Leighton Holdings Limited and Corporate Social Responsibility Group Analysis - Case Study Example

LEIGHTON HOLDINGS LIMITED AND CSR GROUP ANALYSIS Leighton Holdings Limited and CSR Group Analysis Customer Name: Lecturer Name: Date: Introduction Leighton Holdings Limited The Leighton Holdings Limited, Australia was founded in year 1949, and in 1962 was listed on the ASX. The organization has gained global recognition as the being among the largest contract miner, project developer and service provider. Leighton Holdings Limited is the owner of other companies including Leighton International, Leighton Contractors, Thiess, Leighton Asia, John Holland, and Leighton Properties. The company has substantial stake in Devine Limited, Al Habtoor Leighton Group and Sedgman Limited. Whereas the owned companies operate autonomously, the operations of Leighton Holdings Limited span more than thirty countries, with its head office in Sydney, Australia. The company employs more than hundred thousand persons directly or indirectly, and offers financial strength and corporate governance structure to its descendant companies to give them strategic competitive advantage in international markets. The company boasts of several strategic resources including experienced management, long service in the industry, internationalized operations and a strong balance sheet. The child companies offer diverse contracting and project development expertise to private and public institutions. These include building construction, telecommunications, contract mining, engineering, infrastructure development, property development and infrastructure construction operations and maintenance. CSR CSR was founded in Sydney in 1855 as the Colonial Sugar Refining Company. Currently the company is the leading building products provider in Australia and New Zealand; in addition the company trades in Asia. The company has enjoyed more than a century in the business environment and has broadened its portfolio to embrace a wide range of leading products and services. Whereas the company began in the sugar industry, Wilmar International purchased its sugar and renewable energy company - Sucrogen - in December, 2010. The company up to then dealt with production of renewable electricity and ethanol, milling of raw sugar and manufacturing and distribution of refined sugar products. In addition, the company operated in diverse business sections including Property, building products and Aluminium. The Company which publicly trades in the Australian Stock Exchange has expanded shareholding with principally Australian fund managers and retail owners. Leighton Holdings Limited Financial analysis Performance in the year 2008 In the year 2008, the group had total revenue of $ 10,321,705,000 and expenses worth $ 9,762,643,000. Before taxation, the profit was $ 767,948,000 which translated to a profit after taxation of $ 609,091,000. In the same year, the dividends per share were 145.0 ¢. The basic earnings per share were 218.6 ¢. The Price-Earnings Ratio - P/E Ratio of the Group was 27.4, the percentage yield was 4.6 %. The enterprise value (EV) to earnings before interest and taxes (EBIT) was 12.5 %, while the enterprise value (EV) to Earnings Before Interest, Taxes, Depreciation, Amortization (EBITDA) was 7.8. The Dividend Yield was 2.8 %, while the DPS was 31.9%. The ROIC, ROE and ROA were 79.1%, 34.6 % and 9.4 %, respectively. From the Groups’ financial reports, the Net Profit margin was 5.0 %. Performance in the year 2009 There was an increment in the group revenue to $ 13,275,384,000 representing an increment of 28.61 percent from the previous year. According to Allen, (2008) an increase in group revenue, cannot in itself be an adequate metric to denote company growth. The profit before taxation reduced to $ 585,253,000, with annual profits being $ 439,231,000. The total dividends per share were 115.0 ¢. According to Moles and Terry, (1999), dividends earnings can infer to an organizations’ performance. The basic earnings per share in the year which was 149.5 ¢, representing a 32 percent reduction while the Price-Earnings Ratio - P/E Ratio of the Group was 13.1, the enterprise value (EV) to earnings before interest and taxes (EBIT) was 9.2 %, while the (EV) to (EBITDA) was 5.6. The Dividend Yield was 4.9 %, while the DPS was -19.9%. The ROIC, ROE and ROA were 63.1%, 27.4 % and 9.8 %, respectively. From the Groups’ financial reports, the Net Profit margin was 4.8 %. Performance in the year 2010 The group posted Total Revenue of $ 14,559,605,000 representing a 10 percent rise; the company had $ 41,540,727,000 as the Value of Work in Hand showing 12 percent increment. $ 842,654,000 was the profit before tax, which was a substantial rise of 44 percent, while Profit After Tax of $ 615,137,000 was 40 percent more. Earnings Per Ordinary Share were 204.6¢ a percentage increase of 37 % and the Dividends Per Ordinary Share were150.0¢, which is 30 % on the positive. Total Capital and Reserves were $ 2,568,142,000, an increment of 10 percent from 2009. The Total Assets amounted to $ 8,765,874,000 representing 14 % increment from the previous year’s assets which were $ 7,692,314,000 while the cash and cash equivalents in the same period was $. 