The Action Act IMA EDUCATIONAL Case Journal Case Study ima ISSN 1940-2003 Forge Group Ltd Case Study (A) The Revealing N

[answerhappygod]

The Action Act Ima Educational Case Journal Case Study Ima Issn 1940 2003 Forge Group Ltd Case Study A The Revealing N 1 (54.83 KiB) Viewed 37 times

The Action Act Ima Educational Case Journal Case Study Ima Issn 1940 2003 Forge Group Ltd Case Study A The Revealing N 2 (57.99 KiB) Viewed 37 times

The Action Act Ima Educational Case Journal Case Study Ima Issn 1940 2003 Forge Group Ltd Case Study A The Revealing N 3 (68.88 KiB) Viewed 37 times

The Action Act Ima Educational Case Journal Case Study Ima Issn 1940 2003 Forge Group Ltd Case Study A The Revealing N 4 (56.06 KiB) Viewed 37 times

The Action Act Ima Educational Case Journal Case Study Ima Issn 1940 2003 Forge Group Ltd Case Study A The Revealing N 5 (44.31 KiB) Viewed 37 times

The Action Act Ima Educational Case Journal Case Study Ima Issn 1940 2003 Forge Group Ltd Case Study A The Revealing N 6 (49.02 KiB) Viewed 37 times

The Action Act Ima Educational Case Journal Case Study Ima Issn 1940 2003 Forge Group Ltd Case Study A The Revealing N 7 (43.32 KiB) Viewed 37 times

The Action Act Ima Educational Case Journal Case Study Ima Issn 1940 2003 Forge Group Ltd Case Study A The Revealing N 8 (58.33 KiB) Viewed 37 times

