Babushka’s Baubles plc Financial Analysis Report

Executive summary

The following is an actual analysis report for Babushka’s Baubles plc Financial Analysis. In order to understand the company financial statement, this paper will focus on company’s activities, the main user groups and their needs, company’s equity, debt structure,key ratio,fixed assets, and intangible assetsand so on during the financial year. The main objection is to recommend whether or not to invest in Babushka’s Baubles plc.

Background

Babushka’s Baubles is an international manufacturer of jewellery and fashion accessories, established in 1975. They manufacture mainly in a region with low labour costs and sell worldwide. Recently there have been problems with the quality of manufacturing by several sub-contractors, leading to disruption in supply.The current share price is 380 pence per share.And Benny’s Bling plc was established in 2004 by a highly regarded young designer. Manufacturing is in a country with higher costs but more reliable quality. Both businesses are highly seasonal with the main manufacturing period being July to September and sales peaking at Christmas.

  Revenue this year was $42million, anddecrease of 7per cent,on last year, and operating profit after tax was $81 million,an increase of 86 per cent.The increase in revenue is being passed on to shareholders,as a dividend of 8 cents per share, fully franked, making cents per ordinary share fully franked for the year

Babushka’s Baubles is an international manufacturer of jewellery and fashion accessorieswith an increasingly strong financial and shareholder focus during the year,

The main user groups and their needs

The structural characteristics of the main user groups: generally, female, married, above25 years of age, college below, the proportion of users with the monthly income below 2,000 dollar(including no income)  in the characteristics of data occupy a major position, on the occupation hand, fashionable female and lady are still the main users, the ratio was 34.2%, 12.6%, but the proportion of the latter previously decline, in addition, the proportion of state organs, the party organization staff, enterprises management, production and transport equipment operators have more growth than the past, respectively, 7.4%, 9.3%, 5.0%, public administration and social organizations, the IT industry, wholesale and retail trade, education, the manufacturing sector is the main distribution industry, the ratio reached 9.3%, 7.7%, 13.0%, 14.6%, the of jewellery and fashion accessories has the further broad structural characteristics.Usually, the demand follows above:

1), good-looking 2), complete,3) easily carrying; 4), color; 5), novel; 6), fresh.

The nature of the company’s activities

The principal activities of the Group during the financial year were the provision of jewellery and fashion accessories.#p#分頁標(biāo)題#e#

Babushka’s Baubles offer specialised and fashionableprograms to young man mainly. The company‘s aim is to ensure young manbegin and continue to make notable and fashionable choices, as well as developing and enhancing their fashion favourite.

The productionand the activities offered in this building block are based on the individual young man and lady. Each ladyis able to get favourite production according to their own unique abilities and special service.

Profitability review

This year it wasbeyond 2.2% ofnet sales. Finance and servicing fee income includes jewellery and fashion accessories. I would question why this wasincreased (as a percentage of sales) for 2008. A possible explanation could be a significant change which had a higher percentage of servicefinanced or possibly theyincreasesfinance charges (i.e.bellowed interest rates to their customers or gave cash terms which resulted in collecting morefinance charges.) 

What is more, this year, cost of serviceand occupancy costs were less. General and administrative expenses have also decreased both in terms of real dollars and as a percentage of service.

Balance review

Babushka’s Baubles has inclined from last year and is upindustry averages. The Current Ratio which measures a company's ability to meet its current obligations has increased .The Quick Ratio (a more liquid measurement which compares only cash plus receivables to current liabilities) has also inclinedReceivable turns (net servicedivided by receivables) has been increased. This is a faster turn than the industry average probably due to the financing arrangement whereby the company servicetheir receivables to an outside company. The change from 2005may have something to do with changing to a different factoring company and probably also increased due to the servicing of receivables to an outside party (receivables are actually held on the books until collected.) 

When a company generates a profit, management has one of two choices: they can either pay it out to shareholders as a cash dividend, or retain the earnings and reinvest them in the business(Joshua kennon,, 2006).

Fixed assets and other long term assets remained relatively changed from 2005. 

 Cash and cash equivalents is 57.641, trade and other receivables is 36.675, other financial assets, inventories and the total current assets is 216,800.Fixed Assets module handles all transactions related to fixed assets, for lease as well as for own use. It also provides for information like asset enhancement, physical verification, insurance and asset tracking(net, 2007).

