Program – CF56 Bachelor of Property
Using
Accounting for Decision Making – ACCT11059
Assignment
Stage 1 – ASS#1
GETTING STARTED
Student – Melissa Gaultier
Lecturer – Martin Turner
Extension Due Date – Thursday 24th December
2015, 11:00am
Step 1 – Personal
Profile
Hi
A brief ‘about me’ can be found in the personal profile
description box on Moodle
You can also access my blog link either, through the blog
links forum
or by clicking below for direct access to my blog
Step 2 – My
Company
I have really enjoyed investigating my assigned company,
Balfour Beatty, including trying to understand their yearly financial reports –
please see ‘Full Financial Reports’ below
Exploring Balfour
Beatty
Balfour Beatty is a public company listed on the stock
exchange with over 100 years experience as a leading international
infrastructure group based in the UK, creating and caring for vital assets that
enable societies and economies to grow: road, & rail; airports, seaports,
tunnels & bridges; health & education facilities; heat, light, power
& water; places to live & places to work.
Balfour Beatty operates across the full infrastructure
‘lifecycle’. They not only develop and
construct, but also finance, design, project manage, operate & maintain
assets. Although they primarily operate
in the UK & US, they also have developing businesses in Canada, the Middle
East and South East Asia.
The business is reported in three performance segments:
·
Infrastructure Investments
·
Construction Services
·
Support Services
Full Financial
Reports
2014
2013
2012
Know Your Company
http://www.balfourbeatty.com/
The company has
technologically emerged in the way they display and explain data over the past
three years, evidence can be seen clearly in the massive changes in their
online presence. The revolutionising of Balfour Beatty on the
internet appears to have commenced in 2013 with particular notability in this
last year, 2015 at the hands of new CEO, Leo Quinn. Outstanding material
is being displayed for their investors, subcontractors & the like. Viewing was actually quite enjoyable with their
choice of cleverly designed and marketed campaigns. I could honestly say it was the first time I
have ever found myself immersed in a Chairman's or CEO's address.
The influx of short
feel good You Tube videos relevant to Balfour Beatty's core business and their
clear future goals are cleverly delivered in a manner easily absorbed. I
can only assume that the marketing of this company has had a huge overhaul.
With a recent 300 million pound loss of income in their construction
services sector, one would assume it was code red for this company, as in leave
no stone unturned in catapulting Balfour Beatty's image into the 21st Century.
I found their website
easy to read and follow, however it's funny how simple little things make a
difference, like a home button so you don't have to flick around the place to
get back to the start. I ended up working out that if you click on their
name it takes you back to the beginning. To the GEN Y this might have
been common sense, but considering that there could be still be quite a number
of older investors researching this site, I think the technology geeks should
remember the simple basics like a home button. I know for sure if my
Uncle or Mother is investing and there are several companies to choose from and
the basics are too annoying, they will just move onto another company. Which
makes me wonder how many companies out there are losing customers and therefore
money because they have over thought their websites and made it too
complicated?
I know in the
property market we have something like 9 seconds to capture someone’s
attention, if a customer has to spend their 9 seconds trying to find the home
button, then they probably wouldn't be a customer for too long.
Particularly if the company is being researched for share investment.
In saying all of this
I have really enjoyed researching this company. Balfour Beatty like all
company's has had its ups and downs, however, as it is such an old established
company, the leaders of Balfour Beatty have proven that they will take any
drastic measures to stay one of the world's leading infrastructure groups.
The 2011/2012 Reports
show to counteract the US & UK construction problems the CEO continued on
with of the 'Cost Efficiency' Program which commenced in 2010 in what appears
to date in 2015, a successful way of helping recoup loss from past projects
which weren’t so successful. This is one of the aspects I really
like about this company, this mind set of we have been here already for over
100 years, we will not be going broke anytime soon. They started it in
2010 & had plans to reach a massive target of 80 million pound annual
savings by 2015, this apparently has been achieved. This program helps to
identify where the weaknesses are in the construction core of the business and
sell off any non viable projects. Focusing on instead a strategy that
embraces the over 100 years of local presence in the infrastructure industry
with end to end asset knowledge & skills across infrastructure assets as an
investor and developer creating a niche in the market. Key areas they
planned to target were transportation, power, energy, water, mining and the
emerging geographies & resources driven economies where they see potential
growth.
