Abstract
The assignment is to make on the research and analysis of the financial performance of the selected company as we selected the Medibank private limited so we are going to analyse the medibank financial performance. This assignment requires making a comprehensive and detailed examination of the financial statement and its annual report, its share market, its market value, to come out the conclusion regarding the financial position and strength of the company. The financial statement gives overall data of the company of the same year. Analysis of financial performance can be done by making a comparison for two year or previous year’s data, these financial data helps to identify the real situation of the company. Financial strength can be measured by making the market analysis of customer satisfaction by its products and services offered by the company. This analysis report is required to make to provide advice to the wealthy investors regarding the financial position, its stability in the market, its transparency in the market. This analytical report gives assurance and a kind of satisfaction before making the investment in it. So that members trust can be enhanced by making believe on the productivity of the company.
I Introduction
Organisation that is selected for analysis in this report is Medibank Pvt. Limited. Medibank commenced on 1 July 1975 after passing the medibank legislation by joint sitting of parliament on 7 august 1974.the health insurance bill 1973 was the main bill that established MEDIBANK. Medibank private limited is a national private health insurer based company in Australia. It is second largest health insurance provider of Australia with the 3.8 million members & 29.1% market under two brands (medibank and ahm) .this company was set up to provide competition to private “ profit making company” health funds. Medibank was previously run as a not for profit organisation and later operated as a for profit government business enterprises with dividends paid to the federal government. It is a listed company on ASX. Medibank invests in community programs that support the health of all Australian this includes growing healthy kids which encourage healthy and active lifestyle in childhood.
II Financial Analysis of selected company
Description of one key product or service provided by the company
PRODUCTS OF THE COMPANY: COMPANY is providing the following services:
- Private health insurance
- Travel insurance
- Life insurance
- Pet insurance
- Workplace health promotion
- Workplace health management
- Health call centre.
Out the above one key product or services offered by the company are:
Private health insurance: private health insurance is also main product or services which are offered by medibank private limited (Medibank.com, 2019).
Health insurance policy is very important for managing the health issues, health care needs and health related expenses (Mustafa, et. al., 2012). We can claim the tax benefits under section 80D of the IT Act.
There are multiple health policy are available in the market which makes us confused , out of these which is best for us..
WHY MEDIBANK HEALTH INSURANCE
Medibank private limited health insurance policy is better than others.
Medibank private limited provides health insurance for all (singles, couples, family, single parents it has the staff having knowledge and expertise according to needs of individual.
The company uses the following kinds of offers to attract and to optimise the satisfaction of its customers.
Offers:
- 100% back on optical: get 100% back on the optical item ( up to the annual limit) at any recognised provider (Friesl, 2012).
- 100% back on dental twice a year: get 100% back on up to two dental checks up every year, including x-rays, from any member choice dentist.
- 100% back on kids extras: the company offers for kids no hospital excess on every one of its family hospital covers. And it also offers 100% back on included extras at member’s choice providers, as part of growing family and settled family packaged cover; it only applies to child and student dependents (Medibank.com, 2019).
- Accident cover boost…etc.: life is not predictable, any injury happened because of the accident, requires the hospital treatment, this insurance cover such risk that means services which are normally excluded will be treated as included to cover the injuries caused by accident (Rao, et. al., 2013).
Identify and conduct a trend analysis with two groups of financial ratios, including liquidity and capital structure of the selected company.
| Particulars | 2016-17 | 2017-18 | 2018-19 |
| Health Insurance Revenue | 6797 | 6468.8 | 6655.8 |
| Claim Expenses | -5553.1 | -5206.8 | -5341.9 |
| Net Income | 1243.9 | 1262 | 1313.9 |
| Other Income | 11.8 | 12.5 | 6.4 |
| Operating Expense | -766.3 | -771.7 | -806.8 |
| Income Tax | -179.2 | -174.2 | -178.6 |
| Investment Income | 139.3 | 95.6 | 102.8 |
| Profit for Discontinued Operation | 2.5 | 20.9 | 21 |
| Net Income | 452 | 445.1 | 458.7 |
| Balance Sheet | |||
| Cash | 597.6 | 470.1 | 656.5 |
| Trade & other Receivables | 317 | 292.2 | 283.9 |
| Other Assets | 2088.8 | 2328.7 | 2190.1 |
| Current Assets | 3003.4 | 3091 | 3130.5 |
| Long Term Investments | 87.3 | 53.6 | 49.3 |
| Intangible Assets | 321.1 | 350.1 | 405.9 |
| Other Assets | 53.7 | 50.2 | 45.1 |
| Net Fixed Assets | 462.1 | 453.9 | 500.3 |
| Total Assets | 3465.5 | 3544.9 | 3630.8 |
| Current Liabilities | 1564.7 | 1534 | 1517.5 |
| Total Liabilities | 1742.7 | 1715.7 | 1695.4 |
| Total Stockholders’ Equity | 1719.8 | 1829.2 | 1935.4 |
| Share Information | |||
| Earnings Per Share – Basic | 16.3 | 16.2 | 16.7 |
(Source: Annual Review, 2019)
(Source: Annual Review, 2019)
Trends:
- In the year 2016-17 the current ratio is between the 1to 2. But in the year 2018-19 & 2017-18. The ratios were greater than 2. It depicts that the company had sufficient funds to pay of the payables and the current liabilities (Delen, et. al., 2013)
- Liquidity ratio is less than 1.but it shows positive results hence the company can pay liquidates expenses or contingent.
