financial modelling Assignment Sample

Financial Modelling Assignment Solution

Introduction- Financial Modelling Assignment 

Industry Structure and Investment Programme

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A company's business strategies and Financial background determine its status in the Business environment. "Hilton Food Group Plc" is a company developed in the United Kingdom which is packages meat. It deals through three regions of Europe. This company's industry value is very high since many investors focus on the companies that are on the trending list because of their success rate, and "Hilton Food Group Plc" is one of them (Richmond et al.,2017). This company has a strong background of many successful investors.

This company's investment programme includes smart strategies like "Crafting of Budget",, which calculates the difference between input and output. Other programmes include "Management of Accounts" and Maintaining a good relationship with customers by reaching up to their demands. Despite maintaining a good record, it's always safe to have a backup plan since due to the various opinions of different shareholders change the market price can sometimes worsen. It's always safe to analyze the graphical data of earning history of "Hilton Food Group Plc" in the last few years. It clearly shows that investment strategies are working in the right way or not (Strait et al.,2017). In trending reports, the growth rate of "Hilton Food Group Plc" is much highlighted because of its high success point.

Hilton Food Group Plc

"Hilton Food Group Plc" is one of the leading food packaging companies which deals mainly through Europe via Ireland, Sweden, Holland, Denmark. It supplies its products across all regions of Europe. It has many subsidiary companies like "Hilton Food (UK) Limited", "Hilton Food Ireland Limited", "Hilton Food Group Denmark", "Hilton Food Group Europe", and many more.

Figure 1: Hilton Food Group Plc Market Position

(Source:https://finance.yahoo.com/news/worry-hilton-food-group-plcs-084604634.html)

In 2016, the business was very successful as the company has seen a massive volume of growth of profit and launched many trading companies in Australia and Portugal. The Board Of Governance declared "Hilton Food Group Plc" as one of the most progressive companies of 2016 since its investment strategies and valuation system remained appropriate for the upcoming years (Schuerch et al.,2018). 2017 was a moderate year for the company as it has witnessed the expansion of business in Newzealand and Central Europe. Significant strategic progress was noticed. In the year 2020, it broke all previous records by achieving success in a vast volume. The shift of supply of food from restaurants to supermarkets has been very impactful amongst the buyers. The new idea helped the familiar people in the time of COVID-19 when the world faced a crisis, and it is very known to all what kind of difficulties ordinary people faced. Online purchasing of food items was a beneficial practice which came out as the most promising one to earn cash most quickly.

Food Packaging Industries

The food packaging industry is one of the world's necessary industries, where the selling rate of food is directly dependent on the packaging structure. The packaging structure tells the customers about the product's information, necessity, and benefits of the same. This method changes buyers' thoughts, and direct communication with the customers can be done (Lozano et al.,2017). The packaging of the food includes a hologram of the company. The customers can directly complain to the company if they face any issues regarding the particle food product. It will suit the most if the packaging can be titled as "Mute salesman". To maintain food safety, food packaging is essential; thus, it is in high demand in the market (Schuerch et al.,2018). In India, a 15% overall growth has been noticed in the last 15 years (Richmond et al., 2017). Globally the packaging production is over 148 million tons.

Key Competitors

Success is something that is not easy for anyone and anything. Competing with others makes it best amongst the all (Schuerch et al.,2018). The "Hilton Group" is one of the companies that has many competitors in the market. Mainly key competitors are "Friesland Campania" which has finance of 10 billion, "Groupe Danone" in "South Africa" which has overall finance of 23 billion. Another highly successful company of "South Africa" is "Nestle", which has accounts of 89 billion and very popular throughout the world not only business-wise but also socially (annual reports, 2021). They are associated with many brands that help people globally. The "Fage" another big company in "South Africa", having overall accounts of more than 100 million. "Karro", "Fortune", "Young's" are the other companies which compete with “Hilton Group”.

Financial Analysis

The success rate of Business activity and Investment Strategy depends on how the final background is affected. If there is a positive impact of the strategies used in the financial status means the finance rate is increasing, then the strategies are declared appropriate for the upcoming years, but if it sets a negative impact due to which the company starts to run in the loss, then the strategies need to be checked and modified.

Similarly, there are many other points where a company can face financial risk.

Though the success rate of "Hilton Food Group Plc" is maintained through the years, they still face financial problems when many shareholders share a different point of views at the same time, and as a result, the share price generally gets decreased (Schuerch et al.,2018). Thats why it is always safe to keep the investors updated about the problems faced by a particular company. Via the analysis that is made from the past few years, "Hilton Food Group Plc" has made an impact in the share market and throughout all the business companies. Since 2016 it continued to increase the finance level and also spread many branches across "Europe", "Australia", "New Zealand."

