Well it went from cars to construction. To be 100% honest, housing doesn’t interest me that much, and as a result I am struggling to find motivation to read copious amounts of information about this company. I don’t know if it’s because I don’t own my own home yet so don’t have a significant attachment to the housing sector or the fact that in ACCT11059, I was given a company that actually interested me, so I was thoroughly engaged. Either way, I have an assignment to do so here I am.

My company is Barratt Developments PLC who as you may have already connected the dots, develop houses. They are a company based in the UK and seem to be doing reasonably well for themselves based on a quick glance at their annual report.

Starting with the history, Barratt Developments was founded in 1953 when Sir Lawrie Barratt, an accountant couldn’t afford to buy a house so instead decided to build one for £1,750. 15 years later, the company made its way onto the London Stock Exchange and by the end of the 80’s, have sold over 100,000 new homes across the UK. In the 90’s, a venture (Oakleaf Homes) from 1971 re-emerges and older homes are sold at a competitive prices and benefits usually only available on new homes. By 95, Barratt opens a show village in Northampton and the milestone of 200,000 homes sold is reached. 2013 marks the year where Barratt scoops up 102 Quality Awards for outstanding workmanship in the annual NHBC Pride in the Job competition (highest amount ever won by a single company). 2014 marks 400,000 completed homes and as a result, they plant 400,000 trees and shrubs over the following 18 months. Fast forward to 2019, the Barratt Group again achieved the maximum five-star rating in the annual Home Builders Federation customer satisfaction survey. This was the tenth year running that Barratt has won the top rating – the only major national housebuilder to do so.

Moving on to the reports, there’s a lot of information in the annual reports which is very new to me such as ‘waste intensity’ where Barratt measures the amount of waste per tonne per 100 m² generated from above ground construction. I guess it’s one of those things that you don’t think about if you aren’t in the business but would be an essential measurement tool to track expenses and ensure efficiency across the projects. One thing I did find interesting though was ‘Land Bank’ as it’s a real eye opener. My preconceived notion of property development companies is they see a block of land, buy it, flip it and make a buck or two. Turns out, land bank is the collection of land the company has acquired. Surprisingly, in the 2019 financial year, Barratt Developments PLC had 18,448 plots approved for purchase which equates to 4.7 years worth of land for future development. That surprises me because it requires the business to literally gamble with land by acquiring it at the lowest price and wait for it to develop into a prime location, to then on sell for a profit.

Personally, I think this company will build on me (no pun intended) but will require a bit of time for me to dissect all the finer details. Now that’s going to require time and time is something that I currently don’t have due to our good friend COVID-19.

Obviously, there’s 2 major concerns that I am thinking about when reading through the annual reports. How will Brexit and Coronavirus effect this company? Like any company when there is a massive change announced or a worldwide pandemic, shares will fall, deals fold and revenue is lost.

So brief history here, 22 Feb 2016 saw the referendum date of 23 June 2016 announced regarding Brexit. Vote passed 52% – 48% meaning UK is leaving the EU. Pros and cons to this, but for Barratt, they faced the reality of a can of worms being opened up. You see, a free movement of labour within the EU (having 28 countries pre-Brexit) meant wages can be competitive and sourcing of material can be cheap due to the competitive market. All positive things for a company that tries to maximise profits and keep costs down. As outlined in this article, Barratt now face the obstacle of labour shortage if the UK is to leave the EU. CEO of Barratt, David Thomas estimates that 30-40% of its workforce are from Mainland EU and if the UK were to leave the EU, it would lead to less foreign investment (up to 60%) and drive up labour and material costs (55% and 53% respectively). That’s a huge jump in the terms of outgoing expenses.

Surprisingly though, Barratt have defied the odds of crumbling and posted profits of £910m pre-tax in the 2018-2019 financial year which was an 8.9% increase over the previous financial year. Operating margins rose by 1.2% from 17.7%, home completions rose 2.6% to 17,856, dividend per share up 5.9% from 43.8p to 46.4p however revenue did drop 2.3% from £4.87b to £4.76b so overall not such a bad year.

Now with Coronavirus, I don’t have much information to share with you as it is something the world has never experienced before but since it has come around, Barratt’s share prices have taken a massive tumble, 47% to be exact in a 1-month period (21/02/2020 – 20/03/2020). Clearly this is a devastating blow to a company that was tracking so well but it will be interesting to see how they bounce back from it.

