Analysis And Investment In British Airways And Carrefour Finance Essay - Free Essay Example

I am a Thai national people and seldom invest the vast of money before in my life except Thailand Government bonds and have been closed with the extra dividend in two years ago. Although Im just student and very young but I also need to appraise the risk appetite of establishment that I need to deal with. At my young age of 22 years old, I am very dynamic person and never scare about investment if I confident to do so under my creature, whether it is a long-term investment but I foresee would be great in term of dividends when I get older. I have knowledge in aviation industry. I used to be customers of airline and supermarket, British Airways and Carrefour respectively. Personally, I decided to leave some amount of money in the UK bank account say saving in short-term period on saving account to protect myself in case of recession. Thus, I invested to Lloyds TSB Bank. Leaving your money in the bank is good because it will increase interest eventually (Eberts, et. al. 2005). However, if we really want to earn, it is better to invest rather than depositing it to the bank. Although there is a high risk when you invest, there is also a high chance of earning. Hence, I decided to look for companies that would be in my best interest. In order to do so, I gathered financial information of British Airways as well as Carrefour prior to my decision of investing to the any of those companies or invest to both. Thus, financial highlights of the said company were gathered for analysis. II. My aspiration against investment In an investment, there is a risk whether the money that you invest will eventually return or not. Therefore, having 300,000 US dollars it would be handful to deposit at least 100,000 US dollars to the bank to assure that there is an interest to earn. Since, pounds is much higher currency than dollars, it is advisable to open an account and deposit in this currency. If I will invest to the bank like in the Lloyds TSB bank (Im currently having a saving account with them), the money that I have will surely increased in accordance to its interest. Table 2.1 Lloyds TSB Bank Interest Rate Term Deposit 6 Month Term Deposit Amount Invested Annual Option Monthly Option AER/Gross % Net % AER/Gross % Net %  £10,000+ 1.15 0.92 1.15 0.92  £2,000 to  £9,999 1.15 0.92 1.15 0.92 Term Deposit 3 Year Term Deposit Amount Invested Annual Option Monthly Option AER/Gross % Net % AER/Gross % Net %  £10,000+ 4.10 3.28 4.10 3.28  £2,000 to  £9,999 4.10 3.28 4.10 3.28 Source: Lloyds TSB Bank In a short-term deposit in Lloyds TSB Bank, investing will increase the money by as much as 4.1%. Having $300,000 US dollars in this rate will increase at least $12,000 annually. In some point, it is better to deposit the amount wherein the money will surely increase in interest. In few years, this will increase by 20%. Prior to investment, it is advisable to have an increase amount prior to investment (Siciliano, 2003). The key step in investment is to deposit in a bank, then choose a company to invest via financial analysis, complete the requirements to invest and then wait until you gain the profit. III. BA Analysis When it comes to airline companies in UK, British Airways is one of the well-known companies. This airline operated in different continent of the globe like in America, Middle East and South Asia, Asia Pacific, Africa, and Europe. This airline company is operating almost 150 cities. The company is also on continues strategic development to farther increase the operation capacity of the company. It latest financial report shows how the company is doing its business by the numbers. Table 3.1 BA Income Statement (Source: British Airways)   Group  Company  £ million  2009 2008 Restated  2009 2008 Restated Cash flow from operating activities       Operating (loss)/profit  (220) 878  (165) 862 Operating loss from discontinued operations   (2)    Depreciation, amortisation and impairment  694 692  670 672 Operating cash flow before working capital changes  474 1,568  505 1,534 Movement in inventories, trade and other receivables  32 96  (28) 89 Movement in trade and other payables and provisions  (136) (325)  (132) (276) Payments in respect of restructuring  (64) (32)  (62) (30) Cash payment to NAPS pension scheme   (610)   (610) Payment to DOJ in settlement of competition investigation   (149)   (149) Other non-cash movement  1 3  7 (32) Cash generated from operations  307 551  290 526 Interest paid  (177) (182)  (163) (169) Taxation  3 (66)  26 (108) Net cash flow from operating