- Net Margin ratio is almost equal in all the year. It means that the company had not improved a lot but also not make losses from the past years (Danese, 2013).
- The net worth ratio will be slightly downward as compared to the other years
Perform a non-current asset analysis
The assets schedule is given below:
(Source: Annual Review, 2019)
Perform a scenario analysis with data provided
| Average Price | $20 | ||||
| Units to be sold | 360000 | ||||
| Life | 4 years | ||||
| Equipment Cost | $2,500,000 | ||||
| Residual Value | $500,000 | ||||
| Working Capital | $800,000 | ||||
| Variable Cost | $18 | ||||
| (Source: Annual Review, 2019) | |||||
| NPV | Worst Case | ||||
| Years | 0 | 1 | 2 | 3 | 4 |
| Equipment Cost | 2500000 | ||||
| Sales | 7200000 | 7200000 | 7200000 | 7200000 | |
| Working Capi1tal | $800,000 | 800000 | 800000 | 800000 | |
| Variable Cost | 6480000 | 6480000 | 6480000 | 6480000 | |
| Residual Value | $500,000 | ||||
| Cash Fixed Cost | 550000 | 550000 | 550000 | $550,000 | |
| Profit Before Tax | ($630,000) | ($630,000) | ($630,000) | ($630,000) | |
| Tax | -189000 | -189000 | -189000 | -189000 | |
| Profit after Tax | ($441,000) | ($441,000) | ($441,000) | ($441,000) | |
| Discounted Values | 1 | 0.892857143 | 0.79719 | 0.71178 | 0.63552 |
| Discounted Cash Flow | 2500000 | ($393,750) | ($351,563) | ($313,895) | ($280,263) |
| (Source: Annual Review, 2019) | |||||
| Outflow | 2500000 | ||||
| Inflow | -1339471.06 | ||||
| Net Present Value | -3839471.06 |
| Average Price | $30 | ||||
| Units to be sold | 540000 | ||||
| Life | 4 years | ||||
| Equipment Cost | $2,500,000 | ||||
| Residual Value | $500,000 | ||||
| Working Capital | $800,000 | ||||
| Variable Cost | $12 | ||||
| (Source: Annual Review, 2019) | |||||
| NPV | Best Case | ||||
| Years | 0 | 1 | 2 | 3 | 4 |
| Equipment Cost | 2500000 | ||||
| Sales | 16200000 | 16200000 | 16200000 | 16200000 | |
| Working Capital | $800,000 | 800000 | 800000 | 800000 | |
| Variable Cost | 6480000 | 6480000 | 6480000 | 6480000 | |
| Residual Value | $500,000 | ||||
| Cash Fixed Cost | 350000 | 350000 | 350000 | $350,000 | |
| Profit Before Tax | $8,570,000 | $8,570,000 | $8,570,000 | $8,570,000 | |
| Tax | 2571000 | 2571000 | 2571000 | 2571000 | |
| Profit after Tax | $5,999,000 | $5,999,000 | $5,999,000 | $5,999,000 | |
| Discounted Values | 1 | 0.892857143 | 0.79719 | 0.71178 | 0.63552 |
| Discounted Cash Flow | 2500000 | $5,356,250 | $4,782,366 | $4,269,970 | $3,812,473 |
| Outflow | 2500000 | ||||
| Inflow | 18221058.73 | ||||
| Net Present Value | 15721058.73 |
(Source: Annual Review, 2019)
Interpretation on the sensitivity
Selling price: 9055951 = .19
450000*35*3.037
Variable Price = 9055951 = .44
450000*15*3.037
Fixed Cost = 9055951 = 6.63
450000*3.037
Identify and discuss any latest share or bond issuance by the selected company\
ON 26 MARCH 2014 Minister for Finance Mathias command announced that medibank sold through initial public offer in 2014-15 financial years. The sale was completed with 100% of the company sold .listing was done on Australian stock exchange under the code MPL on 25 November 2014.at that time market capitalisation was A$ 5.921billion.
Ray Williams, who was the public servant created the medibank in 1976 and he said the benefits should go directly to the customers.
The medibank IPO price was $2.15 and then government exceeded the range $1.55 to $2.00 and after it sale was gone up to 5.7 billion for the government.
Medicare is equity oriented entity, it possess 29 percent share of health insurance which enables it to negotiate in the market with other health insurance providers (Azim, 2012).
After this IPO, no further issue, right issue, private placement, bonus issue was brought by medibank private limited .as the medibank is an equity oriented company, authorised equity share capital of the company has not been changed (Siddiqui, 2015). it is the same as earlier however earring per share changed in every year because of retained earnings and reserves which was created by the company every year.
