专B458全稿(529修改,修改公式标红)

AstudyofthecorporateperformancefocusonMetalMining

industryandSoftwareindustrylistedintheUK

Tableofcontents

11ntroduction

5

2.LiteratureReviewandResearchApproach

6

2.1LiteratureReview6

2.2ResearchApproach8

3.Rationaleformetalminingindustryandsoftwareindustry

10

3.1Anoverviewofindustrialdevelopment10

3.2MetalMiningIndustryandSoftwareIndustryinUK11

3.3Rationaleofselectedcompanies12

3.3.1Metalminingindustry12

3.3.2SoftwareIndustry

14

4.PESTanalysisandPorter'sFiveForcesModelforbothindustries

16

4.1PESTanalysisformetalminingindustry16

4.1.1PoliticalFactors16

4.1.2Economicfactors18

4.1.3Socialfactors20

4.1.4Technologicalfactors21

4.2PESTanalysisforsoftwareindustry22

4.2.1Politicalfactors22

4.2.2Economicfactors23

4.2.3Socialfactors24

4.2.4Technologicalfactors26

4.3Porter'sFiveForcesAnalysis27

4.3.1MetalMiningIndustry27

4.3.2SoftwareIndustry28

4.4RankingonExternalStrategy29

4.4.1MetalMiningIndustries29

4.4.2Softwareindustries30

5.RatioAnalysis

31

5.1.1MetalMiningIndustry

32

5.1.2SoftwareIndustry44

5.2OverallRatioRanking52

6.SWOTAnalysisforVedantaResourcesandK3Business

55

6.1VedantaResources55

6.2K3Business58

7Conclusions

60

References62

ListofFigures

Figure1Recoveryofeconomicoutputcomparedwithrecent

downturns19

Figure2TheUKunemploymentrate20

Figure3Softwareinvestmentofvariousnationsasa

percentageofEuropeantotal24

Figure4EUaveragehoursspentonline25

Figure5NetProfitMarginofMetalMiningCompanies...33

Figure6PriceofIronOrefrom2008to201334

Figure7EBITDAMarginofMetalMiningCompanies35

Figure8ReturnonAssetofMetalMiningCompanies36

Figure9AssetTurnoverofMetalMiningCompanies37

Figure10SalesVolumeofMetalMiningCompanies38

Figure11StockTurnoverofMetalMiningCompanies39

Figure12ReceivablesTurnoverofMetalMiningCompanies

40

Figure13EquityMultiplierofMetalMiningCompanies..41

Figure14CurrentRatioofMetalMiningCompanies42

Figure15QuickRatioofMetalMiningCompanies43

Figure16NetProfitMarginofSoftwarecompanies45

Figure17EBITDAMarginofSoftwareCompanies46

Figure18ReturnonAssetofSoftwareCompanies47

Figure19AssetTurnoverofSoftwareCompanies48

Figure20ReceivablesTurnoverofSoftwareCompanies.49

Figure21EquityMultiplierofSoftwareCompanies50

Figure22CurrentRatioofSoftwareCompanies51

Figure23QuickRatioofSoftwareCompanies52

ListofTa

1.Introduction

Thereportaimstogiveathoroughevaluationoftheperformanceofthe

metalminingandsoftwareindustriesfocusingonthreecompaniesfrom

eachindustry.Thisreportwillexaminetheexternalfactorsaswellasthe

internalfactorstofindouttheinfluentialforacompany'ssuccessorfailure.

Moreoverthisreportaimstocompareeachcompanyagainsttheindustry

averagesandtomakeacomparisonbetweenthechosenindustriessoasto

findoutthecharacteristicofthesetwosectors.

Thisreportisbasedonmetalminingindustryandsoftwareprogramming

industry.Thesesectorshaveasignificantimpactoneconomyaswellasour

dailylife.Theyalsodifferalotinexternalenvironmerit(governmentpolicy

forexample)aswellasinternalfactors(theirrelianceonfixedassetsfor

example).Soitisinterestingandrewardingtostudyonthedifference

betweentheseindustries.Inthisreport,BHPBillitonplc,RioTintoPlcand

VedantaResourcesPlcareselectedforthemetalmining.Forthesoftware

programming,K3BusinessTechnologyGroupPlc,MicroFocusInternational

PlcandIntercedeGroupPlcarechosen.Eachcompanyisarepresentativein

theirrespectiveindustryandislistedontheLondonstockexchangemarket.

