Analysing The UK Economy, Investment Opportunity, And Sectorial Evaluation

Analysing the current UK economic situation as at the end of February 2018

Discuss About The Fifteen Financial Ratios Evaluate Jordanian.

The overall assessment mainly focuses on identifying the investment opportunity in UK, which could help in generating higher returns from investment. In addition, FTSE 250 stocks are mainly used for conducting adequate investments in the stock market, which could help in generating higher returns. Moreover, an evaluation of the current economic condition in UK is conducted, which could help in supporting the investment strategy. Furthermore, sectorial evaluation is also conducted on businesses which used for the investments in the portfolio. This a relatively provide adequate growth forecast of the stocks which could increase returns from investment. Besides, adequate ratio analysis is conducted to detect the financial capability of the company to produce returns from investment. Lastly, analysis on investments that is conducted from March 5th to 29 March is depicted, where the returns that is generated from the trade is evaluated

Figure 1: Depicting the growth prospect of UK in 2018

(Source: Focus-economics.com, 2018)

The above figure mainly helps in depicting the overall growth prospects of UK in 2018, which would eventually help the capital market to prosper during the fiscal year. From the list of top 10 world’s biggest economies for 2018 and 2019, UK is considered to be in 6th position with an annual growth rate of 1.3% in 2018 to 1.4% in 2019. The forecast is mainly based on the overall GDP and the current position of UK in the Global market. From the evaluation of past performance before the augmentation of the recession the overall Gross Domestic Product grew by 2.8% on an average per year for UK. However, after the credit crunch which was affected by the financial crisis the overall GDP of UK declined by 5.2%.  Moreover, the overall GDP of UK rebounded in 2010 to 1.7% which was conducted due to the expansion process initiated by the UK Government (Focus-economics.com, 2018). This relatively indicates that UK economy will eventually stabilize over the period of time, which will improve the overall capital market to boost its performance in forthcoming years. Many economists predicted the worst-case scenario for UK, which was proven wrong when the economic conditions of the country improved instead of declining as the predictions (Bankofengland.co.uk, 2018).

Moreover, before the Brexit many economics relatively indicated the downfall of UK, which would directly collapse the overall economy in few years. However, this incident did not occur due to the overall improvement that was witnessed in the economy after June 2016. The overall economy of UK mainly increased its operations after the exit from European Union, which was evaluated to be an Armageddon for the country. In addition, the overall growth of UK is identified to be increasing at a slower pace due to the private consumption conducted by the UK investors. Nevertheless, UK is considered to be the largest economy in the world with an overall GDP of $2.8 trillion which is estimated to grow at a rate of 1.3% in 2018 and 1.4% in 2019 (Focus-economics.com, 2018).

Sectorial report on each of the three-industry grouping: Power to include sectors, Retail and personal consumption including sectors, Technology and communication including sectors

From the evaluation of the UK economy it could be identified that the growth of the country didn’t slow as per the feared assumption that was conducted by analyst and economics. Furthermore, the overall industry of UK is a relatively low, as the government needs to increase growth in the economy raising the level of cash availability. Moreover, some of The Economist indicated that the growth spectrum in 2018 would be around 1.4% (Theguardian.com, 2017). In addition, the Brexit directly allowed the manufacturers of UK to increase the exports due to the competitive pricing conducted by the decline in GBP value. This relatively increased the competitive edge of UK and improved the capability to raise the level of Exports in the international market. In this context, Realbusiness.co.uk (2018) stated that the economic condition of UK has improved over the turmoil period of Brexit, which increases the attractiveness of investors in the country.

Figure 2: Depicting the forecaster of oil prices in 2018

(Source: Strategyand.pwc.com, 2018)

The above figure represents the overall forecast for oil prices in 2018, which will generally increase over the time boosting the oil and energy sector of UK. Currently the overall declining prices of crude oil has directly hampered the energy and power sector of UK by reducing its capability to generate high returns. However, the evaluation relatively indicated a turnaround in the prices of crude oil which will directly boost the actual economic conditions of UK for the companies that are operating within the country. Nevertheless, the Gas, Water & Multiutilities sector of UK is relatively boosting, due to the improvements in the economy expenditure of UK.  The Other sectors such as a mining and oil are relatively declining due to low prices of crude oil, which cannot increase returns of the oil refining companies. Moreover, the overall gas, water and multiutilities sector of UK is a relatively improving due to the low cost incurred by the organizations for conducting the operation (Strategyand.pwc.com, 2018). The Brexit a relatively declined the overall value of GBP against other countries, which a relatively improved the overall position of Companies depending upon exports. The slow prices of Oil and Gas would eventually allow the multiutilities sector to reduce the expenses and increase overall profit from operations (Goldsmith, 2017).

