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In this project the researcher is going to analyze the Future Plcs’ future financial position. The Future Plc is following the investment strategies to build a financial structure in the company. The report analyzed the equity valuation, which indicated comparative evaluation, dividend growth model, cash flow to equity analysis, projection of the cashflow for the next few years, termination cash flow of the company as well discounting cash flow technique. Future Plc has followed the technical analysis, which include the major impacts of the company and minimize the negative threats from the company. The company has followed some strategic ideas to expand the revenue structure of the company. Financial performance indicates the companies’ several financial structures in the global market. It has been summarized that the company Future Plc has invested 55000 to 100000.
1.Introduction
The study is about the role of investment banking in the company FUTURE PLC it will discuss the role of investment bankers and investment banking in the financial market of the UK. The banking sector plays a crucial role in the development of the economy and further growth of the company. In the economic outlook, it will analyze the growth of the UK economy and global, and discuss the last 6 months performance of the UK stock market. Further, it will discuss the financial performance and Equity performance and technical analysis of the selected company Future Plc. in financial projection, it will discuss the company’s 5 years financial projection based on the previous 3 years financial performance.
In the discussion of global economy or world economy, it has been identified that the expected growth of global is approx. 6 % in the financial year of 2021 and can be 4.9 percent in 2022. Almost all countries have faced the covid 19 pandemic issue and in 2022 the war situation can be a reason for the low growth of the global. It has been estimated that the global growth in 2022 and 2023 is 3.6 percent. The global growth rate is decreased to 3.3 percent over the medium term (Saif-Alyousfi et al. 2018).
The economy of the UK considering a highly developed and market oriented economy. The economy of the UK considered as the sixth largest economy by GDP, and it is measured as the most globalized economy. As per the report the GDP of the UK in the financial year of 2022 is approx $ 3.320 trillion and the growth rate in the financial year of 2018 was 1.3 %, 1.4 % in 2019 -9.8 % in 2020 and happened due to the pandemic issue. It has been analyzed that the growth rate in 20222 is 4.2 %, and GDP per capita income is $ 49761 in the financial year of 2022. In the fiscal policy of the UK government, it has been identified that the government has reduced the rate of income taxes from 20 % to 19 % from 2024 April (Eisenberg 2018). It has been analyzed that the annual cost will be £ 5.3 billion in the financial year of 2024 and 2025, and it will be increase to approx. £ 6 billion in the financial year of 2026 and 2027. The government has announced a temporary cut in fuel duty of 5p per liter for the financial year of 2022 and 2023. On the other hand, to support the fund the government has increased the household budget by £ 500 million for the financial year of 2022 and 2023 (Ademmer and Jannsen 2018).
Based on the growth of retail industry growth in UK is oriented with 439,600 million GBP in FY 2019, which is providing CAGR growth 16% (Statista.com, 2022). According to CAGR rate of retail industry is presenting positive growth of retail industry of UK. Although economic trend of UK is continuously growing, which is good sign for business growth. Additionally, post covid situation is presenting huge percentage of sales growth has been identified. After pandemic situation online sales of retail industry has performed better than offline sales. Online sales of UK’s retail industry push positively around 15% growth has been identified in revenue growth. Although, retail industry sales volume in FY 2021 has reported around 465248 million GBP, which indicate the retail industry growth is positive to future business expansion of retail companies. Stable pricing policy of the UK is oriented with less tax approach on retail products.
3.1 Financial Performance
The financial performance of the Future Plc company is going well as it seems the company’s revenue structure is b enough. The revenue of the company has increased by 48% and the organic growth of the company has increased by 4%..
Profitability Ratio:
With the help of the financial ratio, it will analyze that the liquidity ratio of the company indicates the liquid amount of the company, the company gaining a positive liquid amount. On the other hand, the debt ratio of the company indicates that the company has not much more liability or debt in their company that they can reinvest in the business. Profitability ratio of the Future Plc is presenting growth of NP margin in consecutive years, which is presenting operational activities are consuming less expenditure. Although, GP and NP margin growth attract investors to invest more to expecting better growth to wealth creation. Moreover, investors involvement will improvise more financial condition., that would help to expansion of business in future.