The Action Act IMA EDUCATIONAL Case Journal Case Study ima ISSN 1940-2003 Forge Group Ltd Case Study (A) The Revealing Nature of Numbers Sw Malowy University of Southern Queensland Toowoombs, Anestratur. 4350 Sazy. Malowy wydaw THE FORGE GROUP LTD SUMMARY In 2012-2015, Forge Group Limited had more than 2.000 employees working wicht in four continents. The pride in the growth story is evidentas Forge Group 2012 Annual Reported in September 2013 lists accomplishments in what is described as a groundbreaking year. The main milestones pastatus of the types of projects the company was involved in sec Fugue 1 Athe time of listing June 2007 Forge GroupFGRshares traded for $0.5 (All monetary amants descued herein arc in Australian dollars. To consent to another ciency, it www.x-sex.com) The shares poked at Munch 2013. valuing the company to million in less than a year. FG. was placed in a trading halt February 11, 2014 Voluntary administrates and receive were appointed THE ENGINEERING AND CONSTRUCTION INDUSTRY strict compliance, and quinements en engin the sect. The mens many funded sumber of large scale infrastructure projects in the formath of the Global Financial CGFC) the com Joint ventures and publicate puteniqua come in the introduce the eleck pop and to che adequate capital expertise Doctly incumber of different comic with peimar contact and contact lendering and tingit. This makes the industry Lighly competenti di vial to be appropriate contingan memperis Mining companies to dage see cheaper finance GFCd the wing demand for minerals andre large scale pets been the deving fee for someone, especially But with the other projects nating completion and induction phase there is a drop in capiacering compending In Australia in 2013-2014 centie spending was stilist the previous year. This incompetector and therefore, demand for licence can be completion times The market value engineering and esta comptes based their secondo bek Onder bestemme in the engineering and The engineering and construction sector provides sirrificant comitivity in many countries Lampe-scale engineering and construction projects including highwass bridges, railways, purts, haus, doction facilities and the and apartment building provide employment opportunities and attract large capital investment. The quantum of resources employed in this industry and the profound affect they love on society means that there NA EDUCATIONAL CASE JOURNAL VOLL NOLAN 2 MARCH 2015
Figure 1: The Year in Review construction sector to capture the company's future work and the dollar value of the work. The future work is contacted through the normal selling of services and though tendering for large-scale werkneeded by governments and large private companies, a poject is very large, it may be divided into segments with a separate tender process for cachment. Companies love to carefully consider the risk attached to cachment of the larger project and the interrelationship of each of the segmentA company can be held liable to another company if their soment completion is delayed and the other company cannot complete its work on time as per their contract, because of the delay For example, when building a tunnel, the riskierement may be blasting the rock and strengthening the tunnel Excavating the ground and surfacing the road may not carry the same risk but could be held up if the blasting and strengthening not completed on time In comparison to a retail or manufacturing concem. the products being sold a large capital that send not to be completed within a neat 12th period. This means that the need to be payment points built into the contract. There we called milestones. Once a project micis reached it trigger point when the engineering and construction company can ince the purchase and recognise the revenue in it. The product code Cot Goods Sold expertsogint this revere will contain material laborats and veb-contractor These con call capitalized into inventory at the time they are incurred but not expensed until they cach mieste. A tof dollars-term timchi subjectives and the application of large capital equipment com contribute to the overall business in the Many companies have suffered as a result of stalled projects foreseen circumstances et problems pore conting of the handlinglash Within the industry, there is usually significant take-over activity. This is die in part by companies not performing well and insolvency and also by nemal merget and Smaller companies find it difficult to compete with large companies for the larget peojects IMA EDUCATIONAL CASE BURNAL VOL ENLART 2 MARCH 2015