Figure 3: Depicting the growth of all retail sector

(Source: Statista.com, 2018)

The above statistics relatively depicted in the overall growth perspective in Retail Industry from 2013 to 2008 which is relatively improved to 11.9% in 2018. The previous assumption was mainly at the levels of 7.1%, which was nullified by the growth rate of 11.9% (Statista.com, 2018). This relatively indicated that the retail sector is currently booming, which might allow the investors to generate higher rate of returns from investment. However, the excessive competition that follows within the sector is relatively reducing the overall financial position of the companies falling under the sector. The sector also indicates the inclusion of personal consumption, which relatively portrays a profitable sector that could allow investors to increase the returns from investment. the financial position of companies located in the retail sector has a relatively improved over the period in comparison to other sectors in United Kingdom. In this context, Ramanathan et al., (2017) stated that the overall improvement of Sainsbury and Tesco’s financial position directly indicates the growth and prospect of the retail sector which could allow investors to generate higher returns from investment.

Ratio analysis

The sector also complies with travel and leisure which has the relatively improved over the period of time due to the decline an overall oil prices. However, the current increment in crude oil price has a relatively reduced the overall prospects in the travel and leisure sector, which is not providing adequate returns from investment for the investors. Nevertheless, the growth prospects in the sector is immense if the crude oil prices decline making the overall expenses of the sector reduce substantially to increase the returns from investment. This will directly allow investors to generate higher Returns by accumulating Capital growth and dividend from companies. Yu, Ramanathan & Nath (2014) argued that the decline in GBP increased the overall expenses of airline companies in buying oil from the commodity market, which directly hampers their profitability.

The sector comprises of all the technological advancements, which is relatively increasing over the period of time and providing high returns from investment. The overall mobile communication sector has a relatively grown in UK, as maximum of individual living in the country are using mobile communication on a daily basis. This relatively increases the market for the companies in the country, while increasing the returns from investment.  Moreover, it is estimated that more than 90% of the adults in developed Nations will be using smartphones which will be powered by mobile services from different factors. The UK mobile sector industry relatively provide services to home country and other neighboring Nations. this could eventually help boost the mobile sector of UK (Deloitte.com, 2018).

Similarly, the overall software and technological sector of UK is improving immensely during the previous fiscal years. This relatively indicates the higher rate of returns that could be generated from technology and communication sector. Moreover, this could eventually allow the investors to generate higher returns with adequate investments in the companies. Therefore, it would be understood that the current sofa and technological sector of UK has relatively improved after the Brexit, as it has reduced the overall GBP conversion power against other currencies. This relevant decline in GBP has allowed the software companies to quote competitive prices in the international market, which increases their overall revenues and net profits. According to Deloitte.com (2018), reduction in currency valuation of UK allowed the exporters of the country to increase the competitive level in the international market, which helped in improving the overall GDP of the country.

Evaluation on investments conducted during March 5th to 29th

The overall investment rational is based on the economic situation and sectorial analysis that is conducted in the assessment. the investment rational relatively indicates that the overall investment needs to be conducted on stocks which could provide the highest returns from investment. The detection of the highest return stocks could be conducted with the help of ratio analysis and price movement analysis. This relatively helpline detecting the overall investment scope which could generate higher returns for the investors. with the help of ratio analysis adequate financial condition of the company is conducted, which relatively depicts the future returns it could provide. In this context, Atoom, Malkawi & Al Share (2017) stated that with the help of ratios investors able to evaluate company’s ability to support their short-term obligations. Schwager & Etzkorn (2017) additional stated that with the help of technical analysis the investment timing is detected by the investors which could provide the highest returns from investment.

Moreover, adequate economic situation as factorial analysis is conducted to detect whether the investment opportunity is viable for the investors. The evaluation of current economic condition of UK relatively depicts an investment opportunity for investors after the Brexit, as companies expected to grow due to the impact of decision conducted by UK Government. The sectoral analysis also indicated boost, which was provided by the UK government to the economy. In addition, the declining prices power sector was mainly due to the reduced crude oil prices in the international market. Nevertheless, the retail sector has provided stagnant progress due to the excessive competition that is conducted within the sector (Danson & Gilmore, 2018). In addition, the technology and communication sector relatively increased the overall performance due to the increment in profit and revenue generated by the organization. The improvement and technological sector is seen due to the high revenues that is generated by companies in the sector. The current economic conditions of UK are relatively improving, as the negative impact from European Union has declined after the Brexit.