Liquidity Ratio:
Liquidity ratio of Future Plc is exploring with positive growth due to increasing current assets compare to current liabilities. Based on current ratio growth in short term financial strength help to gain more option to managing external debts of the organization. Gannett current ratio growth in FY 2016 is presenting more financial sustainability has presented compare to Future Plc. Based on this ration Future PLC should need to adopt financial strategies to reduce current liabilities, which might be useful to improvise current ratio.
Debt Ratio:
Debt ratio of both organization is presenting debts consumption compare to equity, where ZIP Ltd. Has more financial stability to managing external debts. Although, Future Plc debt to equity ratio 0.03 is describing organization is using less percentage of debts use to continuous of business operations. According to condition of both organization debt to equity ratio is presenting external debts could be used to exploring bsunies operation further.
Performance of UK media industry and Future Plc:
The pandemic situation of covid19 has late to a drastic impact on the financial performance of the Future Plc and on its industry on a huge basis. It has been integrated from the financial data of the company that it has faced a certain fluctuation in making its sales and profitability position within the international market. Due to cover effect of covid19 issues regarding selling of product services has been seen with a major impact on the operational performance of the firm.
3.2 Calculation of BETA for the selected company
Beta refers to the volatile price of stock in comparison to the overall stock market. It is a core of CAPM, which helps to calculate the cost of equity, which is an important input for the stock valuation. If The value of Beta is more than 1 then it indicates the price of share can swing widely. In the calculator of Beat for the company, it has been unidentified that the value is 1.
4.1 Comparative valuation
The value of the terminal cash flows for the year 2023 is estimated as £57500 which can be invested within the business for gaining a stipulated volume of profit. Valuation of equity through CAPM and dividend growth model present different has presenting book value of other companies that help to gain information about each organization book value. Although, book value of the Future Plc is higher than other competitors that providing information that investors presence e in thus organization is more than other organizations. Future Plc book value increment compare to other competitors has present this organization business expansion plan attract investors for further investment.
4.2 Valuation based on using dividend growth model
4.3 Valuation associated with cash flow to equity analysis
Figure 2: Cash flow trend of Future plc
(Source: Wsj.com, 2022)
Several investment strategies such as value investing strategies, contrarian investment strategies and passive strategies played an effective role in making financial decisions within the business (Soboleva et al. 2018). Cash flow of the Future Plc is presenting continuous growth of cash balance isa helping this organization to grow business capacity. Although, managing activities of this organization has performing well to managing financial liquidity in this organization. Free cash flow increasing in last year of the Future Plc that help this organization to gain more financial leverage to expansion of bsunies in new regions. [Referred to Appendix 1]
The main purpose behind the cash flow projection for the upcoming five years is that it helped in making the analysis effective and helped in accumulating the financial results (Harris and Roark, 2019). Next five years cash flow projection of this organization sis presenting positive cash balance will be marinated by management because of targeting revenue growth of 10% on CAGR basis. Although, approximate growth of cash balance will be evaluated higher productivity ion this organization in future. [Referred to Appendix 2]
The terminal cash flow of the company has been determined to help in evaluating the financial volume and the relative managerial strengths of the business (Afiezan et al. 2020).
The discounted cash flow technique has been used to determine the present value of shares of the Future plc (Future plc annual report, 2021). Appropriate discounting factors and the sustainable financial volume of the business has been used that helped in determining the financial activities of the business (Future plc annual report, 2021). Based on using the several student managed investment fund theories and prospects, it helped in determining how much should need to be invested with the shares of the organization (Gülec and Bektas, 2019).
Technical analysis is the method of forecasting to identify the strategic directions of the business of ‘Future Plc’. Specific analysis identifies investment opportunities with the help of a systematic pattern. Technical analysis sometimes described the trading discipline to evaluate more opportunities for the business. Understanding technical analysis efficiently scrutinized the supply chain management as well as changes in price volume. Conjunctions with the other form of research ‘Future Plc’ has focused on the technical analysis to improve price charts and major limitations. Technical analysis helps individual investors and traders to identify as well as navigate the gap in the market. As per the opinion of Wójcik et al. (2018), the difference between a range of contraction and expansion is clearly described by the technical collaboration. In order to, the maintenance of the secretarial reports, technical analysis involves reasonable assurance to monitor financial records or activities.