and generally need to combine or more in some way or stay small. This adds further risk and places the financial statements and the ordet book under increased scrutiny as business valuations tely on this information THE FORGE GROUP LTD (FGL) SHARE MARKET INFORMATION The historical share price chart since listing is shown in Figure 2 Figure 2: FGL Share Price Closing Price $7 SE 54 &&&&& AM 51 21/2002 6/27/2009 327/2010 27201 6/21/2012 212000 The company was a success story. It listed on the Australian stock exchange on June 26, 2007, from a private construction company called A Construction. It was a well-ean company that needed access to more capital if it was to continue to prow. Within a ycat it made its fiest acquisition by taking over Abesque Engineering. The company wervived the Global Financial Crisis and leveraged to the subsequent mining and construction boom led by China's appetite for minerals and resources. Oher the next few years, the company grew organically and in April 2010 another construction company called Cloughbought 13% (10.5 million shares of FGL ordinary shates, thus becoming the largest shareholder. Clough continued to purchase shares in FGL until it divested its total holding of 359 in March 2013. Clough management explained its divestment indicating that expectations of joint ventures between the two companies did not eventuate, and therefore, the equity holding was cashed in to allow the pursuit of other ohjectives In January 2012. FG. undertook a major acquisitive by purchasing CTEC Pty Lod. In essence, the acquisition mean taking over two majo penjects. The mantina Power Statico (DPS) Project in Queensland, Australia and the West Angeles Poner Station (WPS) Project in the Pillua tepice of Westem Australia. It was expected that these major projects would add $7.5 million and $10 million to camins before interest to depreciation und amortization (EBITDA) in 2012 and 2013 respectively. The purchase price was $16 million up front with further payments due on the meeting of specified performance targets total paid was $12.00 million. This increased FGEN eder book significantly, and FGL share price in response In June 2013. FG. acquired lagrar Global for $45 million This purchase meant that FGL was now diversifying into asset management and into other conomie The market closing prices major announcements, and significant shacholding changes are listed in chronological order in Table 1 CTEC PURCHASE In the wash up of the demise of FGL is the attention being paid to two main contract: The Diamantina Power Station (DPS) Project in Queensland, Australia and the West Angelas Power Station (WAI'S) Project in the Pilbara spion of Western Australia. Both projects were acquired after FGI. took over CTEC Pey Led on January 13, 2012. The purchase of CTEC was to change the business model by bringing sub-contracting work in-house with the intended consequence of taking out the middle man and thereby increasing camnings by negating sub-contractor margina) The CTEC purchase payment terms required an up- front payment of S16 million with subsequent payments conditional on meeting performance criteria (posible further payment of $40 million in total. CTEC's prior year (June 30,2011) EBIT was $2 million, with expected EBITDA year end 2012 and 2013 to be $18.4 million and $24.8 million. respectively. The DPS and WAP projects were to increme this expected EBITDA by 575 million in 2012 and $10.8 million in 2013 IMA EDUCATIONAL CASE JOURNAL VOL NO ART 2 MARCH 2015
Table 1. Timeline of Forge Group Ltd (FGLI Date Closing Market Major Announcement Change June 21.2001 組 Astralian Staccharge re 2008 5021 June 30 2000 3040 Gobol Francia Aarl 2010 1256 Caughpur 165 million shoes for whip ne 2010 1256 0.2012 35-40 June 20.2012 54:37 12.2012 3525 Fol 100% CTCPVM formen March 2011 569 Peric March 2013 SOS Cough Fat 605187 million, FG May 17, 2013 Laddar contactgeld June, 2017 Fotos como sy 2013 Hilda TAN Bupati Ane 2013 1409 August 2013 Anal por PAT 563 million milion dividend 0:4 per Sister2.2013 $10 biliojo tuwin Dungua mada to Forgede tek owat 52. bilioni Sinter12.2013 Panded mar contractanding for his T-50 million September 19, 2013 majer contattated Dugalder Detaber, 2013 FGL lectures 350 million in major contract in US de June 2013 November 4, 2013 5413 Trading November 2013 ANZ Bank maar appoints Kontanter tooks November 2010 FILMA ANZ Bars sports entre cities Catering Wifes underperforming at CTEC prohl Nagtatagent with some and subcontractors Permal certion for the bett November 2010 3858 FOL Martet Aroucement 5127 przewie deur ons hooptrach Car Foto West Angle Power Station 56 milion to complete the Oluling in town ANZ Bank cod with some ofrece - November 200 300 Trading to December 2013 FGL Marie Announcement ponse to Sindicated becane weimaria Power Station and West Regio Power Suite without condus eft grade. Conting analytin during out and Nevad tooted trading and profit downgrade in New December 17, 2013 FOLwded million com a Northern coach J. 2014 $125 Trading tot 14.2014 14 2014 510 Trading tatt 2014 2014 Jenay 21 2016 February 10, 2014 Forway 11, 2014 Bosnia and creditors IMA EDUCATIONAL CASE JOURNAL VOL 3, NO. 1, ART. 2. MARCH 2015
