Assignment 1: Steps 3-5
- ryanoakey
- Aug 7, 2022
- 12 min read
Step 3: Irish Continental Group Annual Report KCQ's:
Upon receiving the name of my company, I wasn't sure what they did at first. Are they a singular company? It appears that they're a group comprised of a few companies or subsidiaries. They're comprised of divisions that operate out of Ireland and provide transport services between Ireland, England and Europe. Are subsidiaries always considered as divisions of a parent or are they independent? The financial report states they only have two divisions however they list that they operate under five brands. This is confusing. Do they lump the other 3 into their freight division on the reports?
Their day in the life video found on their website does a good job at showcasing what they do, and their website has a lot of information detailing their operations as well. Finding the report itself was quite easy and accessible on the front-page quick links drop down. Great!
Reading the Annual Report:
Geez, 216 pages of fun, hopefully I'll be able to get what I need out of it before reading it all but we'll see, I guess. Are all end of year reports this long?
The report itself initially gave a me a good overview of what the business does. They transport people and freight between Ireland, England and Europe. It also gave me an overview of where they operate, what services were available to each location and which division oversees those locations. The financial highlights section wasn't a huge help as it does well to hide that they've been operating at a loss for two years now. No dividends have been paid for both years either. If a company is running at a loss, do they not pay dividends? I guess if there are no earnings then there is nothing to give out, I suppose. Is this done the same way internationally?
The chairman's statement was straightforward and easy to comprehend. It was a challenging year with travel restrictions due to Covid-19 and continuing struggles from England’s exit from the European Union. However, they've managed to succeed with their strategic plan of expanding their sea route from Dover and Calais; their increased year-on-year debt was due to asset acquirement to meet future goals. With the issues they are continuing to have and whilst operating at an overall financial loss they've still managed to invest what they can into future growth. This sounds like good news in the wake of an unfortunate couple of years.
The Ferries Division:
The Ferries division is performing worse than expected due to covid-19 restrictions continuing, struggles with Brexit impacting ease of travel between Ireland, England and the EU and fuel expenditure due to the conflict in Eastern Europe. Fuel expenditure saw an increase of €10.2 million on the previous year. They implemented covid-19 travel safety programs to increase customer confidence in the service and implemented a more flexible ticketing program to accommodate consumer needs. The impacts of Brexit are still being felt with decreased trade flow in the regions affected. However, they have adjusted capacity in these areas due to their fleet’s flexibility. Overall, I think this isn’t too bad as they have invested into alleviating the costs with increased revenue streams by investing into a new travel route.
The Container and Terminal Division:
The container and terminal division saw growth in revenue and EBITDA due to an increase in volume shipped during the financial period of 2021. They added an additional chartered vessel to accommodate the demand. Unfortunately, a lot of the revenue gained by this increase in volume was offset by rises in charter costs and fuel costs. To alleviate some of the costs, they passed increased rates onto the customers. This seems about expected to me as in my experience freight companies have always passed costs down the line onto customers and the business I work for is seeing the effects of lower capacity in freight causing supply issues. I think it’s wise for them to scale up capacity whilst there is a demand for it.
Both divisions seem to be equally important to the group’s success with revenue being split between 52% and 48% respectively so I believe the company has been wise to invest in both divisions. They are continuing to monitor the situation with covid-19, the struggles with the transitionary period of Brexit, and the conflict in eastern Europe and how these impact their business.
Overall, I found the report structure quite easy to read with different sections for each division being clearly outlined. The statements from the Chairman, CEO and CFO were informative and simple to understand for someone new to the subject matter. For me personally just having definitions of all the abbreviations and acronyms accessible on the report was handy too.
Am I happy with the company?
I didn’t know much about what they did or who they were but after reading most of the report, I can say I’m pleased with the steps they are taking to be carbon neutral in their divisions which I find to be an important step for companies to take for the future. I don’t have a huge opinion on the company as they’re a transport company and I don’t have any particular interest in it. I found their financial statements to be very similar to others I had read but in particular I found it to be easier to read. It was in portrait and had its information clearly laid out with definitions of information provided preceding the content itself. It may have been nice to have a company closer to home as I may have had some more experience with it.
Studiosity feedback
My feedback from Studiosity was helpful to identify minor grammatical errors, however, it gave me some unnecessary feedback with the writing. In particular the tone of the writing which I felt was fine as its mostly reflective and doesn’t need to be too formal. It was very quick though which will be great for future assessments. I’d definitely recommend using it.
Favourite Blogs
From even just the design alone I can tell Dan has put the work in, it is well laid out and well written. I enjoyed reading his thoughts about his company and KCQ’s.
