Comprehensive Business Economics Report: UK IT Sector Analysis

This report provides a detailed analysis of the UK IT sector, focusing on its growth, investment potential, and financial performance. The executive summary highlights the sector's rapid expansion and the emergence of new services driving profitability. The analysis includes a review of global and UK economic factors, an industry analysis emphasizing the sector's growth rate, and an investment portfolio assessment of Total Mobile, covering turnover, profitability, and ratio analysis. Non-financial aspects, including a SWOT analysis, are also included. The report concludes with a summary of findings and references, offering a comprehensive overview of the UK IT sector's current state and future prospects. The report analyzes the impact of political, economic, social, technological, and legal factors on the IT industry in the UK. The financial analysis includes turnover, profitability, and ratio analysis to evaluate the company's performance and investment potential.

BUSINESS ECONOMICS

EXECUTIVE SUMMARY
In the present research study detailed analysis of UK IT sector is done and it is identified
that it is growing at fast rate in the nation. There are number of new services that are added in the
mentioned sector in past years and these are forming base for companies to earn good amount of
profit in the business. In the future time period also there is huge earning opportunity for the
firms in the industry and IT sector will grow at fast rate.

TABLE OF CONTENTS
EXECUTIVE SUMMARY.............................................................................................................2
ANALYSIS OF GLOBAL ECONOMY AND UK ECONOMY...................................................4
INDUSTRY ANALYSIS................................................................................................................5
INVESTMENT PORTFOLIO.........................................................................................................7
Turnover.......................................................................................................................................7
Profitability..................................................................................................................................8
Earnings before interest, taxation, depreciation and amortization...............................................8
Ratio analysis...............................................................................................................................9
Net profit margin..........................................................................................................................9
Return on shareholders ‘fund and capital employed..................................................................10
Liquidity and gearing ratios.......................................................................................................11
Non-Financial analysis...............................................................................................................12
SWOT analysis..........................................................................................................................12
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

ANALYSIS OF GLOBAL ECONOMY AND UK ECONOMY
There is a larger amount of impact of the economy on decision-making strategies of the
organization. Total Mobile is a company functioning in UK, which provides mobility solutions
to its employees. It has to choose its business functions based on the prevailing conditions
outside the organization. These are the common macroeconomic environment factors, which
help in assessing the global environment, and then UK includes the following:
 Political factors: Change in the policies of the government refers to political factors of
any country. The economy has witnessed constant fluctuations in its activities and hence
the company need to make changes in the product portfolio accordingly. Companies that
are operating in European Union have to opt for the directives that have been laid down
by EU. The areas of political framework have huge impact on the member states of EU.
Total mobile is required to consider the ongoing government policies of the state not only
in which functioning but whose influence can directly affect the business of the
organization. The government in UK is fairly active and stable which makes it an
effective choice for conducting business (Zalata and Roberts, 2016). Economic factors: The global economy is currently fluctuating which is thereby
impacting the demand and supply of the products. Change in life style increases or
decreases the demand and hence bring considerate amount of changes in price offered by
the company as well. Any change in the economic factors in primary countries such as,
UK and China demand change in the policies of the organization of UK as well. An
increasing phase of globalization is also seen in various countries which has direct
indication towards removal of the trade barrier. The typical economic indicators that can
reflect the position of UK are, inflation, market competition and competitive intelligence.
GDP of country is 5th highest in the world and has increased foreign direct investment as
well which reflects better conditions of UK. However, the growth of the country has
decreased since 2008 and 2009 global recession (Laufs and Schwens, 2014). Social factors: A change in the social structure has also been noticed at the global level.
These factors are, change in taste, buying patterns, lifestyle of the population. It has direct
influence of age, gender, etc. It is important for the organization to understand the critical