Instead cost everans and poor budgeting meant that the projects revised 2013 estimates showed a $61 million project margin loss for the DPS project and a $41.7 million project margin lou on the WAP project. The cost overruns on these two projects lead to the petit downgrade and contributed to the resulting shortage of cash. Added to that was the doomery of an early payment to the vendors of CTEC Pty Ltd before its performance conditions were met. Further, the payment of bonuses to the previous Namaicine Director. Peter Hunchinson, of $375,000 was made for a successful puisition and integration. These payments ac the subject of further investigation by the liquidato DPS AND WAPS COSTING AND BUDGETING In any business the casting and budgeting wstems are critical to success. The FGL. administrator report for 20122014 year coding January 2014) shows that the • Actual work-in-peopress income for the period was $1.26 million below management forecast • Laborants were $70 million ever budget Material costs were 555 millioner budget. • Work-in-peagress verhale et $2.2 million over budget FINANCIAL INFORMATION The financial statements for 2010-2014 we presented in Table 1.5 Table 2 Comprehensive Income Statement (in thousands of Australian dollars! June 2010 June 2011 Sen. June 2012 mu June 2010 $1,054,100 Uredited January 21, 2016 $520,941 on Revenue Gustos Dest 15.00 11.000 Ingloyee Direction and more Comingos hivio One Other 532 Results from operating Activities $54.990 250 03 5162 S. France 302 Net Prolit Before Tax 100 S. 12.00 10:31 2 000 . 0241 300 SO, Net Profit Atter Tak Foreigneret Total Comprehensive Income 12.10 13 S. SE2 IMA EDUCATIONAL CASE JOURNAL VOL END LART 2 MARCH 2015
Table 3. Balance Sheet (in thousands of Australian dollars) June 2010 June 2011 June 2012 Jer 2014 5511 Current Assets Garanch Dortomis Tale www 22.500 ותו SN Other Norcones Total Current $112.00 $150.023 SUN Nomerset 20 TO מת Property and 20 22 org ומו Total current Assets Total Annet 52 12200 310.00 SIL 21 22 3.272 Current Listies Trade Πιστους Current hoito Other Total Current S. . Noncret Liabilities Eats and enter payables Brown Deed to Intrigued BAS One Total Nancurred Liabilities . 1102 Total Liais NetAssets 2711 11.08 1. 100 TOS un capital ho 1.22 Petan Totally Number of shares 105 1505 103 M47 M 135 1. S. 2110 04 11.541.5 H IMA EDUCATIONAL CASE JOURNAL VOLL NO LAT 2 MARCH 2015
Table 4. Statement of Cash Flows in thousands of Australian dollars) 2010 2011 2010 Cash Hews from Operating Activities Tecnigte tomatoes Payment to plan and are 25. 25.2001 7000 1. 337,54 00 201 EM 25 $12.822 nad Net cash flows provided by operating activities Cash Flows from Investing Activities Payments for reperty plant andet rowed from all property, plan and on 2:30 224 5.07 712 07.126 11227 S. 0.454 Tordipeatured Anored from Action of new Pamer of decoration Net cash flows provided by used in financing activities Cash Flows from Financing Activities Process of capital Pored trombong Hope of boats rid Dividend paid Net cash provided by used in financing activities Net intrare decrease in cash and equivalente Cash and beginning of your Efect of charge tech Cash and equivalents at end of you 024 07:25 1995 . S. 13.11 SILOS 24 2 22.10 5.2009 . SUS 1744 $57.320 5725 5.720 Table 5. Reconciliation in thousands of Australian dollars) 2010 2011 2012 2013 3.217 Praft for the year after tax Deprecated artition Other ronca Decretaria Decreme contentories and WP Decreereat other comme 1954 67 25 TORTY 03 2.23 2014 21 15 Decretarded Decreto Decreto create an deemed talables tren terror Net cash inflow from operating activities 54 356 33:18 517.22 IMA EDUCATIONAL CASE JOURNAL VOLINO ART 2 MARCH 2015
3. FINANCIAL STATEMENT ANALYSIS a. For the years ending June 30, 2013, and June 30, 2011, compute and discuss the return on equity (ROE), return on assets (ROA), profit margin ratio, asset turnover ratio, current ratio, cash flow ratio, debt-to-equity ratio, interest coverage ratio, debt coverage ratio, NTAB, EPS, DPS and the PER. b. Discuss the major differences between your analysis of the June 30, 2013, report and the June 30, 2011, report (prior to the takeover of CTEC). Appraise the problems faced by FGL management in light of your analysis. c. Using the January 31, 2014, unaudited financial information, compute the ROE, ROA, profit margin ratio, asset turnover ratio, current ratio, cash flow ratio, debt-to- equity ratio, interest coverage ratio, debt coverage ratio, NTAB, EPS, DPS and the PER. Comment on the ratio analyses performed. . 4. COMPANY GROWTH a. Outline and compare two types of company growth strategies. b. Hypothesize why it is important to compute financial metrics that link the income statement and the balance sheet to help understand the growing business. Use the FGL example to test your hypothesis.