I enjoyed reading Josh’s blog and felt like I related to him as we’re both starting Uni later than most (I’m 26 but I still feel older than that these days). I found his KCQ and reflections and how they relate to his real circumstances funny and interesting.
Bri’s blog looks well presented and easy to navigate and read. It was interesting to read about her journey to how she got to be here, and I wish her all the best in her endeavours.
Step 5: KCQ’s Chapter 2 – Understanding the game:
This is my reflection of the second chapter ‘understanding the game.’
You have to learn the rules of the game. And then you have to play better than anyone else.
Such a brilliantly inspirational quote, but unfortunately not everyone plays by the rules so playing better against someone who does not can be a difficult thing to do. It depends on how harmful not following rules to a tee is. Locks exist to keep honest people out, those that break the rules won’t care that there is a lock but will find a way to bypass it regardless.
Understanding what can and cannot be written when preparing financial reports to people outside of the business seems quite important. You wouldn’t want firms tricking people & organizations to invest or lend money on basis of false or misleading information.
2.1 Rules of the game:
I can imagine it is not good for some businesses to not flash their financial information unless it is required. Are privately owned businesses held to different regulations than publicly traded businesses?
I thought it would be common sense to know where your loaned money is going. Myself loaning a mate $20 for groceries, knowing that he may spend it elsewhere due to my privileged knowledge. Banks and lenders would want to know where they are loaning large sums of money and receiving financial information from the receiver to make an informed decision should be a given, right? The same thing should be provided in some regard to investors too I would suppose.
Are there penalties for firms not following the rules in the same way there are penalties for individuals breaking the law?
Dunn and Bradstreet Corp. not revealing its own earnings to its own stockholders is such a hypocritical thing; rules for thee not for me. The US setting the rules and the world following is the usual case. Whether or not their regulatory systems are what best suits everyone else is a different thing entirely. So, with one set of accounting information, can regulatory bodies like the SEC require all of it or only select parts that businesses only have to offer as set by the regulations. Does the SEC get the whole picture of how a business is doing?
Why are rules not the same in every country? I would have assumed firms manage their financial information in the same way as others around the world. I’m glad that the same rules when preparing financial reports are used internally and externally, it’d be a mess if they were different. If I have been understanding this paragraph correctly, there are three standards bodies in Australia, all of which have different rules that update frequently. Would it not be easier to have one body that manages different sectors?
Fortunately, my earlier question was answered with the IFRS standards. That explains why financial reports between my company and other Australian companies I have read look similar in format.
I couldn’t imagine how small businesses would operate should they have to dedicate time and resources to general purpose financial statements. It would be pointless chaos.
2.2 You cannot have a rule for everything:
There certainly shouldn’t be and anyway, who would enforce all these rules? Everything being shades of grey is certainly true, not all actions that break rules are done with malicious intent and judgements should be made with that in mind. For example, jaywalking is a fineable offence here in Queensland but I can’t recall ever hearing of fines being issued for it.
The way you talk about learning is quite inspiring and I found a quote from Benjamin Franklin to be quite fitting here, ““Tell me and I forget, teach me and I may remember, involve me and I learn.” To understand what you’re learning you need to be involved and actually reflect and understand what it is you’re trying to get out of learning. My prior understanding of university was that it was a means to and end; finish degree and receive the piece of paper. But I’m slowing coming around to the idea that I need to be more involved in my learning. I never took my learning too seriously in high school, picking a mix of subjects I enjoyed and easier ones for the ones I didn’t. It did come back to bite me later. I look forward to involving myself in new subjects.
I still don’t have the best idea of how to understand how well a business may be doing based on their financial reports. Regarding my business, Irish Continental Group, their Chairman, CEO and CFO’s statements talked about financial loss and struggles throughout the year, but their strategy so far has succeeded. Their figures reflect the struggle but a lot of what has been causing issues has been out of their control due to Covid restrictions. So, it is hard to gain a real understanding of whether the business is unviable due to strategy or due to circumstance.
All these standard bodies fighting for their vision of what a financial reporting should look like sounds like a huge mess to me. I’m glad I’m not in the position to make a call as to whether one way is better than the other.
The AASB Framework seems like the ideal choice, provide information that appeals to all that require it and let them decide which information to act upon.
2.3 Accrual accounting:
The analogy of for the application of accrual accounting was fantastic here and so easy to understand. Everyone makes use of utilities that are provided and paid for later and particularly for me, council rates for water use. So, how would a firm account for this should the service provided not be paid for until after the financial year ended? Would it look like a loss in the EOFY report and a gain on the next one?
