You work for a company which is thinking of making an investment in Collins Foods Limited. You have been asked to advise management on the basis of the company’s annual reports. You can obtain the financial reports at http://www.collinsfoods.com/investors/news-and-announcements/. In announcement types, select annual reports for 2017, 2016, and 2015.
If you refer to information from other sources, you must include specific references, so I can check this quickly. For the purposes of this assignment, include the links to the pdf etc. in the body of the response, as well as in the list of references. Please use the Harvard referencing system.
The word count is 2,000, plus or minus 10%. You are required to work in teams of up to 4 students.
The following text is taken from the unit outline.
A major objective of this assignment is to put you into a situation where you develop your ability to negotiate and work in groups with people from different backgrounds. No group is to have more than 50% of its members from the same background. For the purpose of this assignment, all Desis will be classified as belonging to one group, so in a group of 4, no more than 2 can be Desis. Similarly, all Chinese born outside Australia will be treated as coming from one background.
Mono-cultural groups will be penalized 20% of the marks as they have not had to deal with the added complexity of engaging in cross-cultural negotiating and teamwork. Students who do not form a group will be penalized 25%, as they have not had to deal with the complexity of working in teams. Groups of more than 4 students will be given 0 marks for the assignment. Students who breach the ‘50% rule’ will be penalized 15%.
Details on managing groups are provided on the “Study Help” website, which can be accessed via Moodle. Each student must maintain a diary of their contribution to the assignment. The diaries are to be submitted if they are requested by the unit convener. Groups are to prepare agendas for group meetings and to keep minutes of group meetings. The agendas and minutes are to be submitted if they are requested by the unit convener.
I MUST be informed if a group member is not behaving properly, such as failing to contribute or missing 2 or more meetings.
All group members will get the same mark unless there is evidence that a team member did not contribute fairly. If the team members indicate to me, at least 10 days before the assignment deadline, that a team member did not contribute fairly, I will consult with the group. If the consensus is that the member in question only contributed 20% of what he or she should have contributed, that member will receive 20% of the marks awarded to the other team members for the assignment.
Please see section 5b below for late penalties. Students who do not submit the assignment within the designated period (see 5b), and do not have a legitimate reason, will be given a fail grade of NC (did not complete all assessment items).
Students who have a legitimate reason for not submitting an assignment and produce acceptable evidence will be required to complete a separate assessment item covering the same learning outcomes.
Students will not be able to ask for a deferred deadline on the assignment because their computer blew up or crashed, or was attacked by a virus etc. You must make multiple backups of your work in progress. I strongly suggest you email copies of your workings to yourself. If you only back it up to a thumb drive that is also destroyed, that is your bad luck.
Marks will be awarded for your ability to identify and communicate relevant information through your written responses to the manager’s questions (below). Please place your responses directly below each question. Ensure you address all sub-parts of each question.
One team member will submit the assignment via the assignment drop box in Canvas.
The unit outline contains material relating to late penalties and the deadline (see ‘extensions’ in section 5b of the outline).
Questions from your manager
- What is this company’s goal? What strategy is it using to achieve this goal? Has this evolved or changed over time? What risks can you identify? What benefits can you identify? Does this look like a sustainable strategy?
- Your manager wants to get a better understanding of how the investments in Sizzler have affected the company’s performance. He asked if there were any differences in the company’s business model in relation to the Sizzler investments. If there are, what impact(s) would this be expected to have on the risk/return profile for Collins?
- Your manager wants to get a clearer understanding of the performance of the Sizzler Asia investment from 2015 to 2017. He wants to know the carrying amount of this asset at the start of 2015 and the end of 2017. He also wants to know whether it has been impaired and how much it contributes to the revenues and profits of Collins. He suggests the notes relating to segment reporting may be of some assistance.
- The company refers to EBITDA and underlying EBITDA or adjusted EBITDA. What is the difference between EBITDA and the other figures? Why would the company use underlying or adjusted EBITDA?
- Your manager wants to get an understanding of how the company’s managers view the future performance of its major product lines. Specifically, he wants to get a sense of whether the company’s managers expect the future cash flows of the various restaurants (KFC, Sizzler, Snag Stand) will grow or decline.
Luckily for you, your manager recently met a tipsy accountant, who mumbled something about checking the value in use calculations. This friendly chap suggested your manager ignore information relating to cash flows greater than 5 years. Your manager decided to accept this advice.
- Provide advice to your manager stating whether the managers of Collins seem to be deliberately overstating or understating expected growth in cash flows. Include any concerns you have about the method used to develop this advice (see below). Support your response with evidence. Your manager asked you to compare the predictions of one year with the results of the next year, and to use the underlying or adjusted EBITDA figures for the actual results. That is, you will compare expected growth or decline in cash flows in one year with the underlying or adjusted EBITDA in the next year. You may also want to suggest alternative methods to address your manager’s concerns.
- Using spreadsheet formulae, calculate the following ratios for 2016 and 2015. (Yes, he meant those years. The responses to questions 1-6 relate to 2017, 2016, and 2015. However, question 7 only relates to 2016 and 2015.)
You discovered that the miserable old goat has only provided you with the figures in pdf documents. A colleague suggested you copy and paste the balance sheets, income statements (don’t worry about other comprehensive income) and the cash flow statements for 2016, 2015, and 2014 (comparison figures in the 2015 reports, into the spreadsheet. Tidy the material up, ensure the figures can be manipulated. That is, ensure the figures are numbers, not text.
The manager wants the ratio analysis to be presented using the structure below. Copy and paste this into a tab on the spreadsheet. The formulae will need to link to the figures from the relevant statements.
|OCF to interest|
|Operating profit margin|
|Gross profit margin|
|Average inventories turnover|
|Settlement period for receivables|
|Settlement period for creditors|
Having calculated the figures for the ratio analysis, identify and discuss any issues you think the manager should be made aware of. You must also identify and discuss any issues/difficulties you came across when preparing this analysis. Ensure your discussion covers the impact on the way certain ratios are interpreted.