activities  133 303  153 249 Cash flow from investing activities       Purchase of property, plant and equipment  (547) (596)  (528) (592) Purchase of intangible assets  (24) (33)  (24) (32) Purchase of shares in associated undertakings   (54)    Proceeds from sale of other investments  7   7  Proceeds from sale of property, plant and equipment  5 11  10 11 Insurance recoveries for write-off of Boeing 777 aircraft  12 51  12 51 Purchase of subsidiary (net of cash acquired)  (34)   (144) (1,016) Cash inflow from disposal of subsidiary company   1    Interest received  105 117  53 123 Dividends received  17 3  6 4 Decrease in other current interest-bearing deposits  202 458  356 1,238 Net cash used in investing activities  (257) (42)  (252) (213) Cash flows from financing activities       Proceeds from long-term borrowings  377 172  377 172 Repayments of borrowings  (66) (68)  (55) (57) Payment of finance lease liabilities  (402) (356)  (411) (355) Exercise of share options  1 4  1 4 Dividends paid  (58)   (58)  Distributions made to holders of perpetual securities  (17) (14)    Net cash used in financing activities  (165) (262)  (146) (236) Net decrease in cash and cash equivalents  (289) (1)  (245) (200) Net foreign exchange differences  8 (29)  31 (29) Cash and cash equivalents at April 1  683 713  433 662 Cash and cash equivalents at March 31  402 683  219 43 According to its annual report, the company has a total revenue  £8,992m in 2009 compared to  £8,758 last 2008. However, when it comes to loss before tax, the company suffered a gross loss of  £401 million from its 2008 to 2009 operation as compared  £922 million prior to the given year. On the contrary, when it comes to operating loss, the company was able to reduced operating loss to  £220 million as compared to its  £878 prior to the given year. Table 3.2 BA Balance Sheet (Source: British Airways)   Group  Company  £ million  2009 2008 Restated  2009 2008 Restated Non-current assets       Property, plant and equipment:       Fleet  5,996 5,976  5,805 5,794 Property  971 977  920 924 Equipment  266 310  258 301   7,233 7,263  6,983 7,019 Intangibles:       Goodwill  40 40    Landing rights  205 159  163 159 Software  22 22  22 22   267 221  185 181 Investments in subsidiaries     2,356 2,207 Investments in associates  209 227    Available-for-sale financial assets  65 80  27 24 Employee benefit assets  340 320  340 320 Derivative financial instruments  3 51  3 51 Prepayments and accrued income  25 19  9 9 Total non-current assets  8,142 8,181  9,903 9,811 Current assets and receivables       Inventories  127 112  125 109 Trade receivables  530 586  517 574 Other current assets  268 308  382 371 Derivative financial instruments  40 241  40 241 Other current interest-bearing deposits  979 1,181  43 399 Cash and cash equivalents  402 683  219 433   1,381 1,864  262 832 Total current assets and receivables  2,346 3,111  1,326 2,127 Total assets  10,488 11,292  11,229 11,938 Shareholders equity       Issued share capital  288 288  288 288 Share premium  937 937  937 937 Investment in own shares  (9) (10)  (9) (10) Other reserves  430 1,847  10 1,444 Total shareholders equity  1,646 3,062  1,226 2,659 Minority interest  200 200    Total equity  1,846 3,262  1,226 2,659 Non-current liabilities       Interest-bearing long-term borrowings  3,074 2,751  3,333 2,971 Employee benefit obligations  191 330  182 322 Provisions for deferred tax  652 1,075  592 1,017 Other provisions  256 210  215 185 Derivative financial instruments  123 4  123 4 Other long-term liabilities  204 168  169 132 Total non-current liabilities  4,500 4,538  4,614 4,631 Current liabilities       Current portion of long-term borrowings  689 423  689 421 Trade and other payables  2,796 2,875  4,045 4,036 Derivative financial instruments  471 20  471 20 Current tax payable  4 4  4 3 Short-term provisions  182 170  180 168 Total current liabilities  4,142 3,492  5,389 4,648 Total equity and liabilities  10,488 11,292  11,229 11,938 As an investor, you are most probably interested to know the basic loss per share. The company suffered 32.6 pence basic loss per share but gained 61.9 earnings per share. There is almost 1 is to 2 ratio between the loss and earnings of basics per share. Likewise, looking at the overall performance of the company from its network, the company performance of 53% Network-wide Ready to Go compared to the previous year with only 34%. Looking at the company highlights, it is quite considerable to invest in this company knowing that the company is very competitive in the airlines industry. With the continuity