Management of Fleetwood Corporation Limited Company - Case Study Example

Foundation of Business University’s Name Submitted by Name Tutor: Date: Company Analysis Introduction The paper analyzes Fleetwood Corporation Limited (FWD) Company that is based in Australia and provides products like vehicle spare parts, accessories, caravans, and portable accommodation. The paper focuses on the overview of the company, its products, management, employee benefits and attributes, and the financial performance in 2015. The company analysis, therefore, is carried on FWD. An Overview of Fleetwood Corporation Limited Fleetwood Corporation Limited (FWD) was founded in 1964 and it is based in Australia. The company has its headquarter in East Perth, Australia (“Fleetwood Corporation Limited”, 2014). The company is involved in the manufacturing and selling of various products like caravans, spare parts and other accessories. Other products that the company manufactures and distributes to the market include park homes and mobile accommodation. However, it started by manufacturing and selling caravans and accessories. The company was listed in the Australian Stock Exchange in 1987 after it had expanded. FWD is not only found in Australia, but it also has some of its outlets in countries like New Zealand. The company employs about 786 workers in both Australia and New Zealand. It has a number of subsidies that include Fleetwood Durabuilt Pty, Flexiglass Challenge Pty, Fleetwood Pty, and Fleetwood Finance Pty that are found in Australia. It subsidies based in New Zealand include Flexiglass Challenge Industry and Sarada Limited. Currently, FWD is focusing on three main sectors in Australia, which include recreation, retirement, and resources. At the same time, it has two main divisions, which include recreational vehicles and manufactured accommodation. The company controls between 20-25% market share when it comes to the construction of caravan in the whole of Australia. Despite the stiff competition in the market, it has a competitive advantage in the Australian market because it offers a variety of recreational vehicles that meet various needs and budget of different consumer segments. Therefore, FWD has different brands of recreational vehicles that it uses to meet the specific needs of the target customers. It targets customers that emphasizes on different features of recreational vehicles. The company has three main manufacturing plants that it used to make different caravans. It first established Comec Group in 1964 to manufacture spare parts, accessories, and marine materials that it distributes in the whole of Australia through retail and wholesale outlets (“Fleetwood Corporation Limited”, 2014). Afterwards, it established Coromal Caravan in 1977 to produce camper trailers and pop-top caravan. Coromal Caravan is rated as the largest caravan manufacturer in the whole of Western Australia and taken to be one of the largest in the entire Australia. Finally, it established Windsor Caravan that is based in Melbourne and it is regarded as the fourth largest caravan manufacturer in the entire Australia. FWD distributes its campers through the dealer networks. Therefore, the company has been able to experience steady growth since it was established in 1964. There are a number of factors that have facilitated the growth of FWD. First, the company enjoys high profitability and revenue that has helped it to expand to various markets in Australia and New Zealand (“Fleetwood Corporation Limited”, 2014). At the same time, it has effective distribution and sales networks that have given it a competitive advantage. The company is also likely to expand more, especially after enter an agreement with the Gateway Lifestyle Group to be an exclusive manufacturer and supplier of pre-fabricated homes in both Queensland and New South Wales. In addition, it is also favored of the new Australia economy that has led to increased demand on caravans and homes. However, the growth of FWD is faced with a number of threats such as the increasing cost of raw materials, the rapidly changing technology, and fluctuation in taxes that are imposed by the Australian and New Zealand governments. Therefore, it must be creative and innovative to continue dominating the Australian market. The FWD has also been able to factor in the concept of sustainability in its operations. It has embarked on ways of reducing environmental degradation, as it has improved in its waste disposal and treatment. For instance, its waste water treatment plant that is located at Searipple Village in Karratha is now able to treat about 65% of all its waste in Australia. It also recycles a significant amount of water that it uses in it manufacturing plants, which makes it one of the companies that are socially responsible to the environment and the surrounding communities. Company Products FWD offers two main categories of products that include recreational vehicles