The hallmark of this research work focused on the strategy needed in order to analysis the operating movement of Halma plc (HLMA). The values of ratio analysis are significant tool which identify and assess the financial performance of any company. Halma PLC a group holding company that is primarily involved in developing, designing and selling of health and Analysis products with solution; infrastructure sensors and safety industrial products of which these three operating sector was chosen because it offers a sustained market growth which is underpinned by resilient drivers.
The competitive landscape of Halma plc shows that their big companies has wide network distributes and offers a broad selection of product and services to their customers while their small companies operates successfully by stocking parts of their customers needs, stocking their specialized products and delivers superior services of which half of their sales comes from Europeans accounts.
In financial analysis, ratio analysis is one of the systematic widely tools that is used to interpret the current financial movements or historical performance by dictating the strength or weakness and the assessment of these value so as to draw a final conclusion of that business performance. The term ratio refers to the quantitative or numerical relationship of two variables and inserting the value of these variables in its appropriate position or what the results of these figure implies is also important.
Halma plc operates in three business segments; health Analysis, industrial safety and infrastructure sensors and are involved in creating products that detect hazards in order to protect assets and people in commercial/public buildings. The company strategy aimed in achieving a high returns on capital investment, creating long-term sustainable shareholders value, creating a significant entry barriers for competitors and operating in a specialized non-cyclical global markets.
1.2 PROBLEM STATEMENT
This is a clear or concise statement which elaborates symptoms to be addressed and assessing of companys financial condition using ratio analysis is recognized as a limitation because no group of ratios or single ratio is adequate enough to assess all aspects of a company financial condition.
1.3 OBJECTIVE OF THE STUDY
The primary objective is analyzing the financial performance of HLMA and suggesting the company their area of strength and weakness based on the analysis. The secondary objective is to analyze the cash, profitability and capital position of the company. The main aim of HLMA is to protect the safety of human life, develop the quality of life on individual and businesses worldwide.
1.4 RESEARCH DESIGN
Secondary data is used in this research work by collecting data from HLMA website, textbooks and other relevant journals and websites. The Analysis used is ratio analysis and industry comparison through findings. The researcher also used 2years annual report to present ratio analysis and industry comparison in order to standardize the elaborated analysis of HLMA.
1.5 REVIEW OF LITERATURE
1. Accounting ratios dictates irregularities, surprises and anomalies which needs further investigation to ascertain the future or current position of a company. (Elliot.B &Elliot.J,2007).
2. Ratio analysis figure from the financial statement is a useful instrument used to identify, quantify and value the companys financial position, efficiency, profitability and strength both in a relative or absolute basis to other companies. (Shannon &Niculita,2008)
3. Any potential investors or lenders use the analysis of a company as a guide in making investment decision or assessing whether creditors loans can be repaid or not. (Gowthorpe,2008)
4. Halma plc, the leading health, safety and sensor technology group was measured by LONDON(Dow Jones) based on the current forecasts and trading stating that their estimated profit (3% increase) and revenue(8% increase) grows more than its market expectation in their three industrial sectors from GBP78.9 million to GBP82.1 million which started from 4th October to date. (ADVFN PLC,2010)
1.6 LIMITATION OF STUDY
Maximum time is required by the researcher in order to analyze the performance of HLMA. Also using the company 2years annual report and some analyses to present the report is very difficult to get all the relevant information within one month.
There is difficulty in using ratio analysis to estimate a good set of industry averages and it is risky for a company to depend on the ratio value. Also there is possibility that the information gotten from the internet may not correct.
CHAPTER TWO
2.1 COMPANY HISTORY
Halma plc (HLMA) was originated as a Ceylon tea company in 1894 as Nahalma Tea Estate Co Ltd. In 1937 the company was shifted to a rubber producing company as Nahalma rubber plantations limited.
