Identify Profits, Earnings, and 5-year trend and ratio calculations

Discuss about the Financial Management Tools for Financial Decision.

This report is helpful to develop the deep understanding about the financial management tools for taking the financial decision in a company. James fishers and sons is the company that has been selected in this report. This company operates its business all over the UK. The report covers an analysis of different types of ratios, financial stability, and liquidity and profit earnings for purpose of assessing the investment opportunity in its stocks.

James Fisher and Sons plc is leading service provider of the Marines and Oil and Gas base industries. The company also provides customized solutions and services in the nuclear, construction and transportation sectors. The company provides the innovative solutions to the industries in the most critical areas of their operations and satisfies the customers worldwide. The total numbers of employees were 2747 in the year 2016 and the presence of their group companies in 25 countries at different parts of the world (James Fisher and Sons Plc, 2016). The annual turnover of the company is £437.93m and the market capitalization of the company is £793.30 million (CityWireMoney, 2017). The main strategy of the company is to gain the excellence in their core areas at the global level.

As per the table and figure, it indicates that the company net profit of the company was £24.12 in Dec 2011 and £40.07 in 2015 so it is identified that the net profit of the company is increased by 60.19%.The reason behind the increase in net profit is the increase or decrease of price of the units. The company’s cost such as the cost of finance and common cost (Fixed and Variable cost) is decreased as compared to previous years. These are the main indicators behind the increase in the percentage of profit in last five years. Similarly, revenue of the company is also increased by 307.62 to 437.93 in 2015 i.e. 70.24% from 2011.It is indicated that the company successfully innovations in their services to meet the changing needs of the customers as well as the company used the effective price strategies to maintain the revenue in the last five years. Moreover, the Earnings per share (EPS) of the company is also increased from last five years that is shown in below figure.

From the last 5 years, it is identified that the company’s increased their dividends on per share i.e. 16.1 to 23.8 it is indicated that the company achieved the good net profits in past years so that they distribute the dividends to its shareholders more (Michael et.al, 2015). And the second reason is that the company’s also earns the sufficient profits in their different divisions and also plan to seek more growth and expansion in other areas. As per the above indicators discussed, it reveals that the growth of the company is substantially good in major areas of their operations.

It assesses the capabilities of the company to derive profits from its operations. Below given table discuss the profitability ratios of the company for their 5 year period time.

Profit margin ratio of the company indicates the higher percentage in the year 2012 it means that the company achieves the highest profit over their sales or revenue. After that, the profit ratio is increased i.e. 9.29 in 2015 as compare to their previous years. The profit margin is increased because the company performs effectively in their area of operations and company reduced their operating expenses. Similarly, the lowest profit margin is recorded in 2011 i.e. 7.84% which means that the competition in the industry was high and company did not produce the economies of scale and the pricing strategies also affected the net profit margin of the company (AccountingExplained, 2016). Similarly, on the other hand, Return on Assets ratio indicated the highest percentage in the year 2012 i.e. 11.15% and lowest in 2011 and 2015 i.e. 7.05 and 8.02.It seems that the company effectively used their assets to generate income. Currently, the ROA ratio is 8.02% it means that the company should effectively use their assets by reduced the cost and monitors the expenses of the assets periodically. Also, company can increase the revenues that help the company to increase the percentage of ROA. These ratios affect the financial performance of the business and impact the level of competition in the industry (BDC, 2016).

Dividends ratios and their influence on financial performance

Dividend payout ratio is the important ratio for the investors to analyse the sustainable dividends from the company. The consistent trend in the ratio is considered as good as compared to high and low ratio. As per the table, it seems that the company pay out the dividends to their investors at a uniform rate for last 5 years. It seems that the company’s operating performance is good and it capable of paying the dividends in future. The company paid 30% dividends to the shareholders in 2015 and 33% in 2011 it indicates that the company manage their debt and operating expenses effectively that improves the financial performance in future. Similarly, dividend yield ratio refers that the cash amount distributed by the company to its shareholders relative to the market value of each share (Gibson, 2012). It seems that the shareholders got 3.20% on the market value of per share and that is highest as compared to the previous years. It means that the investor’s money is appreciated in the company’s assets or stocks. The lowest yield ratio is recorded in the year 2013 i.e. 1.60% it means that the company cannot give the appropriate values to the investors according to the market value of the each share.

Dividend ratios help the financial performance of the company; if the shareholders or investors are wealthier then it would be the indication for the company for more capital and investments. It seems that the company gives a uniform percentage of payout to the investors from 2013 to 2015.It also indicates that the company effectively managed their operations in these years and improved their performance effectively. Large dividends payouts are riskier for their future earnings.

Financial stability of the company is measured by the solvency ratio. In this ratio, it evaluates the company’s debts to its assets and equity (FT, 2016). The debt to equity ratio of the company in below figures indicates that the 1.33 in 2015 which is higher than the previous years. It is indicated that the company’s liabilities is increased as compared to its equities. The highest debt to equity ratio is recorded in the year 2011 i.e. 1.60 and after that, there is a subsequent decrease in their ratio levels from 2012-2014.From the above analysis of the 5-year trend ratios, it is assumed that the company has effectively managed their debts in these periods and generated their outstanding money from creditors on time. As per the risk perspective, the current year ratio is not good because it affects the cash flow of the business and company could not take effective decisions in operating and finance activities of their business. The higher debt ratio level limits the credit availability of the company in future (Investing, 2016). The availability of credit is difficult for the company from the various lenders. So the company needs to maintain the debt equity ratio for better investments and extension of business in future. A uniform debt ratio helps the company to attract more investors and credit availability.   