As the company is listed on asx ,shares are traded on asx.
The current market price of share of medibank private limited 3.36AUD ON 26 September.
The company is equity oriented so no bond was issued by the company. And no preference shares were issued by the medibank private limited (Akpan & Amran, 2014).
Calculate and discuss the PE ratios and share price movement of the selected company through 3 years
P/E Ratio will be used for the relative valuation. It is used to compare the share price to stocks earning per share. It is used to compare the investment basis that what are the returns on the basis share price (Medibank.com, 2019).
Formula
Price-Earnings Ratio = Price per share ÷ Earnings per share
Price of the share : $ 3.08
Earnings per share : $0.168
Price Earnings Ratio = $3.08 / .168
= 18.3
Hence it will show that the company will pay 18times that the share of investment.
III Recommendation letter
After the analysis of the financial position of the Medibank. The following recommendation can be made for the betterment of the company. The company is doing well with the business. Hence the ratio are calculated to know the company analysis and to know profitability of the company, the profitability is maintained in all the 3years of the business, hence the shares of the public in the company are secure, and they will be getting good result as per the expectation. The company should perform extra activities or make the popularise to increase the income and to grow the profitability of the company. The company should invest in the long term investment to increase the income of the bank. The PE ratio of the company is also showing that the company is also giving good returns of return. For maintaining the PE ratio the company should fluctuate rate of interest as per the market trends, so the interest on saving as well as on the loan should be balanced. The company assets which are in the progress should get complete as the 3 years or above had passed in the working stage. As per the analyst the investors should invest in the company to get better results.
IV Conclusion
Medibank is providing different kinds of insurance like health insurance, life insurance, and pet insurance etc. to cover the risk of its members. Multiple analysis was done to come out on the conclusion like non-current assets analysis, cash flow statement analysis, liquidity ratio, capital structures that means all over financial statement. By the analysis of income statement and comprehensive examination of financial performance based on financial statement of medibank private limited for financial year 2018-19. Profit was enhanced by 3.1% in the comparison of 2017-18 financial years. Earring per share was also enhanced by 3.1% as in 2018 it was 16.2and in 2019 it is 16.7.and if we talk about dividend per share it was also enhanced by3.1%. In 2018it was12.70 and in2019 it is 13.10.
The health insurance premium revenue was also enhanced by 2.3%in the comparison of the last year so on the basis of comparative study of two years in the simple words we can say that profitability of the company is increased. And it gives satisfaction to the investors to invest in product and services of medibank private limited that the company is growing company and it will fulfil the needs of the company. Andes for the fulfilment of companies gives different kind of health insurance offers like 100% back on optical,100 percent back on dental twice in a year.100 % back to kid’s extras. these offers are provided by the company to enhance the customer satisfaction and needs of the customer, Medibank not only providing offers but also providing different mode to claim the insurance, so that its member can claim the insurance amount very conveniently and their trust will be enhanced day by day on the company, In fact they also encourage to people to invest in company.
References
- Akpan, E.O. and Amran, N.A., 2014. Board characteristics and company performance: Evidence from Nigeria. Journal of Finance and Accounting, 2(3), pp.81-89.
- Annual Review, 2019. Medibank [Online]. Annual Review. Available at https://www.medibank.com.au/about/investor-centre/results-reports/annual-reports/[Accessed on 27.09.2019].
- Azim, M.I., 2012. Corporate governance mechanisms and their impact on company performance: A structural equation model analysis. Australian journal of management, 37(3), pp.481-505.
- Danese, P., 2013. Supplier integration and company performance: A configurational view. Omega, 41(6), pp.1029-1041.
- Delen, D., Kuzey, C. and Uyar, A., 2013. Measuring firm performance using financial ratios: A decision tree approach. Expert Systems with Applications, 40(10), pp.3970-3983.
- Friesl, M., 2012. Knowledge acquisition strategies and company performance in young high technology companies. British Journal of Management, 23(3), pp.325-343.
- Medibank.com, 2019.About Medibank Australia [Online]. Medibank.com. Available at https://www.medibank.com.au/about/ [Accessed on 27.09.2019].
- Mustafa, S.A., Othman, A.R. and Perumal, S., 2012. Corporate social responsibility and company performance in the Malaysian context. Procedia-Social and Behavioral Sciences, 65, pp.897-905.
- Park, T.Y. and Shaw, J.D., 2013. Turnover rates and organizational performance: A meta-analysis. Journal of applied psychology, 98(2), p.268.
- Rao, J., Yu, Y. and Cao, Y., 2013. The effect that R&D has on company performance: comparative analysis based on listed companies of technique intensive industry in China and Japan. International Journal of Education and Research, 1(4), pp.1-8.
- Siddiqui, S.S., 2015. The association between corporate governance and firm performance–a meta-analysis. International Journal of Accounting and Information Management, 23(3), pp.218-237.