Blackmores Corporate Financial Analysis
1. Executive Summary
Blackmores Ltd is one of the leading contenders in the Health Care sector. The company specialises in a range of products including herbal and vitamin supplements. The company has a major share in the Australian and New Zeeland’s market generating almost 85% of the revenue from this region. Blackmore’s capital structure has been analysed as requested by the Board of directors to assist them in optimizing the company’s current capital structure.
Firstly, the report analyses and compares Blackmores Ltd. financial data with two comparable competitors in the industry: Pharm-a-Care laboratories Pty Ltd and Swisse Wellness Pty Limited. Secondly, a detailed financial analysis was performed to analyse the capital structure of the organisation. The capital structure was compared to other similar organisations in the industry and analysed using various theories such as the security mispricing theory, management inertial theory and the pecking order theory.
Thirdly, the report then aims to determine the optimal capital structure for the organisation. Several determinants of the optimal capital structure such as profitability, income, tax rates, growth etc. were analysed. Various managerial theories were considered, such as the trade-off theory, Agency theory, Stakeholder theory and the Predation theory to determine the optimal capital structure.
Lastly, the report is finalized along with recommendations that the company can implement to optimize its capital structure along with the industry practices that can help the company be more efficient.
2. Company and industry Overview
Blackmores Ltd is an Australian public company, manufacturing and marketing a range of health products including herbal, mineral and vitamin supplements. The company employs over 500 workers in Australia, New Zealand and Asia. Blackmore was originally incorporated in 1962 Queensland as “Blackmores Naturopathic Organisation Pty Ltd”. The company’s name was changed to Blackmores
Blackmores Ltd is one of the leading contenders in the Health Care sector. The company specialises in a range of products including herbal and vitamin supplements. The company has a major share in the Australian and New Zeeland’s market generating almost 85% of the revenue from this region. Blackmore’s capital structure has been analysed as requested by the Board of directors to assist them in optimizing the company’s current capital structure.
Firstly, the report analyses and compares Blackmores Ltd. financial data with two comparable competitors in the industry: Pharm-a-Care laboratories Pty Ltd and Swisse Wellness Pty Limited. Secondly, a detailed financial analysis was performed to analyse the capital structure of the organisation. The capital structure was compared to other similar organisations in the industry and analysed using various theories such as the security mispricing theory, management inertial theory and the pecking order theory.
Thirdly, the report then aims to determine the optimal capital structure for the organisation. Several determinants of the optimal capital structure such as profitability, income, tax rates, growth etc. were analysed. Various managerial theories were considered, such as the trade-off theory, Agency theory, Stakeholder theory and the Predation theory to determine the optimal capital structure.
Lastly, the report is finalized along with recommendations that the company can implement to optimize its capital structure along with the industry practices that can help the company be more efficient.
2. Company and industry Overview
Blackmores Ltd is an Australian public company, manufacturing and marketing a range of health products including herbal, mineral and vitamin supplements. The company employs over 500 workers in Australia, New Zealand and Asia. Blackmore was originally incorporated in 1962 Queensland as “Blackmores Naturopathic Organisation Pty Ltd”. The company’s name was changed to Blackmores
References: Baker, M. & Wurgler, J. 2002, ‘Market Timing and Capital Structure,’ Journal of Finance, vol. 57, pp 1-32 BKL annual report: http://datanalysis.morningstar.com.au.ezproxy.lib.uts.edu.au/af/company/corpdetails?ASXCode=BKL&xtm-licensee=datpremium Frank, Z.,M., Goya, K., V. 2005, ‘Tradeoff and Pecking Order Theories of Debt’, Centre for Corporate Governance, Tuck School of Business 2005, viewed 15 Oct 2014,<http://www.tc.umn.edu/~murra280/WorkingPapers/Survey.pdf> Grinblatt, S.,Titman,M Hawawini, G. and C. Viallet. Finance for Executives: Managing for Value Creation. South-Western College Publishing, Cincinnati, OH, 1999.