New Life Holiday and Leisure Group Plc: Finance and Operations Report

This report provides a comprehensive financial and operational analysis of New Life Holiday and Leisure Group Plc, focusing on a proposed expansion into the French holiday market. It evaluates operational and regulatory factors, identifies financing needs (both short-term and long-term), and assesses alternative sources of finance. The report includes a critical evaluation of the proposed investment, along with an alternative financial plan, incorporating contribution analysis, breakeven analysis, payback period, ARR, and NPV calculations. It also examines the impact of Brexit and currency risk. The analysis is supported by relevant academic theories and concepts, offering clear recommendations for the board's consideration, and includes a detailed evaluation of the project's financial worth and potential risks, providing a well-structured and academically sound assessment for decision-making.

Managing finance
And operation

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK ..............................................................................................................................................1
CONCLUSION................................................................................................................................6
REFERENCES ...............................................................................................................................8

INTRODUCTION
Operation management is the managing of the companies operation and activities in order
to acquire the desired results. There are many activities in the company which relates to the
planning and forming of policies and procedures. These policies are formed by the directors in
order to achieve its organizational goals and targets.
In the report, the company New Life Holiday and Leisure group Plc uses various methods
to operate its business functions. The board have to take appropriate decisions in order to achieve
desired goals in the company. Also the report includes operational and regulatory factors to be
considered by the board of directors in the company. Report also includes the management
theories.
Furthermore, the report includes the various financing needs of company New Life
Holiday and Leisure group Plc and also the alternative sources of finance by which funds can be
raised by the company in order to meet its capital requirement. The report also includes the
calculation of financial worth of the current proposal and an alternative
evaluation including all costs and revenues. The report also includes contribution analysis, break
even, payback, ARR and NPV of the company New Life Holiday and Leisure group Plc.
TASK
A) Operational and regulatory factors to be considered by the board
with the growing organization structure in the industry there is prime need to grow and
achieve success to survive in the global market. For the company achieving success it is essential
to have effective leaders and efficient top management . The board of directors in the company
New Life Holiday and Leisure group Plc. Have to formulate the plans and policies in order to
manage its operational in the business. With the effective board structure the company can
achieve its success and with the bad policy management there can be failure in the company New
Life Holiday and Leisure group Plc . Therefore for the required success there have to be
significant board policies to achieve its organizational goals. There are many factors which can
be effected by the board decisions on the organization like customers , employees, production
and manufacturing and also various plans and policies followed by the organization New Life
Holiday and Leisure group Plc (Carrillo de Albornoz And et. al., 2018). There are four main
factors which can be increase and decrease the board effectiveness. The factors are as follows-
The Four P's of Board effectiveness
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People- People in the organization are the factors which can effect the functions of
organization New Life Holiday and Leisure group Plc on large scale. Therefore while deciding
the policies for the organization by the board its employees have to be given priority in its
operation. The policies regarding the working hours and shifts of employees, also the needs of
board to recruit the employees. Also there have to be formulation of various regulation regarding
the legal implications associated with attracting and retaining talent. Also the company New Life
Holiday and Leisure group Plc need to formulate the remuneration strategies and also determine
the focus of the policies on whether to achieve benefits or to increase salary (Dalgliesh, 2016).
The company's New Life Holiday and Leisure group Plc board of directors will also decide
whether they will build talent or will purchase the talent through outer recruitment.
Product- the product in the organization is the another essential factor. Effective board
evaluate and provide an overview of the organization performance by questioning loops and gaps
in the business operation that are critical for its performance. The organization New Life Holiday
and Leisure group Plc business is widely dependent on the product or services provided by
organization. Effective boards review the core product of the organization which are the cost of
production, pricing, competitor analysis and advice accordingly to the operation mangers.
Therefore the formation of the accurate policies by the company New Life Holiday and Leisure
group Plc can help the company in achieving its product goals as well as organizational goals in
the process of development (Iossa and Saussier, 2018). If the policies are not made in proper
manner by the organization there can be low quality of goods and services in the company which
can lead to lower customer satisfaction to its customers.