Anyways, that’s enough for now I believe. Will be interesting to see where this term takes me in regard to learning about this company but for now I think this is as much property development I can handle. If you want to read up more about the company, look here.

Please find below my word document for steps 7 – 9 and my company’s spreadsheet!

Everything is limited. The vocabulary I poses is limited. My capabilities to finish tasks is limited to the knowledge I poses. Reading through this section, I couldn’t help but reflect on many things. I usually do these assignments and try to think of an answer to every section I read, just to make sure I have something to talk about and actually complete the task at hand however today was different. I don’t know whether it was because of my mindset or thinking freely but when I read this section, I couldn’t help but reflect on a conversation I was having with my mate on the last night he was in Townsville before moving to Newcastle.

Martin talks about how managers must make decisions and each decision has an opportunity cost and benefit associated with it. Although I am not a firm, I am still my own manager and my life is my firm so join me whilst I reflect on my conversation and how it relates to what Martin explains. Just like you, I have 24 hours in my day to use as effectively as possible. Every decision I make in my day can have implications to my firm (my life) for days, weeks or even years to come. To give you a little bit of background, this is a typical weekday for me:

6:30am: Wake up, feed bird, make lunch, get ready for work.

7:30am: Drive to work

7:50am – 3:50pm: Work

3:50pm – 4:40pm: Drive home

4:40pm – 5pm: Get ready for uni study

5pm – 7pm: Uni

7pm – 9pm: Dinner, dishes, feed animals, spend time with partner, shower, etc

9pm – 12:30am/1am: More uni

12:30am/1am – 6:30am: Sleep

Now, when I was talking with my mate before he moved away, he asked me a question which really made me think. “Why don’t we hang out as much anymore?”, and the simple answer was “uni” however it was much deeper than that. You see, for me, my days are set out methodically. If I get home from work and think about having a nap, I have a few factors to think about. The opportunity cost for that nap is study, the replacement cost is more time out of my weekend being used for uni rather than spending time with friends / family, but the benefit is a nap which will allow me to feel refreshed.

In the same conversation, my mate said something to me which I thought of when reading this chapter. He said “I envy you for the fact that you have your head screwed on. In 4 years time, you will have a degree and hopefully a good paying job. You made the choice to stop coming out with us boys every weekend to focus on your study and as a result, you will be successful and in 4 years, us boys will still be trying to figure out what we want to do”. In other words, I have made the decision at the age of 22 to study a university degree. Short term, the opportunity cost is spending time with my friends, going out on the weekends, seeing my family as much, spending quality time with my partner (other than studying together) however the benefits are discipline, time management, education and job opportunities.

Me as the manager of my life, I have made the decision to study which has cost me time with friends and family but the expected returns in the future outweigh the costs incurred in the short term.

Moving on to the payback period, I couldn’t help but think about McDonalds for two reasons. One, I am hungry and secondly, when I worked at McDonalds Willows, we were the only Maccas within proximity to roughly 5 major suburbs and opposite a major shopping center. In 2012, there was only 5 Maccas (excluding express stores inside shops) between 3 different franchisees. Paul was the owner of Rassmussen and Willows (where I worked) whilst another couple owned 2 and someone else owned the last one in town. When the plans for a 6^th Maccas was released, all three franchisees went into a frenzy to outbid each other and gain the rights to the store. Paul was able to secure it which was imperative to the operations of Willows as the location of the new store (called Thuringowa) was on the same road but at the other end (roughly a 5-minute drive) meaning business nearly halved at Willows.

I had a chat with Paul at the opening of the Thuringowa store as I was asked to transfer there to assist in the opening and in our conversation I asked him “if you don’t mind me asking, how much did this place cost you?”. He was always open with me and simply replied “roughly $3.5 million to cover everything”. Now Paul (at that time) owned 6 other McDonalds in Queensland so had plenty of money but I was still curious to know how long it would take him to pay this one off. “It should be paid off within 7 years if everything goes to plan”. Now I can only assume that the way he figured that out is by using the payback method and if that’s correct, he would need a cash flow of $500,000 each year (3500000/7 = cash flow).

Last thing I want to touch on is where Martin states that “past contribution margins of a firm’s products can give useful guidance and be useful starting points for managers to consider the future contribution margins of a firm’s products.”. Over time, the costs of products that Maccas uses to make burgers increases so when they days such as McHappy Day, they can’t look at the figures from the previous year and know exactly how much the costs incurred, and profits received will be. They can however use it as a starting point to see what the most popular item ordered was. How price changes affect the profit per item. What item should be pushed for add-ons, etc. Its with these tools that businesses can then change their product focus and increase their profitability.