Taking a look at some
other emerging problems for Balfour Beatty, we see in the 2013 report even
though the 'Cost Efficiency Program' showed much success and on track, a new
issue emerged in risk management when five employees of contractors lost their
lives while working on Balfour Beatty projects. The company needed to
once again evolve. However the core goals of the company - local
presence, asset knowledge the companies skills as an investor developer
continued to be the focus. Sustainability also became of great importance
for Balfour Beatty with a goal to achieve sustainability by 2020 in three key
areas - profitable markets, healthy communities & environmental limits.
The 2014 Reports show
Health & Safety back in the spotlight with the worrying news that six
workers lost their lives across the Group. In the Chairman's address he
outlined the renewed focus on fatal risks and health and safety targets which
had been revised. The primary KPI for safety changed to Lost Time Injury Rate,
which is a more thorough indicator. From 2015, the Group redoubled
efforts on Zero Harm programs.
Looking to the future
- The move through 2015 saw Balfour Beatty implementing the 'Built to Last
Program' focusing on the Group’s performance as it affects all stakeholders –
customers and supply chain, employees and subcontractors, investors and
communities – by driving continuous, measurable improvement against four goals:
Lean, Expert, Trusted, Safe. They also won an industry award for the
construction company taking on the most contracts for 2015, proving the company
is well aware that they need to successfully complete as many contracts as
possible to financially stabilise the construction sector of their business,
while at the same time focus on safety and risk management for all employees,
contractors & employees of contractors working on Balfour Beatty projects.
KCQ’s
1. There are two sets of financial reports for
Balfour Beatty in 2012. I struggled with this until another student
helped me find the document that explained what was going on. The 2012 income statements have been
re-represented to classify Rail Germany, Rail Scandinavia, Rail Spain and
the UK facilities management business, Balfour Beatty WorkPlace as
discontinued operations.
2. What is a PPP portfolio? - I obviously
understood what a portfolio was, but had no idea what -PPP stood for.
I eventually got to the bottom of it when I was uploading
information from the balance sheets and I discovered in 2011/2012 that
recorded under current liabilities, borrowings being PPP non - recourse
loans, but in 2013/2014 just stated non- recourse loans, so I had no
choice then to go hunting, or Googling to be exact. All it took was
- what does Balfour Beatty mean by PPP and up pops....Public-Private
Partnerships - Balfour Beatty explains it perfectly! Why didn't I do that
in the first place - aaahhh!!!
What
are PPPs?
PPPs
are a long-term, performance-based approach for procuring public infrastructure
such as highways, hospitals, schools and military housing. Through this
approach, the infrastructure project is funded and operated through a
partnership between a public sector agency (federal, state or local) and the
private sector. They enable the public sector to use the services of private
sector entities to share infrastructure development costs and risks from
initial design and planning, to full lifecycle operations and maintenance.
3. This discovery of what PPP meant and why do
two years of financials state, PPP non-recourse loan, while the other two
years did not, lead me to another question. Does Balfour Beatty only
do non-recourse loans for PPP's? The majority of them yes, but not entirely
is the answer. I decided to run
with the most current statement which had dropped the wording PPP in
regards to the non-recourse loans, as when I compared the statement that
had a duplicate, I discovered even though they had changed their wording
the figures were exactly the same
4. In the 2012 Balfour Beatty reported 9 million
pound in Goodwill, without sounding naive I was under the impression that
in this economic day and age, Goodwill was a thing of the past. - Goodwill
continues throughout their four year reporting period?