The companyhas re-invested 95.495 million into earlyproduction-developingover the last threeyears. Current tax payables of the company are 3,061,Non-current liabilities is Deferred tax liabilities is 57, 539, Current Operating lease liability is 999, Non-current Operating lease liability is 16,480. And we know that this is a timing issue due to the timing of payables or the general need for increased cash. The borrowing rate on the line of credit is less than the prime.#p#分頁標(biāo)題#e#

Stockholder's equity incline was due to the net saleson the income statement and the repurchase of treasury stock. The purchase appears to be in relation to the repurchase of stock from former participants in the Company's ESOP plan (employee stock ownership plan.)  The study was guided by an advisory board that included policy makers, academics, labour representatives and private equity executives(Andrew ross sorkin, 2005).

Operation efficiency review

Operations grew significantly through the year. The total number of factories increased from 660 to 933 (905 in Australia, 28 in New Zealand), a growth of 41 per cent. The Company continued to acquire high quality groups and excellent sites and centres in outstanding locations. A strengthening of operational structure has enabledthecompany to focus on and measure quantitative and qualitative performance indicators more effectively. Systems have continued to improve and have reduced the administrative burden for theirstaff, enabling them to spend additional time with the sale. Marketing has been enhanced this year,with a number of major campaigns boosting occupancies. The breadth and scale of operations now means that company have also moved into the ASX Top 100 list of companies. The Company and its operations are now attracting the attention of a new set of institutional shareholders and one of our priorities is to engage with this market to build understanding. The reduction was primarily the result of the increase in notes payable (which I believe is the credit line) and is not an indication of a more efficient use of corporate assets. The equity turnover (net sales/stockholder's equity) has increased which is the result of increased equity (due to the company expansion).

Cash and cash equivalents is 57.641, trade and other receivables is 36.675, other financial assets, inventories and the total current assets is 216,800.This shows the stability on the asset side and indicates that the increasingof stockholder's equity from net income was funded by decreased liabilities. 

Financial risk review                                                                     

 Intangible assets in Not longer than one year is 39,475 Acquisitions through business combinations Disposals or classified as held for sale Net revaluation increments/(decrements) Net foreign currency exchange differences Reclassified to goodwill ,Balance at 30 June 2008  32,464, impairment of these assets: Amortization expense, Impairment losses charged to profit, Reversals of impairment losses charged to pro t , Net foreign currency exchange differences, 30 June 2008 (933). Intangible assets are a big part of contemporary business(Marc G. Olsen. Michael Halliwell, 2003)

The long term debt to equity ratio has decreased slightly from primarily due to the increasingin equity (due to the income profit.) Long term debt to total capital has improved slightly, two factors showed this - the decreased short term borrowing and the increasing stockholder's equity. Total debt to total capital has decreased from .73to .64,which is also a factor of the decreased borrowing and a increasingin stockholder's equity. Total liabilities to net worth (or stockholder’s equity) have decreased from 2.73to 1.75. This is an important indication of the decreased leverage of the company.#p#分頁標(biāo)題#e#

Conclusion                     

Babushka’sBaubles plc has experienced a substantial profit for the year ended 2008. Babushka’sBaubles has consolidated its position in the giant market with the recent acquisition of jewellery and fashion accessories in Texas giving us a total of 417 owned centres and 108 franchised canters in the US. The profit was funded through less short-term debt and lower payables, thus making the company stronger. The Company is also in the process of changing the company's make-up by expanding division. All of these factors lead to concern below the long term health of the company. And at this point, the equity position of the company, is substantial at the consolidated profit t of the Group for the financial year after providing for income tax amounted to $110,000 (2005: $34,000 AIFRS).

  If there are quarterly compliance issues with the bank, are they in compliance or have they been waived? This will indicate whether the bank and the Industrial Revenue Bond holders are working with the company.In addition, security in your inventory should be requested, if possible. 

 

 

Reference

Marc G. Olsen and Michael Halliwell, 2003.Intangible Value

http://www.enjbiz.com

Joshua kennon,, 2006.Investing Lesson 3

Andew ross sorkin,  2005, Study Says Private Equity Isn’t Big Job Killer