and manufactured accommodation. Under the recreational vehicle, it offers products like caravans, spare parts and accessories. It uses its subsidiaries such as Coramal and Windsor Caravans to manufacture and distribute special vehicles such as caravans, campers, and pop tops. Comec Caravans only manufactures vehicles that are distributed in parts of Australia like Sydney, Brisbane, and Auckland (“Fleetwood Corporation Limited”, 2014). However, Coramol Caravan and Windsor Caravan manufacture vehicles that are distributed throughout Australia and New Zealand through national dealer networks. The company also operates on the manufactured accommodation where it engages in designing, manufacturing, distribution, and sales of movable accommodations. It provides manufactured accommodation through its subsidiary known as Fleetwood that only specializes in providing portable accommodation. Fleetwood is based in Perth, but it has its outlets in areas like Adelaide, Darwin, and Alice Springs. In addition, FWD provides homes for retirement, recreation, and resource development. Therefore, it offers vehicles and accommodation facilities to its various customers. Management The management of Fleetwood Corporation Limited comprises of experts with wealth of experience from both public and the private sectors. The primary role of the Board of Directors is to ensure that there is ethical corporate governance in the company and it also ensures effective implementation of the goals and objectives of FWD. The Board works hand in hand with the CEO and other non-executive officers to ensure the success of the company. FWD manages its operations as independent division where each division is required to design and execute the company’s goals and objectives (“Fleetwood Corporation Limited”, 2014c). However, the board and the executive oversee the operations of the two divisions and make key decisions in the company. The current board of FWD comprises of four non-executive directors and executive managing director. The board is chaired by Michael Hardy who is also the non-executive director of the company. Hardy, who is a barrister and solicitor was appointed to the board in 200. His extensive experience in commercial and property law has helped FWD to dominate the market, as he steers the company towards the right direction. Other board members and non-executive directors of the company include Greg Ted and John Bond (Fleetwood Corporation Limited, 2014c). Ted was the managing directors of the company between 1990 and 2007 before becoming the executive director of operations. Brand Denison is the current managing director of the company when he was appointed in the position in August 2014. He served as the chief financial officer (CFO) and company secretary for ten years before being appointed as the managing director. The current company secretary is Yanya O’Hara who ascended into the position in 1st August 2014 after serving as assistant secretary for three years. Company Mission and Values The primary objective of the company is to maximize its financial goals through the provision of genuine products, services and values. Therefore, the mission of the company is to establish a strong and beneficial relationship with its all key stakeholders, especially customers (“Fleetwood Corporation Limited”, 2014b). The company also believes that all parties should honor their commitments towards the success of FWD. At the same time, FWD values the support that it receives from its customers, suppliers, and other stakeholders who ensure that the company is moving in the right direction. FWD is committed to honesty and integrity. As a result, it ensures that there is a safe and healthy environment for all workers and it carries out its activities in an environmentally responsible way to reduce environmental degradations and to conserve the limited renewable and non-renewable resources. In addition, the company also rewards its employees and other stakeholders based on their creativity and dedication. Besides, it also deals with people in a professional and concerned manner to ensure that it meets their economic, social, and social needs to boost their performance and productivity. Therefore, the company encourages innovation, creativity, and professionalism in order to find new ways of doing things, which helps in creating sustainable development. Consequently, the company’s mission is to outperform financially by providing genuine value that are based on honesty and integrity (“Fleetwood Corporation Limited”, 2014b). Employee Benefits Proper and fair remuneration is the main benefits that FWD employees enjoy as they work for the company. The company pays a relatively high wages and salary compared to its peers in the industry, which has enabled it to attract the best workers in the labor market. Workers also enjoy a number of non-financial benefits that motivate then to work harder to meet the set objectives. Employees