Thereportisstructuredasfollows.Inthesecondsection,Iwilldiscuss

theresearchapproachesadoptedforperformanceanalysis.Inthethird

section,thebackgroundofchosenindustrieswillbecoveredincludingtheir

developmenthistory,economicstatusetc.Inadditionabriefintroductionof

thesamplecompanieswillbepresented.Inthefourthsection,macro

industryenvironmentwillbeanalyzedfromfourperspectives-political

environment,economy,socialbackgroundandtechnology(PEST).Iwillalso

applyPorter'sfiveforces.Inthefifthsection,Iwillapplyfinancialratioand

non-financialratioanalysistoselectedcompanies.MoreoverDuPont

Analysiswillbeappliedtoexaminetheoverallfinancialsituationand

interrelatedconnectionbetweendifferentratios.Inthesixthsection,Iwill

reviewthestrength/weaknessandthreat/opportunityoftwochosen

companies,andtrytoputforwardafinancialstrategyforselected

companiestomeetthosechallenge.Inthelastsection,Iwillsummarizethe

keyinfluentialfortheperformanceofminingandsoftwareindustriesbased

onpreviousanalysis.Also,limitationsandfurtherimprovementwillbe

discussedforfutureresearch.

2.LiteratureReviewandResearchApproach

Beforeconductingtheevaluationofchosenindustries,arelevant

literaturereviewconcerningtheperformanceevaluationmethodologywill

bediscussedinthissection.

2.1LiteratureReview

Asanessentialcompositioninindustrialtheoreticalanalysis,the

researchactivitiesonperformanceevaluationhasneverceasedsincethe

industrialrevolutionin19thcentury.Fromtheperspectiveofevaluation

techniques,SunHongqingdividedthecorporateperformanceevaluation

intofourstagesofgrowth.

Before19thcentury,theevaluationmethodismorereliedonobservation.

Sincetheemergingofindustrialrevolution,withtheexpansionofbusiness

scaleandthecomplicationofpropertyrelations,thesimpleobservation

methodhasevolvedtoacertainratioanalysis.However,theseratiosare

mostlystatisticaldatafocusoncostandhaslittlelinkswithfinancial

accounting(ChrisloperMeyen).

Inearly20thcentury,integratedenterprisesinvolvedinvarious

operationsexperiencedarapidgrowth,raisingthedemandformore

sophisticatedevaluationmethods.In1929,Lauren.H.SloaninStandard

Statisticscompanyconductedathoroughanalysisoftheoperation

performancefrom1926to1927on550biggestAmericanlistedcompanies

adoptingpublicfinancialreport.Inthesameperiod,DolnasonBrownfrom

DuPontcompanyestablishedaDuPontfinancialanalysisratiosystem

centeringonreturnoninvestment(ROI).ThissystemstartswithROIasthe

keyindexanddecomposeitintoseveralelementssoastoformaratio

systemwithinterrelatedcausallinks.Bycomparingtheratioswithinthe

DuPontsystem,weaknessincorporateoperationcanberevealedforfurther

improvement(JeffreyM,1997).Thissystemwasembracedbythebusiness

worldsinceitsfirstappearanceandcontinuestodominatethefinancial

performanceevaluationsector,later,morenon-financialratioswereadopted

includingcustomsatisfactionandinnovativeability.Anappraisalsystem

withfinancialratioasthemaintoolsandnon-financialratioas

complementarywasformedinthisperiod.

Howeverastheratioanalysisismainlybasedonhistoricaldataandthe

outcomeofpastbusinessdecisionsandthustheevaluationisstaticand

failedtoappraisethecorporatestrategicreactiontowardsfuturechanges.