Figure 2: Shareholder’s Position of Hilton Food Group Plc

(Source: https://fintel.io/so/uk/hfg)

In each year, the success rate may vary, but the company never took a step back in highlighting their products in the best way. In 2020 due to the pandemic situations, there was continuous pressure on the food companies to get modernized about the ideas, and the Hilton group was dealing with all the challenges very smartly (Schuerch et al.,2018). It became smooth for them because, in 2019, the financial growth increased by almost 8.9% by witnessing a commendable amount of diversification internationally. Later in that year, the company started to supply packed red meats to retailers from the branches of "Belgium".

The growth rate

The overall impact of a company is incomplete without having any proof of its growth and success rate, and the historical performance of the past few years are the best way to highlight improvements and business performance of the company. "Hilton Food Group Plc" has always been on the list of successful companies, which is proved by the calculated data. In the year 2016, the opening price of the company was 530 million, and throughout the month, the price was increasing as the business was running good. At the closing time, the amount was moderate by having 520 million. In the third month of the year, the financial growth was noticeable, where the opening price was much less than the closing price of 563 million (annual reports, 2021). By the end of the year means in December, the success rate was increasing in a promising way. In that month, the opening amount was 590 million, and the closing amount was 621 million. Throughout 2016 a huge amount of volume increase was noticed in the financial zone. In the next year, 2017, the journey was commendable since just at the starting of January, the opening was increasing by a huge margin and ended up having 667 million.

Figure 3: Stock prices of Hilton Food Group Plc

(Source: https://www.marketscreener.com//4Traders_us)

A moderate transformation was noticed throughout 2017, where in December, the opening amount was 834 million, and the closing amount was 864 million. The reason for that success also includes the new branches that were made in "Newzealand" and "Ireland" (annual reports, 2021). In 2018 they continued doing excellence by diversifications. It is known that international business includes many obstacles, so the Hilton group also faced that. At the starting of January, the amount was 864 million and ended up at 850 million. By the end of the month, the amount increased upto 902 million. In 2019 the business again raised on the stairs of success. The opening price was 902 and ended up having a profit of 928 million (Lozano et al.,2017). Throughout the year, the company showed a much-progressing rate by ending at 1109 million when the starting price of December was 1020. Finally, 2020 has been a benchmark for the company when the shifting idea of food to supermarkets and online delivery had increased the volume in a huge amount. The data for the whole year has not been yet analyzed, but at the starting of January, the opening price was 1108 million and increased throughout the month.

Modeling & Valuation Development of Financial statements

Profit & Loss statement

The total revenue of the company remains quite consistent. In 2016 the total revenue was 1135.26. In 2017 it increased to 1234.49, then in 2018, it was 1357.28. In 2019 the total revenue increased a lot due to lockdown, went up to 1649.59, and last in 2020, it was the highest, and it went to 1814.67. The total gross profit of the company in 2016 was 140.62 in 2017 it was 150.83 then in 2018, it went to 161.86 then in 2019, it increased to 209.4 and lastly, in 2020 it was the most profit of 247.95 (annual reports, 2021). Total operating expenses in 2016 was 1135.25; in 2017, it was 1200.17, then in 2018, it was 1322.17, and in 2019 it went to 1603.29 in 2020, it increased to 1758.9. The operating income of the company in 2016 was 50.32 then in 2017, it decreased to 34.32 then in 2018, it was 35.11, and then in 2019, it went up to 46.3 and lastly in 2020, it was the highest 55.77.Net income before paying taxes of the company in 2016 was 35.42 in 2017 it was 33.21, in 2018 it was 34.21 then in 2019 it increased to 43.33 and then in the last year, it was 43.16 (Lozano et al.,2017). Net income after paying all debt in 2016 was 25.35, then in 2017 it went down to 24.65 then in 2018 it was the same as the previous year in 2019, net income went up to 32.53, and in the last year, it increased to 33.06.

