FINANCIAL ANALYSIS

Financial Analysis: Hemscott

Financial Analysis: Hemscott

Financial Highlights

Hemscott is a supplier of global business and financial information and international online investor relations solutions. Co.'s operations are organized along three business lines: Global Business Information providing financial and business information; Global Corporate Investor Relations providing financial information and related services for corporate investor relations websites and intranets; and Media for advertising and online publishing.

Total Revenue

20,160,000

Operating Income

(3,483,000)

Net Income

(4,054,000)

Total Assets

46,729,000

Current Assets

10,927,000

Total Liabilities

28,714,000

Current Liabilities

12,344,000

Long Term Debt

16,370,000

Stockholders' Equity

18,015,000

Delivering Value to Shareholders - 2003 to 2007:

It is important for a Hemscott's management to ensure that share value is protected and shareholders are given the value for their investment. When investors see the companies increasing its value, this sentiment fuels the investor confidence. The value is delivered by way of Dividends and Capital Appreciation through share buybacks which results in increased EPS.

In order to identify Total Shareholders Return (TSR), following formula has been recommended by the academics:

TSR = Dividends paid + (Opening Share Price@ start of Fin Year - Closing Share Price@ end of Fin Year)

Figure 1.1 illustrates the computed TSR using above formula for Hemscott and its peer group. Hemscott has increased its value between 2003 & 2007 by posting a 65% growth, and also outperformed both Michelle & Butler Plc and Hemscotts Investors where MAB added only a 6% value whilst MCD diminished its value by 35% in terms of delivering the value to shareholder.



Figure 1.1 - Computed TSRs of Hemscotts Investor, Whitbread Plc & Mitchells & Butlers Plc

Notably, as illustrated in the Figure 1.2, Hemscott has also outperformed during last 5 years against the FTSE 100 and Industry indices which indicate that Hemscott has achieved it objective of delivering value to shareholders.

Figure 1.2 -Hemscott Performance against FTSE-100 & Travel & Leisure Indices

Hemscott has also maintained investor confidence through steady dividend payouts (Figure 1.3) and returning £750m to its shareholders by way of bonus issues (annual report 2007).

Figure 1.3 - Hemscott Dividend Payments & Growth (Source: FAME & Hemscott Website)

Hemscott has maintained a dividend growth rate of 11% over the last 5 years to 2006/07 and it remained at same level for 2007/08. Investors have kept their confidence on the positive growth of dividends which helped Hemscotts share price to secure a positive growth.

Although, above analyses proves that Hemscott has delivered value to its shareholders, an examination of Hemscott's P&L accounts during last 5 years to 2007 (Figure 1.4) indicates that Hemscott has paid out dividends in 2006/07 utlising its reserves which depleted from £2bn (2005) to £906m (2007). We can argue that Hemscott has done this with a view to maintain its dividend growth, thereby winning investor confidence, but resulted in reducing shareholder value and increasing gearing ratio to 101.93 in 2006 and 141.59 in 2007. Further, risk associated with such decisions is that it creates expectations in the minds of investors to receive similar returns in the future & if Hemscott is unable to maintain similar growth, it may result in losing investor confidence affecting share ...