Financial stability and Liquidity ratio’s and their impact on financial performance of the company.

On the other side the current ratio of the company is recorded highest in 2011 and 2012 i.e. 1.72 it indicated that the company was strongly capable to pay off its short term obligations. The good current ratio is considered is more than 1.After that there is slightly reduction in the ratios in 2013 and 2014 that indicated that the company’s was not effectively maintain their inventory levels and working capitals that reduce the ratio levels. Similarly, in 2015 it went up to 1.58 that depicts that the company effectively manages their inventories and generates cash from their debtors to pay off its obligations in short span of time. As per the analysis of the solvency and liquidity ratios of the company it is consider that the company should effectively manage their ratios for good performance in the future. It is considered that the company’s ratios’ reveals the good opportunity for investors to make investments in their projects.

This news is related to the BAE system testing of the technology for the ship energy assessment which is enhancing the condition optimization and routing enhancement system. It has impacted the transformation and ship maintenance of the UK companies (Navel technology, 2016). This news was released to develop the technology to monitor the equipment, fuel and energy that can help marine industry in future for better decisions in real time. BAE system is the leading system of the technology to suppliers that helps to monitor the fuel and energy performance of the ships and cargos.

This system testing technology was provided by the James Fisher and sons’ plc in Northern Europe. It is used to monitor the operational performance of vessels at sea to inform potential inefficiencies (Marty, 2012). The SEA CORES is designed to reduce the complexities in the organization. This technique is used for analysis of the performance of the vessels to coordinate with environmental conditions such as weather, energy consumption and performance of ships in marine industry (Nick and Jos, 2012). The usage of BAE system impacts the management decisions such as enables the operator to reduce fuel consumption and minimize wear of the engines, and helps to save costs and increase the availability of the fleet to fulfill operational commitments around the world.

James fishers and sons is the leading brand of UK. It offers services to all sectors of marine industry and specialist suppliers of engineering services to the energy industry. It operates its businesses in marine support, offshore oil, specialist technical and tank ship division of the northern European regions (James fishers and sons.com, 2016).

Research information about the company that affects the performance of company.

James fishers and sons is adopted the BAE system technologies for offering better services to ships in marine sector (Leonard and William, 2013). These are helpful to organization to use the Energy assessment system (EAS) and system information exploitation system (SIE) technology in productive manner. Both the technologies are beneficial for the optimization of fuel consumption and engine efficiency (Brain and kees, 2015). The company can also use the other strategies to optimize the vessels performance in marine sector. Further, this technology provides the valuable information to the company, which helps to better understand how to operate the fleet (Stephen, 2015). However, it is reducing the speed that may affect fuel and management of the optimum speed of the engine.

Evaluate the corporate governance. Describe the role of executive directors, non- executive directors and combined code of corporate governance.

Corporate governance report of James fishers and sons ensures accountability of different stakeholders towards shareholders by maintaining will disciplined the corporate code of conduct in the marine industry (Alice, 2016). The corporate governance is currently consists of 7 broad of directors such as chief executive officers, non- executive chairman, group finance directors and 4 non-executive directors. All these broad of members contribute towards the established the ethical standard; define strategies and financial objective of the company.

The broad members of James fisher and sons take decisions for betterment of company. Board members are responsible for long-term success of the company with correct strategic direction, management and control employees in the organization. The executive officer’s role is to take care of day-to-day responsibility of the company (Charles, 2016). Executive directors work for the company’s long-term sustainable growth. While non-executive directors have the business and commercial experience to bring independent and objective, judgment by bearing in minds the challenges. Constructively the Executive Directors helps to identify solutions of issues of strategy, performance, resource and standards of conduct.

Well-balanced decisions from Non-Executive and Executive Directors enable clear and effective leadership and maintain the highest standards of integrity across the Group’s business activities (Richard and John, 2016). Each Non-Executive Director is expected to commit sufficient time to in Board and Committee meetings and to stay in touch with the senior management, shareholders and other stakeholders of company. The combined code is set of best practices applied in the organization for sustainable growth in the market (Thomas et.al, 2015). It was provided by financial reporting council of the corporate governance of the UK.

The corporate governance has set of the provisions of the combined code of every company for broad of directors, and relation with shareholders, remuneration and auditing and accountability, leadership and effectiveness of company. In the report of corporate governance, code of financial reporting council helps to better understand each department of the company. It includes board of director, accountability, effectiveness, leadership and relation with the shareholders of the company (financial reporting council, 2016). The broad of director are executive and non-executive director of the company. Relationship with shareholders is also kept in mind while designing combined code by corporate governance. The good corporate governance is important for achievement of the goals and target of the company in effective way.

After analysis of the asset value per share and current market value of share, it can be concluded that the company has the potential shown incremental market price per share and asset value of per share in last 5 years. Further it has also been analyzed that the company dividend payout ratio has increased in 2015 as compared to past years. This can make the shares of company attractive in capital market (Anderson, 2014). Therefore, it can be suggested to the investor to invest their money in this company, as it will be beneficial for future return over their investment.

Conclusion

From the above report, it is concluded that it would be a productive investment decisions for investors to invest their money in stocks of James Fisher and sons’ plc. The market price per share of this company has continuously increased in last 5 years. This could provide the capital gain benefit to shareholders. Along with this, the dividend yield ratio of company has increased from 2012 to 2015 continuously. It also depicts good opportunity for investors to invest their money in this company. Further, it can be concluded the BAE system techniques are applied in the company to enhance the performance of the company. This technique would be helpful to company for improving operational efficiency and reducing cost of different operations. This way, it can maximize company’s profitability.

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