Fletcher Building Financial Performance Analysis

This assignment requires an in-depth analysis of Fletcher Building's financial performance between 2013 and 2017 using various efficiency ratios. The analysis includes calculating and interpreting receivable turnover, inventory turnover, creditor turnover, price-to-earnings ratio (P/E), and dividend yield ratio. Additionally, solvency ratios such as times interest earned and debt to equity are examined. The assignment aims to assess the company's operational efficiency, profitability, and financial health over the specified period.

RUNNING HEAD: Fletcher Building Company
1
Name of the student
Topic- Business analysis of Fletcher Building Company
University name-

Business analysis of Fletcher Building Company
2
Executive summary
This report has reflected key understanding on the business performance of the Fletcher
building company working in New Zealand. This report provides the financial and business
performance of the organization which reflects whether this company could create value or not in
this present business environment. The methodologies used in this report reflect that investors
should invest their capital in the business of company only when they want to create long term
value creation. If they invest for short run then it will destroy the value of their capital. In the
end, conclusion shows the quality and impact of core competency of business in the given
market segment.

Business analysis of Fletcher Building Company
3
Table of Contents
Executive summary............................................................................................................2
Introduction.......................................................................................................................3
Present description of company........................................................................................3
Project report objectives....................................................................................................3
Methodologies...................................................................................................................5
Balance score card of Centaur Media.................................................................................5
Financial analysis of Fletcher Building Company................................................................6
Finding............................................................................................................................... 7
Financial analysis derived and trend of Fletcher Building Company..................................9
Analysis and interpretation..............................................................................................10
Discussion and explanation of BSC and the Map (Why it is used)....................................11
Recommendation.............................................................................................................11
Conclusion........................................................................................................................13
References....................................................................................................................... 14

Business analysis of Fletcher Building Company
4
Introduction
With the ramified economic changes and complex business functioning, each and every
business is performing innovative and creative process to earn profit. This report is completed in
various parts such as in the starting of the part brief introduction about the business and after that
methodologies have been used to critically evaluate the business performance of the
organization. After that finding and interpretation of the calculated data have been taken into
consideration. In the end of the report, conclusion have been drawn to determine whether
company has been performing well or not in current business functioning. Shareholders and
other investors could use this report to make their investment decision. The annual report of the
Fletcher Company has been used to prepare this report
Present description of company
Fletcher Building Company is one of the largest listed companies in New Zealand,
having a market capitalization of over NZ $ 5 billion. It is an integrated manufacture and
distributors of world-leading building and construction Service Company. This company has
been running its business on international level (Fletcher building Company, 2016).
Project report objectives
These objectives of the Fletcher Building Company are based on the key intents of the
business process such as specific, measurement, accurate, relevance and time.

Business analysis of Fletcher Building Company
5
Specific- This report helps in identifying the core intents of business performance of
Fletcher Company.
Measurable- Implement analysis process to compute the financial trend of company
Accuracy- It will help in gauging the financial performance and business effectiveness in
accurate manner by using annual report of company.
Relevancy- It will increase the overall understanding to set targets and goals for
organization.
Time- The proposed study will take time of around 1 month action plan to complete this
report (Bloomberg, 2017).

Business analysis of Fletcher Building Company
6
Methodologies
Balance score card of Centaur Media
Particular Objectives Goals Indicators Initiatives
Financial
perspective
Company wants
to increase its
revenue by 20%
in coming two
years.
Increase overall
sales by 30% and
profit by 25%.
Use of annual
report and
financial
statement
Install new cyber
computing
system to
increase the
productivity.
Customer
perspective
Increase
customer
satisfaction and
productivity to
cover 22%
overall New
Zealand Market
share.
Increase the
production by
20% by installing
cyber computing
system
(Bloomberg,
2017).
Increased client’s
satisfaction and
brand value of
business.
Improve the
product mix and
implement
marketing
strategies.
Internal process
system
Installation of
cyber computing
system and
improve the
product
functioning to
improve the
quality value
chain activities.
Company needs
to reduce the
labor turnover
and increase the
productivity of
business.
Determine the
target and set
outcomes of
business.
Installation of
new system to
increase the
building
manufacturing
Learning and
growth
Hiring of highly
skilled
employees and
invest in research
and development
department.
Setting training
and development
department.
Entering into
strategic alliance
with other
partners.
Implement
strategic cost and
less effective
business.
Environmental analysis strategic tool