The recent technological development of future Plc is product offering with the help of digital way. The fastest technological assumption is the efficient way and that can be maintained by the ‘Future Plc’. Identify the technological impact s necessary to minimize unwanted threats to the company. Targeting net-zero GHG emission is the scope 1 conducted by the company to identify business objectives (Annualreports.com, 2022). The rate of technological diffusion is necessary and most consumers identify the necessary services due to technological assumptions (Knight et al. 2018). The impacts of the cost structure, as well as value chain structure, are improving by the technological opportunities. The technological analysis identifies the basic impact of the global platform by using a responsible technological strategy. In order to, ‘Future Plc’ rebuilds the way of representation through the diversity and involves more opportunities among the colleagues. A unique opportunity has been considered by the ‘Future Plc’ and that efficiently controls technological disruptions in the business process.
The valuation of the market price of ‘Future Plc’ has efficiently been compared to the company's share price. An appropriate action plan needs to involve in the company to manage technological disruptions of the entire business. ‘Future Plc’ always focuses on the technical analysis and that need to improve to more accurately manage major business risk. In order to, highlight the major risk technological knowledge is necessary and that can be involved in valuations methods to identify the threats (Pa�itka et al. 2021). The market prices of the business company are measured by the technical analysis. Based on the technical evaluation, the management believes plant and equipment over their estimated value are compared by the straight-line methods. The residual value, as well as depreciation methods, is focusing on the financial reports to identify and rebuild the economical aspects of the business industry.
The acquisition of the business is considered the fair value and formally identifies company’s liability. The assets and liabilities of the business are assumed by the fair value, and certain lease arrangement methods are recoverable by the fair value. Fundamental analysis is the method of measuring the stock value of the company and computing the real worth of the company. The absolute valuation models are used by the ‘Future Plc’ and that can be computed by the annual reports. Individual financial managers need to be conscious to compares the transaction methods of the entire organization. In order to, identify the company's share price is necessary to compute companies P/E ratio. Sell: analysis recommends that sell anytime companies stock decreases in value in the near term (Morrison and Wilhelm Jr, 2019). The valuation of the company is based on the technical analysis that needs to be prepared by the company's financial analysis methods.
The quantitative process helps to determine the fair value of the company’s assets and compares the assets of similar companies. However, the analyst traditionally classifies the important methods to take appropriate action to “Buy, hold or sell”. Buy also is known as a purchase of specific security on the other hand sell is representing the sell a security if liquidating the assets (Jurayevich and Bulturbayevich, 2020). The analyst recommendations for buying, holding, or selling the assets are crucial moments that can be monitored by the technical analysis methods. The potential risk of ‘Future Plc’ is assuming companies shrinking and that shrinkage can be involved competitive markets in the business. In order to, acquire add value identifying the extra risk is necessary that can be minimizing the debt and limitations. The potential risk factors of the business are measured by the technical analysis and that minimizes the major business difficulties.
The fully possible transitions of the management are involved by the MBO by enhancing sales volume and accurately developing customer services. The total earnings of the employees are depends on the management systems that can efficiently achieve the organizational targets (Khan et al. 2020). Define individual employees' objectives and performance evaluation as well as continuously monitor performance progress by providing efficient feedback involved by the MBO. The targets of the MBO need to develop to identify the achievable targets of the company. MBO is generally used by the management to enhance the motivational levels through strategic planning. The abilities of the performance management are needed to develop by MBO to achieve future succession plans of the business. Throughout the management decisions ‘Future Plc’ is needed to achieve objectives by using a strategic management model.
On the basis of the next 5 year financial performance of the Future PLc it has been analyzed that the Future Plc will increase their performance. On the other hand, the dividend growth model of the company indicates that the company has a large amount of revenue in their firm. By which the company Future Plc can reinvest in the business and expand the net income.