enjoy and healthy and safe working environment that is implemented through the company’s workplace health and safety management system. The company also ensures that it embraces diversity through its diversity policy (FWD, 2013). Consequently, employees experience no form of discrimination based on gender, ethnicity, race, religion, disability or sexual orientation. FWD also rewards creativity and innovation, which encourage employees to come up with new ideas that can solve various challenges and problems that the company faces. Employees, therefore, enjoy a favorable environment for creativity and innovation. Employees also enjoy open communication and smooth flow of information that helps in promoting transparency and accountability in the workplace. In addition, there are internal employee training and development programs that enhance the knowledge and skills or workers. Therefore, employees at FWD enjoy a number of financial and non-financial benefits. Employee Attributes The company considers qualifications, skills, knowledge and experience of candidates before employing them in the company (FWD, 2013). At the same time, it considers the professional, integrity and reputation of the candidates before giving them a chance in the company. In order to serve in the board, a candidate must have sound leadership skills, strategic and risk management skills, and financial knowledge and experience. Therefore, only the best employees in the company make it to the board. At the same time, all employees must have standard ethical and moral behaviors in order to work in the company. In addition, all employees must be socially responsible, especially in the protection of the environment, which is one of the core company values. As a result, apart from academic and professional qualification, the company is look for employees that can help in it in the implementation of its goals, objectives, and values. Consequently, only employees that believe in environmental sustainability and ethical behaviors can enjoy working in the company. At the same time, those who value integrity and honesty can find FWD a suitable company to work in. Finally, the company values transparency and accountability, which means that accountable and transparent employees will enjoy working at FWD. Financial Statements Income statement 2015 2014 ($’000) ($’000) Sales revenue 302,000 366,289 Other income (65) 229 Materials used (101,525) (146,573) Sub-contract costs (68,181) (90,935) Employee benefits (58,366) (66,181) Operating leases (10,712) (11,173) Impairment of non-current assets (4,477) (5,000) Other expenses (24,708) (23,430) EBITDA 33,966 23,226 Depreciation and amortization (29,113) (17,624) Profit before interest and tax (EBIT) 4,853 5,602 Finance costs (3,959) (2,227) Profit before income tax expense 894 3,375 Income tax expense (718) (2,809) Profit from continuing operations 176 566 Loss from discontinued operation - (490) Profit for the year 176 76 1. Recreational Vehicle $ in Million 2015 2014 % change Revenue 112.2 136.5 -17.8% EBIT -7.0 -2.1 -229.7 2. Manufactured Accommodation $ Million 2015 2014 % change Revenue 189.6 229.7 -17.5 EBIT 18.5 16.0 16.1% The Above tables show that FWD managed to earn total revenue of $301.8 million in 2015 compared to $366.2 million that it earned in 2014. Therefore, it revenue reduced by about $58.1 million. The reduction in revenue was almost the same in both the recreational vehicle segment and manufactured accommodation segment because they reduced by 17.8% and 17.5% respectively. This showed that the performance of the company reduced in 2015 was lower that its performance in 2014 (“Fleetwood Corporation Limited”, 2015). The reduction of revenue in the manufactured accommodation segment is associated with a decline in demand, especially in Western Australia and Queensland as a result of completion of programs to move year 7 students to high school. However, the demand for manufactured vehicles remained relatively steady on the remaining part of the market. The performance of the recreational vehicle in 2015 was lower than 2014 due to decline in demand and because of the slow implementation of the initiatives that was initiated by the management to improve the performance of the sector (“Fleetwood Corporation Limited”, 2015b). Therefore, generally, the performance of FWD in 2015 was lower than that of 2014. However, the profit for the year 2015 was more than that of 2014 because the company did not have a loss from discontinued operations, which led to a profit of $176 million in 2015 and $76 million in 2014. Balance Sheet 2015 2014 $’000 $’000 Current assets Cash and cash equivalents 6,634 6,405 Trade and other receivables 96,197 46,654 Inventories 45,246 44,504 Other financial assets 206 - Non-current assets held for sale - 51 Tax assets - 55 Total current assets 148,283 97,669 Non-current assets Property, plant and equipment 107,676 109,702 Inventories - 45,745 Goodwill 