Business analysis of Fletcher Building Company
7
This Environmental analysis strategic tool of Fletcher Building Company reflects that
company needs to implement effective business functioning if it wants to increase its overall
revenue and turnover.
Portal’s five model of Fletcher Building Company
Particular Implementation
Buyer’s power In building construction market, buyers are
more inclined towards the services and
products offered by Fletcher Building
Company due to its high brand.
Suppliers power It is evaluated that due to high turnover,
Fletcher Building Company has faced high
problem in buying raw material from suppliers.
Suppliers in New Zealand are having strong
market position.
Rivalry in market There are several rivals who are following cost
leadership and product differentiation strategy
to beat the competition in market.
New entrants power Starting business in construction requires low
investment but effective strategic alliance. In
addition to this, this construction business has
high growth rate which attracts high numbers
of new entrants.
Financial analysis of Fletcher Building Company
Fletcher Building Company has effective business functioning. After evaluating the
annual report of company, it is considered that in 2013 Fletcher Building Company had .90
current ratio which it increases to 7.12 in 2017 after that, it has also increased its quick ratio to
6.19 which is very high as compared to 2013 data. Profitability ratio of company has decreased
throughout the time. Return on equity of company has gone down by .20 points since last five
years. In addition to this, return on assets of company has also gone down to .90 which is not
indicator of the company’s functioning. Assets turnover of company has increased to 311%

Business analysis of Fletcher Building Company
8
which is very high as compared to last five years data. Efficiency ratio also reflects that
receivable turnover ratio of company has increased which is good indicators. Inventory turnover
has also increased by 10% in these five years which will help company to reduce its cost of
capital. Market based ratio of Fletcher Building Company reflects that it has created value on its
investment and resulted to 264.33 which is 350% higher as compared to its last five years data.
Solvency ratio of company also reflects that it has increased its overall capital structure to
maintain effective cost of capital. In addition to this, time interest earned reflects that company
has low level of interest earned ratio which may be not good indicator for the effective business
functioning (Fletcher building Company, 2016).
2013
2014
2015
2016
2017
Industry average
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
Total revenue
Cost of goods sold
Net profit
Total assets
Finding
Environmental analysis tools discussion

Business analysis of Fletcher Building Company
9
Fletcher Building Company has set up specific objective to increase its overall business
productivity in determined approach. It has set up target to achieve at least 24% market share in
New Zealand and increase its overall turnover by 40% in coming 5 years.
Fletcher Building Company has measurement to cut down its overall cost to terminate its other
units which is giving less amount of output. This level of strategic program and cost reducing
strategies will give an advantage to increase its overall profit.
Fletcher Building Company has incorporated a business process in which accurate set
measurement is identified. All the cost and price determination is based on the inventory
management policies and cost of the capital of the organization. Fletcher Building Company has
determined its product sells price after including 20% profit margin in its cost of production.
This has shown the accuracy of the price of the products sold in organization (Brigham &
Ehrhardt, 2013).
It has to design its price of the products very low with a view to increase its overall sales. It has
relevancy with the cost of the production and offered products price of the rivals. Fletcher
Building Company has kept low price of its offered product for the relevancy of its cost
leadership strategy.
Fletcher Building Company has planned its action plan to deliver its business process to increase
the effectiveness of its business. It has developed its core competency to increase the overall
productivity by reducing the overall time involved in business.
Discussion criteria

Business analysis of Fletcher Building Company
10
Feasibility- All the data and financial information of Fletcher is based on the ratio
analysis implemented on the data shown in annual report of company.
Acceptability- Financial statement of Fletcher has been prepared by following domestic
and IFRS accounting standards. It increase its acceptability on international level
Quality- All this financial and business information will assist students to make a final
judgment on the performance of company.
Reversibility- This solution developed is relevant and in case of failure to draw effective
conclusion will give idea to student to implement another analysis tool.
Ethics- All the data or work done in this presentation is plagiarism free and only relevant
and truthful contents have been used in this presentation.
Cost- preparing this presentation will be accompanied by very low cost due to easy and
free access to annual report of company.
Financial analysis derived and trend of Fletcher Building Company
It has been observed that company will increase its all of its productivity and net profit
by at least 250% in coming next three years.