Process- after considering the people and product of organization by its board there is
need to plan for the process to be used by the company New Life Holiday and Leisure group
Plc. The process of company refers to the formulation of policies for production of goods and
services in the organization to achieve the desirable outcomes. This might include performance
indicators such as profits, quality or sales. Effective board map includes the efficient operational
management and evaluating operational risk. It can also include the involvement of techniques
by which human capital in the company New Life Holiday and Leisure group Plc can be
replaced by mechanical automation (4 Key Factors to Consider for Board Effectiveness, 2017) .
Profit- profit of an organization is another important factor for which a business operates.
The company New Life Holiday and Leisure group Plc works for earning the return for the
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activities of the business. In the board decisions, directors have to decide the source of profit and
also the margins made from the expected deliverables. If the company New Life Holiday and
Leisure group Plc is having problem is making even the operating level return, than the profits
are going downside. Also in the process of taking decisions for profit company needs to decide
the dividend policies of the organization, capital optimization and returns on assets and returns
on equity. Therefore the company needs to make policies in the management of deriving profits
for the company so that the company New Life Holiday and Leisure group Plc can achieve its
organization goals in long run (McMurray and et. al., 2017).
Operation management
Operation management involves certain responsibilities and from all the responsibilities
there is one responsibility of the management to operate business effectively, in terms of
utilizing the resources effectively and with there use ensuring that there is satisfaction of
customers to optimum level. There are many theories and approaches designed to study the
operations management in the organization to achieve its desired operation goals (Mello and
Livingston, 2016). The organization New Life Holiday and Leisure group Plc uses the
operational management theories which are explained below-
Business process redesign - Business process redesign theory was formulated in 1993
which focuses on analysing and designing workflow and business processes within the company.
It is used in the company New Life Holiday and Leisure group Plc to restructure organization by
designing the business process from the initial levels.
Reconfigurable manufacturing systems - this is concerned with the company’s
restructuring through the incorporation of changes in structure, software and hardware
components. In New Life Holiday and Leisure group Plc this system assists the rapid changes in
the production capacity and also the ways in which they can effectively function in response to
market or intrinsic system changes (Mestry, 2016).
Six sigma theory- this approach focuses on the quality of the management. The six-sigma
method within the company New Life Holiday and Leisure group Plc focuses on sequences and
financial targets, like increasing profits or reducing costs. The various tools which can be used in
company New Life Holiday and Leisure group Plc include trending charts, potential defect
calculations and other ratios.
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Lean manufacturing theory- it is a systematic method of eliminating waste within the
manufacturing process. It comprises of removing wasteful resources which affects the higher
operational costs to be bared by an organisation. (Operations management theory, 2017).
B) Financing needs and sources of finance
Financing needs
There are certain needs of the company which are associated with the functioning of the
companies. The finance needs of companies are evolved through the operations of business.
Funds are needed for purchase of raw material, expenses incurred in the manufacturing process
of the product. Also the fund is needed in the purchase of asset and capital goods in the company
New Life Holiday and Leisure group Plc for improving the working capacity of the company.
There are mainly two types of financial needs in the company which are as follows-
Fixed capital- The nature and size of the business determines the amount of fixed capital
requirement in the business organization (Obaidullah, 2018). The company New Life Holiday
and Leisure group Plc needs the fixed capital to purchase land, building etc. Also the trading
concerns need relatively lesser investment in such assets. The decision regarding the requirement
of fixed capital are to be taken properly in the company. The fixed capital of company requires
long term finance to achieve its organizational goals.
Working capital- working capital is the investment of money in the company New Life
Holiday and Leisure group Plc in short duration. The working capital in a company includes
purchase of raw materials, payment of wages etc. Also the working capital includes repairs and
maintenance of machinery, also the expenses incurred on advertisements of product and services
(Owen and Mason, 2017). In the company requirements of these funds are at short intervals and
are usually lesser in amount. The funds invested in the working capital are mostly in current
assets. As the funds invested in such assets are mostly recovered through realisation of cash, and
again reinvested in current assets therefore it is known as circulating capital or revolving capital.