Figure 4: Profit & Loss Statement

(Source: Excel)

Balance Sheet Statement

The total current asset of the company in 2016 was 230.85, then in 2017, it went down to 202.33 then in 2018, the current asset of the company was 269.84. In 2019 due to the lockdown situation, it increased to 343.47, which is a huge success for the company. In the last year, it increases the most and went to 416.46 (annual reports, 2021). The total asset of the company in 2016 was 305.62 in 2017 it went down to 287.21 then in 2018 it increased to 433.36, in the last two years the total asset was 577.07 and 905.55 which was the highest. The total current liabilities of the company in 2016 was 154.62 in 2017 it was 173.2 in 2018, it was 225.39 in 2019 it increased to 280.29, and in the last year, it went up to 398.01 (mccourier.com,2021). Total liabilities of the company in 2016 was 200.65; in 2017, it was 198.73, then in 2018, total liabilities was 274.71, and in 2019 it increased to 401.5 and in 2020, total liabilities was the highest 719.32. Total long term debt in 2016 was 20.52 in 2017, it went down to 17.41 in 2018, it went up to 38.06 in 2019 it was 109.43, and in the past year, it was the highest of 308.16. The total equity of the company in 2016 was 90.45 in 2017, it was 88.48 in 2018, it was 158.65, then in 2019, it went to 175.57, and in 2020 the equity was 186.23.

Figure 5: Balance Sheet Statement

(Source: Excel)

Financial Position

Financially they grew the most in the year 2020. The gross profit of the company in 2016 was 12.38% in 2017 it was 12.21% in 2018 it was 11.95% which is the lowest one in the past five years, but due to the lockdown situation, it went up to 12.69% in 2019 and 2020 it was the highest which is 13.66%.

Figure 6: Gross Profit

(Source: Excel)

Net profit after paying taxes in 2016 was 2.23% which was the highest. On the other hand, in 2017, it decreased to 1.96%, in 2018, it came down to 1.83% in 2019, it was 1.97% and lastly, 2020, it was the lowest 1.82% (mccourier.com,2021). Because of their huge gross profit and due to other circumstances, the net profit was the lowest in 2020.

Figure 7: Net Profit

(Source: Excel)

Operating profit in 2016 was 4.43%, in 2017 it came down to 2.78% in 2018 it was 2,58% and 2019 it was little profit, and it went to 2.80%, and in 2020 the operating profit was the highest, and it was 3.07%. The current ratio is a company's potential to pay its liabilities, and in 2016 it was 0.49% profit in 2017 the profit was 0.16% in 2018 it was 0.19% in 2019 it increased a little it was almost 0.22% and in 2020 in decreased to 0.04% (mccourier.com,2021). The debt of equity ratio in 2016 was 0.22% in 2017, it was 0.19% in 2018, it was 0.23% in 2019, the ratio was 0.62%, but in 2020 it was the highest, and it was 1.65%.

Figure 8: Operating Profit

(Source: Excel)

Assumptions

Covid 19 Impact

The company's trading is matching with the expectation of the board. In the pandemic situation, they were receiving more demands from the customer. and they have worked closely with their main customers to fulfil their requirements. They have a good potential co-worker with whom they have been working for a long time (mccourier.com,2021). They worked hard even in this pandemic situation to help with the production level. They provide their colleagues with a strong protocol to keep them safe, and so they don't come in contacts. At this time, they made a deal with a plant in Belgium to fulfil their red meat demands. The red meats business has enlarged hugely because of unexpected selling in the lockdown period (Lozano et al.,2017). They had close to 39% profit in 6-month revenue. In middle of July they were reaching too many supplies, so they started sharing their help with others and they dealt with some restaurants to lower their retail requirements (annualreports, 2021).And in the present days they have seven plants of manufacturing and another one is located in belgium.

Figure 9: Covid 19 impact on Hilton Food Group Plc

(Source: https://ei.marketwatch.com)

The pandemic situation made them quite strong to face any difficulties now they know how to keep the whole process hygienic and also how to keep everyone safe and also reaching their customer’s demands.Company didn't have to close any of their plant even in this pandemic.They planned to keep their volume of product same but not the most expensive one.They are happy and satisfied with their reach of expectation and don't afraid even if the situation is more challenging (mccourier.com,2021).Currently they are looking to grow in australia.In 2019 they experienced almost the growth of double.Tesco’s employee said they provide many facilities and always try to do their business in an unique way to assure the future success.They have been set themselves as an example of the surviving successful team.

Investment Policies

“Hilton Food Group plc” holds the place of one of the leading international meat retail packaging businesses.They are progressing with their business in both the UK and also Ireland (Lozano et al.,2017). In the central part of Europe their growth is going up because of red meat and good quality fresh food,In Australia they keep remaining quite strong with their growth.Company’s financial position endures healthy, because of positive feedback from customer they willing to grow more in other country.Financially they are in competition with other successful business.They recently launched hotel brand which provides friendly lifestyle for the traveler and trying to reach their expectation.

Growth rate

By the passing year this company has gone through many changes in the net income.In the past five years what are the growths they have gone through is going to be described (annualreports, 2021).In january of 2016 the beginning of the company’s starting stock was 540 and in december the closing stock was 659.5, so they made some profit in the year of 2016.

