Origin Company for Australia Pacific LNG -myassignmenthelp.com

Question: Discuss about theOrigin Company for Australia Pacific LNG. Answer: Introduction This paper presents a comprehensive formal report for a stakeholder (potential investor) that interprets the annual report of an Australian company (Origin Energy) and makes appropriate recommendations. The core business of Origin Energy is to natural gas exploration and production, energy retailing, electricity generation and Australia Pacific LNG. Origin Energy has a diverse exploration portfolio. This entails the Cooper, Surat and Bowen basins in the Central Australia. It also include the Otway as well as Bass basins in the Southern Australia. The company further has interest in Perth Basin alongside Browse in Western Australia. Origin further operates externally in Kupe gas field in Taranaki basin of NZ. Origin holds interest in NZs Canterbury basin. Besides the companys local gas operations; Origin works with ConocoPhillips alongside Sinopec in Australian Pacific LNG. This is a joint venture that deliver the largest Australian coal seam gas (CSG) to the LNG export project in Que ensland. Origins energy retailing has approximately 4.217.0 million customers. It services both huge energy customers and residential alongside small business market. Origin commodities offering encompass natural gas, electricity and LPG. The company is also leading provider of the low-carbon products like GreenPower, solar PV and Green Gas. Origin also operates one of the countrys hugest power generation portfolios with 6010.0 of capacity. The firm is further active in renewable energy. The firm has spent many years to developing in this arena. As a potential investor who needs to invest in Origin Energy, this paper needs to provide key analysis of its financial performance, financial position and the cash-flow management. The investor needs to know the profitability, cash management and liquidity of the Origin Energy and well as detailed understanding of the , companys performance and management of the company. This will include P/E ratio = (Market Price/Earnings per share), Earning per sha re ratio = (Profit after tax/No. of ordinary shares), dividends per share ratio = (Total dividends of the year/total number of ordinary shares) *100, dividends yield percentage = (dividends per share/market per share) *100, profitability and liquidity ratios to get an overall view of how the company is performing. Profitability, cash management and liquidity The earning per share of the company can be categorized as diluted and basic. The basic EPS for year June, 2015, June 2016 and June 2017 are given as (0.52), (0.37) and (1.27) whereas the diluted EPS for the same years are given as (0.52), (0.37) and (1.27) same as the basic ones. The EBITDA for the same years are presented as 475, 426 and (1,178). The dividend for the last three years have also been presented as 0.48, 0.11 and no dividend in 2017. The dividend payout ratio is given as 116.3 in 2015 and there was no dividend in 2016 and 2017. The dividend yield percentage for the last three years have been given as 4.39, 5.64 and 1.7 for 2014, 2015 and 2016. In terms of profitability, the EBT margin for the company for the past four years are given as 5.15, -4.62, -6.18 and -15.21. The ROE has been given as ratio has been given as 3.97, -5.03, -4.33 and -17.19. The return on invested capital for 2014 through 2017 include 4.16, -1.79, -1.28 and -8.63. In terms of cash flow ratios, the free cash flow/net income from 2014 to 2017 include 2.56, -0.15, -1.21 and -0.39. The free cash flow/sales percentage for the same period included 9.35, 0.86, 5.98 and 6.38. In terms of liquidity/financial health, the current ration from 2014 to 2017 include 0.97, 1.62, 1.24 and 1.3 while quick ratio include 0.86, 0.48, 0.92 and 0.71. The financial leverage include 2.32, 2.62, 1.99 and 2.21 whereas the debt/equity ratio for 2014 to 2017 include 0.67, 0.93, 0.66 and 0.74. Companys performance, management of the company The financial results of the company has not been performing well in the last three years. As reflected in the analysis, it is clear that Origin is not promising for the investment. There has been a decline trend in most of the ration as indicated in the above analysis. For example, in terms of profitability, there has been a decreasing from the 2014 through 2017. The ROE percentages declined to negative values from +3.97 in 2014 to -17.19 in the year 2017. This is an indication of less performance and negative returns and hence the investor needs not to invest in the company. Also, in terms of the return on capital invested there has been a decreasing trend in from 2014 to 2017 from +4.16 in 2014 to -8.63 in 2017. This is a further justification that things are not well in Origin and hence it is not appealing for the potential investors (Henderson, Peirson, Herbohn and Howieson 2015). Also the interest coverage also show a declining trend between 2014 and 2017 from +2.65 to negative 2.75. Such decreasing trend was also noticed in net margin that decreased from +3.65 to -16.31 between 2014 and 2017. The asset turnover (average) and the return on assets also declined between the periods. Also, financial leverage (average) recorded a declining trend from 2014 to 2017 from positive 2.32 to 2.21. The firm is not also appealing for potential investment in terms of its financial performance. For example, the earnings per share showed a declining trend between 2014 and 2017 indicated by +0.4 in 2014 to -1.26 in 2017. This means that this trend will still continue and hence the potential investor will lose his investment in case he invests in the company. Also, the dividends showed a declining trend between the period with 2014, 2015 and 2017 figure being +0.49, +0.48, +0.1. This is a clear indication of the decrease in profitability of the firm and hence less dividends being paid. The dividend payout ratio also showed were rising between 2012 and 2015 at 75.9 and 116.3 but there were no dividend payout in the subsequent years through 2017. The operating cash flow also showed a declining trend and reduced from 2227 in 2014 to 1289 in 2017 while free cash flow per share were rising and decreasing between the periods. In terms of growth performance, the dividend yield percentage increased between 2014 (4.39) and 2015 (5.64) but sharply dropped to 1.70 in 2016. This was a clear indication of rough times ahead in the