61,761 59,431 Intangible assets 5,166 4,844 Deferred tax assets 4,822 4,396 Total non-current assets 179,425 224,118 Total assets 327,708 321,787 Current liabilities Trade and other payables 43,672 37,853 Interest bearing liabilities 62,500 62,411 Tax liabilities 959 - Provisions 5,605 5,837 Other financial liabilities - 139 Total current liabilities 112,736 106,240 Non-current liabilities Provisions 971 1,138 Total non-current liabilities 971 1,138 Total liabilities 113,707 107,378 Net assets 214,001 214,409 Equity Issued capital 194,762 194,096 Reserves (257) (219) Retained earnings 19,496 20,532 Total equity 214,001 214,409 The company’s current assets are less than the non-current assets. Interestingly, the company does not have any inventories non-current assets in the whole of 2015 compared to 2014 which it has total non-current inventory assets that amounted to $47,745 million. This shows that the company needs to invest more in research and development to come up with quality goods and services that can meet the needs of customers (“Fleetwood Corporation Limited”, 2015). Therefore, the company should improve its capital investment. It also has significant intangible assets. In addition, the company also does not have any tax assets in 2014 in comparison to 2014 that it had tax asset that amounted to $55 million. Its net asset equals to $214,001 million, which shows that the company is stable. Financial Ratios $ Million (unless stated) 2015 EBITDA margin* 12.7% EBIT margin* 3.1% Interest cover (times) 1.2 Earnings per share (cents) 0.3 Dividends per share (cents) 0.0 Return on equity 0.1% Debt 62.5 Debt / Shareholders funds % 29% Cash flows from operations 42.2 Number of shares on issue (million) 61.0 The above financial statement also shows that company’s low relative net margin and its unfavorable asset returns shows that the company has a problem with its operating strategy. The company had EBIT margin of 3.1% in 2014, which also calls for the improvement of its operation strategy that can also help in enhancing the performance (“Fleetwood Corporation Limited”, 2015). FWD also experienced a decline in assets that was also witnessed in the last four years, which shows that its competitive advantage in the market is declining. At the same time, a decline in revenue shows that the company is not moving in the right direction and it needs to improve its strategies to remain to maintain or improve its position in the market (Duffy, 2015). Besides, the current operating performance of FWD may not allow it to raise additional debts. Conclusion FWD is a company based in Australia and it operates in other countries like New Zealand after it was established in 1964. The company’s main objective is to outperform financially through the provision of genuine values, products, and services to its esteem customers and other stakeholders. Its operations are guided by two main values that include honesty and integrity. At the same time, the company strives to ensure environmental sustainability and the health and safety of its workers. The company has two main segments that include manufactured accommodation and recreational vehicles that it uses to produce products like vehicle spare parts, special caravans, and accessories. It also uses Fleetwood, one of its subsidiaries to make portable houses in various parts of Australia and New Zealand. The board of directors is chaired by Michael Hardy while the executive is headed by Brand Denison who is the managing director. The 2015 financial report shows that the performance of the company is declining, especially is revenue that has been declining for the last four years. Therefore, the company needs to evaluate its operation strategies to continue dominating the market. Reference List Duffy, T. 2015. What’s Happening to the Share Price of Fleetwood Corporation Ltd? Retrieved from http://www.dailyreckoning.com.au/whats-happening-to-the-share-price-of- fleetwood-corporation-ltd-asxu/2015/08/12/ Fleetwood Corporation Limited, 2014. About Fleetwood. Retrived from http://www.fleetwoodcorporation.com.au/About-Fleetwood Fleetwood Corporation Limited, 2014b. Fleetwood: Delivering the Promise. Retrieved from http://www.fleetwoodcorporation.com.au/About-Fleetwood/Delivering-the-Promise Fleetwood Corporation Limited, 2014c. FWD: Director and Executives. Retrieved from http://www.fleetwoodcorporation.com.au/About-Fleetwood/Corporation-Photos Fleetwood Corporation Limited, 2015b. Preliminary Final Report 2015. Retrieved from http://www.asx.com.au/asxpdf/20150831/pdf/430yl7npvlyz9n.pdf Fleetwood Corporation Limited., 2015. Annual 2015 Financial Report. Retrieved from http://www.fleetwoodcorporation.com.au/ArticleDocuments/87/Preliminary%20Report% 202015.pdf.aspx FWD, 2013. Fleetwood: Corporate Governance Statement. Retrieved from http://www.fleetwoodcorporation.com.au/ArticleDocuments/103/Corporate%20Govenan ce%20Statement%202015%20FINAL.pdf.aspx Read More