Okay, so reading through chapter seven was a rollercoaster in its own sense as I genuinely question some managerial decisions made at work which seem like common sense scenarios but aren’t acted out in the same way. I have been a Compliance Officer for the Department of Human Services for 2 years and my role in the big cog is to ensure people are reporting their earnings correctly to receive the right rate of support payments. As an APS4, I don’t have the ability to make decisions for two reasons. One, an APS4 is a senior ‘foot soldier’ which has no bearing weight regarding organizational decisions and two, our decisions are made by none other than ScoMo and his team, my role is to implement the decision made.

“As firms get larger, as their scope and reach and influence gets larger, managers need to delegate more and more decision-making to others.” See, I can see why this happens. Take for instance my work. Morrison is advised that there is $1.2 billion (2018/2019 financial year) in outstanding funds incorrectly paid to both current and non-current welfare recipients, so he decides to recoup this money as it is taxpayer money. Now Morrison has a lot on his plate already, meaning he can’t physically oversee the operations of recouping that money so he delegates to the Secretary who then delegates further down the chain of command until it lands at the hands of us Compliance Officers who must make decisions within the boundaries of the legislation set by the House of Representatives. As you could imagine, this takes a lot of co-ordination as there are many cogs that must work together to get the big wheel to turn.

Alongside co-ordination, Martin touches on communication which is vital to any organisation. I completely agree with this as low and behold, when communication fails (especially in a highly publicised job like mine), it is not a good outcome for the business. Perfect example, without boring you with my job role and how everything is done (I’m sure you’ve seen news articles about ‘Robo-debt’ (which is completely wrong on its own but that’s another story for another day)), in November 2019, someone decided to change the policy regarding how we can conduct compliance reviews. The only problem with this change is it was communicated to us at the same time the media outlets reported on it. As you could imagine, this then caused a massive disruption to business as customers were calling to find out what’s happening, and we had zero information to offer them.

Moving towards the bottom of the chapter, when reading the section about measuring performance, I fell into agreeance with the underlying message that measuring performance and rewarding or punishing based on targets can encourage behaviour inconsistent with the goals of a firm. Like anything, there are pros and cons with everything. When I worked as a car salesman, we received commission from each car as well as bonus incentives. Like any young person who thought money was the most important thing in life, I put exuberant amounts of pressure on myself to sell 10 cars a month (this was the expectation from management) to receive a $500 bonus. After 10 cars, the pressure was to reach 15, to receive a $1000 bonus. After 15, it was 20 cars to get a $1500 bonus as well as a paid day off. I drove myself so hard, put so much pressure on myself that I saw a change in my mental wellbeing. I started to crack due to the amount of pressure put on an 18-year-old to meet business targets of a minimum 10 cars per month.

One thing I noticed however was the amount of strain on workplace relationships because of these targets. See, it was near daily that there would be an argument between workers over who spoke to what customer first, and that’s because everyone has a target to hit and will do anything to reach that goal. This is where people started acting against the goals of the business in order to reach their own performance target just so they don’t get punished. This was a very ineffective practice set out by management and explains the high turnover rate of new car sales employees.

If there is to be a rewarding system, I personally agree with the balanced scorecard system if it is applied correctly. In my current role, we have a derivative of a balanced scorecard where the performance measurement is on productivity rather than outcomes. Every morning we have a team meeting where everyone’s stats are shown on a board and we discuss the previous day. Productivity is the main topic where it is compared to the individual goal set by us which then contributes to the team goal which rolls into the organisational goal. We collectively talk about impacts on productivity which allows staff members to assist others who are struggling and allows management to identify areas of improvement. This system is very rewarding as there’s no ‘punishment’ for having ‘bad stats’, rather a learning opportunity and the ability to gain assistance with areas you are struggling in.

So, the task for step 3 of the assignment was to restate the figures from assignment 1 into operating and financial tasks. Personally, I believe that what I have taken away from this is very valuable as I can now look at a company’s annual report and determine whether an activity relates to the operating side or financing side of the business. I believe this is a vital skill moving forward and especially if one is wanting to get into acquiring shares in a company.

