Business valuation and financial analysis Assignment

Business valuation and financial analysis Assignment Words: 1820

Interest rate risk 5 Foreign currency risk 5 Opportunities 6 The retreats Appendix 7 Reference: 1 5 Company Profile Greenville Group Limited is a public entity that is listed on the Australian Securities Exchange under the code BRB. The company focuses on the development, marketing and distribution of a large range of culinary appliances which could be classified into three categories: Beverage, cooking and food preparation (Bowsprit 2014). The predecessor of BRB was Housewives International Limited (HOW) that was established in 1 957 and became listed in 1999.

With a successful acquisition of the Braille company n 2001 and the expansion of the global market of electrical business, HOW decided to change the business strategies and dispose of its homewards and cleaning business in 2007. A year later, the HOW changed the name to Braille Group Limited (Braille 2015). Today, BRB owns and operates more than three brands and distributes its premium products in many different countries and areas globally including Australia, New Zealand, Hong Kong, North America and United Kingdom through online retail platforms and local third party distributors (Attitudinal 2014).

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The group is now ranked f 653 out of the top 2000 companies in Australia (Fishbowls 2014). Firm’s Economic Environment The following information of economic environment helps to understand the Brig’s past performance and provide predictions of future performance in Its principle markets in Australia, New Zealand, Hong Kong and United Kingdom. Exchange rates Over the past five years (from 15 Mar 2010 to 9 March 201 5), Australian dollar (ALAS) have been depreciating against New Jutland dollar by 19. 57%; British Pound by 17. 04%; Hong Kong dollar by 16. 5%. Furthermore, due to the most of appliances are designed in Sydney, but assembled in China, the currency against Chinese Yuan which has depreciated by 23. 80%, has to be taken into consideration. (Appendix 1) inflation The inflation rate needs to be controlled to maintain stable, too high or too low of the inflation rate will cause uncertainty such as unemployment and consequently harm the overall economy. As of January 201 5, the inflation rate in Australia is 1 . 7%; in New Zealand is 0. 8%; in Hong Kong is 4. 1% and in United Kingdom is 0. 3%. Appendix 2) interest Rates The current interest rate in Australia is 2. 25%; in New Zealand is 3. 5%; in Hong Kong is 0. 5% and in united Kingdom is 0. %. (Appendix 3) GAP Growth Rate (YON) In 2014, the GAP expanded in Australia by 2. 5%; in New Zealand by 3. 2%; in Hong Kong by 2. 2% and in United Kingdom by 2. 7%. (Appendix 4) Population Population indicates the number of potential customers. By January 2014, the population of Australia was 23. 13 million; New Zealand was 4. 51 million; Hong Kong was 7. 23 million and United Kingdom was 64. 31 million. Appendix 5) The influence of economic environment on firm’s historical performance With the effect of a stable interest rate, it has a positive effect on the current revenue. According to the company report (Appendix 6), under the condition that Brig’s worldwide developing, marketing and distributing its electrical products, the revenue shows an upward trend annually and an general increasing growth rate from -0. 2% to 13. 8% from 2011 to 201 3, but with a slow decline to 11. 3% in 2014. The business environment suffers as a result of consumer spending less on some alternative items during the recession.

On the other hand, if the economic environment is in harmony, consumers will have a tendency to spend money not just on necessities, but also on some larger items. Taylor, 2015). For the factor of foreign exchange, due to the Australia dollar’s depreciation against other foreign currencies during the year of 2014, there was a slow decline in Brig’s net profit. In 201 3, the net profit was Lag$49. 7 million, however, it dropped to LAG$48 million Australian Dollars due to the depreciation of Australian dollars. (Appendix 7) .

Generally, figures such as asset turnover ratio, current ratio and dividend per share shown in the annual report are above the industry average. (Appendix 8) The influence of economic environment on firm’s future performance The ICP is instantly used to measure inflation, a high percentage increase in ICP will reflect a high inflation rate. An increasing in the Consumer Price Index would help the government to make determination about fiscal policies, such as offering money easier or raising interest rates, which will make it more expensive for organizations and individuals to borrow loans, and result in less spending and more saving.

Therefore, government policymakers as well as individuals who have different purchasing powers with variable wage ranges can closely monitor the inflation and help to curb inflation. Industry Analysis Rivalry between existing firms BRB specializes small home appliances offering a large range of household products. GUT (GUT Holding Ltd. ), which is the parent company of Sunbeam, and BRB are two largest suppliers in the market of small home appliances, with total sales exceed 50% in the current markets, and in specific products, such as kettles, bread makers, blenders, hand mixers and juicers, this figure would have exceed 80% (AC,2010).

