Financial Analysis and Decision Making: Aspermont & Enero Group

This report presents a financial analysis of two Australian companies, Aspermont Limited and Enero Group Limited, examining their financial performance and position over a three-year period. The introduction defines financial analysis and its importance in evaluating business performance. The report includes company background research, outlining the operating activities and economic factors affecting each company. Financial ratio analysis is conducted, focusing on profitability ratios and their trends. Lending and investment decisions are evaluated based on the financial data, considering factors such as cash flows, profitability, and debt-equity ratios. The analysis concludes that banks should not provide loans to either company due to their financial performance. The report uses financial statements and online resources to support its findings.

FINANCIAL BUSINESS
DECISION MAKING

TABLE OF CONTENTS
TABLE OF CONTENTS................................................................................................................2
INTRODUTION..............................................................................................................................1
1. Company Background research...................................................................................................1
a)..................................................................................................................................................1
b)..................................................................................................................................................2
2. Financial ratio analysis................................................................................................................2
3. Lending Decision.........................................................................................................................3
a)..................................................................................................................................................3
b)..................................................................................................................................................3
c)..................................................................................................................................................4
4. Investment Decision....................................................................................................................4
a)..................................................................................................................................................4
b)..................................................................................................................................................6
c)..................................................................................................................................................6
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUTION
The Financial analysis refers to the process of analysing the business performance and
position over the relevant financial year. Finance is the management of money, particularly in
relation to companies, organisations, or governments. Specifically, it deals with the questions of
how an individual, company or government acquires the money needed - called capital in the
company context - and how they then spend or invest that money. Financial analysis helps the
business to evaluate the liquidity, solvency, profitability and efficiency of the business for
warranting investments. The report is based on two Australian companies Aspermont limited and
Enero group limited. The report will analyse the financial performance and position of the
companies over the last three years.
1. Company Background research
a)
Operating activities of the Aspermont limited and Enero group plc.
Aspermont Limited
Aspermont is Australian media company listed over ASX having its operation in
Australia and cross borders. The main business of company is production of the B2B
informational services across the construction sectors, resources, conferencing, delivery through
print and the online media channels. The operational activities of the business are complemented
with the additional services offerings inclusive of the specific industry search engine, directories
and archives and graphic design capabilities (Aspermont Limited, 2019). It provides newsworthy
insight to the independent readers in specie target markets by offering end to end target market
solutions by print, conferencing and the complementary service channels.
Enero Limited
Company like Aspermont is engaged in communication and marketing services including
the market research, strategy, advertising, communication planning, public relations, graphic
designs, direct marketing, event management and the corporate communications (Enero Limited,
2019). Company possess over ten communication and marketing businesses in 8 countries. It is
having two CGU that are Operating brands and Search methodology.
Both the companies provide the marketing and communication services and provides
solutions to the customers. On the other Aspermont is having two segments that are publishing
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segment and the conferencing segment. Enero generated revenues from the operating Brands and
search methodology.
b)
Economy wide factors
Economic factors include factors related with the economy of country.
1. Increased inflation rate of 2.1 will make the prices to go up and will increase the foreign
currency exchange rate risk.
2. Cash rate of company has gone down to 1.5% for the banks to cut their interest rates. this
change will increase the competition in the market requiring the company to put more efforts.
Industry Factors
1. Growth of the telecommunication services in the Australian market has grown by 0.5% that
will bring new opportunities due to increased use of mobile services and specific information.
2. Public relation services are seeing moderate growth and it can decline further requiring the
companies to cut their cost.
Specific factors
1. Marketing and telecommunication services providing the BSB services will face more
compliance procedures as per the new Australian rules and regulations.
2. Companies are required to provide enhanced security to the customer information which will
increasing the cost without generating additional returns.
3. Companies are operating in the field of continuous innovations and inventions as the strong
competition can affect the business of the company.
4. The slowing economic growth may affect the business as it will lead to reduced business
having direct impact over the profitability of the business.
2. Financial ratio analysis
Profitability ratios are the most useful ratios for the analysts to see the current
performance of the company.
Aspermont Limited Enero Group
2019 2018 2017 2019 2018 2017
Cost of Sales 7461 6455 6874 121173 100497 96354
Sales 16379 14031 14750 255020 230030 200039
Gross Margin
Total Sales –
COGS/Total 54.45% 53.99%
53.40
% 52.48% 56.31% 51.83%
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Sales
Net profit -7452 -943 -1343 3581 5661 8473
Sales 16379 14031 14750 255020 230030 200039
Net profit
ratio
Operating
Income/ Net
Sales -45.50% -6.72% -9.11% 1.40% 2.46% 4.24%