5. Balfour Beatty has three core streams of
income - construction services, support services & infrastructure and
investments. Of the three the one that has been taking its financial
toll on the company has been the construction services sector. To
recover a loss of $300 million pound the company has set up a revolving
credit facility of $400 million pound and won quite a number of contracts
in 2015 to bail out the previous loss. The realisation for me I
guess was that when I followed the reports over the years showing the
company trying to recover lost money by dropping projects, starting cost
cutting programs, rearranging their board, changing their image, pushing
marketing, winning major awards proving they have won the most contracts,
it made me see at this level of business, when you have been around for
over 100 years, sometimes there is no other option than to pull out all
stops and swim like crazy as there is just too much at stake to fail.
Failing is just not an option to this business level. There is
no option to say, oh I had a shot at this and it didn't work out, but I
did try my best, I'm really sorry - NOT POSSIBLE.
Know Your Company In the NEWS –
As
reported the 14th Dec
2015 -UK Balfour Beatty wins the trophy for the construction company winning
the most new work in 2015
My
thoughts – If construction appears the weakest commodity for this company as
clearly outlined over the past three financial statements and by the Chairman’s
own declarations, while at the same time winning a major award that claims
itself to be the ‘most transparent construction award’ as it is based on
mathematics for the most new builds in 2015, then has this company simply
poured much of its energy and finances into its weakest area to bail it
out. Have they had to purposely take on as much work as possible to pay
back the investors losses of the previous projects that failed? My
question to the company would be how you will continue to manage risk with
subcontractors under such a workload, considering that five employees of
subcontractors lost their lives in 2013 while working on Balfour Beatty
projects.
As
reported 10th Dec
2015- Balfour Beatty expecting good results from the ‘Built to Last Program’
designed to turn things around.
My
thoughts- The implementation of the 'Built to Last Program' including
refinancing of the existing financial facilities/loan costing in reality a
total of $700 million pound - $300 million pound lost last year and the $400
million pound to refinance is quite a lot of money to recover, hence the only
way to do this is to dive into as much work as possible. The revolving
credit facility will allow them to move swiftly from one job to another without
lengthy delays from banks, valuers and the like. I do think these
measures that CEO Leo Quinn has implemented, make good financial sense. Balfour
Beatty could not afford to let the construction side of the business fail so
badly. The only obvious way to bail it out is to go quite further in,
taking on as many profitable contracts as possible –although there is no room
for risky new investment contracts. The question then would be, is
Balfour Beatty spending enough on a well executed risk management system.
I fully understand that decision makers need to save the company financially by
pouring the construction side of the company into as many projects as possible,
so that the projects can be turned over as quickly as possible to recoup lost
funds, but nothing or no one can buy back a life or the bad publicity the
company will get if the numbers of deaths increase.
Managing
the financial clean up and risk management of the company simultaneously is
going to be paramount for a successful future for Balfour Beatty. It
appears at a glance if the company could clean up the loss or most of the loss
from their construction side over a period of time, they should then run a
business plan alongside the clean up to start cutting back on physical
construction, diversifying further and moving into the infrastructure
investments & support services in which they appear so strong in.
Working out the magic percentages of focus for each area of expertise I feel
will be the way of the future for Balfour Beatty.
At
a glance- Balfour Beatty cannot afford over the long term to drop construction
as a core of the business entirely or it would lose touch with the
'physicality' of the industry that Balfour Beatty's company model has steamed
from. It appears that the company's strengths in infrastructure
investments and support services comes from the stability of over 100 years in
the construction industry, so the absence of this aspect of business over
generations would deteriorate the strengths in the areas of infrastructure
investments and support services which have grown successfully from the
knowledge of being so long in the physical construction industry. An idea
to combat this problem would be to look to the future of technology in the
construction area and develop this area into two categories - physical
construction and construction technology. The new Balfour Beatty business
model could look like the following - 35% Infrastructure Investments, 35%
Support Services, Construction - (15% Physical Construction & 15%
Construction Technology).
