BABCOCK PLC.

Corporate Financial Management Assignment: Babcock Plc.



Corporate Financial Management Assignment: Babcock Plc.

Introduction

Babcock International Group Plc was founded in 1981. It is British multinational support company which specializes in managing complex assets and infrastructure in safety. The company has contracts with civil bodies, which is its main business. The civil bodies includes, network rail and ministry of defence ok UK. The company has four operating division which are operational overseas in Africa, Australia, and North America. According to defence revenue, Babcock was the world's 41 largest defence contractor in 2010 and the third largest in UK after Rolls-Royce and BAE systems. It is head quartered in London, United Kingdom. It has an employee base of 25,000, headed by Peter Rogers (CEO).

Babcock Plc is the UK leading engineering support service organization with an order book of circa  £12 billion and annual revenue of over £3.2 billion 2013. Babcock Plc is found to be critically supporting the sectors of telecommunication, energy, defence, transportation and education. The services provided by Babcock Plc is underpinned by the three main core capabilities, integrating engineering expertise, delivering projects and programmes, and managing assets and infrastructure.

(Babcockinternational.com, 2013)

Calculations and Interpretations

Dividends Paid (last 5 years)

The list of dividends that Babcock Plc paid in last years in descending order is

In 2012 company paid 20.00p

In 2011 company paid 17.00p

In 2010 company paid 14.20p

In 2009 company paid 12.80p

In 2008 company paid 10.40p

(Babcockinternational.com, 2013).

Current share price of the company as of November 15,2013 is 1,315.00p listen on LSE

Current Market Capitalisation of the company is £4,761.24 (millions).

They equity beta value of the company is 0.46.

(Yahoo! Finance, 2013)

Task A

To gauge the performance of the company a number of accounting ratios were calculated and then their interpretation was done. The following ratios were used

ROCE Ratio

This ratio basically help to determine that how much a company can lose form its liabilities and how much can it gain from its assets. The formula for ROCE (Return on Capital Employed) = ( operating profit/ capital employed)x 100.

For 2012:

Capital employed = 1989.4

ROCE = ( 202.2/1989.4)x100

ROCE = 10.16%



For 2011:

Capital employed = 1987.1

ROCE = ( 153.2/1987.1)x100

ROCE = 7.71%

ROCE is the vital metric that can helps in driving the management performance and in also helps in framing the investment strategy. The company uses ROCE in order to monitor the progress of capital efficiency. The companies usually publish the ROCE performance figure with preliminary and interim results. The comparison of ration between 2011 and 2012 shows that company has delivered progressive improvements in return. The only drawback that is associated with ROCE is that it ignores the time value of money.

Current Ratio

This ratio defines the ability of the company to pay its short term liabilities. The higher the current ratio, the more capable the company is in paying off it debt responsibilities. The formula for calculating current ratio is current assets/ current liabilities

For 2012:

Current Ratio = 0.76

For 2011:

Current ratio = 0.77

The above ratios show that Babcock Plc in 2011 was more capable to pay of its debt ...