Business analysis of Fletcher Building Company
11
2013
2014
2015
2016
2017
2018
2019
2020
Industry average
(Fletcher Building company financial data NZD
in Million except per share data)
0
2,000
4,000
6,000
8,000
10,000
Total revenue
Cost of goods sold
Gross profit
Operating profit
Net profit
This trend reflects effective business functioning of Fletcher Building Company in
market.
Computation of financial data
Details
(Fletcher Building company financial data NZD
in Million except per share data)
2013 2014 2015 2016 2017
20
18
20
19
20
20
Industry
average
Total
revenue
8,519 8,401 8,661 9,001 9,004
9,
18
8
9,
34
5
9,5
02 9254
Cost of
goods
sold
6,346 6,255 6,553 6,767 7,319
7,
38
5
7,
63
1
7,8
77 7865
Gross
profit
2,173 2,146 2,108 2,234 1,685
1,
80
3
1,
71
4
1,6
25 1,389
Operating
profit 556 581 483 601 257 32
2
26
4
20
7 1014
Net profit 326 339 270 482 94 20
6
17
4
14
2 110

Business analysis of Fletcher Building Company
12
Analysis and interpretation
After evaluating the details and market data, it is considered that industry average of
Fletcher Building Company reflects higher profitability and efficiency of business. If company
wants to grow its business then it will have to increase the overall productivity at the industry
level (Ehrhardt &Brigham, 2016).Profitabiltiy of company is high and company is also managing
it business efficiently which not only increases the overall productivity but also efficiency of the
business.
Discussion and explanation of BSC and the Map (Why it is used)
This balance score card approach and strategic map of Fletcher Building Company is
designed to increase the overall productivity and improve its financial and business activities. It
has been observed that if company could increase the overall productivity by installing cyber
computing system and adopting newly advanced technologies in its internal system. This will
help company to increase the productivity and reduce the overall cost of the capital. Fletcher
Building Company has to improve its performance by increasing the return on capital employed.
Recommendation
Strategic Map and flow chart from solutions proposed in BSC and Portal five model
A strategic Map is the diagram which is used to implement effective internal and external
set goals of the prepared balance score card.

Business analysis of Fletcher Building Company
13
(Source by author)
Company needs to set its target realistic and achievable for the sustainable future to
increase the overall productivity of organization. It has installed cyber computing enterprises
resources planning to increase the efficiency of its internal control system. In addition to this,
company needs to set new targets at least 20% higher than last year to increase the revenue of
company. In addition to this, Fletcher should also increase the overall employee’s numbers to
15000 and hire experts in particular department (Fletcher building Company, 2016).
Challenges identified and discussion on the same
Identified Discussion
Rivals core competency in cost leadership Other rivals such as KIWI glassware and
Lucky constructions have developed core
competency in market. Fletcher needs to
reduce its overall cost and increase return on
capital employed...
Not effective innovative machineries Fletcher needs to invest more capital in
research and development department to
increase the productivity of business.

Business analysis of Fletcher Building Company
14
Hiring of experts and talented employees It is hard to find skilled employees; company
needs to import the services from other
countries to increase the effectiveness of
business.
Conclusion
After analyzing and evaluating all the details of the annual report of company and
business performance of Fletcher Building Company, it is considered that if company could
install newly adopted cyber computing enterprises resources planning in its business process then
it will surely help company to increase its profit and overall business efficiency. The main
problem of company is related to increased cost of production and less effective business
functioning.

