Professional Documents
Culture Documents
ABP
ABP Level 7
MA / MBA Advanced entry
Level 7 Business and Strategy
Level 7 Business and Strategy Marketing
Management of Financial Resources & Performance
April 2013
Contents
1.Barclays;
2. BP Plc.,
2.2 Limitations;
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11
References;
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1.Barclays Plc;
Barclays Plc was founded in 1690, top 20 in the FTSE 100 headquarters in London, listed in
LSE, UK, and leading financial services provider, has operations worldwide (Barclays, 2013a)
,has 147,500 employees working in more than 50 countries.
Barclays Plc, provides various financial products and services including commercial, retail
banking, investment banking, credit cards, wealth management and investment
management services and other banking and mortgage products through Woolwich. And,
supports businesses from microenterprises to multinationals, through Barclays investments
banking and investment management portfolio (Barclays, 2013a,b,c,d).
All the share holders of the Barclays group are regularly communicate through their
investor relations team all over the world, to collate financial results (Barclays GroupInvestor, 2013).
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Customers of banking,
Suppliers- global sourcing team is providing the support to reduce Barclays costs and
improve the value of purchasing decisions when selecting suppliers for products and
services.
Competitors -other banks, performing the same banking operation e.g. HSBC, RBS etc.,
Media- corporate affairs team protects the trusted reputation ensuring both international
audiences and internal colleagues are kept informed of the groups news and objectives.
NGOs- working with charity Junior Achievement Worldwide helps young people in 14
countries to improve opportunities towards employment.
Society- partners with Plan and CARE to improve the quality of life for poor people by
extending and developing access to basic financial services through the development of
savings-led community finance. Also, supports disadvantaged people in the UK to make
informed responsible and sustainable financial decisions (Barclays Group-Investor, 2013).
And, lending support through British Red Cross for the immediate relief efforts and longterm recovery programme for natural disasters and emergencies across the globe. And, with
UNICEF, empowering young people.
Governments-The corporate real estate service mitigating the environmental impact of
Barclays buildings to ensure the organisation complies with property governance. And, the
Barclays property team manages the groups premises.
Barclays advices the internal and external stakeholders through the compliance team to
advice on litigation affecting the global groups business activities and assets.
people driven solutions, Barclays enhances the system and processes. As a financial
institution, Barclays is at the forefront of the fight against criminals who attempt to defraud,
launder money or finance terrorism and against weapons proliferation. And, Barclays shows
a legal, regulatory, moral and social responsibility to restrict the access of criminals to the
financial services market.
Employees;
The employees of the Barclays are trained in Anti-Money Laundering policy (AML), zerotolerance approach to bribery & corruption and complying data protection in all
jurisdictions of operation and obligations, in relevant legislation, rules and industry guidance
to enable to prevent organised crime and terrorism. The employees failure to comply with
these can result in personal liability like fines, imprisonment, disciplinary and dismissal
(Barclays, 2013 a,b,c).
Barclays rewards and benefits one of the best in the banking sector, which often get
criticism from the environment, to attract and retain talented people and stimulate high
performance. And, 35,000 UK employees have signed up for the share-save scheme of the
bank. Also, the employees benefit with the child care payment scheme since 2002, benefits
them from the exemption of NI contributions.
Environment;
Barclays has the sanction policies which are operated as official restrictions on activity with
targeted countries, individuals, entities and industries. And, committed to complying with
financial sanctions and export controls in order to comply with the law, help to prevent
weapons proliferation, organised crime and terrorism. Also, set out the guidelines and
places restrictions on the individuals and entities. And, failure to comply with AML and
sanctions requirements will expose Barclays to civil and criminal liability, fines, loss of
reputation, public reprimand, limitation on business and other serious consequences.
The community investments are channelised in five key areas, education, and people with
disabilities, social inclusion, the arts and the environment. And, Make A Difference Day
(MADD), innovative action practised to renovate schools, orphanages and local hospitals,
taking disadvantaged and disabled children on outings, repairing roads, pedestrian
crossings, speed bumps, clearing parks and play areas.
In the UK, Barclays is the first UK high street bank to receive ISO14001 environmental
certification for their Environmental management system (EMS), which reflects their
business in the environment index of corporate environmental engagement ranking.
this (Salz, 2013).Moreover, cautioned the short-term financial returns and employee
rewards are ever too dominant in the Barclays culture are the cause of problems.
2. BP Plc.,
BP Plc, an integrated oil and gas operative company, listed in LSE since1954, has an
employee strength of 85700, revenue of 245 Billion (net income of 7.60 Bn) by 2012
headquarters at London. The company operates in 80 countries, having capacity of 2.4
million barrels of oil refined per day (BP, 2013a; FT, 2013) with a proved reserves of 17,000
million barrels of oil equivalent. Recently, there are no major mergers or acquisitions. They
provide fuel for transportation; energy for light and heat, petrochemical and lubricants
helps the day-to-day life like clothes, packaging and paints (FT, 2013).