The working capital requirements in the company New Life Holiday and Leisure group Plc is
required in completing the manufacturing process of the product and services.
Sources of finance
Financing is a crucial part of every business it determines the amount of capital required
by the company (Ponnusamy and Bao, 2018). The financing of funds is the collection of funds
from the various sources in order to meet the long term and short-term requirements of the
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company. There can be two types of financing in the company which can be long- term finance
and short term finances. For meeting the long- term and short term funds requirement in the
company there is availability of sources like capital generated by the firm and from the external
factors like new debt and equity.
LONG- TERM FINANCING
Long term finances is needed in the company New Life Holiday and Leisure group Plc
to meet its capital requirement. The capital requirement is usually needed to acquire new
equipment, research and development,to enhance cash flow. Also the long term financing is
required for companies expansion and technological advancements. Although there are many
sources of long term capital some of the major methods for long-term financing are explained
below-
Equity financing- equity financing in a company New Life Holiday and Leisure group
Plc includes the issue of shares to the public to collect funds from them. The equity financing
method is less risky in respect to cash flow commitments (Stewart, 2017). However the cost
associated with equity is very high and required expenses in order to issue shares and maintain
shareholders.
Corporate Bond- in order to collect funds by the company it issues special kind of
corporate bonds which helps in effectively collection of funds to achieve its goals and meet the
long term requirements. The corporate bonds issued by the company New Life Holiday and
Leisure group Plc comprise of the maturity date and the principle amount which is to be
redeemed to the bond holders. There are bonds on whom the investors have options to convert
bonds into equity in the company New Life Holiday and Leisure group Plc.
Capital Notes- capital notes are a type of convertible security that are exercisable into
shares. The capital notes are alike warrant but they don't have expiry date on an exercise price
(Sudo, 2016).
SHORT-TERM FINANCING
Short-term financing are the funds used for the short run and there is less amount of
capital required as compared to the long term requirements. The short term finances is used
usually to pay inventory orders, payrolls and daily supplies of goods. These are certain short-
term financing instruments-
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Commercial Paper- commercial paper are promissory note which have pre-determined
period of time. The maturity time of the commercial paper is usually 1 to 364 days. The
commercial which have excellent credit ratings can sell their commercial paper at good price.
Promissory Note- it is a type of instrument in which the issues or maker of the
instrument promises to pay any pre determined amount on a specific date or on demand raised by
payee and under specific terms.
Asset- based Loan- this type of loan are secured by company's assets. The assets which
are used for backups can be real estate, accounts receivable, equipment and inventory (Kang and
Mason eds., 2016) . The asset for raising loans can be of single category of assets or by a
combination of assets in the company New Life Holiday and Leisure group Plc.
C) Critical Evaluation of Financial Appraisal
Contribution Analysis
Contribution is calculated by subtracting variable cost from profits. By calculating
contribution company can find out how much cash is available with company for the payment of
its fixed assets. Contribution of New Life Holiday and Leisure Group Plc in its new project is
453562.5 Euro and fixed cost of company is 150000 Euro thus, it is evaluated that company is
earning profit as it has more amounts left after paying fixed cost incurred in project. Contribution
also shows amount of sales which is not utilised in paying of variable cost. Contribution also
helps reducing and managing cost. As if variable cost is high and it is giving more low amount of
contribution than company than it is helpful for company in reduction of cost.
On the other hand, contribution only gives details about cost & sales it does not show
over all profits & financials of project. Further, contribution does not consider all type of cost as
it does not shows overall profitability of business firms.
Break Even Point
Companies calculate break even point for determining a point where sales of firm is not
giving profit & loss. After this point company is able to earn profits.