In early 1950s Sri-Lankan government nationalized the rubber estate company. In 1956 changed to Halma investment Ltd by stopping operations from rubber and diverted to an investment management and industrial holding firm. In 1972, HLMA did some researched and began a series of acquisitions in electrical, mechanical and electronic engineering companies which leads to their success as a public limited company in 1981. Halma plc (British Hammer International Limited) is now an international health, safety and sensor technology leader located in UK and is also among the London Stock Exchange FTSE 250 listed companies for 20years, having 3,689 employees and 40 subsidiaries around the globe.
(source: http://www.halma.cn/about/halmachina.html)
OLD-HALMA (1894) AND NEW-HALMA PLC (2010)
Old Halma-plc(HLMA)
(Source:http://www.halma.cn/about/halmahistory.html)
New Halma-plc(HLMA)
(Source: http://www.halma.com/our-companies.aspx)
HLMA regarded as the world leader in products which includes;
(Source: http://halmapr.com/news/india/2010/09/27/halma-wins-chinese-business-award/)
CHAPTER THREE
3.0 ANALYSIS AND INTERPRETATION
This comprehensive information gives an unbiased strategic analysis and clear in-depth view of the key Strengths and potential Opportunities of the company. Ratio is seen as the relationship between various items found in the financial statements.
3.1 RATIO ANALYSIS
Figure:1
Figure1 shows that the percentage of values in 2009 which includes 28.24%, 19.24% and 18.56% respectively is lower compared to 2008 values which includes 32.76%, 22.42% and 19.83% respectively, which explains that the performance of HLMA decreased in 2009 compared to 2008 which could be as a result of decreased in the company finance income or inappropriate control of expenses, therefore the company needs to put more effort to increased its product demand, control its expense and improve their source of finance.(Refer-appendix:1)
Figure:2
Figure 2 shows that the 2009 values (1.47, 2.62 and 1.92) is higher than the 2008 values (1.46, 2.03 and 1.51) respectively. Financial leverage multiplier tells that the capital employed within the two years is bigger than the fund of shareholders, while the current and acid test ratio tells that the conversion of company liquidity position of assets into cash increased in 2009 which also covers the claims of creditors within the period.(Refer appendix:1)
Figure:3
Figure 3 shows that the Gearing ratio increased in 2009(31.89) compared to 2008(31.57) while shareholders ratio reduced in 2009(0.68) compared to 2008(0.68) which means that HLMA depends on long-term financing and borrowing which will lead to high financial risk as a result of high volatility of profits. The interest cover also reduced in 2009(7.15) compared to 2008(7.6) meaning that the degree in which earnings are available to meet the payment of interest decreased, therefore the manager needs to put more effort to maintain a good equity financing. (Refer appendix:1)
Figure:4 Figure:5
Figure 4 shows that the values for 2009 (2.36, 7.39, 4.91 and 10.24) is higher than the value in 2008 (2.30, 7.34, 4.43 and 8.11) respectively, which indicates that HLMA products is selling well, their cash basis on account receivable is efficient and also the payable turnover shows that HLMA pays off its suppliers at a faster rate.
Figure 5 shows that the 2009 value (1.04, 1.42 and 3.82) is lower compared to 2008 value (1.13, 1.51 and 4.52) respectively, which indicates that the sales generated or raised by HLMA capital base reduced in 2009. Therefore the manager needs to put more effort in order to improve their source of finance. (Refer appendix:1)
INVESTMENT-RATIO
Figure:6 Figure:7 Figure:8
This investment ratio is mainly investors key interest before investing in any company like HLMA. Figure 6,7 and 8 shows that the earning per share and dividend yield increases in 2009 i.e. 0.14 and 174,90.62 respectively compared to 2008 which has 0.13 and 141,052.9 respectively while the price per earning and dividend cover decreased in 2009 i.e. 1.83 and 1180.36 respectively compared to 2008 which also has 1.84 and 1490.38 respectively.(Refer appendix:1)
This signifies that other ratios are good for investor except dividend cover which was slightly different but the profit attributed to equity shares after the deduction of profit after tax is still increasing which is good for investors in forecasting the financial position. It also helps the investors to indicate, compare and estimate the amount of dividend paid out each year which relates to its market share price as shown in appendix:6.