development in this field and strategies must be formed keeping in mind the social and
cultural aspects of the country. UK is considered to be a densely populated place which
have high requirement of every aspect of the business and hence prove to be a good
country to establish a business in. Technological factors: These factors have greater influence on the business strategies'
formation. It can be in the form of adoption of new innovations and inventions in the
business (Kjellberg, Azimont and Reid, 2015). A varied change in the world of Artificial
Intelligence has been analysed which has gained wider relation in business arena.
Changing technology around the world has become a major driver of these types of
business with the perspective of globalization. UK holds expertise in science and IT
which makes it technologically advanced. Further, effective law in intellectual property
right prove to be beneficial for the IT companies functioning in UK to work effectively.
 Legal factors: Change in the government rules and regulation have significant impact on
its functioning. Any change in the law of European Union can significantly affect the
functioning of UK as well. Since, UK is planning to withdraw its membership from EU,
It can bring major changes in the functioning of total mobile. It is due to imposition of
trade barriers and other business and globalization related rules that has been formulated
by EU.
INDUSTRY ANALYSIS
Software industry in UK is dynamic and fast moving. The growth intends to be positive
where the employment for the same is also increasing at faster pace. Expansion of IT industry
has led to requirement of adequate amount of capital to be invested in this sector. The investment
raised in 2016 upto £9.2bn. It has grown requirement of people to opt for different roles which
has increased twice in comparison to the non-technological companies (Curme and et.al., 2014).
Hence, assessing the Total Mobile growth, it indicates positive outcomes for the company. The
statistics have proved to show the value of IT which is at increasing phase since 2011. It has
been expected that at the end of 2017, the industry will be able to touch 59 billion Euros.The
services of IT incorporate cloud computing, biog data analysis. Further, software industry is the
subset of It, which includes, application software, security software and development of
operating systems.

Figure 1 Growth in IT and Software industry
(Source: IT services and software market value in the United Kingdom (UK) from 2009 to
2017, 2017)
IT industry is growing at rapid pace across the globe as it can be observed that it is increasing at
fast rate in the UK. Growth rate of technology sector is greater than UK GDP growth rate. It can
be observed that 72% of venture capital firm’s investment goes to technology sector of UK
especially in IT. In same way private equity firms also make their huge investment in the
mentioned industry. In current time period in respect to IT sector UK is leading entire Europe
and after it there are France and Germany. 28 billion investment was made in UK in technology
sector followed by 11 billion investment was made in France and 9.3 billion in Germany. In past
couple of years domestic firms make huge efforts to improve their technological base and due to
this reason UK firms are leading innovation in IT sector across the world. Some of the domains
are emerging in IT sector of UK specially IOT and data analytics (Bekaert and et.al., 2016).
Apart from software development now firms are focusing on improving their efficiency level.
Software companies are also developing software’s and providing analytics services. Through
providing market intelligence services, analytics services and software development firms that

are operating in UK IT sector are earning billion of revenue. Due to availability of pool of
talented people and strong technology infrastructure firm is able to give tough competition to
rivals in the business. This is the major reason behind growth of the IT sector in the UK. Total
mobile is operating in IT sector of UK and is offering multiple solutions to the customers at the
workplace. It is making available AI based services, mobile applications and analytics services to
the customers. Through its AI based solutions firm is automating task for its clients. Hence, work
time needed to perform task get reduced to great extent (Bibi. and Amjad, 2017). Such kind of
tasks are giving boost to the UK IT sector. Earlier software development was only task that was
performed in IT sector but now AI based solutions and analytic services give expansion to the
spectrum in which firm is operating its business. It is expected that in upcoming time period
demand for AI based solutions will increase at rapid pace and this will accelerate growth of UK
IT sector.
INVESTMENT PORTFOLIO
Before investing capital in the business, it is necessary to assess their financial outcome
and results to examine that how well company is performing in the market. In competitive
period, investors behave rationally and put money in the firm in which investment is expect to
derive profitable results.
Turnover
Total Mobile Company provides innovative, deployable and the best class workforce
management solution to various industries as per the customized needs of the consumers. It
keeps their consumer priorities at the top level and use native designs to meet user’s
requirements
Year Turnover % Employees Revenue per employee
2012 7,966,778 4.38% 62 128496
2013 9,697,968 21.73% 70 138542
2014 11,522,333 18.81% 93 123896
2015 12,594,752 9.31% 105 119950

2016 10,759,433 -14.57% 100 107594
1/1/12 1/1/13 1/1/14 1/1/15 1/1/16
7,966,778
9,697,968
11,522,333 12,594,752
10,759,433
Total Mobile's Turnover
Turnover
The chart discovered that in the last five years, till 2015, Total Mobile’s turnover shows
increasing trend. In 2013, sales show dramatic growth at a year-on-year growth by 21.73%
against preceding year of 4.38%. It is because of delivery of consumer-focused mobility software
solutions. In following year, it dropped down by 18.81% & 9.31% respectively. Recently, in
2016, it came down by 14.57% due to volatile market era, volatile market demand, political
uncertainty because of Brexit and other reasons. In order to cut staffing costs, company had
reduced its employee base, which in turn; revenue per employee came down to 107,594 each
worker.
Profitability
Total Mobile Company is a profit-oriented business establishment, which aims at
maximizing its profitability by generating larger turnover and rationale spending plan. In order to
make rationale investment strategy, investors invest their money in such firms in which there is a
greater possibility of growth.
Earnings before interest, taxation, depreciation and amortization
Year EBITDA YOY % change
2012 1,670,215 -15.17%
2013 1,164,061 -30.30%
2014 2,163,768 85.88%

