MBA403 Financial and Economic Interpretation and Communication Report

MBA403 Financial and Economic Interpretation and Communication

Your Task

Students will select an ASX listed company and prepare a 2000-word report regarding its financial and non-financial management.

Assessment Description

• Students will write a financial management report and record a video presentation on a selected company, based on concepts learned in Weeks 1-8.
• Students will provide a clear recommendation to a nominated stakeholder of the selected company.
• Students will interpret financial, non-financial and sustainability metrics and consider ethics issues related to the selected company.
• The assessment addresses Learning Outcomes 1 to 3.

Assessment Instructions

• Students will select an ASX listed company that has currently published financial        statements which meet accepted standards of financial reporting.
• The report is limited to 2000 words (+/- 200 words), excluding the title page, bibliography.
• The report is to be formally written as per Resource A below.

Solution

1. Key Performance Indicators 

1.1 Discussion on Financial Results and Trends ($million)

Brambles Limited sales for the year 2018 are $47470.30, and its sales revenue is increased yearly. In the year 2019, sales increased by $125.2. In 2020 sales increased by $122.4 compared to the previous year. In the year 2021, sales increased by $491.9. The company's gross profit is increased every year except for 2019. As per MBA Assignment Expert, Sales in 2019 decreased by $37.17. The company's net profit is not in an upward or downward trend. In 2019, the company's net profit was $1467.7 because the company earned a huge amount of profit from the discontinued operation. 

The company's assets decrease yearly because it is regularly paying its trade payable. Trade receivable increases yearly, meaning the company sells its product on credit. The company's liability increased yearly except in 2018 (Elly, 2018). The company's short-term borrowing in 2018 was $91.2, but in 2019, this borrowing increased by $465.6. The company's long-term borrowing was $2397.1, but in 2019, it repaid the loan by selling some of its business. But in 2020, the borrowing increased by $74.7 (Easton, 2018).

1.2 Discussions on Financial Ratios

Financial stability ratios of the company for 2018 to 2021 are 0.40, 0.36, 0.34 and 0.36 respectively. Efficiency ratios are inventory turnover ratio, assets turnover ratio and receivable turnover ratio. Inventory turnover ratios for 2019 to 2021 are as follows 9, 9.6 and 9.9 days. The assets turnover ratio for 2019 to 2021 are 0.59, 0.63 and 0.71, respectively. The profitability ratios are gross profit, net profit, and operating. The gross profit ratio for four years is as follows: 48.97%, 49.10%, 59.10% and 56.10%. Net profit ratios for 2018 to 2021 are as follows: 10%, 9.49%, 31.90% and 15.49%. Operating profit ratios for 2018 to 2021 are 13.28%, 14.90%, 14% and 17.40%, respectively. The liquidity ratios are current ratio and the acid test ratio. Current ratio for four years is as follows: 0.73, 1.1, 1.5 and 0.71. Acid test ratios are 0.69, 1.57, 1.07 and 0.68 respectively.   

1.3 Discussion on non-financial and sustainability indicators

1.3.1 Non-financial Indicators

Brambles has developed a Zero Harm Charter, which lays down the idea that everyone is rightfully entitled to be safe at work and return to their homes as healthy as at the beginning of the day. The Brambles Injury Frequency Rate (BIFR) is a metric used to evaluate the company's safety record. It includes the number of work-related deaths, days away from work, work restrictions, and medical care given to employees per million hours worked (Annualreports.com, 2022, p. 26). 

1.3.2 Sustainability Indicator

Brambles are contributing to developing a nature-positive economic system that prioritises regeneration, reuse and resilience at its core (Brambles.com, 2022, p. 4). It's how the firm makes up for the resources it uses without depleting the environment or its social standing while working to reduce emissions to zero as quickly as feasible. In other words, the company needs to find a way to decouple individual behaviour from its impact on the natural and social worlds. It means putting back into the planet more than the corporation takes out or transitioning from deteriorating strategies that waste resources to restorative ones that repair nature and improve society (Brambles.com, 2022, p. 5). 