Howtoreacttowardaever-changingmarketandkeepacorecompetitive

edgeandlong-termprosperityhasbecomethemajorconcernformodern

enterprisesin1990s.AsMichael.Porterhaspointedout,competitive

strategyhasbecomethecoreofcorporatestrategy.Numerousresearchers

haveexploredinnovativeperformanceevaluationmethods.James

O.McKinsey,forexample,cameupanintegratedapproachcombiningthe

researchofinternalandexternalenvironmentwithmarketpositiontogivea

thoroughappraisalofcorporateactivities.StemStewardin1991brought

forwardEVA(economicvalueadded)appraisalwhichmeasurethedifference

betweenthenetoperationincomeandcapitalcost.Thephilosophyisthat

shareholdervaluecanonlybeobtainedafterpayingoffthecostofequity

andliability(FredrikWeissenrieder,2002).In1996,KaplanandNorton

establishedtheBalancedScorecardperformanceevaluation.Accordingto

BSC,companyneedstofocusontheirstrategyandlong-termgoalsand

transformsthemintoobtainableactionplan.TheyneedtofindouttheKey

PerformanceIndicators(KPIs)andconvertthemintomeasurableindex

systemwithfourperspectives,financial,customer,internalbusiness

processesaswellaslearningandgrowth.BSCincorporatethelong-term

andshort-termelements,internalandexternalelementsthatwillimpact

corporateperformanceandprovideinformationforbusinessfromdifferent

angles.Ithasbecomeoneofthemostimportantanalysistoolsinthe

businessworld.

2.2ResearchApproach

Togiveathoroughevaluationofthechosencompanies,anintegrated

approachfocusoninternalandexternalfactorswillbeadopted.

First,thecurrentexternalenvironmentwillbeevaluatedusingPESTand

Porter'sfiveforces.Wewillcomparetheoperationenvironmentrisksfacing

thetwoindustriesandappraisethecompaniesstrategicreactionunder

certaincircumstances.Wewillrankthesixcompaniesinthreelevelsas

excellent,ordinaryandpoor.Second,wewillappraisetheinternal

environmentofeachcompaniesusingratioanalysisandrankthem

accordingly.Alsowewillcomparetheratiodifferencebetweenthetwo

industriesinordertofindoutthecharacteristicofthem.

Asaresultthekeyperformanceindicatorswillbedividedintotwo

groups,externalandinternal(seeTable2.2forKPIs).Itmustbementioned

thatasdifferentindustrieshavedifferentfocusontheirexternal

environment.Differentindexwillbeincorporatedintheappraisalsystem.

Table1KPIsforperformanceanalysis

1level2level3level4level

•LocalCommunity

•Environmentprotection

CSR•Providingemployment

•Charity

External•Compliancewithlaws

Strategy

•Geographicposition

PerformanceIntangible•Resources

Appraisalasset•Politicalsupport

System•Governmentinvestment

•R&Dactivities

•NetProfitMargin

Profitability•EBITDAMargin

•ROA

Operation•AssetTurnover

efficiency•StockTurnover

Internal•ReceivablesTurnover

OperationFinancial•EquityMultiplier

leverage•CurrentRatio

andliquidity•Quickratio

Thecombinationofstrategicanalysisandfinancialanalysiswillhelpto

solvethefollowingissuesconcerningthechosenindustry.First,whatisthe

statusquooftheindustrialenvironment?Howwillitaffecttheselected

industries?Then,bydrawingcloser,Iwillcomparethehistoricaltrendof

individualcompanyhorizontallytofindoutitsstrengthandweakness.

Specialinternalstrategicdecisionandexternalimpactmayworktogetherto

formachangeonafirm'sbalancesheet.Itiscorporatereactionsunder

differentcircumstancesthatIamtryingtofindandstudyon.

3.Rationaleformetalminingindustryandsoftwareindustry

3.1Anoverviewofindustrialdevelopment

Miningindustryhasaverylonghistory.Itsdevelopmentiscloselyrelated

toindustrializationprocess.Globalminingischaracterizedbyitsobvious

periodicfeatures.Thecycleofminingindustryisconsistentwiththatof

globaleconomicdevelopment.Demandforresourcesisprogressiveinterms

oftime,whichdeterminesthecontinuousprosperityofminingindustry.The

shiftingofcenterofglobalmininghappenedwiththatofglobal

industrialization.Fromthisperspective,globalminingindustrycyclecanbe

dividedintofourbooms(DavidHumphreys,2009).Thefirstboomwas

stimulatedbyEuropeanpostwarrestoration.Thesecondboomwasthe

1960sminingGoldenAgebroughtbytheJapanesehigh-speedeconomic

growth.ThethirdperiodwastriggeredbytheEasternAsianmodeandthe

emergenceofthefourlittledragonsofAsia.Thefourthboombeganin2003

andwastriggeredbytherapidincreaseofdemandfromtheBRIC.The

longevityandpeakofthisstagehasfarexceededthatofthefirstthreeboom.

