Finance Analyses Admiral Group.- Assignment 1 PDF

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Assignment on financial Analyses of Admiral group for Accounts in MBA program...

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UNIVERSITY OF WEST LONDON The Claude Littner Business School

MBA

ANALYSES THE FINANCIAL PERFORMANCE OF ADMIRAL GROUP (UK) AND ITS BUSINESS GROWTH

Nam UWL ID: 21384289 E-mail Address: [email protected] Date of Submission: 25th March, 2019

Module Tutor: Mr. Nishantha Hewavitharana Word Count: 3173 (Including Numbers & figures, Contents and References)

Table of Contents LIST OF FIGURE.............................................................................................................................................. 1 LIST OF TABLES .............................................................................................................................................. 1 01. INTRODUCTION. ...................................................................................................................................... 2 02. OVERVIEW OF COMPANY. ...................................................................................................................... 2 03. FINANCIAL ANALYSIS............................................................................................................................... 3 3.1 Financial Statements Analysis. ............................................................................................................ 3 3.1.1 Horizontal, vertical and segment turnover analysis. ................................................................... 3 3.1.2 Conclusion of Financial Statements Analysis. .............................................................................. 7 3.2 Financial Ratio Analysis. ...................................................................................................................... 8 3.2.1 Profitability, liquidity, efficiency, gearing and investment ratios. ............................................... 8 3.2.2 Conclusion of Financial ratio analysis. ....................................................................................... 10 3.3 Growth strategy, long term solvency and considerations for investors........................................... 10 04. CONCLUSION IN GENERAL. ................................................................................................................... 11 References .................................................................................................................................................. 12

List of Figure Figure 1: Operating profit for last ten years. (Complied by Author subject to financial reports of Admiral Group) ........................................................................................................................................................... 5 Figure 2: Profit after tax(Complied by Author subject to financial reports of Admiral Group).................... 5 Figure 3: Balance sheet vertical analysis....................................................................................................... 6 Figure 4: Total equity (Complied by Author subject to financial reports of Admiral Group). ...................... 6 Figure 5: Current assets (Complied by Author subject to financial reports of Admiral Group) ................... 7 Figure 6: Current liabilities (Complied by Author subject to financial reports of Admiral Group) ............... 7 Figure 7: Profitability ratio (Complied by Author subject to financial reports of Admiral Group) ............... 9 Figure 8: Investment ratio (Complied by Author subject to financial reports of Admiral Group) ............... 9 Figure 9: Efficiency ratio (Complied by Author subject to financial reports of Admiral Group)................... 9

List of Tables Table 1: Income statement horizontal analysis ............................................................................................ 3 Table 2: Balance sheet horizontal analysis ................................................................................................... 4 Table 3: Income statement vertical analysis (compiled by Author) ............................................................. 5 Table 4: Financial ratio analysis ...........................................................................................................8 1|P age

01. Introduction. The report discusses the financial performance of Admiral Group based on the historical financial data. In order to obtain the required financial data to perform the financial analysis, it is accessed to annual reports of the organizations to gather financial data from audited financial statements. Financial performance analysis contains two aspects such as financial statement analysis and financial ratio analysis. Financial statement analysis mainly focuses on horizontal, vertical and segment turnover analysis and financial ratio analysis evaluates the implications of profitability, liquidity, efficiency, gearing and investment position of the organization for last financial years. In addition to that it is discussed the strategic approaches and practices which can be taken in order to achieve the long term growth strategies and ensure the stability of investor considerations in terms of financial performance of the organization. Based on these implications, it is arrived general conclusion over financial performance of the organization. The author has selected the Admiral group to do this research, due to his interest on insurance industry.

02. Overview of Company. The Admiral Group PLC is a UK based company which related to motor insurance and they have insurance for many categories of vehicles. The company started in 1993 with 57 employees and at present it has more than 8000 employees in world wide. Admiral group is, one of the largest insurance providing company in UK. Other than the motor insurance admiral group dealing with house insurance too. Recently they have developed two law firms and expand the group. Admiral group has many partially owned subsidiary companies and few 100% owned subsidiary companies. The business model of the Admiral group is prioritizing satisfied customers and happy staff. Currently organization is highly concerns on requirements and expectations of the target market customers in order to retain the existing customers and attract new customers towards the organization. In terms of financial perspective, organization has gained 390Mn Pounds net income in financial year 2018. In overall perspective, organization has gained reputation in the industry and higher market concentration ratio over the period of time. The Admiral group has operations internationally, especially in Spain Italy France US and Mexico. They have their headquarters in south wales UK. (Admiralgroup, 2019). 2|P age