1.4 Financial Statement Summary

Table 1: Financial Summary
(Source: Created by author)

1.5 Trend Analysis

Table 2: Trend Analysis
(Source: Created by author)

1.6 Ratio Analysis

Table 3: Ratio Analysis
(Source: Created by author)

1.7 Non-financial and Sustainability Indicators

Table 4: Non-financial and Sustainability Indicators
(Source: Created by author)

2. Interpretation and Insights

2.1 Causes of change in Brambles' financial performance 

The company's sales revenue has increased every year. Still, its gross profit ratio decreases yearly, as shown in appendix 1, because the company is not maintaining its supply chain properly. In 2018 and 2019, the company's gross profit ratio was above 50%, but the gross profit ratio decreased and was below 50%. The company cannot increase its sales revenue compared with the cost of goods sold (Jurakulovna, 2021, p. 91). The net profit ratio of the company for 2019 is double because the company sold some of its subsidiaries. The net profit ratio increased slightly in 2020 because the company reduced operating and non-operating expenses. In the given case, the company generated 10% profit for every dollar sale in 2021 (Bexell and Jönsson, 2017, p. 17). In the year 2019, the company's operating expenses decreased by 3.40% because the operating expenses increased as compared to the previous year. In the year 2020 operating profit ratio is slightly increased because the company can reduce its fixed cost. But in 2021 operating profit ratio decreased by 1.7% because of fixed cost expenses.

The debt-equity ratio defines a 0.36 debt for every equity in 2021. It means the company has enough equity capital to pay its debt. The inventory turnover ratio defines that the company takes 9 days to sell its product in 2021. The assets turnover ratio indicated that the company is generating revenue of $0.59 by using its assets. In that case, the company is not efficiently using its assets. The acid test ratio indicates that the company has a $0.69 quick asset for every $1 liability.                       
2.2 Analysis of non-financial Indicators and Sustainability Performance

2.2.1 Non-financial Indicators

Through its "share and reuse" philosophy, Brambles consistently improves the environmental and economic advantages of its clients' supply chains (Brambles.com, 2022, p. 6). Through its Zero Waste World programme, Brambles has planned to increase the number of customer collaborations worldwide from 250 to 500 (Brambles.com, 2022, p. 6). Workplace BIFR has decreased by 25% due to an ongoing initiative to improve employees' well-being. More women are employed at its factories, and at least 40% of managerial positions are held by women (Brambles.com, 2022, p. 6). Over 10 million individuals have benefited from Brambles' efforts to distribute surplus food via food banks. A million individuals have been inspired, informed, and empowered by Brambles' efforts to become agents of change in the circular economy (Brambles.com, 2022, p. 8). These initiatives are aligned with the UN’s SDGs: 12, 13, 9, 17, 3, 5, 10, 16, 2 and 4.

2.2.2 Sustainability Indicators

Brambles guarantee the sustainable development of two trees for every tree it uses (Brambles.com, 2022, p. 6). All of the company's wood will come from sustainable sources, and they'll help additional markets in the forestry industry become Chain of Custody (CoC) certified. As part of its commitment to a 1.5C climate future, Brambles has developed a carbon emissions SBT that aligns with the Paris Agreement (Brambles.com, 2022, p. 7). By 2025, all of the organisation's electrical needs will be met by renewable sources, and it will be operating carbon-free (Brambles.com, 2022, p. 7). With a goal of using 30% recycled or repurposed plastic waste in their closed-loop goods, Brambles is also dedicated to ensuring that none of its product components reaches landfills (Brambles.com, 2022, p. 8). These sustainable initiatives are aligned with the UN's SDGs: 15, 8, 13, 7, 12, and 6 (Bexell and Jönsson, 2017, p. 16).

2.3 Brambles Strength, Weakness and Opportunities

Strength

● Heightened expansion plan due to revenue performance – Annual revenue growth rate of 10% (Brambles Limited SWOT Analysis, 2022, p. 4).

● Global presence – The company’s diversified income sources mitigates the risk of operating in a single economy. 

Weakness 

● Low liquidity – current ratio declined from 1.1 in FY 2020 to 0.7 in FY 2021 due to a decrease in current assets (Brambles Limited SWOT Analysis, 2022, p. 4).
Opportunity

● In North America, the container and packaging market grew by 6.4%, and by 2025, the market is expected to grow by 22%. This optimistic forecast bodes well for the company's future financial success.

● Strategic merger would increase the company's supply efficiency and expand its customer base. It also contributes to the company's operational and financial efficiency (Brambles Limited SWOT Analysis, 2022, p. 4).