You
Tube Video Released 28th October
2014 -
Titled
– Zero Harm – Make Safety Personal
My
thoughts – Fantastic video, I was really impressed and inspired by this video.
Very cleverly executed and in the 4 mins and 13 sec it takes to play it, it
dissolves all of my previous concerns on whether or not this company is going
to make safety of human life a prime concern. The answer is ‘Yes’!
Let's hope they continue to make risk management a focus.
You Tube Video Released 16th April 2013 –
Titled
– Sustainability Next Generation Stakeholders Panel
My
thoughts – Clever marketing department in this company! Obviously the
ideas are filtering down from the CEO and leaders of Balfour Beatty to the
marketing department; however the simple execution is nothing short of
ingenious. Nerd to Normal information and the use of making a Next
Generation Panel whether it was because the company was actually interested in
their views or whether Balfour Beatty just wanted to use the fact that
this panel meet to use as a form of advertising. Either way it was very clever.
Since the next generation is who excels at internet marketing, twitter, face
book, Linked In etc, I think this will prove a successful marketing ploy.
The use of You Tube is proves a clever strategy as it is a cost effective
viral way to distribute the company's marketing campaign & message. It is
also a great way to show that Balfour Beatty nearly a 107 year old company can
still power through the generations by focusing on new blood.
Before I start with
my favourite Blog’s
– I would like to make mention of my favourite helper & her blog- Beverley
deserves the ‘Most Helpful Blogger’ Award! Maybe this could be a new category
Martin – the blogger who you connected with the most. You can meet her here at
her blog – Accounting Insight Blog
Or
actively helping on forums or via email xx
My Top Three Blogs!
Top 3 Blog’s – as you can see my brain does not clearly
operate in an accounting order (that’s why I’m studying property) It does say
you have to rate the blogs, but I can’t see anywhere it says – “rank” them, so
I feel my choices are all ten out of tens!
Snap shot –
Matt’s Blog– I like this young guy’s writing style &
his go go go – priceless these days…conquer the world who said you can’t
approach.
Renae’s Blog – ‘Nerd to Normal’ – people like me NEED
this to survive in all these sheets of paper.
Cam’s Blog – CLARITY – I hear choir bells. Cam has the
art of clarity!
10/10
I don’t know if I like Matt’s blog more because it’s easy
to read or I like the fact that he seems to have it all together at such a
young age. He has a clear direction of
how to get there, even what to wear! Love it!
Such a clever field to go into for an employable future and to carry out
his own ambitions long term, I’m sure this young man will be very
successful. I think Matts company
Hutchison Whampoa Limited should partner with mine to bring Balfour Beatty a
head in technology. I also enjoy Matt’s
style of writing for someone who claims to “at first be extremely unexcited
about participating in blogging”; he sure did a great job! (And um Matt, you
actually sound like you like it a teeny tiny bit now).
10/10
If this blog didn’t make my list, then there would be
clearly something wrong with me. It’s so
sparkly, I feel like a bower bird while looking at it, I want to pick it up and
take it home. Where did she get the time
to do this? On a serious note – Renae is
obviously passionate about accounting hence the degree and the ornate art of
being able to translate ‘Nerd to Normal’.
The blog is easy to read and very informative, I was especially
impressed with the interesting and flowing layout. Renae shows how you can still have a
personality while developing the concepts of accounting.
10/10
As much as order doesn’t come naturally to me, I enjoy
other people’s practicality and Cam has a fantastic way of making you focus on
everything you need to know without being boring. The blog is crazily easy to
read. I particularly like his layout in
Assessment 1- step 2 on his blog, well done!
This was actually one of the first blogs I read and I noticed his talent
in clarity from the get go. After
watching the video Cam chose in his assignment, I would agree with him that it
is quite lengthy but it is informative.
I don’t know if it was the urgency in the voice over or the blue tubes
that you follow, but it does seem to have you fixated on them, proves an interesting
marketing approach from his company Hunting PLC.