Figure:9
Figure 9 shows that the percentage in 2009(83.29%) is higher than 2008(82.24%) which reflects that the profit position of HLMA is good as reviewed in appendix:1 and also reviewing the estimated forecast by UK analyst in appendix:5 shows that the company has a continuous higher profit in the future as a result of developing more new products that is relevant within the globe as shown in appendix:9 and 10.
LIMITATION OF RATIOS
a. Suitable yardstick may not be easily obtained in comparison purposes.
b. Ratio calculated within a particular period are less informative and defective suffering changes within a short-term.
c. The cost techniques used in calculating the analysis is expensive of which small companies may not afford it.
d. It is a quantitative analysis tools that ignores qualitative points of view.(Adeniji,2008)
e. The style performed in management accounting practices across countries and companies may not be the same.
f. Ratios dont reveal future trends and it is static.
g. It has ambiguous interpretations.
h. It may not reflect the real value of ratios reported.
i. Companies are highly diversified due to others ratio limiting comparability.
j. Different people understand the resulting ratios and financial statements in a different way based on their motivations or point of view. (Parker,2010)
IMPORTANCE OF FINANCIAL RATIOS
a. it helps to evaluate or assess companies performance
b. it guides investors in making divestment /investment decisions.
c. To determine whether to embark or discontinue on a new or existing product.
d. For estimation and financial planning.
e. To measure the weaknesses, strength and determine the threats and opportunities of a business entity.
f. It helps in forecasting, budgeting and inter-firm comparison.
g. It helps to simplify and determining the financial position of the concern.
h. It exposes the business Liquidity-position, Long-term solvency and Operating-efficiency.(Adeniji,2008)
Figure:10
Figure 10 shows the share movement of HLMA for 5years indicating that the price was decreasing in 2008 but later picked up in 2009 with high growth till date which also helps to estimate that the companys future is good.
Figure:11
Figure11 shows Halma plc position with other companies which explains that the three companies was struggling in November 2009, later in March till May 2010 the company came to 3rd position but later picked up in July to the second position and is now moving higher to be in first position as a result of their new innovation and other products as shown in appendix 2 which they are putting more effort to achieve their target.
CHAPTER FOUR
4.1 FINDINGS
HLMA is regarded as an international markets leader and their subsidiaries produce product that improves and protect human lives through innovation products market by making their customers more competitive, safer and profitable. Referring to appendix 10 reveals that HLMA has opened a Mumbai office that is now assisting the economy of India in areas like energy; manufacturing; water and waste treatment; transport; construction and healthcare.(Business-Wire-India,2010).
Heroic company which are among the subsidiaries of HLMA is recognized in UK survey as a unique company and also won an award as part of the top 50 companies in UK based on the companys evaluation.
4.2 RECOMMENDATION
Referring to the information as shown in appendix 2 to 10 including UK analyst estimation of the company shows that HLMA is a standard and determined company since they are the world leader on safety products which will lead to explosive growth and will yield better return for investors in the future. The company also uses high powerful combined creativity with best practical engineers and scientist to run their business.
CHAPTER FIVE
5.0 CONCLUSION
Products of HLMA are more sensitive with high visibility compared to any product available in the market today, even perform well in traditional difficult situation and as a global leading company on human safety increased their revenue by 1% to 459m, profits increase by 9% to 86m, shareholders dividend by 7% in 2010. This elaborates that this company based on their current and newly innovative products as shown in appendix 9 and 10 shows that their future ambition and targets is more than the estimation of peoples thoughts.
Furthermore, the company is currently regarded as the UK mid-caps biggest gainer as a result of increase in their share price by 7.4% to 244.5 pence and also with over 459,120,000 Sales. Per revenue for HLMA employees is about $600,000. HLMA also maintains strong returns, healthy margins, and good cash flow, but still aim for higher improvement. The Creating of high innovative products through the bringing of new solutions or ideas from the company skilled professionals is the source that moves the business to a greater level so as to help, protect and design the globalised world.
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