Intoday'sglobalcontext,asEuro-USdebtcrisiskeepworseningand

Middle-Eastsituationisundergoinggreatchanges.Theriskofdoubledipof

globaleconomyisincreasing,therecoveryofglobaleconomydoesnotlive

uptoexpectations,andthedemandformineralsisdecreasing.Global

miningcanbecharacterizedbyweakdemand,higherprice,volatility

intensifyingforsometimetocome.

Contrasttothelonghistoryofminingindustry,theterm"software"asa

prankwasjustappearedin1953,butin1963itbecamethenameofan

industry(Niquette,2006).Nowadays,thehealthydevelopmentoftheglobal

economy,particularlyinthedevelopedmarkets,dependsprofoundlyonthe

technologicalinnovation.Accordingtothereportfromthe(2013)

thesoftwareindustryobtainedthehighestleveloffundingin2013.Bobby

Franklin,CEOoftheNVCA,saidthatinvestorsareoptimisticaboutthe

investmentinsoftwareindustry,whichalsomakestheexitmarketbecame

strongandimprovedeconomy(Grant,2014).

3.2MetalMiningIndustryandSoftwareIndustryinUK

MetalproductionintheUnitedKingdomhasdecreasedoverthepast

century.Ironandcopperarenolongerminedinsignificantquantitiesinthe

UnitedKingdomduetotheeffectsofglobalization.CopperfromChileand

NorthAmerica,andironorefromChina,BrazilandAustraliaarehigher

gradesofmetalsatlowercosts,loweringdemandfromtheUnited

Kingdom'scopperandironoremines.AlthoughUKenjoyslargereservesof

ironoreandcopper,copperandironorearenowlargelyimportedfromother

countries.TheUnitedKingdomhasalargevarietyofimportantmetals,but

littlequantityiscurrentlybeingminedintheUnitedKingdomdueto

competitivelaborcostsandtaxratesinothercountries.However,withUK's

largedepositsofstrategicmetals,Britainisstillregardedbyvariousmining

firmsasaprofitabledestinationfornewprojects(,Revivalof

Britishmetalminingindustry).

Throughoutthe40yearhistoryofthesoftwareindustry,TheUKplayan

essentialpartinworldcomputeraswellsoftwaresectors.Accordingto

GlobalITIndustryCompetitivenessIndex2011,UKranksfifthinEuropefor

ITcompetitiveness.UK'soutperformanceoftheirEuropeanrivalsislargely

duetothecountry'sembraceoftechnology.Today,astheeconomyslows

down,itseemthatIThasbecomethecureforUK'sailingeconomy.

AccordingtotheCouncilforIndustryandHigherEducation,thetechnology

industriescontribute£102bntotheUK'seconomyeachyear.Howeverthis

seemsfarfromenough.Todaymostoftheworldknownsoftware

companiesarefromUS,itseemsthatUKsoftwareindustrystillhasalong

waytogo.

3.3Rationaleofselectedcompanies

3.3.1Metalminingindustry

Thereasonsforchoosingthesethreecompaniesisasfollows.Theyareall

listedintheLondonstockexchangebuthaveverydifferentsizeofmarket

value.BHPBillitonplcobviouslyisthelargestandmostfamousresource

companyintheworld.VedantaResourcesPlcwithasmallersizebuthasa

fastsalesgrowth.RioTintohasexperiencedaseriesofM&Aandgrownto

oneofthelargestironoreproducerintheworld.

Table2:theselecjedcompaniesinmetalminingindustry

AnnualSalesSalesMarket

Quoted

IndustryCompanyRevenueGrowthValueEmployees

Company

GBP(mil)Rate%GBP(mil)

MetalBHPBillitonLondon

42,033.02.09%63,853.849,496

MiningplcStock

Exchang

e

London

Stock

RioTintoPlc32,694.6-1.17%38,307.066,000

Exchang

e

London

Vedanta

Stock

Resources9,41%1,346.831,071

Exchang

Plc

e

(DataSource:www.northcote.co.uk,

/homepage.aspx)

BHPBi/litonDIC

BHPBillitonplcisaleadingglobalresourcescompany.Thecompany

operatesinninesectorsincludingPetroleum,Aluminum,BaseMetals,

DiamondsandSpecialtyProducts.Asof2013,theCompanywasworkingat

141locationsin26countriesandhasabout128,800employeesand

contractors(bhpbilliton,2014).