The major two business segments are,
Exploration and Production and Refining and Marketing-
consumption to 36% in between 2011 to 2030, where most of the demand is from NonOECD countries.
According to Maheswaran (2013), the operating and net profit margin in 2012 is 5.25% and
3.08%, far beyond industry average of 13.99% and 7.84%. Whereas operating and net profit
margin were at 10.6% and 6.84 % in 2011 reduced to half in 2012. However, it was in
negative (-1.25%) in 2010 due to its major oil spill in Gulf of Mexico, which ate away the
operating profit elements. In 2012, sales and other operating revenues were 245 Bn ($
375,580 million), income before interest and income tax revenues 12.9 Bn ($19733
million)and a net income of 7.6 Bn ($11,582million). Correspondingly, the total assets
increased by 0.24% (an increase of 4.6 Bn & $ 7125 millions) and the share holders equity
also increased too (by 6949). The operating cash flow was decreased from 14.5 Bn ($
22154 million) in 2011 to 13.33 Bn ($20397 million) in 2102, due to the increase in capital
expenditure of 34% (15.08 Bn / $23078 in 2012 and 11.67 / $17845 millions) and
decrease of free cash flow 1.76Bn ($ 2681 million).
The current business environment-2013 is challenged by the dynamics shaped by future
technology developments, policy choice, and changes in tastes considering the energy
security, affordability and environmental impacts. BP strongly believe, these demands can
be met by strategising the diverse mix of fuels and technologies with supporting lowercarbon economy with their stronger portfolio of products of oil sands, shale gas, natural gas,
deep water oil production, wind and bio-fuels.
Moreover, their strategy relatively
-to drive forward the financial performance and not by just increasing production volumes,
-to give priority for operating cash flow and replacement cost operating profit over
production achievements,
-to propose investment in the greater potential areas to generate strong and reliable growth
in operating cash flow through deep water operations and exploration to gas value chains
and giant fields giving emphasis on safety and risk management (BP Annual Report, 2012) to
edge over the competition.
In
In
Million
Million
2012
2011
116,402
125,786
Current Assets
68275
62791
Current Liabilities
(47731)
(54255)
8536
Total Assets
184,677
188,577
Non-Current Liabilities
(63357)
(61945)
Net Assets
73590
72378
73590
72378
In Million
elements
Sales Revenue
231055
241629
Operating Profit
11990
25513
7269
16792
Return on capital employed, (ROCE); profitability and the level of profit made
corresponding to the value of capital deployed in the business
ROCE = operating profit / (equity+ non-current liabilities)
= 11990/ 10593
= 25513 / 10433
= 1.13 %
= 2.45%
The ROCE is more in 2011 than in 2012, which showed more command over its business
gaining. There was a rise in 2011 then, the previous year, but, it got declined in 2012
(Maheswaran, 2013).
Profit Margin ;profitability ratio and identifies the percentage of the revenue which is the
profit after all the costs met.
Profit Margin = operating profit / sales *100,
For the year 2012
=0.11%
The profit margin ratio in 2012 is nearly half of that of the ratio in 2011. So, BP enjoyed a
higher profit margin in 2011 than that of 2012.
The decision of sale of non-current assets in upstream (North Sea oil and gas fields, Maclure,
Harding and Devenick, Brea complex and Braemar field) and downstream (Carson refinery,
California), will help the disposal programme of various assets and associated liabilities to
the tune of US$ 846 million will help the adjustments in working capital and operating profit
attributes.
Current Ratio; liquidity state of the BP and its ability to meet its short term debts. Current
Ratio = Current assets / Current liabilities,
For the year 2012
= 68275 / 47731,
=62791 / 54255,
= 1.43;1.
=1.16;1
In 2012, BP has higher current ratio (1.43;1) than 2011 (1.16;1), shows that the situation in
2012 has favourably increased and BP invested more in long-term assets and alternative
project assets than in 2011. However, the favourable current ratio does measures the
quantity and not the quality, and the higher ratio may be in trouble, and the Work in
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progress, which cannot be convert in to cash and therefore it may have a less cash to pay off
to the current liabilities and most of the times the companies will manipulate by over
valuing (Kaplan et al ,2011).
Gearing Ratio; the long-term loan to payback with interest, where the higher gearing ratio
shows the risk the business faces.
=non-current liabilities (equity + non-current liabilities),
2012
2011
= 63357 / 10233,
=61945 / 10433,
= 6.19.
