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Financial analysis of Adelaide Brighton LTD for investment decision making

   

Added on  2019-09-26

27 Pages7229 Words150 Views
Result: HD (87)Description of the Key Issues /Problem / Organisation Presented information about the organisation. Clearly articulated the key issues / problem.10The report provided information about the organization. E.g. the history, background, dividend, services, key performance indicators, comparative analysis, stock price trends, industry position, etc.Principles and TheoriesIdentified and demonstrated an understanding of relevant principles. Demonstrated the use ofappropriate jargon. Identified and discussed appropriate literature.20Awareness of deeper aspects of liquidity, profitability and financial decision making. Demonstrated the use of appropriate jargon. Identified and discussed appropriate literature.Analysis and EvaluationDescribed method used (where relevant). Used facts and evidenceto support argument / evaluation. Applied principles and theory to the issue / problem. Presented outcomes / recommendations with justifications.40• Highly developed analytical and evaluation skills. Demonstrating critical reflection. Clearly articulatedargument throughout. • Analyzed and interpreted the ratios to evaluate the company’s operations and performance plus any limitations • Explained the concepts and techniques employed • Provided investment recommendations ReferencingAcknowledged sources of facts appropriately.Used appropriate number and quality of references (refer to AIB Style Guide). Adhered to Harvard Style referencing conventions. 10The report met the requirement on the number of references and acknowledged sources of facts appropriately including the in-text references.Structure and PresentationLogically structured the content.Demonstrated clear report format and presentation (as detailed10Demonstrated clear report format and presentation- would have preferred a much shorter and brief exec summary - The introduction should have alsoprovided the background, report aims, objectives and goal of the report and the background to the assignment and why it is useful

in AIB’s guides).Communication Style and LanguageDemonstrated good writing style (as detailed in AIB’s guides). Adhered to the conventions of written English (grammar, punctuation and spelling).10Adhered to the conventions of written English Demonstrated good writing style • the calculations,definition of variables, and formula could have been better placed under appendix

Financial ManagementFinancial analysis of Adelaide Brighton LTD for investment decision makingStudent name:Mark CarolineStudent number:A001532083Subject name:Financial ManagementCode:712FMGTAQF Level:8Subject Credit Points:10Word Count:2 743 words

Executive SummaryThe subject of this analysis is Adelaide Brighton Ltd, established in 1882, distributed in strategic locations across Australia. Adelaide Brighton, the largest importer of cement in Australia, supplies building, construction and infrastructure markets with material. Proactivemanagement has kept costs under control with a reliable and efficient asset base.The prime motive for business is to make a profit and for investors to have a return on their investments. The analysis of the financial statements looked at liquidity, profitability, capitalstructure and share value providing a rounded analysis. The ratios representing liquidity, profitability and capital structure show an organisation that is sustainable in the long-term and supports investment. Analysis of the capital structure shows potential for the organisation to grow the capital base.The response from the investor market shows a share value that is above the share value calculated using the constant dividend discount model. The financial statements lean towards a recommendation to invest, while the investor market indicates a no-buy position.

Contents1.Introduction...........................................................................................................................................12.Financial Analysis...................................................................................................................................12.1Liquidity: Current ratio...................................................................................................................12.2Profitability: Net profit margin ratio and Return on total assets...................................................32.3Capital structure: Debt ratio and Interest cover ratio....................................................................52.4Market value: Price-earning (P/E) ratio.........................................................................................63.Share Valuation - Constant Dividend Discount Model...........................................................................84.Recommendation................................................................................................................................105.Conclusion...........................................................................................................................................11References...................................................................................................................................................126.Appendix 1...........................................................................................................................................141Financials.........................................................................................................................................142Growth & Ratios..............................................................................................................................153Industry Averages............................................................................................................................164Competitive Environment................................................................................................................177.Appendix 2...........................................................................................................................................21

1.IntroductionAdelaide Brighton Ltd is a publicly owned company, established in 1882 and is registered on the Australian Stock Exchange (ASX) under the code ABC. Adelaide Brighton (ABC) manufactures and distributes material across the building construction and infrastructure markets as well as mineral processing market. Major manufacturing facilities are strategically located in South Australia, Western Australia and the Northern Territory, enabling ABL to supply all Australian major centres. To support this, ABL have distribution joint ventures in Victoria and Queensland.The majority of revenue, 104.92%, for ABC is derived from the cement, lime, concrete and aggregates segment with concrete products providing 10.09% and unallocated industry segments returning -15.01% [ CITATION IBI15 \l 3081 ]. Adelaide Brighton has a 38.6% share of the cement and lime-manufacturing segment, followed by Cement Australia Holdings Pty Ltd andBoral Ltd [ CITATION IBI15 \l 3081 ]. This report on the financial analysis of ABC, to support or not support investment in ABC, will look at liquidity using the current ratio, profitability using net profit margin and return on total assets, and finally the capital structure using debt ratio and interest cover ratio. The results of the analysis will be presented in the recommendation section of this report with concluding remarks in the conclusion.Towards the end of November 2015 the shares recovered to an upward trend. The past five years has seen patterns of upward and downward trends. Overall, there has been an upward trend in the share price. The cyclical nature of the share price trends for ABC has seen drops in price close the beginning of the year with recovery around July. Recovery for 2016 was early, around January reflecting the possibility that the share price might be over inflated and due for adownward trend. 2.Financial AnalysisThe financial analysis from financial records published by ABC and reported on by IBISWorld (2016). 2.1Liquidity: Current ratioNote: Unless otherwise stated, the values used are from Appendix 1.Page | 1

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