Business analysis of Fletcher Building Company
15
References
Bloomberg, (2017) retrieved on 14th November, 2017 from www.bloomberg.com.au
Bloomberg, 2017, government security retrieved on 14th November, 2017
https://www.bloomberg.com/markets/rates-bonds/government-bonds/australia
Brigham, E.F. & Ehrhardt, M.C., (2013). Financial management: Theory & practice. Engage
Learning.
Ehrhardt, M.C. & Brigham, E.F., (2016). Corporate finance: A focused approach. Engage
learning.
Fletcher Company (2016), annual report, retrieved on 14th November, 2017 from
https://www.google.co.in/search?
q=annual+reprot+of+Fletcher&oq=annual+reprot+of+Fletcher&aqs=chrome...69i57.524
2j0j7&sourceid=chrome&ie=UTF-8
Yahoo finance, (2017) retrieved on 28th October, 2017 from https://in.finance.yahoo.com/
(Link of annual report)- https://fletcherbuilding.com/investor-centre/financial-results/2017-
annual-report/

Business analysis of Fletcher Building Company
16
Appendix
Computation of financial data
Details
(Fletcher Building company financial data NZD
in Million except per share data)
2013 2014 2015 2016 2017
Industry
average
Total revenue 8,519 8,401 8,661 9,001 9,004 9254
Cost of goods
sold 6,346 6,255 6,553 6,767 7,319 7865
Gross profit 2,173 2,146 2,108 2,234 1,685 1,389
Operating
profit 556 581 483 601 257 1014
Net profit 326 339 270 482 94 110
Interest 147 121 128 116 113 115
Inventory 1,353 1,362 1,506 1,479 1,652 1741
Current assets 1,362 15,572 11,958 14,828 15,417 16451
Cash and cash
equivalents 123 134 228 356 216 125
Receivables 1,346 1401 1509 1362 1525 1645
Current
liabilities 1,517 1596 1947 1947 1996 1536
Payables 842 1234 1315 1342 1406 1256
Shares
outstadning 1,234 0 0 0 0 2145
Equity 3,519 3419 3686 3691 3556 3452
Total
liabilities 7,103 6941 7501 7267 7673 7575
Total assets 7,103 6,941 7,501 7,267 7,673 7,575
Market share
price 6.95 5.76 6.64 6.64 6.99 6.94
Description Formula
(Fletcher Building company
financial data)
2013 2014 2015 2016 2017
Industry
average
Profitability
Rqturn on
equity
Net
profit/rev
enues
0.038267
402
0.0403
523
0.0311
742
0.0535
496
0.010439
805
0.011886
752
Return on Net 0.092639 0.0991 0.0732 0.1305 0.026434 0.031865

Business analysis of Fletcher Building Company
17
assets
profit/Eq
uity 955 518 501 879 196 585
Financial
leverage
EBIT /
EBIT -
Interest
1.359413
203
1.2630
435
1.3605
634
1.2391
753
1.784722
222
1.127919
911
Asset turnover
total
assets /
total sales
*365
304.3309
074
301.56
708
316.11
419
294.68
448
311.0445
358
298.7762
049
Earkings per
share
Net
income -
pref div /
shares
outstandi
ng
0.092639
955
0.0991
518
0.0732
501
0.1305
879
0.026434
196
0.031865
585
Liquidity
cash ratio
cash
equivalen
ts +
cash /
current
liabilities
0.081081
081
0.0839
599
0.1171
032
0.1828
454
0.108216
433
0.081380
208
Current ratio
Current
assets/cur
rent
liabilities 0.90 9.76 6.14 7.62 7.72 10.71
Quick Ratio
Current
assets-
Inventory
/current
liabilities 0.01 8.90 5.37 6.86 6.90 9.58
Efficieny
ratio Fletcher Building company
Particular Formula 2013 2014 2015 2016 2017
Industry
average
Receivable
turnover
Receivab
les/ Total
sales*365 57.67 60.87 63.59 55.23 61.82 64.88
Inventory
turnover
Inventory
/ cost of
goods
sold *365 77.82 79.48 83.88 79.77 82.39 80.80
Creditor
Turnover
Creditors
/ Total 13.27 19.73 20.07 19.83 19.21 15.97

Business analysis of Fletcher Building Company
18
purhase*
365
Market based
ratios
Price / earings
ratio
Market
value per
share /
earnings
per share 75.02 58.09 90.65 50.85 264.43 217.79
Dividend yield
ratio
dividend
/ current
share
price #REF!
Solvency
Times inteest
earned
EBIT /
Interest
expenses
3.782312
925
4.8016
529
3.7734
375
5.1810
345
2.274336
283
8.817391
304
Debt to Equity
Ratio
Debt/
Equity 2.02 2.03 2.03 1.97 2.16 2.19