Asset Management at Wolseley - Essay Example

Asset Management at Wolseley Wolseley is the world’s leading distributor of plumbing and heating products as well as the leading supplier of building and construction materials. Wolseley Company started in the year 1887 in Sydney, a historical period when Frederick Wolseley launched the Wolseley Sheep Shearing Machine. The company further developed into heat industrial pipes and distribution, thereby setting its foundation for the 21st century. Due to the success in the adaptation of the changing business conditions, Wolseley is able to stay successful. The company recognizes the value of managing its assets in a bid to ensure that it remains relevant in the market. This paper will highlight how Wolseley manages its assets. An overview of Wolseley’s Investment in Assets WOLSELEY COMPANY FINANCIALS Assets £ (M) 2013 2012 2011 2010 2009 Reporting date 31 Jul 2013 31 Jul 2012 31 Jul 2011 31 Jul 2010 31 Jul 2009 Tangible assets 1,263 1,195 1,249 1,409 1,593 Intangible assets and goodwill 1,246 1,160 1,628 1,812 2,223 Investments and other non-current assets 359 408 434 535 450 Total non-current assets 2,868 2,763 3,311 3,756 4,266 Inventory / Work in progress 1,722 1,606 1,596 1,611 1,624 Trade and other receivables 2,034 1,875 1,928 1,850 1,983 Cash and Equivalents 339 813 503 665 635 Other current assets and asset held for resale 79 83 540 202 553 Total of all ASSETS 7,042 7,140 7,878 8,084 9,061 Web. http://shares.telegraph.co.uk/fundamentals/?epic=WOS As highlighted above, Wolseley has been making a remarkable investment in its different assets. This is in a bid to expand its market and increase its profits in the highly competitive market. However, it is evident that the investment rates have been fluctuating according to the risk factors identified by the company’s experts. Some of the risk that determines whether Wolseley will invest or not include economic factors, new business models, margin pressures, liquidity and funding from financial institutions and other critical risk factors (Hastings 87). Web. http://www.wolseley.com/index.asp?pageid=258 In cases where the company recognizes that the investment does not generate the expected profit margins, it considers disposition. One of the recent cases involved the company’s consideration of disposing its French arm, after the realization that the European markets had become unbearably difficult. Reports indicated that an analysis of the situation revealed that Wolseley would either close down the arm or limit the investment towards it. Other situations include the Danish market, compelling the company to consider disposition. The team of experts assigned the role of strategizing on investment and disposition has done a remarkable task in management (67). This is the reason why the company is a leader among its competitors. As highlighted in the table above, Wolseley had placed increased importance on the importance of goodwill as one of its intangible assets. However, with time, the company has expanded its view of intangible assets to include trade means, customer relationships, and brand. The company has made remarkable efforts of upholding its integrity in a bid to protect its reputation, which has proved to be a significant asset. Wolseley now plans to invest in the other highlighted intangible assets in the future. As highlighted above, the company includes all its details, ofasset investment in its balance sheet. Evidently, Wolseley realizes the importance of asset management in a bid to engage in successful business. Assets are of critical significance as they have the potential of translating into financial gains for the company. As highlighted above, Wolseley invests in both tangible and intangible assets. The fact that the investment rates fluctuate only serves to place emphasis on the effective management, which determines the appropriate investment and disposition. Asset the management of the Canadian Wolseleycompany Travis Perkins is a supplier to the construction and building industry. With its 600 branches, the company offers a wide variety of products in U.K. The company has nine brands including TP, Keyline, city plumbing, CCF, Benchmark, BSS, PTS, Wickes and Tile giant each dealing with a different line of products all relating to building and construction. Wolseley Canada on the other hand provides hydronic, HVA/R , Plumbing and pvf products. Wolseley has 200 branches so compared with Perkins 600, which gives Perkins competitive edge over Wolseley. Comparing the trading Wolseley generates 0.68 times more return on investment than the Travis Company. Travis Perkins had a four billion Euros turnover, which is higher than Wolsey’s 2.4 billion, Euros. Travis Perkins inventory turnover is 5.5 times compared