This is intended to aid the shareholders of the above group and the potential investors to assess the performance of this group of companies over the financial year 2007 & 2008. Some calculations have been made available and please find them in the appendix section. Wolfson plc is a semi conductor company specializing in the design and supply high Performance mixed signal integrated circuits. Its devices play an essential role in many digital consumer products ,converting information of real world of analogue signals.
It focuses on the supply of high performance audio & ultra low pewers integrated circuits and has a world wide reputation built around their competencies. (from business review page 4 annual report 2008). Overall the above group manufactures components that are fitted in other electronic gadgets , eg. , mobile phones ,portable media players, navigation devices. Handled games ,digital cameras etc. The company is based (headquarters) in Edinburgh, UK .
It has total of over 350 employees working in 14 Locations around the world from designers sales & engineering teams in uk, U S A , Japan ,Taiwan, Korea, Singapore and India. Customers. as stated earlier , this group manufactures subsets of other electronics, consumables that implies most if not all its customers are corporate companies like Sony, Samsung, Sanyo, tom tom , apple, canon, Epson, alpine, & many others. Wolfson group customers have a reputation with regard to high product performance , quality & supply.
Wolfson group is one of the TRUSTED Supplier. Competitors of wolfson group There are few competitors, but only on single products and not across the wide range of products. This groups supplies examples could be Texas Instruments, AKM, circus logic, maxim , analogue devices, but wolfson have handled threats of competition by producing superior devices of high performance and additional functionalaties derived from understanding market and customer needs with innovating engineering. Summary of revenue by segments /region. ( sterling 000)
Revenue in japan increased by 11. 48% from 29326 in 2007 to 32693 in 2008, sales in Europe and the rest of the world also went up by 6. 84% from 22155 in 2007 to 23672 in 2008. Emerging markets like asia . sales dropped from 168090 in 2007 to 133915 in 2008, that is a 25. 52% decline which is significant but was predicted due to the economic deterioration of the global economy. The hardest hit sales were those in US . the centre of the sub-prime mortgage scandal (recession) , revenue fell from 12030 in 2007 to 7919 in 2008, by a whopping 51. 9 %.
This was a significant hit to this segment, but largely due to the rapid economic downturn na dfall in consumer demand but as the economy in the US is now growing at a rate of 5% in 2009 & expected to grow further , sales would eventually go up. Key Ratio Analysys. Ratio analysis is considered to be the most important fundamental analytical technique used to assess the financial health of the business. The calculation of these ratios (percentages) converts financial data into information that facilitates the comparison and ultimately enables the interpretation of the significance of the financial data available.
This method enables the comparison between companies of different sizes and different industries, over extended time periods. Ratios are not difficult to calculate but they can be difficult to interpret as they are only the starting point of further analysis. The gross profit margin measures the net income of a company generated by each pound of sales. As this method measures the profit on each Pound gained, it provides some sort of a defensive mechanism for the future in case of the cost of products increases or in case of a dip in sales.
This method also reflects the firms pricing policies and shows profit margin on sales over and above the direct cost of sales. Utilising gross profit ratio, analysis can be made of the company’s performance with respect to the profitability of the organisations. Operating profit was expected to fall due to the drop in revenue by 14. 4% this is alarming because wolfson has maintained its expenses. The position of this ratio (operating profit margin) is explains the increase of amortisation charges of up to 2. 7 million. From 2.
3 million in 2007 to 5 million in 2008. Its possible that some of wolfsons brand items had to be written off due to the tough economic conditions explaining the massive amortisation cost for 2008 of about 54%. This ratio also have halved from 15. 87% in 2007 to 7. 08% in 2008 and this is not likely to please the investors/shareholders in wolfson group of companies. This fall has been in explained by the CFO of wolfson as caused partly due to the inventory write of in the year 2008 as compared to 2007 and a dramatic and rapid down turn in the global economy.
This result in the rapid down turn in the consumer demand for wolfson”s range of products. Debtors days are the average number of days it takes to recover the cash for the goods (or services) provided by the companies. A business will usually be concerned with the amount of funds tied up in trade receivables and try to keep this to a minimum. We have to consider the fact that, the longer it takes to recover the money, the more the business will be losing out as the funds could be used for more profitable purposes.
Wolfson as mentioned in the chairmen’s report is in a strong position in terms of liquidity and gearing and have chart through the treacherous waters resulting from the Global economic downturn using advantage of large cash deposits of 92. 2 milion and the fact that the company is not geared at all ie no debts , gives the company the advantage in terms of financial risk attached to highly geared companies and the ratios indicating liquidity are all beyond expectations will please investors and potential investors in the company.
However looking at the turnover dropping by 14. 4% as shown previously by the figyres calculated and also the fall in net profit by nearly 6. 3 %is not very pleasing for the investors. External factors ie macro economical variables have been the main cause (Recession) and blamed for the wolfson”s 2008 performance . the company has set out an ambitious strategy in place and a massive investment on research and development and efforts to increase the market share , certainly will boost sales and profit margins in the future.