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FR Presentation Report

FR Presentation Report

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Published by: Muhammad Aamir on Mar 07, 2012
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Analysis For Proposed Acquisition Of F & F Limited

30-Nov-2011

Scope 2. Purpose 2.4.Table of Contents 1.1. Limitations 3. Executive Summary 2. Financial Position 3.2. Appendix 2 2 2 2 2 3 3 4 5 5 6 7 2|Page . Qualitative Factors 3. Discussion 3.2.3.1. Conclusion 5. Additional Information 4. Introduction 2.3. Financial Performance 3.

Limitations • • Sector information are not available to compare F & F Limited with other companies in the same sector. Furthermore. 2.00%) in year 2011. Financial position of the company also seems very strong in 2011 compared to 2010. and dividends (by 21. profit after tax (by 22. Purpose The purpose of this report was to analyze financial performance. there is a decline witnessed in current assets and current liabilities by 2. Foreign investment and foreign exchange regulations are not taken into account. and any other additional information helpful in making meaningful analysis are considered.3.94% which not only shows its growth strategy but also guarantees that it possesses latest technology in machinery and equipment.82% and 43. 3|Page . gross profit (by 8.1. it is recommended to wait until the qualitative analysis has been completed.2.1.89% respectively which represents better utilization of resources and less short-term liquidity issues.12% in 2011. Scope While analyzing the proposal. Although facts and figures are going in favour of F & F Limited. available financial data. financial position. and qualitative aspects for proposed acquisition of F & F Limited in order to increase presence of Annaplis Limited in the local automotive components market. Financial performance is analyzed vertically and horizontally. 2. Horizontal analysis depicted promising results and considerable growth evidenced in sales (by 12. qualitative factors. 2. Vertical analysis does not show any significant fluctuation (upward or downward) in performance and investment ratios except dividend yield ratio which is reduced by 5.19%).Executive Summary The purpose of this report was to analyze quantitative as well as qualitative aspects for proposed acquisition of F & F Limited to capture local market of automotive components. This reduction in caused by substantial rise in capital gain.01%).25%).Introduction 2. This report has considered the available financial information and various qualitative factors that can give an insight in order to analyze the financial performance and position of the company. and then adjust the baseline quantitative results with estimates of the additional impact of those qualitative analysis. The company invested heavily in non-current assets resulting in an increase by 41.

74.29 INCREASE/ DECREASE Decrease Increase Decrease Decrease Increase * Refer Chart-1 in Appendix at the end of this report ** Earning per share is based on shares outstanding at end of each year.1. We will expand our discussion on performance analysis with help of given below table.Vertical Analysis (Comparison between 2010 & 2011)* PERFORMANCE & INVESTMENT RATIOS Gross Profit to Sales Profit to Sales Return on Equity Dividend Yield Earnings per Share** YEAR 2011 29. Financial Performance The following table summarizes the results of vertical analysis undertaken to judge financial performance of F & F Limited for year 2011 and 2010.01% 24. In fact all the ratios. no considerable increase seen in company’s performance and investment ratios. Although there is a substantial rise evidenced in sales by Rs.000/-. Decrease in return on equity and in dividend yield is the result of rise in total equity and capital gain (market price of share). 359. labour laws etc.01% 23.01% 11. are to be considered as well.17% 3.85% 14.000/-. gross profit by Rs.65 2010 30. Table-2: Financial Performance – Horizontal Analysis* PARTICULARS YEAR % INCREASE/ 4|Page . corporate laws. except profit to sales and earnings per share. The reason of decline in gross profit ratio is that gross profit is not increased at the rate at which sales increases. and profit after tax by Rs. are on decreasing side.• Local laws such as tax laws.Discussion 1.000/-.00% 12. Table-2.29% 3. 1. Table-1: Financial Performance .58% 9. 73.