2015 2,443,234 12.92%
2016 234,764 -90.39%
2012 2013 2014 2015 2016
1,670,215
1,164,061
2,163,768
2,443,234
234,764
Earnings before interest and taxes
Above line graph represents continuous volatile trend in the EBITDA because of sudden
decline in sales turnover from both national market and overseas operations. Due to increasing
overheads including administration expenses, operating profit shows sudden decline in current
year to GBP 57,627. It resultant sudden fallen in EBITDA from GBP 2,443,234 to GBP 234,764
demonstrates that its performance came down due to declined sales results and overspending.
Ratio analysis
Net profit margin
Year Profit (GBP) Profit margin
2012 1560313 19.59%
2013 1054541 10.87%
2014 2043273 17.73%
2015 2289387 18.18%
2016 63,073 0.59%

2012 2013 2014 2015 2016
19.59%
10.87%
17.73% 18.18%
0.59%
Profit margin
Finding out the results, it is seen that in FY 2012, Total Mobile Company obtained
19.59% return on sales which in next year, fallen to 10.87%. Afterwards, rising turnover due to
increasing demand helps in growing return to 17.73% and 18.18%. However, in CY 2016, profit
margin suddenly dropped down to 0.59% due to excessive spending and less operational
revenues because of political uncertainty due to Brexit. Company had spent huge money in the
research and development functions to develop new and creative software in order to tailor
customer requirements (Lakshmi, Martin and Venkatesan, 2016). The results clearly imply
organization did not show progressive profit results.
Return on shareholders ‘fund and capital employed
Year Return on shareholder’s fund Return on capital employed
2012 33.22% 23.86%
2013 19.20% 14.33%
2014 28.61% 23.13%
2015 25.30% 25.29%
2016 0.69% 0.69%

2012 2013 2014 2015 2016
33.22%
19.20%
28.61%
25.30%
0.69%
23.86%
14.33%
23.13%
25.29%
0.69%
Return on capital employed and return on capital employed
Return on shareholder’s fund Return on capital employed
Total Mobile Company has generated’s return on equity decreased to 19.20% in 2013
whereas FY 2014 proven profitable as it grown up to 28.61%. Its investors are strongly aware of
its exceptional quality and innovative services. Thereafter, in 2016, its profit plummets to 0.69%
shows that it is not delivering good profit results on the shareholders equity. Similarly, till 2013,
its ROCE goes downward to 14.33% and thereafter, grown up to 23.13% and 25.29 %
respectively. It indicates that firm’ profitability results show downward results.
Liquidity and gearing ratios
Year Liquidity ratio Gearing ratio
2012 3.45 42.67
2013 2.82 35.02
2014 3.15 23.9
2015 3.41 2.52
2016 3.3 3.57

2012 2013 2014 2015 2016
3.45 2.82 3.15 3.41 3.3
42.67
35.02
23.9
2.52 3.57
Liquidity and gearing ratios
Liquidity ratio Gearing ratio
The column graph represents that company’s liquidity ratios shows declined trends from
3.45 to 3.30 times, still, the results shows that company has strong liquidity position. It is
because, the ratio is still above the idle ratio of 2:1 which represents that company is able to
make their outstanding payments to suppliers timely as it has enough or sufficient working
capital available in the business unit.
In contrast to this, gearing ratio represents decline from 42.67 to 3.57 shows very low
level of leverage in the business because company uses a very low level of debt in the business
and use excessive amount of shareholders capital (Boyas and Teeter, 2017). It helps companies
managing their solvency position strongly as companies do not have too much debt so that, there
is no fixed burden to pay interest as per the debt covenants.
Non-Financial analysis
SWOT analysis
SWOT analysis is an internal tool that is use to determine key strengths and weaknesses
of the entity, however, it also scan external environment to know opportunities and key threats.
Company’s managerial team focuses on retaining strengths and grab benefits of market
opportunities whilst on the other hand, decisions are made to overcome weaknesses and market
threats which may threaten Total Mobile Company’s survival.
Strengths:

Best-of-class technology: Total Mobile Company provides the best innovative solutions
to the businesses to seamless their workforce management operations. Its software solutions
enable establishments to increase their productivity by saving time over 90 minutes each user
each day.
Strong product portfolio: its product portfolio consists of distinctive software platforms
including Android, Windows, offline working, iOS and others. Its analytical and other business
intelligence tools helps firm in warehousing their data and extract customized KPI reports for
business decisions (Adekola, Samy and Knight, D., 2017).
Exceptional managerial team: Company has a strong, skilled and talented managerial
team who successfully manages and administrates business functions.
Weaknesses:
Declined profitability: Financial analysis found that its profitability results in latest
financial year 2016 shows sudden and dramatic decline due to decline in sales, uncertain
regulatory environment due to Brexit. Thus, it affects company’s financial position largely.
Opportunities:
Growing market: Total Mobile Company provides operational, financial management
and mobile working solutions to the number of industries such as transport, construction, energy
and utility, community care, acute care and others. Thus, rising demand by all the businesses
offer a strong opportunity to the firm of expanding their business and derive benefits of
economies of scale.
Market penetration: Company has opportunity to increase its market share in healthcare
sector and target other verticals to maximize its growth (Cassell and et.al., 2012).
Threats:
Throat-cut competition: In the technology-led world, Total Mobile Company is facing
tough competition from the rival companies such as Kony Inc, Common Time and others. Thus,
in order to retain successfully in the competitive market, firm needs to serve their clients with the
innovative and customized solutions.

Regulatory uncertainty: Brexit may bring regulatory uncertainty for the Total Mobile,
thus, coming of new legislations and rules will affect its operations largely.
CONCLUSION
On basis of above discussion it is concluded that IT sector of UK is in good condition but
Total mobile is not earning good amount of profit in its business. It can be observed that
consistent increase in direct and indirect expenses is the one of the most important reason for
decline in profitability in the business. Liquidity condition of firm is good and it have sufficient
amount of current assets in its business to pay current liability on time. Even though suggestion
is given to make investment in the firm because it is providing AI based services and there is
huge demand of these services across the globe. Hence, there are ample growth opportunities that
are available to be tapped by the firm.

REFERENCES
Books and Journals
Adekola, A., Samy, M. and Knight, D., 2017. Efficient working capital management as the tool
for driving profitability and liquidity: a correlation analysis of Nigerian companies.
International Journal of Business and Globalisation. 18(2). pp.251-275
Bekaert, G. and et.al., 2016. Political risk and international valuation. Journal of Corporate
Finance, 37(12). pp.1-23.
Bibi, N. and Amjad, S., 2017. The Relationship between Liquidity and Firms’ Profitability: A
Case Study of Karachi Stock Exchange. Asian Journal of Finance & Accounting. 9(1).
pp.54-67.
Boyas, E. and Teeter, R., 2017. Teaching Financial Ratio Analysis using XBRL. Developments
in Business Simulation and Experiential Learning. 44(1). pp.15-38.
Curme, C. and et.al., 2014. Quantifying the semantics of search behavior before stock market
moves. Proceedings of the National Academy of Sciences. 111(32). pp.11600-11605.
Kjellberg, H., Azimont, F. and Reid, E., 2015. Market innovation processes: Balancing stability
and change. Industrial marketing management. 44. pp.4-12.
Lakshmi, T.M., Martin, A. and Venkatesan, V.P., 2016. A Genetic Bankrupt Ratio Analysis Tool
Using a Genetic Algorithm to Identify Influencing Financial Ratios. IEEE Transactions
on Evolutionary Computation. 20(1). pp.38-51.
Laufs, K. and Schwens, C., 2014. Foreign market entry mode choice of small and medium-sized
enterprises: A systematic review and future research agenda. International Business
Review. 23(6) pp.1109-1126.
Zalata, A. and Roberts, C., 2016. Internal Corporate Governance and Classification Shifting
Practices: An Analysis of UK Corporate Behavior. Journal of Accounting, Auditing &
Finance. 31(1). pp.51-78.

Online
IT services and software market value in the United Kingdom (UK) from 2009 to 2017. 2017.
[Online]. Available through < https://www.statista.com/statistics/275982/it-services-and-
software-market-value-forecast-in-the-uk/>.