of strategic development, there is no doubt that this company will sooner or later gain the top of the competition. IV. Carrefour Analysis If there are competitive industries to challenge for, the retailing industry is one of the interesting sectors to examine. Wal-mart (ASDA) is the leader among the retail stores in the world. However, there is strong competitor that is trying to keep in step with Wal-mart, and that the Carrefour. This company, which means crossroads, is very active in groceries, merchandise as well as services. Overall, the company operates for 15,400 stores in different names, from hypermarket, supermarket, convenience stores, and discount stores and from any types of stores that you could think of. Overall, the company extended its operation for about 30 countries in different continent of the world. Figure 4.1 and 4.2 Net Income from Securing Operations Group Share and Earnings per Share4 Reviewing its financial highlights, the company was able to reached 86,967 million Euros in 2008 as compared to 82,148 millions Euros in 2007. Despite of the increase, the companys net income from recurring operations Group decreased from 1,868 million Euros in 2007 down to 1,256 million Euros in 2008. This affects the earnings per share for the shareholders wherein the 2008 earnings per share also decreased from 2.67 in 2007 to only 1.83 earnings per share in 2008. Figure 4.2 Carrefour Consolidated Net Sales From the shareholders view, it is alarming that the earnings per share by about 25% from 2007 to 2008. However, if we look at the type of industry, this is still a competitive industry to invest. Personally, the decreased may be because of the economic recession wherein people are trying to save as much as they can but still the company managed to have positive earnings. V. Comparison and decision making With all the financial data on hand, Im now ready to compare to what extent that the other company have the advantage to make a decision for investment. Looking at the physical features of the two companies, they are operating in different industry. British Airways is operating for airlines industry while Carrefour is for retailing sector. In terms of demands, we all generally know that people travel fastest in the air that is why they are taking the airlines (Keuleneer, et. al. 2001). On the other hand, Carrefour provides daily needs of the people with the products they are offering. In addition, both companies are strategically located at different continents. The best way to decide to invest is through the return of investment in accordance to their financial performances (Chorafas, 2000). Accordingly, British Airways has increased revenue in 2009 by 2.6%. On the other hand, Carrefour managed to increased sales in 2008 by 5.5%. There is a slightly difference in the increased of revenue. Looking at the earnings per share, British Airways shareholders are happy to gain over loss basic shares, 61.9 pence over 32.6 pence. On the other hand, despite of the earnings in 2008, Carrefour has a high decrease in the earnings for per share. British Airways suffered from operating loss despite of the increased in shares. Operating loss was not been highlighted by the Carrefour knowing that this was in their advantage. The operations performances of the two companies are quite remarkable despite of the recent recession. VI. Conclusion British Airways performances over the years is remarkable even though different industries in the world suffered from recession which as felt by the Carrefour. Despite of this, the company has some losses especially in the operating loss. Carrefour on the other hand is still able to get an increased in earnings per share. This is a good point for Carrefour knowing what they have variety of goods and services to offer. In choosing the company to invest, the numbers is quite important to decide where to put your money. If you see there is no earnings it will bring it is better to put it in the bank. However, with these two companies, it is important to note that there is very promising earnings waits. Both companies are in demand with the products and services they are offering hence that the risk of not earning is very low. From the numbers that I have, it is more advantageous to invest in British Airways. The company has a strategic development that is evident in the company. Then again, we cannot disregard Carrefour, because as can be seen from all of information, it has a great deal of advantage when dealing with recession since it has a variety of products and will not all be affected when any recession arise.