03. Financial Analysis. 3.1 Financial Statements Analysis. Financial statements analysis is performed based on the financial data of income statement, balance sheet and cash flow statement. Financial data analysis will help to have an understanding over behaviors of financial performance and financial policies and procedures of the organization (CFAinstitute, 2019). The main drawback of financial statements analysis is, it is difficult to compare the results of financial statements analysis with other competitive business organizations. That is mainly due to the differences of financial policies and procedures of each competitive firm. In this report financial statements analysis is performed based on the implications of vertical analysis, horizontal analysis and segment turnover analysis. 3.1.1 Horizontal, vertical and segment turnover analysis. Horizontal analysis involves with analyzing the behaviors of financial performance considering the base financial year. In this report, financial year 2008 is considered as the base in order to interpret the financial performance of the organization. All amounts in Euro Million FSLI Net revenue Net insurance claims Expenses Operating profit Finance charges Profit before tax Taxation expense Profit after tax

2008 423 (115) (106) 203 0 203 (58) 145

2009 508 (152) (140) 216 216 (59) 157

% 20% 32% 33% 6% -100% 6% 2% 8%

2010 641 (209) (167) 265 265 (72) 193

% 52% 82% 58% 31% -100% 31% 25% 33%

2011 870 (364) (207) 299 299 (78) 221

% 106% 218% 96% 48% -100% 48% 35% 52%

2012 984 (405) (235) 345 345 (86) 258

% 133% 253% 123% 70% -100% 70% 50% 78%

2013 924 (303) (251) 370 370 (83) 287

% 119% 165% 138% 83% -100% 83% 45% 98%

%

2016

%

2017

%

All amounts in Euro Million FSLI Net revenue

2008

2014

%

2015

423

885

109%

905

114%

1,017

140%

1,129

167%

Net insurance claims

(115)

(259)

126%

(227)

98%

(395)

245%

(347)

203%

Expenses

(106)

(270)

156%

(299)

183%

(332)

215%

(367)

247%

203

355

75%

380

87%

290

43%

415

105%

0

(5)

-18500%

(11)

-44500%

(11)

-45700%

(11)

-45700%

203

351

73%

369

82%

278

37%

404

99%

Taxation expense

(58)

(69)

20%

(77)

34%

(64)

12%

(72)

25%

Profit after tax

145

282

94%

292

101%

214

48%

332

128%

Operating profit Finance charges Profit before tax

Table 1: Income statement horizontal analysis

3|P age

All amounts in Euro Million FSLI

2008

2009

Non-current assets

874

933

7%

1,471

68%

755

-14%

927

6%

943

8%

Current assets

140

245

75%

296

112%

1,860

1231%

2,277

1530%

2,530

1711%

1,014

1,177

16%

1,767

74%

2,615

158%

3,204

216%

3,474

243%

Share capital

0.3

0.3

0%

0.3

0%

0.3

0%

0.3

0%

0.3

0%

Share premium account

13

13

0%

13

0%

13

0%

13

0%

13

0%

252

5

-98%

4

-98%

3

-99%

1

-100%

(0)

-100%

10

282

2642%

333

3134%

378

3568%

447

4236%

511

4860%

Total equity

276

301

9%

351

27%

394

43%

461

67%

524

90%

Non current liabilities

450

539

20%

807

79%

1,334

197%

1,697

277%

1,901

323%

Current liabilities

289

338

17%

609

111%

887

207%

1,047

263%

1,048

263%

Total liabilities

738

877

19%

1,416

92%

2,221

201%

2,744

272%

2,950

299%

1,014

1,177

16%

1,767

74%

2,615

158%

3,204

216%

3,474

243%

% 13% 1965% 282% 0% 0% -95% 5282% 111% 412% 245% 346% 282%

2015 1,077 3,126 4,202 0 13 3 617 633 2,519 1,051 3,570 4,202

Total assets

Retained earnings Other reserves

Total equity and liabilities

%

2010

%

2011

%

2012

%

2013

%

All amounts in Euro Million FSLI Non-current assets Current assets Total assets Share capital Share premium account Retained earnings Other reserves Total equity Non current liabilities Current liabilities Total liabilities Total equity and liabilities

