2. EXECUTIVE SUMMARY
Dear Shareholders,
The company has been renamed to AAND
MOTORS and the management style and
functioning of the company has changed. The
financial position of the company has
improved from having a net retained profit of
£ -157.96 million in 2014 to £207 .76 million
by the end of 2018. Return on Shareholders‟
funds has improved from -49.28 to 23.22, EPS
has improved from -33.72 to 32.83, PE ratio is
third in the market moving from -0.80 to 8.75,
share price has increased from £26.85 in 2014
to £287.29 in 2018 and various other financial
indicators reveal that the company has moved
from a slum to a profitable position. This can
only be attributed to the fact that we have
considered market trends and customer
preferences and have aligned our production
and promotion accordingly. We have tried to
reduce our production costs and enhance our
productivity which stands at 91.11 for the
Alpha model, 47.22 for the Beta model and
11.11 for our luxury model which is Lamda.
The gross margin percentage has also
increased to 20.97%, 29.95% and 24.97 % for
Alpha, Beta and Lamda respectively.
The company still has a loan of £ 284 million
to be paid after taking a further loan of £ 184
million at the start of the operations but the
company is very much able of paying it back
each year as the bank balance is £ 545 million
suggesting that there is sufficient funds . The
company‟s present standing in the market in
comparison to its competitors may not be as
good but this can be attributed to the fact that
the majority of the companies have released
their fourth or fifth models of cars and so their
sales figures are higher which has a huge
impact on revenue. We have chosen the
strategy to analyse and enhance our present
portfolio of models and believe we have done
a good job with that. We believe that now that
we have established faith in the hearts of the
customer and a liking for our brands products,
fourth release of a model would be
appropriate.
Conclusions and recommendations include
maintaining the market share and popularity
that our luxury brand “Lamda” has in the
market. We were the first to enter the market
and are enjoying market share of 1.94%. New
research and development into the Lamda
model and more options would help us
enhance our footing into the luxury market. A
positive which needs to be highlighted is that
in the past four years of trading we have never
had any stock of cars remaining. We have
always tried to sell our cars and it has worked
effectively even though our productivity is
sometimes hampered. Every year we have
gradually increased our prices and slightly
increased our production and the customers
have always bought out our cars which show
faith in our brand and in our products. We
have tried to improve our existing portfolio
and give it a total changeover and it has
worked so we believe an introduction of a new
city car model should be introduced in the
market as we see a demand in the market for
it. Our overall costs per model produced needs
to be reduced and productivity needs to be
enhanced in order to compete better in the
market. Our position in comparison with our
competitors‟ isn‟t pronounced but we believe
that we are heading in the right direction.
3. ANNUAL REPORT:
AAND MOTORS has been handed over the management of EMG plc. from 2015 and it is now run by
a team of four enthusiastic individuals. Their expertise varies in different fields and have come
together to bring a struggling company to a greater heights.
STRATEGIES: The strategy which were discussed and agreed upon by the management as the
business was handed over in 2014 has seen diverse changes as the firm grew and due to various
macro-economic factors like nagging inflation, tough austerity measures by government,
unemployment and low customer confidence. The decisions that were planned from 2015 to 2019
needed to be amended based on competitor performance, market trends, customer preferences and
perception.
Few notable ones that were still implemented included the re-launch of the „Beta‟ model with new
body designs and engines, investment into R&D of existing models in Anti- theft, tracking system,
long term fuel efficiency and eco-friendly vehicles and more investment into automation. Other key
decisions include investment in training and development, improving build quality of the vehicle,
enhancing the present portfolio of models and giving them a whole new look so as to attract the
already existing customers and the younger generations. Making the cars more durable, focussing on
the young business family especially on the woman in the family and finally moving into the
MPV/SUV sector.
Relaunch of the
Beta Model
New luxurious
vehicle
Investments on
R&D
Invesmtent on
People
“VISION STATEMENT”
“Do something, worth doing for the benefit of
the society”
OBJECTIVES: Enhance or increase sales of our models by
repositioning or redesigning.
Complete overhaul of our models to recapture the younger
generation and young business family.
4. STRATEGIES NOT ADOPTED AND NEW ONES EXECUTED:
The major decisions which were not taken include the release of the fourth model in 2017. Other
strategies that were employed include adopting a loan of £184 million in 2016 and issue of 100000
shares @ £550 per share in 2018.