Based on the above context it can be finalized that an investment summary is necessary for the business and that can identify the major economical threats. In order to compare financial performance most, the business organizations are focusing on the MBO to achieve business objectives. The three separate methods are P/E ratio, and P/B ratio is useful to identify the comparative advantages of the ‘Future Plc’. The reasonable assumptions are measured by the company to identify the major threats to the business. The cash flow of the company's discounted rates is necessary to identify and analyze the basic limitations. The absolute valuation models are used by the ‘Future Plc’ and that can be computed by the annual reports.
Journals
Ademmer, M. and Jannsen, N., 2018. Post-crisis business investment in the euro area and the role of monetary policy. Applied Economics, 50(34-35), pp.3787-3797.
Afiezan, A., Wijaya, G. and Claudia, C., 2020. The Effect of Free Cash Flow, Company Size, Profitability and Liquidity on Debt Policy for Manufacturing Companies Listed on IDX in 2016-2019 Periods. Budapest International Research and Critics Institute-Journal (BIRCI-Journal) Vol, 3(4), pp.4005-4018.
Akiyoshi, F., 2019. Effects of separating commercial and investment banking: Evidence from the dissolution of a joint venture investment bank. Journal of Financial Economics, 134(3), pp.703-714.
Eisenberg, P., 2018. Kier Group Plc: business and financial performance analysis and evaluation. The International Journal of Business Management and Technology, 2(6), pp.20-42.
Güleç, Ö.F. and Bekta?, T., 2019. Cash flow ratio analysis: The case of Turkey. Muhasebe ve Finansman Dergisi.
Harris, C. and Roark, S., 2019. Cash flow risk and capital structure decisions. Finance Research Letters, 29, pp.393-397.
Jurayevich, M.B. and Bulturbayevich, M.B., 2020. Attracting Foreign Investment In The Agricultural Economy. International Journal of Business, Law, and Education, 1(1), pp.1-3.
Khan, I.Y., Koptaeva, G.P. and Agabekova, G.N., 2020. Conceptual and instructive instruments for forming investment banking. ??????? ???????????? «?????», (1), pp.143-147.
Knight, E., O’Neill, P. and Pa�itka, V., 2018. Economic geography of investment banking since 2008: The geography of shrinkage and shift. Economic Geography, 94(4), pp.376-399.
Morrison, A.D. and Wilhelm Jr, W.J., 2019. Two Modes of Investment Banking: Technocrats, Relationship Managers, and Conflict. Journal of Applied Corporate Finance, 31(4), pp.105-117.
Pa�itka, V., Urban, M. and Wójcik, D., 2021. Connectivity and growth: Financial centres in investment banking networks. Environment and Planning A: Economy and Space, 53(7), pp.1789-1809.
Saif-Alyousfi, A.Y., Md-Rus, R. and Mohd, K.N.T., 2018. Oil price and banking sectors in gulf cooperation council economies before and after the global financial turmoil: Descriptive analysis. International Journal of Energy Economics and Policy, 8(6), p.89.
Soboleva, Y.P., Matveev, V.V., Ilminskaya, S.A., Efimenko, I.S., Rezvyakova, I.V. and Mazur, L.V., 2018. Monitoring of businesses operations with cash flow analysis. International Journal of Civil Engineering and Technology, 9(11), p.2034.
Wójcik, D., Knight, E. and Pa�itka, V., 2018. What turns cities into international financial centres? Analysis of cross-border investment banking 2000–2014. Journal of Economic Geography, 18(1), pp.1-33.
Wójcik, D., Knight, E. and Pa�itka, V., 2018. What turns cities into international financial centres? Analysis of cross-border investment banking 2000–2014. Journal of Economic Geography, 18(1), pp.1-33.
Wójcik, D., Knight, E., O’Neill, P. and Pa�itka, V., 2018. Economic geography of investment banking since 2008: The geography of shrinkage and shift. Economic Geography, 94(4), pp.376-399.
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