RioTintoPlc

RioTintoplcisaninternationalleadingminingcompanywhichhasmore

than140yearshistory.Thebusinessofthecompanycontainsfinding,

mining,andprocessingmineralresources.Themainproductsarealuminum,

copper,diamonds,gold,industrialminerals,ironore,thermaland

metallurgicalcoalanduranium.Theyhave66,000employeeshaveactivities

inmorethan40countries(riotinto,2014).

VedantaResourcesPlc

VedantaResourcesplcisadiversifiedmetalsandminingcompany.The

companyoperatesinsixsegments:zinc,ironore,copper,aluminum,

powerandoilandgas.TheirassetsarelocatedinIndia,Zambia,South

Africa,Namibia,Ireland,Liberia,AustraliaandSriLanka(vedantaresources,

2012).

3.3.2SoftwareIndustry

Thereasonsforchoosingthesethreecompaniesareasfollows.Theyare

alllistedintheLondonstockexchange.Theyareratherlargesizecompanies

intheirsectorbutwithdifferentproductsandstrategy.MicroFocusenjoysa

largestsaleandmarketvalue.Italsohasthemostsophisticatedcorporate

managementsystem.K3BusinessandIntercedeGrouparerathersmall

sizedwiththeformerfocusingonSCMserviceandthelateronidentity

software.

Table3:Theseelectedcompaniesinsoftwareindustry

QuotedAnnualSalesSalesMarket

IndustryCompanyCompanyRevenueGrowthValueEmployees

GBP(mil)Rate%GBP(mil)

London

K3Business

Stock

Technology63,513.013.76%57,151.2607

Exchang

GroupPlc

e

SoftwareLondon

MicroFocus

Stock

Internation261,673.412.55%649,102.81,206

Exchang

alPlc

e

IntercedeLondon6,727.019.12%84,804.477

GroupPlcStock

Exchang

e

(DataSource:www.northcote.co.uk,

/homepage.aspx)

K3BusinessTechnologyGroupPlc

K3BusinessTechnologyGroupplcisaUnitedKingdom-basedcompany

engagedsupplyingmanykindsofsoftware.BusinessIntelligenceand

e-commerce,hostingandmanagedservicestothesupplychainindustry.

TheCompanyfocusedontheRetail,ManufacturingandDistributionmarkets

andtheysupportserviceinover20countries(k3btg,2014).

MicroFocusInternationalPlc

ThemainactivitiesofMicroFocusIinternationalplcismakingandsellingof

softwareproducts.TheCompanyprovidessoftwaretoclientsworldwide.

TheCompanyhasthreegeographicsegments:NorthAmerica;International,

whichconsistsofEurope,MiddleEast,LatinAmericaandAfrica,andAsia

Pacific(OneSource,2013).

IntercedeGroupPlc

IntercedeGroupplcisaUKbasedholdingsoftwarecompany.Thefirmisa

developerandsupplierofidentityandcredentialmanagementsoftware.The

companyteamofglobalexpertslocatedintheUSandUK(intercede,2014).

4.PESTanalysisandPorter'sFiveForcesModelforbothindustries

4.1PESTanalysisformetalminingindustry

PoliticalFactorsEconomicFactors

•GovernmentRegulations•EconomicGrowth

Environmentprotectionlaw•Unemploymentrates

Safetylaw•Investmentrate

•GovernmentPolicy

Taxpolicy

SocialFactorsTechnologicalFactors

•Localcommunities•Miningtechnologytrends

,Sustainabledevelopment•Newexplorationtechnology

4.1.1PoliticalFactors

GovernmentRegulations

UKisrichlyendowedwithvariousmineraldeposits,whichontheother

handbringsconsiderableenvironmentalissuesassociatedwiththemetal

mining.Forexample,incentralandeasternEngland,thehistorical

productionofferrousandbasemetaloresandtheirresultingwastehas

causedconsiderableenvironmentalproblems,includingthechemical

pollutionofstreamsandaquifersbyheavymetals.Accordingly,legislation

governingtheminingindustryhasgrownovertheyears,oftenfollowinga

majorminingdisaster.whichhasledtocallsforspecificlegislationtocontrol

oreliminatecertainoperationswithintheindustry.Recently,the

governmenthasimplementedacomprehensiveframeworkforthesafe

managementofwastefrommetalextractiveindustries.Nowadays,asthe

regulationsregardingenvironmentbecomesmorespecificandstricter,the

punishmentforlawviolatorshasgrownmoresevere,andthepoliticalrisk

forminingbusinessisveryhigh.