Break Even Point= (Fixed Cost/Contribution Margin)
=(150000/52.43%)
= 286587.69
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If sales of New Life Holiday and Leisure Group Plc in Philgamel Suites is 286587.69
Euro than company can make profits by increasing its sales beyond this point. As sales of
company in this project is more than break even point which shows its new project is profitable.
Further, company also can invest more money in for earning extra profits by promoting sale of
its new product line, It also helps company in maintaining its sales volume so that it cannot
reduced below this level. It also beneficial for company in setting up of its fixed cost thus, it is
evaluated that allocation of fixed cost in this project is viable. This break even point shows that
investment planning & decisions are good and facilitating sustainable growth of business and
company also able to set its sales target with this.
Break Even point helps companies in managing its sales level and direct cost engaged in
production of products & services(Polman and Sinke, 2016).
Pay-back Period
Payback is a period which calculates a time period in which company is able to offset its
cash outflows with cash inflows. A project which require less time is most viable and profitable
of firms. There are two method for calculation of payback period Subtraction & Averaging
Method. New Life Holiday and Leisure Group Plc calculates its payback period with the help of
Averaging Method.
Payback Period= (Initial Cash Outflow/ Cash Inflow)
(1050000/303562.5)= 3.45 years
Cash Inflow
Sales 953562.5
Less- Variable Cost 500000
Less- Fixed Cost 150000
Net Inflow 303562.5
Cash Outflow
Building Cost 1000000
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Equipment 50000
Net Initial Cash Payment 1050000
New Life Holiday and Leisure Group Plc can mitigate cost of all its investment in 3.45
years after this company can make more profits by operating business in this project. Whereas
with this company can not evaluate value of its future cash flows. By comparing payback period
of two projects company can also evaluate that which project is taking less time in converting its
cost of project in profit.
Annual Rate of Return (ARR)
Annual Rate of Return is calculated for determining profits earned by business firms out
for investments made by them. By calculating ARR New Life Holiday and Leisure Group Plc
can identify how much their investment is beneficial and what type of changes are required in
investment decision of company so that it cab achieve its objectives. ARR is also calculated for
checking feasibility of financial appraisal of business and calculation of annual rate is explained
below-
Accounting Rate of Return- (Incremental Accounting Profit/Initial Investment)
=(303562.5/1050000)
=28.91%
By evaluating financial appraisal of New Life Holiday and Leisure Group Plc is
evaluated that company make an investment of 1000000 Euro in Purchasing of Building and
50000 in Equipment. Company earns same amount of profits in all years thus, profit of company
is 303562.5 Euro. ARR of company shows that it earns 28.91% in a year out of its investment.
Thus, ARR helps company in comparing its profitability of a project from other projects of firm.
This percentage of ARR also enable company in making various decisions such as investment
decision, acquisition decisions and other financial decision related to expansion of business.
With the helps of ARR company can increase its annual rate of return by doing further
investment in purchasing of assets and by eliminating unnecessary cost. However, ARR is not
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beneficial for company in identifying profits of projects which are having different cash flows
and different investment value. This percentage of ARR does not calculated by considering time
value of money as it is not helpful in identifying future profits of project(MURPHY, KEANE
and Richardson, 2019).
Net Present Value (NPV)
Net Present Value is calculated for evaluating effectiveness and practicability of
investments made by companies. It is also helpful for New Life Holiday and Leisure Group Plc
in making decisions regarding expansion of business as company is expansing its business by
introducing new suite in its product line named as Philgamel Suites. NPV of company is
calculate below-
Year 0 1 2 3 4
Net Cash Flow -1050000 303562.5 303562.5 303562.5 303562.5
Discount
Factor 1%
1 0.99
[303562.5/
(1.01)]
0.98
[303562.5/
(1.01)^2]
0.97
[303562.5/
(1.01)^3]
0.96
[03562.5/
(1.01)^4]
Present Value -1050000 300556.93 297581.12 294634.77 291717.6
Present Value= [(Cash flows)/( 1+r)i]
Net Present Value= (300566.93+297581.12+294634.77+291717.6-1050000)
=134490.42
Net Present Value of New Life Holiday and Leisure Group Plc is positive which sjhows
that companies new business or investment is profitable. It is also evaluated with the help of
Present Value of company of 4 years that companies profits is increasing day by day thus,
business of firm is growing. Further, its is also analysed that business has an opportunity to
include new product line and can make further investment. As NPV of firm for the new project
of introduction of new suite is positive it assumed that future cash flows is less valuable than
present cash outflows. This is evaluated as NPV considers time value of money. In this case it
can be seen that with the decrease in present value profits of investment by company is
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increasing and as value of cash outflow is also decreasing. This in turn reduces cost of company
& enhances revenue.