How I felt doing the assignment was a rollercoaster of emotions. At the start I had absolutely no idea what I was doing. I felt like a little kid learning how to tie a shoelace, a simple task to an uneducated mind seems like the biggest struggle ever. I watched Maria’s video over and over then suddenly, I figured it out. The SOCIE was coming together and I was able to balance everything correctly. This was a sense of accomplishment! Moving onto the balance sheets, I had an understanding and got the sheet to balance first try! This was the biggest sigh of relief!

Then came time to restate the income statement and my gosh, I have never dealt with so much stress, anger and frustration towards an assignment as I have had to endure whilst doing this section. I cannot for the life of me balance my sheet. I do everything the exact same as the YouTube video, cross-referenced with other people’s assignments whilst giving them feedback to see if I’m missing anything and finally, called in the big guns to give me some guidance (Evan Redward). What a saint he is! Although we were unable to balance it, the help that man provided me was second to none! And I owe him my biggest thank you! I think we spent probably close to 6 hours trying to figure out why my accounts wont balance for the Income statement. To this moment, I still don’t know why they won’t balance. This is a very defeated feeling and I seriously hope I never have to endure this again! I’m fully expecting to be marked down as my figures do not match however, I have been defeated by the restating. If someone can contact me after marking the assessment so we can go through it that would be amazing. I have a feeling its due to the constant change of positive and negative figures from year to year for individual items (more specifically around 2016 when the company went from major losses to significant increases).

Moving away from the negativity, overall, I gained a lot of insight from this assignment and I enjoy restating reports but only when they balance.

Below you will find the feedback I have given to other students:

Amy McClelland	My Comments
Step 3 Restated Statement of Changes in Equity Balance Sheet Income Statement Commentary and discussion with others (Note: You may wish to give some comments on their Excel spreadsheet)	Going through your restated sheets, it is nice to see a simple format allowing me to easily follow along with what’s happening. All items are linked from the financial sheet, so it is easy to ensure that no items have been left out. All your restated sheets balance to what they need to i.e Total comprehensive income in your restated income statement matches the Total comprehensive income in your restated SOCIE. I was surprised to see your restated income statement balance when I did everything the same but have a variance of $7m+. On a positive though, good work on getting your income statement to balance!
Step 4 Individual feedback with other students	Not available
Overall ASS#2 Steps 3 & 4	Overall, your spreadsheet is easy to follow and balances like it is meant to. Great work on doing this mammoth task!

Evan Redward	My Comments
Step 3 Restated Statement of Changes in Equity Balance Sheet Income Statement Commentary and discussion with others (Note: You may wish to give some comments on their Excel spreadsheet)	You have linked everything back to your financial statement sheet which makes it easy to ensure you have included all your totals. I like the fact that you have put comments attached to cells so you can get some background information regarding what the figure relates too. From what I can see, everything balances out which is good. The layout of your spreadsheet is easy to follow and isn’t overcrowded. Great work
Step 4 Individual feedback with other students	I have seen you interacting online with others and I know firsthand how much assistance you can provide. You have helped me extensively throughout this section of the assignment and I cant thank you enough!
Overall ASS#2 Steps 3 & 4	Overall, the simplicity of your spreadsheet and linking back to the financial statements page allows an easy flow on effect. Your formatting allows people to know what is a total and what is an item. Great work overall.

Jewel Westerhout	My Comments
Step 3 Restated Statement of Changes in Equity Balance Sheet Income Statement Commentary and discussion with others (Note: You may wish to give some comments on their Excel spreadsheet)	The restated SOCIE matches up to the totals shown in the financial statements which is good. Its good to see sums at the bottom of each total to ensure it matches however it would be good to link things from the financial statement sheet to ensure you are copying across all items. For the income statement, I had a look at your company’s financial reports, and I think there may be some information missing in your financial statements which will mean your restated amounts won’t match. For example, for 2018, the annual report shows (page 111) $112,975 for Prepayment, deposits and other receivables however this isn’t in your report anywhere (from what I could see). This would make your total current assets $702464 however it only totals $579,489. What this means, is when you restate your report, and use the sum function, as not all information is in there, it wont balance to the totals shown on your ‘financial statement’ sheet.
Step 4 Individual feedback with other students	I can see you interacting with others online which is good to see. You are actively giving feedback and don’t hesitate to help others out. Keep up the good work!
Overall ASS#2 Steps 3 & 4	Overall it is good to see sum functions in the restated reports however I would just double check to ensure that all information from the annual reports are in the financial statements and transpose across to the restated tab.