=5.94
The non-current liabilities are the long term loans due more than a year like preference
shares and mortgages. The higher gearing leverage is more risky as it denotes more
liabilities and less equity (Kaplan et al, 2011). So, in 2012 the gearing ratio was higher than
that of 2011 shows that BP entered in 2012 with more risk by having more long-term
liabilities. BP aimed to increase the level of gearing in the lower half of the 10-20% range
over time (BP Annual Report, 2012).
Moreover, the decision making is the critical managerial function and can be classified in to
strategic and tactical and long run and short run decisions, and the primary objective are to
achieve optimum utilisation of businesss resources and capital. So, the effective decision
making need to be given special attention with the relevant information and analysis of data
(Kaplan et al, 2011).
In annual report 2012, the strategies of 10 point plan includes the focus on
-safety and managing risk,
-gain strength in exploration,
-stronger and more standardised assets,
-active portfolio management to continue by completing US $ 38 Bn to focus on strengths,
-new upstream projects to double the unit cash margins with 2011,
-increase of 50% in net cash in comparison to 2011,
-intend to use half of incremental operating cash for reinvestment, half for other purposes,
-strong balance sheet with intention to target the level of gearing in the lower half of the
10-20% range over time.
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2.2 Limitations;
The BP figures were differed from those given out in LSE, where LSE figures (LSE, 2013) are
taken for consideration for calculations with analysis provided by Maheswaran (2013) and
converted in to GB from US$. Even though, other type of figures available through FT and
chart websites. For e.g., in FT (2013b), the total assets were given as US$ 300,193 million
(2012), and if we convert in GB 195,780 million, and in LSE, (2013a) it was given as GB
184677 millions. So, there was confusion among the numbers in performing calculations. So,
decided to take the LSE, which is the final authority to decide up on the performance of the
company and accounting statements.
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References;
Barclays (2013a), Our History, accessed [online] on 02.04.2013 from:http://group.barclays.
com/about-barclays/about-us/our-history
Barclays (2013b), Barclays Strategic Review, accessed [online] on 02.04.2013 from: http://
group.barclays.com/transform/strategicreview
Barclays (2013c), Aiming High, accessed [online] on 02.04.2013 from:http://www. barclays.
com/supplier/aiming_high_commercial_principles.html
Barclays (2013d), Aiming High, accessed [online] on 02.04.2013 from:http://www.
barclays.com/supplier/aiming_high_our_vision.html
Barclays Annual Report(2012), Building the Go-To bank, accessed *online] on 02.04.2013
from:http://group.barclays.com/Satellite?blobcol=urldatablobheader=application%2Fpdfblo
bheadername1=Content-Dispositionblobheadername2=MDTTypeblobheadervalue1=inline%3B+filename%3D2012-Barclays-Bank-PLC-Annual-ReportPDF.pdfblobheadervalue2=abinary%3B+charset%3DUTF8blobkey=idblobtable=MungoBlobsblobwhere=1330696635849ssbinary=true
Barclays Group- Investor(2013), Corporate social responsibility-Making business sense,
accessed [online] on 02.04.2013 from:http://www.investor.barclays.co.uk/ results/2002
results/annual_report/website/impact/responsibility.html
Barclays Plc., (2011), Consolidated Balance Sheet, accessed [online] on 03.04.2013
from:http://reports.barclays.com/ar11/financialstatements/consolidatedfinancialstatement
s/balancesheet.html
Bloomberg,(2012), Barclays Plc,(BARC: London), accessed [online] on 01.04.2013
from:http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp?ticker=BA
RC:LN
BP (2013a). BP at a glance, accessed [online] on 05.04.2013 from:http://www.bp.
com/sectiongenericarticle.do?categoryId=3&contentId=2006926
BP Annual report (2012), accessed [online] on 05.04.2013 from:http://www.bp
.com/sectionbodycopy.do?categoryId=9039423&contentId=7072266
Caralli R.A., Allen J.H., Curtis, P.D. White, D.W., and Young L.R., (2010), Financial Resource
Management (FRM), Resilience Management Model, version1.0, Hanscom, SEI- Carnegie
Melon University.
FT (2013a), BP PLC, Markets data, accessed [online]on 04.04.2013 from:http://
markets.ft.com/research/Markets/Tearsheets/Business-profile?s=BP.:LSE
FT,(2013b), BP Plc
Balance sheet, accessed [online] on 04.04.2013 from:
http://markets.ft.com/research//Markets/Tearsheets/Financials?s=BP.:LSE&subview=Balan
ceSheet&period=a
Kaplan , R.S. Atkinson, A.A., Matsumara, E.M. and Young S.M.(2011), Management
accounting: information for decision making and strategy execution, Essex, Pearson.
LSE, (2013a), BP Plc, accessed [online] on 04.04.2013 from: http://www.london stock
exchange.com/exchange/prices/stocks/summary/fundamentals.html?fourWayKey=GB0007
980591GBGBXSET0
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