It could be seen from the above data that Aspermont is suffering significant losses from
the past three years where Enero is also declining trend in the gross profit and net profit ratio,
3. Lending Decision
a)
Aspermont has been continuously suffering losses since past many years. The declining
performance of the company has significant impact over its operations. Due to the declining
growth market capitalisation of the company has also gone down significantly. The 10 year loan
application of the company should not be accepted as the losses of the company has declined the
profit to negative 45% that is record low. Also the market trend shows that it will be a difficult
task for the company to regain its profitable stage (Goncharov, Mahlich and Yurtoglu, 2018).
The company if added further loans will further decrease the profit levels due to the interest
expenses.
b)
Cash flows of the Aspermont will give the actual liquidity position of the company.
Cash Flows from 2019 2018 2017
Operating activities -0.39 -0.44 -0.51
Investing activities -0.59 -0.72 -0.59
Financing activities -0.35 1.88 0.01
Net change in cash -1.33 0.72 -1.09
Beginning cash
balance 2.06 1.34 1.34
Ending cash balance 0.73 2.06 0.25
The cash flows of the company during the three years show that it has not suffered
negative balance during the three years. Cash flows from the operating activities of company has
remained negative that show the core of the business is not generating enough money for the
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company and also it is inefficient in managing its working capital. The positive cash flows are
maintained by raising capital from the market (Dickinson, Wangerin and Wild, 2016). Company
should be able to generate positive returns from its operating activities. Also the cash flows are
not showing steady trend over the year. It is having current cash availability of 0.73 million even
when the company was having cash balance of 2.06 million beginning balance.
c)
Though ratio analysis is the tool used by all the experts and analysts for reviewing the
financial performance of company. Assessing the actual internal management is very difficult
using the ratio analysis as it only analyses the quantitative figures presented in the financial
statements. For instance the ratios used for assessing the efficiency of management are
receivables days, payables and the asset turnover. They are also used for analysing the working
capital cycle. Receivables and payables days are calculated on the basis of year end balance
where the policies followed by the company might be different (Ali, Kravet and Li, 2016). The
payable days calculated comes to 38 days and receivables days to 21 days. Where the company
policy is of collecting within 30 days and making payments on 2 months. This makes the
analysis of working capital ineffective and less reliable.
Efficiency ratios
Efficiency Ratios
Aspermont Limited Enero Group
2019 2018 2017 2019 2018 2017
Asset turnover
ratio
Sales / Net
assets 6.22 1.45 1.72 2.17 2.01 1.96
Accounts
Payable Days
Sales /
Inventory *365 38.31 58.48 40.53 54.93 50.52 48.48
Account
receivable
days
Sales /
Accounts
Receivable *
365 20.70 60.74 27.89 48.36 43.15 36.48
4. Investment Decision
a)
Profitability ratio
Aspermont Limited Enero Group
2019 2018 2017 2019 2018 2017
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Employed
Capital
(Total
Assets -
Current
Liabilities) 5129 12019 10923
14617
2
14578
6
11301
7
Net profit -7452 -943 -1343 3581 5661 8473
Return on
capital
employed
Net
operating
profit/Empl
oyed
Capital (145.29%) (7.85%) (12.30%) 2.45% 3.88% 7.50%
Net Income -7452 -943 -1343 3581 5661 8473
Shareholder'
s Equity 2634 9671 8560
11763
1
11424
0
10225
3
Return on
Equity
Net Income
/
Shareholde
r's Equity -282.92% -9.75% -15.69% 3.04% 4.96% 8.29%
Return on capital employed and return on equity are the most important investor ratios. It
analyses the efficiency of the management of the company (Carlon And et.al., 2019). The above
ratio shows that company is having record negative returns over is capital employed and equity.
The business is suffering huge losses due to which it is not able to generate return over its equity
and the capital employed. On the other Enero is giving positive return over its capital employed
and equity investments.
Aspermont Limited Enero Group
2019 2018 2017 2019 2018 2017
Debt equity
ratio Debt/ Equity 94.72% 24.28% 27.61% 22.79% 26.89% 9.84%
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Risks could be assessed using dent equity ratio. Aspermont is having current capital
structure with high debt capital. Enero group on the other is having low financial risk in its
capital structure.
b)
It could be analysed that Bank should not provide loan to Aspermont as company is
having significantly negative profits with high financial risk. Providing loan will be loss for the
bank. On the other though Enero is having positive returns but the profitability and returns over
capital employed of the company is continuously declining (Warren, Jonick and Schneider,
2020). Company is suffering through critical phase and interest charges of the loan will further
decline the profits increasing the financial risks. Therefore the loan should not be provided to any
of the company.
c)
2019 2018 2017 2019 2018 2017
EPS 0 0 0 0.067 0.10 0.02
P/E ratio 0 0 0 31 28 32
EPS refers to price earning ratio means the earning per share of the company. Price
earning ratio is used by the business for measuring the returns in terms of prices. P/E ratio is
down when the market prices are low (Rahman, Ibrahim and Ahmad, 2017). The EPS and P/E
ratio of both the companies are very low. Aspermont is not having any earning due to negative
returns and of Enero is also very low.
CONCLUSION
From the above research it could be analysed that the financial performance of companies is
not good and also the financial position of the companies are not strong. Banks should not
provide loan to Aspermont as it is having significantly low returns and it will not be able to repay
the loan and interest charges. Also the profits and returns of Enero are showing declining trend
therefore it should not provide to this company also.
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REFERENCES
Books and Journals
Carlon, S. And et.al., 2019. Financial accounting: Reporting, analysis and decision making.
John Wiley and Sons Australia.
Warren, C., Jonick, C. and Schneider, J., 2020. Financial accounting. Cengage Learning.
Goncharov, I., Mahlich, J. and Yurtoglu, B.B., 2018. Accounting Profitability and the Political
Process: The Case of R&D Accounting in the Pharmaceutical Industry. Available at SSRN
2531467.
Ali, A., Kravet, T.D. and Li, B., 2016. Accounting profitability and takeover
likelihood. Available at SSRN 2538902.
Rahman, M.H.U., Ibrahim, M.Y. and Ahmad, A.C., 2017. Accounting Profitability and Firm
Market Valuation: A Panel Data Analysis. Global Business and Management Research:
An International Journal.96(1S).pp.679-689.
Dickinson, V., Wangerin, D.D. and Wild, J.J., 2016. Accounting rules and post-acquisition
profitability in business combinations. Accounting Horizons.30(4). pp.427-447.
Online
Aspermont Limited. 2019. [Online]. Available through :
< https://in.finance.yahoo.com/quote/ASP.AX/history?p=ASP.AX >.
Enero Limited. 2019. [Online]. Available through : < https://www.investing.com/equities/enero-
group-ltd-ratios >.
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