A closer look at the website of the company would suggest that its business is divided into three different segments.
Its consumer segment provides services such as Broadband, digital TV, home phones etc. consumers are also offered some bundled packages like Broadband and TV together. Its Small and Medium Business segment provide broadband facilities to the businesses along with offering other services such as web hosting & ecommerce as well as management of email and internet facilities at its clients. Its large business and public sector segment offer services such as networked IT services, Industry expertise, in-house facilities and other high end services.
The following section of the report will present an analysis of the forecasted financial performance of the company as on 31.03.2009. For detailed working of the facts and figures, please see the attached appendix.
1) Sales growth will be taken from the historical trends of the sales growth in last five years. Though the GDP growth Of UK can be considered as an alternative but since company works in more than one country therefore its historical sales growth will be taken while projecting the sales growth as on 31.03.2009.
2) All the cost items will be forecasted by taking their relationship with the sales i.e. as % of sales.
3) No dividends will be paid
4) No fresh injection of equity except increase in it through retained earnings.
5) Taxation is not being computed as per the laws enforced but as a % of the total revenue of the company.
Forecasted Financial Performance
In order to assess the core ratios of the firm, we have taken four most important ratios into account.
First ratio is return on sales or net profit margin suggesting that the historical performance of the company is somewhat mixed and consistent and the predicted results have also suggested that the company has been able to maintain its profitability with upward trends. This also can be attributed to the decreased interest expenses.
Asset turnover is the second key ratio which suggests how the assets of the company are managed in generating the value for the firm. The assets turn over of the firm consistently remained under 1. It may indicate that the firm has assets which are relatively new and are recorded at high cost. Since the company deals with providing services which require high investment into technology which is changing therefore high asset values of the firm may be justified.
Asset leverage suggests the use of equity and debt in acquiring the assets of the company. The predicted figure suggests that the asset leverage has continuously declined due to the injection of fresh equity into the business as well as increased profitability. Asset leverage also indicates towards the fact that the management may have more inclination towards the use of the debt into acquiring the assets. The use of debt also suggests that the firm may utilize