Step 3 – Financial Statements uploaded with
this file
Step 4 –
Chapter 1 – A way of viewing Business
I found myself pondering over Martins first question, the
one at the very bones of this whole course – what is accounting? We have all heard about accounting, have an
assumption of accounting as a facility, but to ask what it is, I found
annoyingly difficult to answer.
An answer did actually come to me quite swiftly, but I
quickly dismissed it as it had nothing to do with mathematical accounting, my
answer – a way to make sense of chaos.
I then asked myself, why would this be my first thought and I realised
it was because to me personally that is what accounting truly is. ‘A way to make sense of chaos. ‘
In a previous time and place there were businesses I
owned, investment properties, shares etc.
I acquired all of these things because that’s what we are taught to do
as an adult out in the world.
Yet we aren’t taught the importance of the fundamentals of
understanding ‘numbers’ and the relationship they have in our world both
personally and in business, which is exactly why Martin is asking. What is accounting?
For example, I see countless numbers of people being
stitched into SMSF deals that have been over inflated. The marketing team who sells this ‘system’ of
acquiring property through SMSF, also sell the concept of a one stop shop,
luckily for the client the marketing group also has a solicitor on board,
finance broker and accountant. That was
sarcasm with the ‘luckily’! Let me just
add at this point that buying property in a SMSF is not at all a bad thing,
it’s how some of these companies pray on naive people and sell them over
inflated houses in the wrong structures and then simply dump the client when
the company has spent the clients money, which is a bad thing. At no
time has the client asked themselves the question before us – what is
accounting or made some attempt to understand the figures. Before too long they have just signed
themselves into a debt of say $450,000 and they still have not thought about
what accounting means to them!
This client then comes to me to sell the same house they
have just bought at a loss (as the original purchase price was actually over
inflated) because they in reality cannot afford the repayments and the
structure and identity that the marketing company set the clients house up in
is actually not legal and therefore must be sold. Time and time again I hear the same words; it
all made sense when someone who claims to be an expert tells you it all makes
sense. We all really need to have a
fundamental understanding of the basics and then seek the advice of
professionals. A big lesson for these
clients is, second opinions count. We
simply must understand the realities of costs to make well thought out
decisions on where either our money goes or the money of the company we are
working on, or at goes.
Hence my answer – ‘A way to make sense of ciaos’. There is of course so much more to accounting
then cleaning up messes. Knowledge
through understanding, why we use systems in accounting and how they apply to
our businesses, is definitely the key to not creating a mess in the first
place.
We need to be able to therefore connect the realities
when looking at a particular company or investment. Once this connection is made then one can
make the best decision for the company to move forward, whether that be a plan
to cut costs over a period of years to recoup losses or whether it is to make a
decision on how to best spend profits in the coming years. Each decision can be made clearly as it is
based on facts and figures, or the realities and how they connect to the
business.
Martin affirms this with a clear explanation. That accounting is about using information to
help us connect to the business realities of a firm.
I enjoyed Martins practicality throughout this chapter to
the point of where he took photos of business signage to concrete in our minds
that businesses are truly everywhere.
Each day we walk past hundreds of businesses without giving them too
much thought, but I find this exercise made me actually walk with my eyes
open. Now I catch myself wondering about
particular businesses. Some I think, how
are they so successful when they aren’t in the centre of town, while others I
wonder if they are struggling with the lease of the main street and what they
do to combat this expense, especially when you see for example a small
hairdressing salon in the main street and you know the lease prices for that
area are extremely high. How do they
keep afloat or profitable? Are they just
working for a wage? I have found myself
walking past various businesses with these questions floating around in my
mind.