Net Present Value of project of New Life Holiday and Leisure Group Plc is calculated on
the basis of all cash inflows, cash outflows and amount of risk involved in a specific project.
Thus, it gives actual profit incurred from investment made by company.
NPV of this project also helps company in calculating aggregate value of profits earned
by company in 4 years. Like in this project firm gain a profit of 134490.42 by discounting cash
flow of different years. This NPV shows that investment decisions mad by company is reliable
and all other decisions regarding revenue & allocation of cots is viable. It is also analysed that
companies companies auditors and other financial manager are skilled and knowledgable.
Positive NPV of project made by New Life Holiday and Leisure Group Plc also helps it
in making further decisions regarding expansion & diversification of business. Thus, this project
is wealthy and helps in maximising financial worth of business(O’Connor, 2018).
On the other hand, Company can not make same financial decision for all of its projects
as different projects require different amount of cost and revenues. Thus, New Life Holiday and
Leisure Group Plc cannot use NPV of this project for its other project. In this case it is
appropriate for Philgamel Suites only. Also NPV of a project is calculated by taking assumptions
so sometimes it does not give true value of profits made by company. Further, rate of return is
assumed for calculation of Net Present Value of in this project firm determine 1% rate of return
which is very low that the reason it is showing higher profit. Whereas if financial manager of
company set higher rate of return than it gives more losses.
Further, its is evaluated company allocate equal cost in all years which benefits it in
calculating profits. But company can achieve higher rate of profits if sales and cost of company
is being revised year by year. This further help hotel in enhancing its customer base & market
share as with new cost and investment offerings of company is maximised. Company can also
calculate NPV of its business assuming different rate of return for evaluation of viability of
projects and it is also beneficial for company to check its projects profitability. With the help of
NPV company is able to make further investment which enhances profits of project and it also
contributes toward overall profitability of New Life Holiday and Leisure Group Plc(Pillai,
Bhatnagar and Thukral, 2016, December.).
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CONCLUSION
With this the report concludes that operation management is the prime responsibility of
the management in the organization. The report states that there is proper formation of the
policies in the organization New Life Holiday and Leisure group Plc in order to achieve its
organizational goals.
The report concludes that there are four major factors which effect the decisions of board
in company. The factors which widely effect the business are- people, process, profit and
product. Also there is use of various management theories in the report. The company New Life
Holiday and Leisure group Plc can improve the decisions of board by concentrating on the four
major factors explained in the report. The effectiveness of board is necessary in order to earn
more profit and better customer satisfaction.
Also the report concludes that there are two types of financing needs which are working
capital finance and fixed capital finance. The finance requirement in the company is fulfilled by
the long- term and short-term financing sources.
Furthermore report states the financial worth of current proposal and calculation of all
cost and revenue of the current proposal in the company New Life Holiday and Leisure group
Plc(Sudo, 2016).
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ONLINE
4 Key Factors to Consider for Board Effectiveness. 2017. [online]. Available through
<http://sbs.strathmore.edu/news/4-key-factors-consider-board-effectiveness/>
Operations management theory. 2017. [online]. Available through
<https://www.investopedia.com/ask/answers/050715/what-operations-management-theory-
and-how-can-it-help-businesspeople>
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