Specification of the Structure of Ownership Governance

Running head: FINANCE
Finance
Name of the student
Name of the university
Author note

FINANCE 1
Table of Contents
1. Description of the company.......................................................................................2
2. Specification of the structure of ownership governance............................................2
3. Fundamental ratios.....................................................................................................3
4. Information from ASX website..................................................................................4
5. Recent announcement................................................................................................6
6. Stock field..................................................................................................................7
7. WACC (weighted average cost of capital).................................................................9
8. Optimal debt structure..............................................................................................10
9. Dividend policy........................................................................................................11
10. Recommendation..................................................................................................11
Reference.........................................................................................................................13

FINANCE 2
1. Description of the company
The a2 Milk Company is a public company that is listed under ASX 200 and it
commercialises the intellectual property associated with a2 milk and the associated
products, for example, infant formula. The company is engaged in the
commercialization of a2MC branded milk and various associated products that is
assisted by intellectual property ownership. The entity carries on its business through 4
segments that includes Australia and New Zealand, UK and USA, China and Other
Asia, Corporate and other. The portfolio of the company includes infant formula, liquid
milk and other. New Zealand and Australia segment are engaged in sales of cream,
milk, whole milk powder, ice cream and infant formula. On the other hand, the China
and other segment look after the supply chain of infant formula from New Zealand to all
over the market. USA and UK segment are engaged in sales of formula milk for infants
and milk. Further, the brands of the company includes a2 milk and a2 Platinum. If the
history or past performance of the company is taken into consideration, one major thing
that can be contributed to present performance of the company is that the company’s
stock was best performer for the last year and during past year the company’s market
value became more than tripled to $ 1.25 billion (The a2 Milk Company 2018).
2. Specification of the structure of ownership governance
i) Major substantial shareholders
Under the family business, 2 or more than 2 members in the management team
are selected from owning family. However, the family business may have owners who
are not the members from family. It can also be managed by the individuals who do not
belong to the family (Peirson et al. 2014). The family members however, are generally
involved in operation of the family business. Looking into the annual report of the a2
Milk Company it is found that 6 shareholders are there who are considered as
substantial share holders. Their names and shareholding percentage are as follows –
Name Number of shares % of shareholding
USB group AG 58,853,304 8.10
Challenger Limited 56,271,981 7.74

FINANCE 3
Colonial First State Asset
Management
46,289,905 6.37
Commonwealth Bank of Australia 45,932,888 6.32
Greencape Capital Pty td 43,888,093 6.04
Harbour Asset Management 36,953,295 5.08
From the above information it can be found out that the company is a non-
family company. Further, no shareholders are holding more than 20% of shareholdings.
ii) Name of main people
 Chairman – Warwick Every-Burns
 Board members –
 David Hearn – Chairman & Executive Director
 Julia Hoare – Deputy Chairman & Non-Executive Director
 Geoffrey Babidge – Managing Director & CEO
 Peter Hinton – Non – Executive Director
 CEO – Geoffrey Babidge
It is found from the above information that none of the board members fall in the
category of substantial shareholder who holds more than 20% of shareholding.
Therefore, it proved from this aspect also that the company is non-family member under
the firm’s governance. Further, none of the board member holds more than 5% of the
shareholdings (The a2 Milk Company 2018).
3. Fundamental ratios
Ratio Formula 2017 2016
Short-term solvency
Current ratio Current assets/current liabilities 2.52 1.78
Quick ratio (Current assets-inventories)/Current
liabilities 2.25 1.69
Long term solvency
Debt equity ratio Total liabilities/shareholder's equity 0.42 0.58
Debt ratio Total liab / Total assets 0.30 0.37
Asset utilization ratio
Asset turnover ratio Net sales/total assets 1.60 1.68