The section on keeping records hit a sore point with me
as I had previously bought an inexpensive business in the past, as pretty much a
tax right off under the advice of my ‘previous accountant’. Let’s just say that you simply MUST treat
every business with the same importance, whether you own Disneyland or the
local mower repair shop, if you DO NOT KEEP your records up to date and in
order, as in all book work, journals, ledgers everything, you will fail! If you do not understand how and why these
systems are important to your business, you will fail! If you don’t understand, hire someone who
does to help you and guide you. Not all
accountants are the same, find an accountant who specialises in the area you
need help in.
Chapter 1 summarises well all of the fundamentally
important aspects we must know about accounting and basic business structures. I still to this day do not have a great grasp
on many accounting concepts, but now I pay an accountant to keep things up to
date and explain to me what the realities are.
I would have liked to see examples in the section with
the accounting equations as many of us are dabbling with these concepts in
everyday life and don’t realise it. As
we all absorb information differently, it would have been good to have some
examples for us ‘visual learners’ to better absorb the information.
I had still many unanswered questions in this section –
can we work through this section of accounting equations with some real life
scenarios? Will we get to explore these
concepts first hand?
Obviously understanding numbers is essential to being a
CEO of a company but surely there is much more to it? I have this image of accountants or people
from a finance background as smart but with no people skills – wow that’s mean
isn’t it (I can’t believe I actually put that in words) but if we are going to
be honest about our thoughts, then I feel I must put that out there so someone
can tell me why I’m wrong. My theory
cannot possible be correct anyway or how could you run a Fortune 500 company
with no personality and there are many of CEO’s from Fortune 500 companies who
were previous accountants or came from a finance background.
‘Nerd to Normal” I like to call it. Are we going to make sense of all of these
equations by practically working on them?
Chapter 3 –
Introducing Financial Statements
Wow opening with the Great Gatsby, huge move by the
author. I just read the title –
Introducing financial statements & then was allowed to be mesmerized by an
extract from the Great Gatsby? My first thought, how will the author tie these
two together?
Reading on – The relevance, of course comes from the
comparison of ‘it’s like meeting someone at a party’!
A first meeting, you know their names but nothing about
them, until you allow yourself to get to know them.
Take away – to really get to understand concepts and
facts about financial statements, it is essential to be able to recall
information. Once we understand the relevance of how something connects to our
lives and our prior learning it suddenly makes sense and we can remember it.
I noticed when reading through my company’s annual
reports there is quite a lot of length to the documents before you get to the
actual figures. In the case of Balfour
Beatty over the past few years this is a good thing because I am sure investors
who have invested in this company would be very curious on the huge losses they
incurred and why. This documentation
gives plenty of information on why things have happened and how the company
intends to fix these things going forward, before one is faced with figures
that scream a 300 million pound loss in ie the construction area of the
business.
I really liked the explanation of ‘balance sheets’, I had
never really thought about how clever they are before. Basically at any given time, you can look at
the balance sheet of a business and it can tell you on that date what is
actually happening with a company’s figures, pretty clever.
I enjoyed comparing the difference between the financial
statements the most in this chapter and picking out key words that could help
me retain the difference between them.
Like Income statements showing, ‘change’ over a period of time and the
statement of equity showing ‘changes’ in ‘shareholders equity’ in a period of
time and of course the fourth financial statement, the cash flow
statement. The opening cash balance at
the beginning of a period – cash ‘flowing’ in and out over that period and of
course the closing balance.
I found focusing on key words helped me differentiate
between the four statements and therefore see the grounding to now move on to
learn more about them!
I feel completely ashamed to have never heard of the book
‘Elements’ before now especially if it is the world’s second most translated
and circulated book to the bible. Wow
those Greeks really knew their ratios.
It really amazed me that some of the theories that we used today date
right back to 300BC.
Overall I found this chapter interesting and easy to
read, bringing to light some terms we use in everyday business life and make
sense of them.
My questions are few in this chapter except for – will we
get to spend some more time on dividends, cash flow statements & changes in
equity statements? These are areas I
would like to spend more time exploring in practical scenarios.
FEEDBACK
Reference: Balfour Beatty Website, http://www.balfourbeatty.com/, December 10th 2015
