Advanced Corporation Finance for Cranswick Plc. food producer.
This is an assignment that focuses on Advanced Corporation Finance for Cranswick Plc. The paper also evaluates the financial performance in regards to the company.
Advanced Corporation Finance for Cranswick Plc.
Case study
Cranswick plc is a leading UK food producer and supplier of premium, fresh and value food products, as on the listing on the London Stock Exchange as a constituent of the FTSE 250 Index.
Given the Brexit uncertainty, the board of directors is considering an expansion of the company and have decided to adopt a growth strategy either by making further investment in a different industry or acquiring an existing company in their industry. At the same time, the board of director has made an agreement to sell one of its subsidiaries to Conagra Brands Inc., an American packaged foods company headquartered in Chicago, in September 2020 and concerns the foreign currency risk that the company exposes to. Required: As the CFO of the Company, you are to write a report to the senior management team address the following key decisions:
Key decisions
Firstly, evaluate financial performance: choose ONE financial ratio from EACH category below to assess the financial health of the company using past 5-year financial information: Profitability Efficiency Liquidity Financial gearing Investment Note: Analyse your chosen financial ratios using information from financial statements.
Secondly, you should focus on five ratios in total in this part of analysis. Critical analysis of the five ratios is for a good work. Please critically evaluate past five-year firm performance, i.e., 2015-2019, using your chosen ratios and discuss the problems and limitations of financial ratios as a tool of financial analysis. Create your own small tables, diagrams and charts in your analysis and present professionally. Financial ratios can be collected using Bloomberg Terminal, Fame or Osiris through ARU library (https://anglia.libguides.com/az.php?a=o), annual reports and other professional resources. Suggested word: 150-250 words. 2. Investment appraisal: The company also wants to diversify its risk by investing in a new industry. Alpha is a long establishment supplier and acquiring Alpha Plc would add substantially to the market capitalisation of the business.
Advanced Corporation Finance for Cranswick Plc.
Additionally, the board of directors wants to explore whether Alpha Plc is worthy of investment. Alpha Plc is currently all equity based. In order to assess the operating risk of the company, you decide to use the asset beta extracted from other proxied companies in the same industrial sector as detailed below. i. Abbot Plc is an all equity company. Its equity beta is 1.05. It has been estimated that 35% of the current value of the company is related to higher risk projects, these projects carry a beta of 1.26. The remaining projects have a similar risk. ii. Broadridge Inc is financed by 30% debt and 70% equity and their equity beta is estimated as 1.34. iii. Cecilia Plc has an equity beta of 1.20. Its capital structure is two thirds equity and one third debt.
The company has two divisions of operations, A and B. Division A has similar operations but those of B operation are 40% more risky than those of A. It is also estimated that Division A accounts for 60% of the total value of Cecilia Plc. iv. Ecolab Group finances its company using 40% debt and 60% equity with an equity beta of 1.16. The company has 55% of its current value related to higher risk projects.
Advanced Corporation Finance for Cranswick Plc. food producer