1,313,716,000 a 97 percent increment from the previous year’s realization. From the above results, the groups’ P/E ratio was 17.0, while the dividend yield was 5.39 %. The percentage return on assets was 6.37 %, while Return on capital was 13.34 %. In addition the company posted EBITDA margin 11.43 %, the enterprise value (EV) to earnings before interest and taxes (EBIT) was 8.8 %, while the EV to EBITDA was 4.9. The Dividend Yield was 5.2 %, while the DPS was 30.4%. The ROIC, ROE and ROA were 72.8%, 24.5 % and 8.6 % respectively, the Net Profit margin was 4.3 %. The ratios above therefore suggest that the performance in the year 2010 was comparatively better than the previous years. CSR Financial analysis 2008 In the year 2008, the group reported a Net profit after tax of $192.8 million before significant items. The net profit after significant items was $177.4 million and the reported Earnings per share were 20.9 cents, this was before significant items. The shareholders benefited from total fully franked dividends for the year to 15.0 cents. The Earnings before interest and tax (EBIT) was $ 386.3 million while the Earnings before interest, tax, depreciation and amortization (EBITDA) was $ 536.5 million. The percentage Return on shareholders’ funds (ROSF %) was 12.7. An important performance measurement ratio according to Charles, (2009) is the Price-Earnings Ratio - P/E Ratio which was 15.8, the percentage yield was 8.7 %. The EV to EBIT was 5.7 %, while the EV to EBITDA was 8.2. The Return On Equity in the year was 13 %, the ROA being 6.6 % and the ROIC was 9.6%. With the Net profit margin of 6 %, the Earnings Per share percentage were -24.4 %, while the Dividend per share was 0%. In the year 2009, the CSR group experienced a general financial decline than in the year 2008. Whereas the Trading revenue rose to $ 3,492.8 million, the cost of margin rose by a bigger margin, increasing from $ 2,410.9 million to $ 2,679.0 million, which resulted to a reduction of Gross margin from $ 820.4 to $ 813.8 million. The operating profit reduced to $270 million. The company posted Net profit before significant items attributable to shareholders of $134.0 Million. Furthermore, the Basic earnings per share based on net (loss) profit attributable to shareholders was (29.7) cents. The total assets however rose to $4,188.4 from $ 4,099.2 million. In the year, the Price-Earnings Ratio - P/E Ratio which was 16.8, while the enterprise value EV to EBIT was 6.9 %, while the EV to EBITDA was 5.8. The Return On Equity in the year was 13 %, the ROA being 5.2 % and the ROIC was 7.9 %. With the Net profit margin of 3.8, the Earnings Per share percentage were -39.0 %, while the Dividend per share was 47.9%. In the year 2010, the company posted an increment of Trading revenue to $ 3,754.9 Million, while the cost of sales increased to $ 2,893.4, million, which resulted to increase in a gross margin of $ 861.5 million. The profit Operating profit increased to $316.1 million, hence posting a profit from ordinary activities before finance and income tax of $ 63.9, million. The (Loss) profit from ordinary activities before income tax reported was ($ 37.2 million) while the Net (loss) profit was ($ 75.3 million). While Basic earnings per share–based on net profit (loss) attributable to shareholders was (8.2) cents, the total assets reduced to $ 1,149.5 million. In the year, the Price-Earnings Ratio - P/E Ratio was 13.5; the enterprise value (EV) to earnings before interest and taxes (EBIT) was 6.0 %, while the EV to EBITDA was 6.3. The Return On Equity in the year was 10.3 %, the ROA being 6.6 % and the ROIC was 9.9%. With the Net profit margin of 4.6 %, the EPS was 6.7%, while the DPS 16.4%. In regard of the above statistical results, the performance of the year 2008, from shareholders point of view was relatively better than the year 2009 and 2010. Financial performance comparison According to Grassley, (2004), financial performance is a result of several different ratios. Using the three year results, The Price-Earnings Ratio of Leighton Holdings Limited was relatively higher than CSR group. In addition, Leighton posted higher EV to EBITDA. However, in the year, 2010 both companies had nearly the same dividend yield. Whereas the Net Profit Margin of Leighton has reduced over the three year period, the Net Profit Margin of CSR is relatively higher. The Return On Equity of Leighton is however considerably higher on the three year than CSR. The Return on Assets is higher at 8.6% at Leighton, just like the Return On Investment Capital which is 72.8% in the year 2010. In the same period ROA and ROIC at CSR was 6.6 % and 9.9 % respectively. The Earnings Before Interest and Tax, recorded a positive value in the year 2010, having recorded negative values in the preceding years. The Earnings before interest and tax of Leighton reduced in the year 2010 to 4.4% from 37.0 % in the year 2008. The Dividend Per Share percentage of Leighton has been more than DPS of CSR for the three years suggesting better performance Harold, (2009). From the above statistical ratios therefore, the performance of Leighton Holdings Limited scores more positive trends than CSR Group hence highlighting better performance, Donna Jo Fuller, (2005). Benchmarks for financial analysis There are several benchmarks that are necessary for financial analysis as pointed out by Siegel, (2008). An important benchmark is the Price – Earnings Ratio which considers the Market Value per share and the Earnings per share. This benchmark is important as it shows how the market values a stock. The Enterprise Value/Earnings Before Interest, Taxes, Depreciation, Amortization are an important benchmark since it is not affected by a company's capital structure, Tracy, (2009). When conducting financial analysis, it is also imperative to consider the Dividend Yield percentage, this benchmark is important since it considers annual dividends per share and the price per share, the dividend shield shows the yield an organization pays out to its shareholders in terms of dividends. Considering Leighton Holdings Limited and CSR Group Analysis, both companies relatively pay the same dividend percentage of 5 %. The Net Profit Margin is also an important benchmark as it shows the net profit after taxes to revenue according to Fontanills and Gentile, (2001). In addition, the Earnings Before Interest and Taxes, Earnings Per Share, Dividend Per Share is important Benchmarks according to Sincere, (2003) since the ratios can be used collectively to deduce the financial position of an organization EV to EBITDA is a benchmark which can illustrate the performance of a business enterprise by pointing out the Enterprise Multiple. The Enterprise multiple is imperative as a metric for international business comparison since it ignores the altering consequences of individual countries' taxation policies. Furthermore, it situations of takeovers, Enterprise value is enhanced than market cap since it considers the debt expected to be assumed by the acquirer, while other metrics such as P/E tend to assume. Read More