Below is the financial position with
comparison to competitiors in the
market in 2018 and various other
financial performance indicators of
how our business has faired and
excelled with the established
strategies and promtion mixes.
Expenditure spent on advertising and
promotions which are £276 million are the
third highest in the market but corresponding
sales have not occurred and our strategy has
not worked.
The Gross margin % of 20.97%,
29.95% and 24.97% are far from
industry standards for our medium,
large and luxury car models
respectively.
The luxury model which is our
„Lamda‟ has high production costs
but we haven‟t matched that with the
gross margin % of 40 in this sector
and so incurring high fixed overhead
costs.
On a positive note we are
maintaining the market share and
popularity that our luxury brand
“Lamda” has made in the market.
We were the first to enter the market
and are enjoying market share of 1.94%.
Another highlight is that in the past four years
of trading we have never had any stock of cars
remaining
MARKETING
STRATETY
•Focus on consumer durable cars and fuel
efficient vehicles
•Making the cars more attractive to the
younger family,while maintaing
excellence in designs and engineering
•Focus on the women in the young
business family.
OPERATIONAL
STRATEGY
•Re launch of the Beta model with better
designs and engines. Total change over
•Improve productivity by investment in
automation and R&D
FINANCIAL
STRATEGY
•Issuing more loan to finance operations
•Reduce production costs and expenditure
on advertising and marketing.
FINANCIAL
STRATEGY
•Raising the minimum weekly wage
rate with par to market standards.
•Investment in training and
development of personnel
5.
6. CONCLUSIONS:
AAND MOTORS, as the company is now
called, has tried to bring the company from a
loss to a profit. We have succeeded in doing so
but are far away from what our competitors
have achieved. We have realised that not
releasing a fourth model into the market has
greatly affected us. We have understood that
our cost on each model whether it be materials
cost, designs, options cost and labour costs are
in higher proportions compare to our
competitors. The promotion effectiveness has
been from low to average varying between all
our models.
The R&D projects which are online are
inadequate compare to the competitors‟ and
needs investment in projects which the
customers want. We have higher costs per unit
of model sold and our sales revenue is not
sufficient to cover the costs adequately. A 60%
proportion in sales revenue could lead us to a
40% increase in profits. We have not been
heading in the right direction as compared to
our competitors and our position in the market
is very poor.
New research and development into the Lamda
model and more options would help us
enhance our footing into the luxury market.
We have always tried to sell our cars and it has
worked effectively even though our
productivity is sometimes hampered. Every
year we have gradually increased our prices
and slightly increased our production and the
customers have always bought out our car
which suggests faith in our brand and in our
products.
Therefore, I would like to conclude by saying
that we enjoy comfortable market share for all
our models and if we can reduce our costs and
increase productivity AAND MOTORS can
compete with the best in the market.
RECOMMENDATIONS:
Based on the above conclusions few
recommendations can be made to improve our
present situation in the market.
Firstly an Operational Recommendation would
be to quickly release our fourth model into the
market which would be into “city” car
segment before the other competitors
strengthen their footing into the market.
Additional investment in R&D initiatives
catering to what customers desire and want.
Secondly a Financial Recommendation would
be to reduce our production costs on each
model, improving our productivity index,
overall productivity of each employee per car
by rightly calculating the ratios and mix for
cars produced to personnel employed.
Improving our Gross margin % which can be
achieved by reducing our production costs and
increasing our prices consequently. We need
to be in the above 40% margin rate if we are to
achieve any success in the coming years and
be in the top three players in the market.
Further recommendation would be pay off our
debt as soon as possible and distribute the
income from public issue shares into the
launch of the new model and into R&D.
Thirdly a Marketing recommendation would
be to reduce the expenditure spent on
advertising and promotion. It is one of the
highest in the market. Focussing on the right
marketing mix of promotions on target
customers and improving its effectiveness.
Fourthly a Human Resource Management
Recommendation would be to invest in
employee re train and management training so
as to improve productivity of the employee
and the company as a whole.
7. Reducing absenteeism and strike would be
another major challenge which needs to be
considered and undertaken. Redundancy cost
needs to be minimised and avoided at all
instances by effective planning and execution
of strategies prior the year starts.