In 2017 their starting stock price was 703.5 and the closing stock was 869.5, they made some good profit in the year of 2017.In 2018 their starting stock price was 880 and the closing stock was almost the same as the starting stock.In 2019 the starting of the stock price was 976 and it ended with 1114 so it was a huge profit in the year of 2019 and in 2020 their starting stock price was 1133.86 hence it was a huge growth of the company in stock market.

Figure 10: Share Prices growth rate of Hilton Food Group Plc

(Source: https://chart.hl.co.uk/charts/chart.jsproto_large.chart)

Valuation model

A company’s valuation depends on the present value that future takes towards the future valuation of that particular company. When Discount Cash Flow is the sum total of all the cash flow of that particular year. It varies and contains flaws along with it (Richmond et al., 2017). The Hilton Food Group Plc, adapts a two way discount cash flow model that takes them into double growth rate. As the name, the first growth rate magnifies the terminal value moving towards the upper side. The second growth ensures the stability of the growth that the company maintains throughout a fiscal year. In the first year the cash flow is estimated throughout that year for the next ten years. In the second year, If these steps are not available then they use the free cash flow to analyze the estimation from the last year (annualreports, 2021). The company assures that if the decreasing free cash flow occurs then the growth will happen and if the company faces an increase of free cash flow then they will face withering of that company at a certain period. The estimation of cash flow represents the growth in early years rather than growth in the ending years.

Figure 11: Changes in working Capital

(Source: Excel)

A discounted cash flow always keeps in mind that the value of a dollar in the present will increase more in the coming days. Valuation is just the one phase of the company. It has many phases that also need analyzation. Discount cash flow is not the only part of the valuation process. Valuation works as a guide to the overvalued cash assumption. The changes that a company goes through at a particular time and the cost of equity or the free rate risk effects at a core level to the bad (Lozano et al.,2017). So before making an investment be aware of any one risks that the company carries. To discover the future earnings of Hilton Food group plc observe the census graph to identify the earrings of the company. The current valuation model of Hilton Food Group plc is 1,084.00. The stocks of this company are falling from the previous year’s stocks (Richmond et al., 2017). The inventors should think twice is they are interested to put their shares behind this company. The year ending revenue that the company has generated is: “Open 1,084.00, High1,114.00, Low 1,084.00”. The Bid Price is “1108.00p

Ask Price is 1112.00p, Spread 0.36%, Prev Close 1110.00p, Volume 167,5981D”.

Valuation Model

The current value of Hilton food group plc UK£563m (Richmond et al., 2017). The initial stage of a company depends upon the cash flow of that company. The second stage of the estimation of cash flow is called terminal value.

Cash Flow Statement

The cash flow statement of a company has the records of the cash they have spent or earned from its operating systems that helps them to run the company. These equipment might include manufacturing, ongoing, regular activities, goods and services and many more activities that bring money to the company (Richmond et al., 2017). In the year 2016, the cash from operating activities has shown number was 42.65. In the year 2017 it grew into one percent that was 41.4 and in the next year, 2018 it was 46.45, exactly to one percent. 2019 it again grew by 53.48 and the last year’s data was 70.26. The company has tried very hard and so that the data increased. The net income of a company is the most crucial factor that affects the growth of the company. The company has grown throughout the five years. In 2016, the total net worth of this company was 32.62. In 2017 it was 33.21 and in 2018 it grew up to 34.21. In the year 2019, it went till 43.33 and the last year it was the highest to 43.16. Depreciation is a factor that happens to a company in an obvious manner. Depreciation is the value reduction of assets that is used by a particular company. In the year 2016, the depreciating rate was 16.52. In 2017 it was 17.26 and in 2018 it was 18.6. In the year 2019 it was 19.29. Last year it was 42.8 (Strait et al., 2017). Since the company was growing and more value was added. So the depreciation rate also increased. The company’s amortization rate depends upon the debt they are paying regarding the company. Since a growing company should reduce their debt by every proceeding year. In 2016, the amortization value was 3.5. In the next year, 2017 it was 2.45 (Lozano et al.,2017). In 2018 it was 0.5 and in 2019 it was 2.54. The last year’s amortization value was 2.62. Non-cash items rate was according to 2016, -0.24. 2017 it was -0.14, in 2018 it was -0.85 and in the last year it was 6.01. Cash taxes paid in the year 2016 it was 7.5 and in 2017 it was 7.46. In 2018 it was 9.67 (Richmond et al., 2017). In the last year it was 7.41. Cash interest paid in 2016 was 1.6. In 2017 it was 1.2. In 2018 it was 0.97. In 2019 it was 3.02 and last year 12.71.