company and hence not advisable for any investment by the potential investor. The current market potential is as weak as can be seen from the analysis of key ratios. This can be demonstrated by the declining profitability of the firm. It is advisable that the potential investor need not to invest in the firm until some promising figures are realized which, however, do not seem to be the case any soon (Bjrnson, Hoydis, Kountouris and Debbah 2014). Origin, however, may have a future potential by when the returns on massive investments in the renewable energy picks up well. The company will still do better in the future by changing the strategies and ensuring that only better strategies are prioritized. The firms current business current business strategy is the integrated energy company that is operational throughout 3 segments of energy supply chain including natural gas as well as oil exploration and production, energy retailing as well as electricity generation. The company draws its strength via the integration-fuel integrated generated and the retailer. The firms strategic focus stays on competitive segments of Australian as well as New Zealand energy markets with potential opportunities in rapid growing energy market in the Asian region. Origin further seeks to deepen the integration within the business crossways energy supply chain to become more effective manger in terms of risks and create growth opportunities (Flammer 2015). I terms of CSR rating, Origin is rated 56 CSR rating compared to all the companies. The energy production means that the firm has to interact hugely with the environment. However, Origin undertakes to disclose the effects of its operation on the environment and what it is doing to minimize the risks to the community where it operates. However, the company has not disclosed all the non-financial information and this is critical to the potential investors since it determines the reputation of the company and hence profits. From the sustainability report, the firm has disclosed its developments in the renewable energy as measure to be sustainable and create the sustainable environment (Ngo, Larsson and Marzetta 2013). One of the major strength in the management of Origin relies on the existence of qualified and motivated staff. This is critical to the potential investor as this has a direct impact on the organization in future financial years. For example, the management team thrives to ensure that change the business model and strategy by ensuring that they engage in the production of green energy which will boost their efficiency. The potential investor is more concerned with the long-term viability of the business for continuous dividend payment. Therefore, with the qualified and determined Origin management team, it is expected that once the renewable energy production is fully implemented the firm will starting improving in terms of its financial performance and profitability and this will attract the investors as the stock performance will improve (Minton, Taillard and Williamson 2014). Origin Energy has adopted various types of remuneration trends from last year to this year for the highest earners. For example, the firm is using the stock for its employees. This is essential as it motivates workers to work hard. Many employees are taking the stock option compensation and this can be attracted to the potential investors who would want to see the stock performance and the dividend payout ratio and yield rising. However, Origin pays less than other companies in terms variation in wages (Lewis, Walls and Dowell 2014). This is a critical concern to the investor as it might lead to staff turnover and hence making the company to lose its qualified and determined staff. The company also give non-wage benefits including the bonuses for better performers. The bonuses are means of motivation its workers and this creates an increasingly inspired workforce in the organization. The current management structure and ownership structure of the firm is under the oversight of the Board. Origin Energys Board is under the chairmanship of H. Kevin Mccann who is an independent non-executive. There are other 8 directors who help in run the Origin at the board levels (Gillingham, Rapson and Wagner 2016). Some board members are non-executive whiles others are executive directors. Apart from the Board, Origin has an executive management team under the executive General Manager Energy markets, Frank Calabria, group general counsel and company secretary, Andrew Clarke. Executive general manager major development project Andrew Stock and other five executive members. The institution ownership of Origin accounts for 18.57% while insider ownership account for 0.13%, the general public ownership accounts 80.94% and private accounts for 0.15%. Conclusion/Recommendation The main need for potential investor in Origin is to invest in the company stock/shares. But, as things stand now, Origin is not performing well and has not even paid the dividend in 2016. Therefore, it is recommended to the potential investor not to invest in Origin at the moment. There is a need to wait for the company to fully benefit from its potential integrated business strategy. Investment in the firm at the moment will make the potential investor lose. This is because Origin Energys profitability is declining as indicated by the negative profitability figures. For example, EBT margin for the company for the past four years are given as 5.15, -4.62, -6.18 and -15.21. The economic cause for lack of profitability is due to the 2.20 billon loss at the APLNG. That even led to the firm declaring no dividend in 2016/17. This means the firm is not profitable enough for the potential investor to invest. As has been acknowledged in the report, there has not been dividend paid out in 20 16 and the trend will not change in 2017 either. Therefore, the potential investor needs to look for new business with rising and predictable performance to invest their money in to get attractive returns on investment. Origin Energy is still in the process of adopting the renewable energy and this will bring more benefits to the firm once full integrated in its trio-business model. There is a promising future in the firm coupled with its strong Board of Management and the Executive Management. References Barbose, G.L., Goldman, C.A., Hoffman, I.M. and Billingsley, M., 2013. 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