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When studying the annual report, we find two distinguished sections. The first section contains overall information regarding the year’s performance. This information is conveniently dissected into market sectors, giving us a breakdown of the group turnover. This enables the shareholder to analyses each of the market sector’s contribution to the final result. Together with the above mentioned, we find the chairman’s statement, the chief executives review and the financial director’s operating review.
All three reports offer a global vision of the company’s current position, and most importantly, answer the question: Where are we heading? Up to this point, the information is clear and comprehensive, dealing mainly with issues that require no technical knowledge whatsoever. In the second section we find corporate governance related issues and the three main financial reports: Balance sheet, Profit & Loss account and Cash flow statement, together with their correspondent notes. We could say that this second section is the technical backup to the first section’s contents.
Softness in the sector together with business disposals and their associated goodwill are to blame for the BIT drop. We also find that transforming floating interest rates into fixed rates has taken its toll on the net profit margin (Figure 1). [pick] This strategic decision’s goal is to improve future interest payments. In any case, by looking at first semester figures, we can see that profitability ratios have improved. Nevertheless, caution is required as this improvement is due to SPIES (French subsidiary) and the oil and gas sector.
There are very concerning issues, such as the industrial sector, US construction and utility services in the I-J. These issues must be addressed immediately for in 2002 they were nearly 25% of the group’s total turnover. In any case, if the second semester is as strong as last year’s, there should be a year end improvement. 3. 2 Efficiency Debtor payments is especially important in the construction industry because the costs incurred are normally very high, therefore an early recovery, contributes to finance projects. In chart 3. Debtor collection has improved, thus efficient recovery policies are in place. In the same way, creditor payment terms should be extended as much as possible, as it is a financing resource for the company. Creditor payment terms should increase up to 2001 levels, given they comply with agreed contract terms.