Anotheraspectsofregulationsthathassubstantialimpactonmining

businessaresafetylaws.Asthesocietyandpublicitybecomemore

concernedaboutsafetyissue,miningcompanies,asalabor-intensiveand

dangerousindustry,haveattractedmoreattentionandgovernancetotheir

operation.Deathontheminingsitescanbedisastrousandcausehuge

economiclossforcompanies.AccordingtorecentstatisticsreleasedbyUS

DepartmentofLaborMineSafety,USminingdeathsjumpedalmost17%in

2013,with42minersdyingonthejobcomparedwith36in2012.Luckily

mininggiantshaverealizedtheimportanceofthisproblemandhavetaken

beforehandactionstoeliminateonsitedeathandinjury.Forinstance,BHP

Billiton(BHPB)IronOrehasspend$1.5million(US$1.37million)onsafety

technologythatgivingoffwarningswhentruckdriversbecomedrowsyat

thewheel.

GovernmentPolicy

Asminingindustryisenergy-intensive,ithighlydependsonpowersource

likeelectricityandfuels.Therefore,therecentGeorgeOsborne'stax

effectivein2013Aprilwillmakefossil-fuelpowersignificantlymore

expensive.Thedirectpurposeofthistaxistomakethecostofelectricity

fromfossilfuelssouncompetitivecomparedwith"renewable"thatitwill

stimulatetheinvestmentonlowcarbonsourcelikewindand

nuclear(ChristopherBooker,2012).Anotherdirecteffectofthistaxisto

driveelectricitybillssohighandsubstantiallyincreasetheenergycostfor

miningindustry.ThistrendislikelytomakeUKminingcompanies

vulnerabletocostriseandweakentheircompetitivenesswithmining

companiesfromdevelopingcountrieswherethecostofenergyandlaborare

rathercheapandtheregulationismoreloose.

4.1.2Economicfactors

EconomicgrowM

Metalminingindustryisthefoundationofnationaleconomicdevelopment.

Itsupstreamindustryisminingequipmentmanufacturing,whileits

downstreamindustriesincludenon-ferrousmetalsmeltingandferrous

metalsmeltingbusiness.Thesetwoindustrieshaveaprofoundinfluenceon

almosteveryaspectsofnationaleconomyincludingrealestate,construction,

manufacturingandetc.ThereforeitissafetosaythatthereboundofUK

economywillhaveapositiveeffectontheminingcompanies.Accordingto

theOfficeforNationalStatistics,afterthreedamagingyearsofflatness,

UK'sgrowthfigureslookspromisingin2013witha1.9%growthrate(BBC

News,UKeconomygrowingatfastestratesince2007).Moreoverthe

economicrecoveryisbroadlybasedwithmanufacturinggrowingmorethan

othersectors,whichwillbenefittheminingindustry(seeFig.1).

Figure1Recoveryofeconomicoutputcomparedwithrecentdownturns

*Outputof100representsthepointwheretheeconomyreturnedtopre-downturnlevels

Source:ONS

Unenwloymentrates

Metalminingindustryisdirectlyinfluencedbyunemployment,because

duringtheperiodofunemployment,peoplehavelessexpenditureon

productsandservices.TheOfficeforNationalStatisticssaidthe

employmentlevelrosetoahighestlevelof29.59mforJuneto

August(telegraph.co.uk,UKemploymenthitsall-timehigh).Thefiguresalso

showedthatunemploymentdropped,to7.9pcfrom8.1pc.Thisfavorable

trendofloweringunemploymentrate(seeFig2),ifremainsinthefuture,will

definitelyhavepositiveimpactonminingindustries.

Figure2TheUKunemploymentrate

TheUKunemploymentrateisbelowthelong-runaverage

Source:

4.1.3So