2.4 Brambles Business Strategy, Competitors, and Outlook

Brambles' strategy is to achieve the number one position in each operational region. These companies want to lead the position of innovation, customer service and sustainability. These companies achieve the best employers award through safety, talent development programmes and diversity. Brambles' sustainable strategy includes the following: business positive, planet positive and community positive (MarketLine Company Profile: Brambles Limited, 2022, p. 6).
Brambles' main competitors are Amcor Plc, Greystone Logistics Inc, Modulaire Group, Singamas Container, Holdings Limited, and Toll Holdings Limited (Murray, 2008, p. 20).

3. Conclusion and Recommendation

Analysing the income statement vertically shows that the company's sales change yearly. In the years 2019 and 2020, sales increased by 3%. In the year 2021, sales increased by 10%. Profit percentage also changes every year. In 2019, sales increased by 112% because of discontinued operation profits. The financial stability ratio shows the relationship between Debt and equity. The company maintains an Inventory turnover ratio of between 9 to 10 days for three years. But the company has to improve this turnover ratio by maintaining a minimum stock level and supply chain. The current ratio indicates the company will not be able to pay its liability by selling its assets. In that case, the company has to purchase more tangible and liquid assets to maintain a standard current ratio. Engagement of additional assets not only helps to mitigate the lender problem but also helps to improve their production.           

The company can improve its performance by increasing its assets turnover and operating profit ratios. The company can also improve their performance by maintaining its supply chain. The company improves their sale by more engaging its assets in production. The company can increase their net profit by maintaining its operating cost. 

The company’s non-financial indicators show that the safety measure performance rating improved in 2021 as compared to the previous year. In 2017 BIFR performance rating was 7.1. The rating decreased by 30% over five years (Johnson, 2020, p. 1890). But this rating increased in 2019 because of a workplace fatality in one of its subsidiaries in Brazil. The company can improve this rating by considering the following things: they have to identify workplace hazards; therefore, it will enable the company to increase their production because workplace hazards bring several illnesses; the company can reduce employees absenteeism by mitigating these problems, taking the initiative in the implementation of safety programmes in the workplace which help the company to decrease their medical expenditure cost and increase product quality and productivity, they have to provide safety training to their employees which will provide awareness about workplace safety, They have to install various safety equipment in the workplace, the company have to take feedback from employees which help to mitigate workplace safety related issues and they have to reduce workplace stress. It is because workplace stress decreases performance and productivity and increases accidents, incident reports and illness (Johnson, 2020, p. 1895).             

References

Annualreports.com (2022), Brambles Annual Report 2019, Annualreports, retrieved 7 September 2022 .

Annualreports.com (2022), Brambles Annual Report 2021, Annualreports, retrieved 7 September 2022 . 

Bexell, M, and Jönsson, K, (2017), January, Responsibility and the United Nations’ sustainable development goals, In Forum for development studies, Vol. 44, No. 1, pp. 13-29, retrieved 7 September 2022 .

Brambles Limited SWOT Analysis (2022), Brambles Limited SWOT Analysis, pp. 1–6, retrieved 7 September 2022 .

Brambles.com (2022), Brambles Sustainability Review 2021, Brambles, retrieved 7 September 2022 .

Easton, PD, McAnally, ML, Sommers, GA, and Zhang, XJ, (2018), Financial statement analysis & valuation. Boston, MA: Cambridge Business Publishers, retrieved 7 September 2022 .

Johnson, MS, 2020, Regulation by shaming: Deterrence effects of publicizing violations of workplace safety and health laws, American economic review, 110(6), pp.1866-1904, retrieved 7 September 2022 .

Jurakulovna, JG, (2021), The Necessity and Theoretical Basis of Financial Statement Analysis in Modern Management, Academic Journal of Digital Economics and Stability, 7, pp.89-95, retrieved 7 September 2022 .

MarketLine Company Profile: Brambles Limited (2022), pp. 1–26, retrieved 7 September 2022 . 

Murray, A, (2008), ‘When Silence Is [a] Golden [Thread]: Approaches to the Construction of Indemnities, Exclusions and Guarantees in Commercial Contracts Since Andar Transport v Brambles Limited’, Commercial Law Quarterly: The Journal of the Commercial Law Association of Australia, 22(1), pp. 14–24, retrieved 7 September 2022 .