000 402. Table-3: Financial Position (Ratio Analysis) RATIOS Current Ratio Working Capital Gearing Ratio YEAR 2011 2. 22.19%. 1.14% 2010 1. it is better to analyze another aspect of financial position which is provided in Table-4 below. These results show that the company is progressing towards a prosper future.989. & Equity in 2011)* PARTICULARS 2011 YEAR 2010 % CHANGE INCREASE/ DECREASE 5|Page .19% 21.01%.000 CHANGE DECREASE 12.000 100.25%.348.95% Before commenting on the Table-3. Table-4: Financial Position (Changes in Assets.000 121.2. and 21.000 2010 2.000 19. profit after tax.25% 22.01% 8. The table below is showing some ratios in this regard.2011 Sales Gross Profit Profit after Tax Dividend 3. Financial Position After having discussed financial performance of F & F Limited.00% respectively.03 350.000 33.000 329.00% Increase Increase Increase Increase * Refer Chart-2A and Chart-2B in Appendix at the end of this report Horizontal analysis shows encouraging results and sizeable progress is demonstrated in sales.000 971. Liabilities.000 897.17 104. we will now move towards analyzing financial position. 8. and dividend in year 2011 resulting in an increase of 12. gross profit.

Risk of expiring contracts.94% -2.94%) which guarantee that they are equipped with latest technology and. current ratio and working capital in 2011 is better than the previous year.320.000 845. there is no fear of technological obsolescence.000 710. since these people typically have exceptional skills in growing businesses and in anticipating and overcoming operational problems.3.200.000 1. Although analysis of financial performance and financial position are showing favourable results of F & F Limited but qualitative factors should also be considered before choosing a course of action. Although. 1. Huge rise in long-term liabilities and decline in current liabilities show management’s policy of relying on fixed debts which improves short-term solvency issues and this decline in current liabilities results in a better current ratio. therefore. Here is a sampling of the more common ones: 1. It is better to see whether F & F Limited’s revenues are tied to short-term sales. If management team of F & F Limited is perceived to be the first class.550. Analysis of Table-4 is evidencing company’s better position in year 2011. 6|Page . it can increase the corporate valuation.82% 156.3. without immediate prospects for renewing the backlog. Management.000 1.000 606.06% -43.000 690. the performance of the company will not last long.82% reveals better management and utilization of resources.2.3. 1. perception in the marketplace. Qualitative Factors There is a broad array of qualitative factors that must be considered.000 700. in fact. and customer relations are driven in large part by the quality of its management team.89% 88.000 41. gearing ratio of the company is increased sharply in 2011 but still the company is not highly geared.14% is a moderate one.000 340. gearing ratio of 33.Non-Current Assets Current Assets Long-Term Liabilities Current Liabilities Market Capital of Equity 2. A seller’s cost structure. The company has invested heavily in its non-current assets (an increase of 41.000 330. Decline in current assets of 2.1. If this the case.57% Increase Decrease Increase Decrease Increase * Refer Chart-3A and Chart-3B in Appendix at the end of this report As shown in Table-3.

risk of expiring contracts.3. and branding were some qualitative factors which have been taken into account. In order to make an insight financial analysis. Another qualitative factor that should be taken in consideration is the establishment of key patents or processes that can give F & & a clear competitive advantage.3. 1. this can give it a significant boost in valuation. 1. sector information is required. Also note that whether F & F has continued to invest in its brands or not.1. Sector information.2. their cultural and social aspects are also considered.Conclusion After analyzing financial performance and financial position. Apart from financial analysis. Branding. This information will be helpful in determining whether there is a free entry or exist for foreign investors. 1. 1. 1. labour laws should be given 2.6. Local laws. So this factor is also worth consideration. Sector information can collected from annual reports of competing firms easily available at stock exchange.3. 1.5.4.4. 1.4. patents. Nothing will drive a buyer away faster than an unresolved lawsuit. it was found that the proposed acquisition of F & F Limited can give Annapolis Limited a large market share. Additional information was also considered. 7|Page . if not then there is a risk of brand degradation that will require years to rebuild. As Annapolis Limited is keen to acquire a controlling interest in a company situated in another country. Lawsuits. It is important to consider the long-term benefit of the company when considering business acquisition. If F & F has invested a great deal of time and effort in creating brands for its product or service. Cultural and social environment. Foreign investment and foreign exchange regulations.4. lawsuits.3. Patents. especially one with a demand for a large settlement. Additional Information In order to make a meaningful analysis.3. Consideration to local laws such as taxation laws. This data enables comparison of company’s performance with industry standards.1. following information should be required.4. corporate laws.3. Foreign investment and foreign exchange rules and regulations should also be considered.

and weaknesses. it can be said. that this acquisition will be beneficial in capturing large market share in the industry.Appendix Chart-1 Chart-2A Chart-2B Chart-3A 8|Page .Though qualitative factors do not give conclusive evidence of company’s performance. strengths. on the basis of quantitative analysis. 3.

Chart-3B 9|Page .

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