I swear that thanks to the roughness of busses I’d be able to survive in a high-g centrifuge test. There was nothing like riding the bus on the way to school and hoping I would make it to school with the same number of teeth that I got on with.
I got to enjoy the use of my go-card recently in Brisbane and felt this for sure. Loaded up with $20 and only needed to spend $8 of that or pay $28 for both trips without the card. I’m sure they make a killing off of these cards with the amount of unused credit.
It’s weird to think of businesses as long-standing dynasties where equity holders can pass it down through their families. Nintendo comes to mind as the product we associate them with now are completely different to what they were in the past. They were founded in the late 1800’s and produced playing cards; a far cry from the gaming systems they produce now.
The idea of information in reports being subjective is hard for me to grasp. With so many rules, unwritten rules, and regulations; How you would tell if something reported inaccurately was done deliberately? Surely those within the firm could just say ‘oops’ we forgot. The individuals surely wouldn’t be found at fault and the firm could be fined I suppose. Thus, allowing it to repeat?
I guess the whole situation around Ansett failing was in a time before corporate bailouts were commonplace. However, upon further research it appears that they had no problems bailing out Qantas a few years prior so I’m sure there was more to it.
I can tell you from personal experience there’s a lot more unwritten rules in Civilization than you’d think. First on my list for that would be not to aggravate Gandhi.
2.4 Quality of information
The writing here can definitely be applied to nearly anything you hear or read. Was it worth your time to read the newspaper’s article or a peer-reviewed source on the same subject? Was it written in good faith, or did it try to manipulate your thoughts? With disinformation so rife it is hard to take sources at face value.
Irish Continental Groups report was, in my opinion, professionally written and documented. It had everything you needed to understand the data in the financial statements further down in notes with explanations of where money had come in or out and why they allocated it there. They also had a great section detailing their adoptions and amendments of various standards like IFRS and IAS.
Consistency in reports definitely seems important to me. There’s no need to reinvent the wheel every year. Make some necessary changes but keep it consistent in design. I’d imagine it’d be confusing even for those within the firm to compare their own reports should they change the way its calculated every time.
3.1 A view of business at rest:
My firms annual report was optimistic to a degree of what you describe in the reading. Not so many smiling faces beyond the one on the cover. It was interesting to see such a candid view into the business reality. The Chairman spoke of the struggles in detail as it faces its second year of loss. Fortunately, their situation has been improving so they were optimistic in some of their writings when it came to their strategic goals that were met that year. They also included thanks and pleasantries to their front-line staff during the pandemic as well. I suppose they want to present themselves as a business that acknowledges the struggle but is making the best out of what they’ve been dealt.
Finding and inputting my firm’s financial information into my spreadsheet was actually quite simple. Not too many overlapping details and quite easy to read. They had only listed their total revenue and not a breakdown of revenue in the income statement itself. The figures that make up the revenue were listed in the footnote further below. I noticed this was different to some other statements that I’d read. As my firm is a group of companies they were listed as consolidated statements. This chapter gave me a pretty good understanding of the differences between consolidated sheets and the notes that form those same balance sheets in my firms reports. I feel like I did this all backwards however as I’d already completed my spreadsheet before reading this chapter. Oh well…
3.2 Business on the move:
I’ve read comments online talking about how businesses only have two goals in mind; profit and growth, and if they’re not boasting either then the business is a failure. Honestly, I’m not sure how true those comment were but seeing how during the early stages of the pandemic all the talk was about how companies were seeking record profit especially in the technology sector. Surely it isn’t sustainable to always be seeking higher profit every year.
“...mega-corporations have a huge influence on our daily lives ... [and] are generally only concerned with one thing ... the bottom line. That is, maximizing profit, regardless of the social or environmental costs.” – David Suzuki
This quote definitely strikes true for me. Take Amazon for example, they’ve been slowly acquiring more and more businesses and moving into different sectors that have influence on the lives of many people. They’ve proven to only be concerned with their own profit at the expense of the health of their employees and are now potentially running into a shortage in their labour pool. Another being the recent acquisition (to be approved and completed of course) of Suncorp by ANZ. Surely it’s not a good thing for consumers to have less competition in the market.
So the statement cash is king still holds true even in business. I guess it’s the same reason as why people panic to remove their money from the bank when there is low confidence in the economy. You can’t pay for your groceries with household assets, especially if the bank you hold your money in goes down. But I think that goes into the whole world of fractional reserve banking that I don’t understand yet. In the case of businesses running out of cash and failing, I suppose that’s why I see auctions for the sale of assets from those said failed businesses; to cover their liabilities?
Here is my step 4 company spreadsheet:
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