Sensitivity Analysis

Sensitivity analysis of a company is the profit they are expecting after selling the goods and services and what they get after sending it to the market (Lozano et al.,2017). The changes in working capital throughout the five year. In 2016, it was 100. In 2017 it was 91.9902. In 2018 it was 52.770. In 2019 it was 196.83. In 2020 it was 206.01. The cash from operating activities was in 2016 it 100. In 2017 it was 97.99. In 2018 it was 112.19. In 2019 it was 115.13. In 2020 it was 131.3. Ther cash from investment activities went like in 2016 was 100. In 2017 it was 92.04 (Richmond et al., 2017). In 2018 it was 638.189. In 2019 it was 94.96. In 2020 it was 110. The ending cash balance in the year 2016 was 100. In 2017 it was 98.01. In 2018 it was 119.47. In 2019 it was 113.23. In the last year it was 275.48

Figure 12: Sensitivity Analysis

(Source: Excel)

Conclusion

The assignment states that the Company Hilton Food Group is a multinational company. This company is based in many countries such as, “United Kingdom, Netherlands, Denmark, Sweden, Portugal, Ireland, central Europe, New Zealand, Australia”. Due to the coronavirus situation all over the world. There are many companies which went into a massive loss. Since, food delivery products were not obligated for a long time. The company has not faced a huge loss. Hilton food group has made their pillars strong since it is one of the best food delivering companies which is following all the protocols of WHO “World Health Organisation”. The Hilton Food Group Plc is a growthful company where their state of growth is increasing as per the 2019 report. It has expanded more over the world since 25 years. The company has expanded 50% of its investment in Dalco with dreams to expand more of it 50% till 2024. This strategy has made their market expansion into an impressive number in the food delivering field and growing in the vegetarian market. According to The Wall Street magazine, it has declared “buy”, “sell”, and “hold” last year. They also stated that they are currently holding 3 buying rates and 1 holding rate for their stock. Since Hilton Group of companies has a good review, so they have declared to “buy” the stocks from them.

Reference list

Journals

Richmond, B.G., Wright, B.W., Grosse, I., Dechow, P.C., Ross, C.F., Spencer, M.A. and Strait, D.S., 2005. Finite element analysis in functional morphology. The Anatomical Record Part A: Discoveries in Molecular, Cellular, and Evolutionary Biology: An Official Publication of the American Association of Anatomists, 283(2), pp.259-274.

Strait, D.S., Weber, G.W., Neubauer, S., Chalk, J., Richmond, B.G., Lucas, P.W., Spencer, M.A., Schrein, C., Dechow, P.C., Ross, C.F. and Grosse, I.R., 2009. The feeding biomechanics and dietary ecology of Australopithecus africanus. Proceedings of the National Academy of Sciences, 106(7), pp.2124-2129.

Schuerch, M., Spencer, T., Temmerman, S., Kirwan, M.L., Wolff, C., Lincke, D., McOwen, C.J., Pickering, M.D., Reef, R., Vafeidis, A.T. and Hinkel, J., 2018. Future response of global coastal wetlands to sea-level rise. Nature, 561(7722), pp.231-234.

Lozano, R., Naghavi, M., Foreman, K., Lim, S., Shibuya, K., Aboyans, V., Abraham, J., Adair, T., Aggarwal, R., Ahn, S.Y. and AlMazroa, M.A., 2012. Global and regional mortality from 235 causes of death for 20 age groups in 1990 and 2010: a systematic analysis for the Global Burden of Disease Study 2010. The lancet, 380(9859), pp.2095-2128.

Online articles

annualreports, 2021 annual report Available at: https://www.annualreports.com/HostedData/AnnualReports/PDF/LSE_HFG_2019.pdf [accessed on 16. 02. 2021]

annualreports, 2021 annual report availble at: https://www.annualreports.com/HostedData/AnnualReportArchive/h/LSE_HFG_2018.pdf [accessed on 16. 02. 2021]

annualreports, 2021 annual report available at: https://www.annualreports.com/HostedData/AnnualReportArchive/h/LSE_HFG_2017.pdf [accessed on 16. 02. 2021]

annualreports, 2021 annual report available at: https://www.annualreports.com/HostedData/AnnualReportArchive/h/LSE_HFG_2016.pdf [accessed on 16. 02. 2021]

Websites

2021 Available at: https://www.mccourier.com/global-house-and-floor-cleaner-market-current-and-future-demand-analysis-2020-2028-by-competitive-outlook-godrej-henkel-ag-co-kgaa-s-c-johnson-son/[accessed on 16.02.2021]