Introduction
Halfords is the UK's leading store, based on turnover, in each of the key product markets where it manages, being, car maintenance, car advancement and leisure (including cycles and pattern accessories and roof top bins etc.
Founded as a local hardware store in Birmingham in1892by F W Rushbrooke, Halfords has since grown to establish its position as the primary shop of car parts, car enhancement, cycles and travel solutions in the united kingdom.
In this article the value of the company is evaluated on the basis of its current statutory accounts. Within this report the choice sources of financing available for the company are also discussed. The areas of corporate risk when bringing up fund, paying particular focus on funds available to the business are also reviewed.
Business valuation:
A formal evaluation of the value of any business using pre-determined and generally agreed after formulas. There's a range of ways to value a company. Valuations predicated on multiples of future income and the capitalisations of future cashflows will be the most common. There are a number of common valuation methods:
Asset founded business valuation methods total up all the opportunities in the business. Asset-based business valuations can be done on a going concern or on a liquidation basis.
- Agoing matter asset-based approachdetermines the business enterprise online balance sheet value of its possessions and subtracts the worthiness of its liabilities.
- Aliquidation asset-based approachrepresents the web cash that would be received if all investments were sold and liabilities paid off.
Earning value approaches
Earning value business valuation methods are based on the idea a business's true value is based on its ability to create wealth in the foreseeable future. The most frequent earning value way is about Capitalizing Former Earning.
With this process, a valuator decides an expected degree of cashflow for the business by using a company's record of earlier cash flow, normalizes them for uncommon revenue or expenses, and multiplies the expected normalized cash moves with a capitalization factor. The capitalization factor is a reflection of what rate of return a reasonable purchaser would expect on the investment, as well as a measure of the risk that the expected revenue will not be achieved.
Discounted Future Earningsis another earning value approach to business valuation where rather than typically past earnings, typically the trend of predicted future earnings is employed and divided by the capitalization factor.
Market value approaches
Market value methods to business valuation try to establish the value of the business by comparing the business enterprise to similar businesses which have recently sold. Certainly, this method is only going to work well if there are a sufficient quantity of similar businesses to compare.
Valuation of Halfords Using the marketplace Value procedure:
Inside the statement the Halfords Company is going to be evaluated using the marketplace value way. Valuation Multiple A value, typically expressed as a factor, used to multiply a business financial benefit to arrive at the business enterprise value.
Market-derived business valuation multiples
Valuation multiplesderived from similar business sales can be used to calculate the likely value of a business. These multiples are calculated as ratios which associate some way of measuring business financial performance to its potential selling price. One of the most popularmultiplesare:
Currant finance composition: Treasury policy
The Group's Treasury Coverage is organized to ensure that adequate financial resources are available for the introduction of its business whilst taking care of its currency, interest and counterparty credit risks. The Group's treasury strategy, insurance policy and adjustments are approved by the Plank. The main components of treasury activity and associated risk are defined below:
Funding
The treasury function arranges sufficient secure money to allow the Group to meet its medium-term business goals, whilst arranging facility maturities appropriate to its projected needs. The Group has a syndicated five-year term center, maturing with a "bullet" repayment in July 2011, totalling 300m of dedicated bank facilities, composed of a non-amortising term loan of 180m and a revolving credit facility of 120m, which, together with cash surpluses, provide enough money for the Group's operations.
Counterparty credit risk
The Group actively manages its human relationships with a -panel of high quality finance institutions. Credit risk is controlled by the treasury function preparing counterparty credit limits by reference to published rating agency credit scores and the organization Default Swap market. All such counterparties, which constitute the syndicated loan provider group, kept at least an 'A' credit rating during the facility contract. The Treasury Policy recognises an exposure to a counterparty occurs with regards to opportunities, derivatives and financial devices.
The Group's treasury department's main responsibilities are to:
- Ensure adequate funding and liquidity for the Group;
- Manage the eye threat of the Group's debt;
- Invest surplus cash;
- Manage the clearing loan company businesses of the Group; and
- Manage the foreign exchange risk on its non-sterling cash moves.
The Group's debt management plan is to offer an appropriate degree of funding to funding the Business Plan above the medium term at a competitive cost and ensure overall flexibility to meet up with the changing needs of the Group. The Group has a syndicated five-year term facility totalling 300m that delivers the Group with determined standard bank facilities until July 2011.
The key hazards that the Group faces from a treasury perspective are the following:
Financial risk
The Business Plan and cashflow forecasts are subject to key assumptions such as interest levels and the importance of these hazards would depend upon the amount of cash flow before interest, taxes, depreciation and amortisation and the strength of the total amount sheet.
Interest rate risk
The Group's coverage aims to control the eye cost of the Group within the constraints of the business enterprise Plan and its financial covenants. The Group's borrowings are at the mercy of floating rate and the Group will continue steadily to monitor moves in the swap market.
Foreign currency risk
The Group has a significant transaction visibility with increasing, direct source buys of its materials from the Far East, with the majority of the trade being in US us dollars. The Group's policy is to manage the foreign exchange deal exposures of the business enterprise to ensure the genuine costs do not go beyond the budget costs by 10% (excluding raises in the bottom cost of the product). The Group does not hedge either financial visibility or the translation coverage arising from the profits, investments and liabilities of non-sterling businesses whilst they stay immaterial.
During the 53 weeks to 3 Apr 2009, the foreign exchange management coverage was to hedge between 75% and 80% of the material foreign exchange transfer exposures on the rolling 15-18 month basis. Hedging is conducted through the use of foreign currency standard bank accounts, place rates and front foreign exchange agreements.
Credit risk
The Group's plan is to minimise the risk that foreign exchange and interest derivative counterparties, the holders of surplus cash and the providers of credit debt will struggle to fulfil their obligations and also, in the case of lenders, unwilling to increase the loan facilities when they expire. The Group made certain that such counterparties used for credit orders held at least an A credit history at the time of syndication (July 2006). Ancillary business, in the main, is directed to the eight lenders within the syndicated group.
The Treasurer is responsible for determining creditworthiness of every counterparty, based on the overall financial strength of the counterparty. The counterparty credit risk is assessed in the Treasury article, which is forwarded to the Treasury Committee and the Treasurer reviews credit coverage on a daily basis.
Conclusion:
Depending on the financial data provided by the Halfords Company the existing financial stability of the company is successfully analyzed.
References
- Annual statement: Halfords PLC
- http://www. halfordscompany. com/hal/ir/fininfo/reports/
- http://www. valuadder. com/glossary/valuation-multiplier. html
- http://financial-dictionary. thefreedictionary. com
- http://www. investopedia. com/terms/c/costofcapital. asp
- http://www. lse. co. uk/shareprice. asp?shareprice=THT&share=thorntons_plc_ord_10p