Thus the small appliance market is fairly concentrated. Both BRB and GUT have strong brand names and the similarity of their product ranges, features and pricing make them the 1st or 2nd hoicks for a large number of Australian consumers (AC,2010). In addition, both firms spend significant investment in product design to match each other’s product features and design, they frequently react and respond to each others promotions offers. Threat of new entrants According to the AC (2010), brand name reputation is regarded as the biggest barrier to entry Australian small appliance market.

This is because brand is important to customers when it comes to purchase small appliance, a large amount of customers would only purchase appliance with brand they are familiar with and trust due to the safety and quality concerns. Because of the importance of brand reputation, retailers are more willing to stock brands that have proved successful sales and less likely to switch to brands that they are less familiar with. Further, new brands will also need to make a significant amount Of investments and spend sufficient time to establish reputation among customers.

However, immigrants also demand brands that are renowned in their home counties, thus this gives an small opportunities to foreign brands to enter Australian market. Threat of substitute products Appliances of different categories are not substitutes of each others, thus hen there is a significant increase in prices, customers are very unlike to purchase different appliances as substitution, for example, customers would be unlikely to purchase a blender instead of a coffee machine when the price of coffee machine increases.

Yet customers may purchase substitutions within product groups when products are multi-purposed, for example, an electric pressure cooker can be used as a pressure cooker, a slow cooker and a rice cooker. Bargaining power of customers Small appliance customers are relatively insensitive to price changes due to rand royalty and the assumed long useful life span. However, same types of products of different brands are very similar and product switching cost for customers are low. Thus the price competition in the appliance industry is moderate.

Bargaining power of suppliers Most of the products in small appliance industry are manufactured in China, where numerous appliance manufacturers are located, and those manufacturers do not differentiate with each other. Moreover it is relatively costless to switch between manufacturers for BRB. Therefore suppliers in this industry have low bargaining power. SOOT Analysis Strengths High level competition Braille insists on and emphasizes on the most competitive position in the industry. It implements the business strategy of distribution in the industry of small electrical appliances to provide diversified products (Appendix 9).

In addition, the company considers the most important thing is to remain good relationship with customers. In order to achieve this goal, Braille emphasizes on the ability of design and innovation by applying consumers’ influence. Profitable organization The Braille has excellent financial performance. It can be seen in the annual port that the profits in each business sector have increased , for example, the revenue of North American increased by 4. 1 % in 2014, reaching $200. 2 million. Braille Annual Report, 2014) Market leader Greenville keeps the leadership of market share because it maintains the principal activities of the Group, such as, creation, development, marketing as well as distribution of mini electrical appliances in New Zealand, North America, Australia and ELK. (Appendix 10) Furthermore, the unique strong cash, business strategy and profitable flow generating maintains the marker share in such a competitive industry. Weaknesses Interest rate risk Braille is facing the risk of interest rate on the cash balances, borrowings, and the financial instrument Of derivation.

The policy of group is to control its interest rate risk by a combination of the rate debt of fixed and variable. Foreign currency risk The fluctuation of Foreign exchange rate may have impacts on Bristle’s performance both financially and operationally. Due to its operations in different countries, the company is exposed to the risk of currency change, because the sales and purchases are denominated in foreign currency. The rate of Foreign exchange also has an important impact on Greenville ‘s unconsolidated results, both the movement of translation and the transaction can have a negative influence on the net profits.

Opportunities The science and technology develops over the time, Braille will encounter opportunities to expend its market share and increase its profit, such as, by offering customers a variety of good quality kitchen appliances with high technology to convenience and simplify people’s lives, not only the existing with good reputation products but also the brand new product in the history, because Braille Group Limited is a company focus on design and innovation tit “Food thinking” strategy, and how consumers interact with it.

In addition, Braille actively protects customer values through increased investment in intellectual property protection, with a portfolio of patented innovative products for future sustainable growth, that are both valuable to people and differentiates Braille from its competitors. Furthermore, Braille will keep close relationship with a number of other company owned brands and brand partners, such as Philip and Halley Lewis, in order to keep improving their products.

Besides that, as the economy keeps increasing people are no anger satisfied with basic products but are willing to spend more money in expensive gadgets, such as kitchen appliances, to improve life qualities. (Braille annual report, 2014) Threats Threats are accompanied with opportunities. To Braille, the technology is changing rapidly in the electrical appliance industry, it is difficult to keep the products updated with the newest technology.

Further, a large amount of invest is required in product development, yet not every single investment fruits or control them, all these variables would affect releasing new products, which in turn detriments the company’s profit and share. Another threat of Greenville is the currency fluctuations, since Braille is an international company, different exchange rates will influence the currency translation and impact the operation of foreign distribution accordingly, it may threaten both of the future operation and financial performance of the Group.

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