Year Dividend History:
Amount Ex-date
Record
Date Pay Date Type
Frequenc
y Forex Rate
GBP 0.040 29/08/19 30/08/19 20/09/19
Cash
Dividend
semi-
annually GBP:GBP 1.0000
GBP 0.079 18/04/19 23/04/19 29/05/19
Cash
Dividend
semi-
annually GBP:GBP 1.0000
Dividend Yield % =
Most Recent Full Year
Dividend / Current Share Price
= 0.119 / 5.87
= 2.03%
 Polypipe's recent 12 months dividend growth is 4.5%.
 Polypipe's dividend growth declined in 2017 (23.3%, -91.5%) and in year 2018 (5.7%, -
75.7%).
Current Share Price is = £5.87.
Polypipe Group's Dividends per Share for trailing-twelve months ended is = £0.119.
CONCLUSION
In the end of report, it is concluded that financial management is valuable techniques
which support in managing the different available resources within an organisation to maximise

the overall profitability. Different sort of ratios are calculated to detect the actual liquidity,
efficiency etc. in respective year.

REFERENCES
Books and Journals:
Gibbert, M., Hoegl, M. and Valikangas, L., 2014. Introduction to the special issue: Financial
resource constraints and innovation. Journal of Product Innovation Management. 31(2).
pp.197-201.
Khalo, T., 2014. Municipal financial management. Municipal management: Serving the people,
pp.226-250.
Karltorp, K., 2016. Challenges in mobilising financial resources for renewable energy—The
cases of biomass gasification and offshore wind power. Environmental Innovation and
Societal Transitions. 19. pp.96-110.
Hasan, M. M. and Habib, A., 2017. Corporate life cycle, organizational financial resources and
corporate social responsibility. Journal of Contemporary Accounting & Economics.
13(1). pp.20-36.
Abdelhak, M., Grostick, S. and Hanken, M. A., 2014. Health information-e-book: Management
of a strategic resource. Elsevier Health Sciences.
Daley, D. M., 2012. Strategic human resources management. Public Personnel Management,
pp.120-125.
Zafar, H., Ko, M. and Osei-Bryson, K. M., 2012. Financial impact of information security
breaches on breached firms and their non-breached competitors. Information Resources
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Ayob, A. H., Ramlee, S. and Rahman, A. A., 2015. Financial factors and export behavior of
small and medium-sized enterprises in an emerging economy. Journal of International
Entrepreneurship. 13(1). pp.49-66.
Purce, J., 2014. The impact of corporate strategy on human resource management. New
Perspectives on Human Resource Management (Routledge Revivals), 67.
Steiss, A. W. and Nwagwu, E. O., 2019. Financial planning and management in public
organizations. Routledge.
Sahi, S. K., Arora, A. P. and Dhameja, N., 2013. An exploratory inquiry into the psychological
biases in financial investment behavior. Journal of behavioral finance. 14(2). pp.94-
103.
Online
Dividend growth model. 2020. [Online] Available Through:
<https://www.dividendinvestor.com/the-dividend-growth-model-definition-and-
formula/>.
About Polypipe Group PLC. 2020. [Online] Available Through:
<http://financials.morningstar.com/income-statement/is.html?
t=PLP&region=gbr&culture=en-US>.
About Balfour Beatty PLC. 2020. [Online] Available Through:
<http://financials.morningstar.com/income-statement/is.html?
t=BBY&region=gbr&culture=en-US>.