to other key players in the industry. The accounts receivable are 7.7 times which mean it has a shorter repayment period (investing.businessweek.com). Saint Gobain This company takes the third position after Perkins and Wolseley. The company specializes in high quality and performance plastics and supplies to major industries and building materials among others. The company’s sales were 42,025 million dollars in 2013, which was a decrease. Comparing Gobain and Wolseley in terms of sales, Wolseley had total sales of 95million Euros. The inventory turnover of Wolseley company was 5.71; 1 in 2013 compared with saint Gobain which was 1.30; 1 which is lower. It means that Wolseley’s sales are more than the industry. Saint Gobain receivable days are 48.07 and for Wolseley is 56.44 which means that Saint Gobain is operating more efficiently than Wolseley since it takes less days for them to be paid. Saint Gobain day’s payables are 48.08, which mean they take longer to pay their creditors compared with Wolseley figure of 76.56 (investing.businessweek.com). WatscoInc It is the largest distributor of heating, conditioning, refrigeration supplies. The company operates in U.S.A, Mexico, Canada, Puerto Rico and it exports its products to Caribbean and Latin America. The assets turnover ratio is 2.2 times which is lower than that of Wolseley. This means that Wolseley makes the highest sales in a year. Looking at the receivables, Watsco has a ratio of 9.9 days compared with that of Wolseley of 56. 44 days. In this scenario, Watsco receives payments faster than Wolseley does and it is less risky since there are a few defaulters. The inventory turnover is 5.5 times compared to rest of the industry (investing.businessweek.com ). HD Supply Holdings Inc. This is an industrial distributor of a wide range of products especially in North America. They repair, maintain infrastructure especially in the construction Industry. The company operates in the United States 47 states and in Canada. The assets turnover ratio is 8.26 times which is higher than that of Wolseley of 5.71 times. It is more efficient in making sales than Wolseley. Trade receivables are collected after 8.6 days, which is lower than the Wolseley Company ( www.marketwatch.com). Generally, companies use industrial ratios to evaluate the performance of their competitors. It will enable them make strategies to stay on top of the market. Industrial ratios however have their own disadvantages such as; each company may have different Accounting policies that they use to prepare their financial results, thus comparing will not be under the same kind of accounting policies. The other disadvantage is that the different companies that are being compared may have different financial periods making the results from the comparison being unfair. Work Cited : "HD Supply Holdings Inc.." HDS Key Statistics.N.p., n.d. Web. 30 Mar. 2014. . "Profitability - compagnie de saint-gobain (SGO)." Businessweek.com. N.p., n.d. Web. 30 Mar. 2014. http://investing.businessweek.com/research/stocks/financials/ratios.asp?ticker=SGO:FP "Profitability - watscoinc (WSO)." Businessweek.com. N.p., n.d. Web. 30 Mar. 2014. “Risk management and internal control.” Wolseley. 2014. Web. 26 March 2014. . “Wolseley.” 2014. Web. 26 March 2014. . Hastings, N A. J. Physical Asset Management. London: Springer, 2010. Print. Appendices Table 1. Assets £ (M) 2013 2012 2011 2010 2009 Reporting date 31 Jul 2013 31 Jul 2012 31 Jul 2011 31 Jul 2010 31 Jul 2009 Tangible assets 1,263 1,195 1,249 1,409 1,593 Intangible assets and goodwill 1,246 1,160 1,628 1,812 2,223 Investments and other non-current assets 359 408 434 535 450 Total non-current assets 2,868 2,763 3,311 3,756 4,266 Inventory / Work in progress 1,722 1,606 1,596 1,611 1,624 Trade and other receivables 2,034 1,875 1,928 1,850 1,983 Cash and Equivalents 339 813 503 665 635 Other current assets and asset held for resale 79 83 540 202 553 Total of all ASSETS 7,042 7,140 7,878 8,084 9,061 Table 2. Assets £ (M) 2013 2012 2011 2010 2009 Reporting date 31 Jul 2013 31 Jul 2012 31 Jul 2011 31 Jul 2010 31 Jul 2009 Tangible assets 1,263 1,195 1,249 1,409 1,593 Intangible assets and goodwill 1,246 1,160 1,628 1,812 2,223 Investments and other non-current assets 359 408 434 535 450 Total non-current assets 2,868 2,763 3,311 3,756 4,266 Inventory / Work in progress 1,722 1,606 1,596 1,611 1,624 Trade and other receivables 2,034 1,875 1,928 1,850 1,983 Cash and Equivalents 339 813 503 665 635 Other current assets and asset held for resale 79 83 540 202 553 Total of all ASSETS 7,042 7,140 7,878 8,084 9,061 Grapgh 1. Formulas Return on Investment= net income/ shareholders equity Inventory turnover=cost of goods sold/ average inventory Asset turnover=revenue/ total assets Read More