2008 874 140 1,014 0.3 13 252 10 276 450 289 738 1,014

2014 992 2,885 3,878 0 13 13 554 581 2,301 995 3,297 3,878

% 23% 2138% 314% 0% 0% -99% 5888% 130% 460% 264% 383% 314%

2016 1,329 3,532 4,861 0 13 52 517 582 2,974 1,306 4,279 4,861

% 52% 2428% 379% 0% 0% -79% 4915% 111% 561% 353% 480% 379%

2017 1,829 4,031 5,859 0 13 52 590 656 3,538 1,665 5,203 5,859

% 109% 2785% 478% 0% 0% -79% 5628% 138% 687% 477% 605% 478%

Table 2: Balance sheet horizontal analysis All amounts in Euro Million FSLI Net revenue

2008

2009

2010

2011

2012

423

100%

508

100%

641

100%

870

100%

984

100%

Net insurance claims

(115)

-27%

(152)

-30%

(209)

-33%

(364)

-42%

(405)

-41%

Expenses

(106)

-25%

(140)

-28%

(167)

-26%

(207)

-24%

(235)

-24%

Operating profit

203

48%

216

43%

265

41%

299

34%

345

35%

Finance charges

0

0%

-

0%

-

0%

-

0%

-

0%

Profit before tax

203

48%

216

43%

265

41%

299

34%

345

35%

Taxation expense

(58)

-14%

(59)

-12%

(72)

-11%

(78)

-9%

(86)

-9%

Profit after tax

145

34%

157

31%

193

30%

221

25%

258

26%

4|P age

All amounts in Euro Million FSLI

2013

Net revenue

2014

2015

2016

2017

924

100%

885

100%

905

100%

1,017

100%

1,129

100%

Net insurance claims

(303)

-33%

(259)

-29%

(227)

-25%

(395)

-39%

(347)

-31%

Expenses

(251)

-27%

(270)

-31%

(299)

-33%

(332)

-33%

(367)

-33%

Operating profit

370

40%

355

40%

380

42%

290

29%

415

37%

Finance charges

-

0%

(5)

-1%

(11)

-1%

(11)

-1%

(11)

-1%

Profit before tax

370

40%

351

40%

369

41%

278

27%

404

36%

Taxation expense

(83)

-9%

(69)

-8%

(77)

-8%

(64)

-6%

(72)

-6%

Profit after tax

287

31%

282

32%

292

32%

214

21%

332

29%

Table 3: Income statement vertical analysis (compiled by Author)

Operating profit 450

415

400

370 345

350

380 355

Euro Millions

299 300 250

290

265 203

216

200 150 100 50 1

2

3

4

5

6

7

8

9

10

years

Figure 1: Operating profit for last ten years. (Complied by Author subject to financial reports of Admiral Group)

Profit after tax 332

350 287

300

282

292

Euro Millions

258 250

221

200 150

214

193 145

157

100 50 1

2

3

4

5

6

7

8

years

Figure 2: Profit after tax(Complied by Author subject to financial reports of Admiral Group)

5|P age

9

10

All amounts in Euro Million FSLI Non-current assets Current assets Total assets Share capital Share premium account

2008 874 140 1,014 0.3 13

86% 14% 100% 0% 1%

2009 933 245 1,177 0.3 13

79% 21% 100% 0% 1%

2010 1,471 296 1,767 0.3 13

83% 17% 100% 0% 1%

Retained earnings Other reserves Total equity Non current liabilities Current liabilities Total liabilities Total equity and liabilities

252 10 276 450 289 738 1,014

25% 1% 27% 44% 28% 73% 100%

5 282 301 539 338 877 1,177

0% 24% 26% 46% 29% 74% 100%

4 333 351 807 609 1,416 1,767

0% 19% 20% 46% 34% 80% 100%

2013 943 2,530 3,474 0.3 13

27% 73% 100% 0% 0%

2014 992 2,885 3,878 0.3 13

26% 74% 100% 0% 0%

2015 1,077 3,126 4,202 0.3 13

26% 74% 100% 0% 0%

2011 755 1,860 2,615 0.3 13 3

29% 71% 100% 0% 1%

2012 927 2,277 3,204 0.3 13

29% 71% 100% 0% 0%

378 394 1,334 887 2,221 2,615

0% 14% 15% 51% 34% 85% 100%

1 447 461 1,697 1,047 2,744 3,204

0% 14% 14% 53% 33% 86% 100%

2016 1,329 3,532 4,861 0.3 13

27% 73% 100% 0% 0%

2017 1,829 4,031 5,859 0.3 13

31% 69% 100% 0% 0%

All amounts in Euro Million FSLI Non-current assets Current asse...