PENNON GROUP PLC ORD 40.7P
Ratios	2014	2015	2016	2017
Net Profit Margin	11.69%	10.12%	12.18%	13.03%
Current ratio	1.36	2.18	2.26	1.87
Quick ratio	1.35	2.15	2.21	1.83
Return on assets	3.17%	2.64%	2.98%	3.05%
Debt ratio	1.31	1.33	1.36	1.34
Interest coverage ratio	4.67	8.06	5.19	5.67
EPS	0.39	0.32	0.37	0.40

The above ratio is iteratively depicting the overall financial position and condition of Pennon group, which falls under the Gas, Water & Multiutilities sector. The investments in the company is relatively conducted after your valuable thing its current financial condition which is relatively improved in 2017 as compared to 2014 (Londonstockexchange.com, 2018). The net profit margin of the company has a relatively improved over the period of 4 fiscal years, which indicates the profits that could be provided from investment. In addition, the current ratio and quick ratio has also improved, while the return on assets has declined. This relatively indicates that the company’s overall financial position has increased over the period. EPS and interest coverage ratio of the company has relatively increased, which indicates the availability of higher returns that is provided by the company. However, the major death ratio of the company has increased over the period, which indicates a problem for the organization as more and more that is been acquired.

INCHCAPE PLC ORD 10P
Ratios	2014	2015	2016	2017
Net Profit Margin	2.82%	2.67%	2.44%	3.09%
Current ratio	1.26	1.23	1.10	1.12
Quick ratio	0.61	0.53	0.50	0.51
Return on assets	5.68%	5.44%	4.90%	5.98%
Debt ratio	1.65	1.55	1.44	1.42
Interest coverage ratio	13.28	13.49	13.03	12.74
EPS	0.40	0.40	0.43	0.65

Conclusion

The financial position of INCHCAPE PLC ORD Can be identified from the above table, which represents the overall financial position of the company from 2014 to 2017. In addition, the net profit margin of the company has a relatively improved over the period, while its current ratio and quick ratio is declined. This indicates that the organization’s capability to increase profitability is higher while maintaining current assets for supporting short term obligations is reducing. Moreover, the return on assets has increased, while the depth ratio has improved indicating that low debt is be taken by the organization to continuous operation (Londonstockexchange.com, 2018). EPS of the company has a relatively increased over the period of 4 fiscal years, while interest coverage ratio has declined, which indicates the high interest payments that is being conducted by the company. However, the overall performance of the company is adequate which could eventually help in generating higher returns from investment.

COMPUTACENTER PLC ORD 7 5/9P
Ratios	2014	2015	2016	2017
Net Profit Margin	1.08%	1.77%	3.37%	1.96%
Current ratio	1.25	1.28	1.30	1.34
Quick ratio	1.17	1.21	1.23	1.29
Return on assets	2.95%	4.79%	9.24%	5.53%
Debt ratio	1.47	1.49	1.51	1.53
Interest coverage ratio	175.97	225.44	370.35	324.22
EPS	0.23	0.41	0.84	0.53

COMPUTACENTER PLC ORD mainly falls under the sector Software & Computer Services, where the overall performance of the company has improved from 2014 to 2017. Both the current ratio and quick ratio of the organization has improved indicating its financial health and capability to continue its operations in the competitive market. The return on Assets of the organization has increased with the debt ratio, which indicates the accumulation of debt that is conducted by the company. Moreover, the interest coverage ratio and EPS of the company has increased which indicates the increment in its financial performance (Londonstockexchange.com, 2018). The rising EPS, return on assets, and net profit margin relatively indicates that high sales are conducted by the company, which could help in raising the level of returns from investment. Hence, investment in the company would eventually allow investors to generate higher returns.

FDM GROUP (HOLDINGS) PLC ORD 1P
Ratios	2014	2015	2016	2017
Net Profit Margin	10.95%	13.71%	13.82%	13.70%
Current ratio	2.26	2.11	1.97	2.26
Quick ratio	2.26	2.11	1.97	2.26
Return on assets	24.94%	33.81%	34.16%	36.26%
Debt ratio	3.53	3.15	2.84	3.16
Interest coverage ratio	48.65	295.20	708.40	1,458.67
EPS	0.13	0.21	0.24	0.30

Financial performance of the organization can be evaluated with the help of above table, which represent different ratios from 2014 to 2017. The evaluation of net profit margin in the case that the company’s overall net income has improved from 10.95% to 13.70% (Londonstockexchange.com, 2018). However, the overall current ratio of the company has remained stagnant at the values of 2.26 from 2014 to 2017. This relatively indicates the overall capability of the company to maintain the level of current assets in the organization to support it short term obligations. Moreover, the return on Assets of the organization has improved drastically where and increment of more than 10% seen. In addition, the debt ratio of the company has declined indicating a low accumulation of debt to conduct it operations. Furthermore, the interest coverage ratio and EPS of the company has adequately increased over the period, which directly States its capability to continue with it operation. Hence, the investment in the organization would provide higher returns from investment.

SPORTS DIRECT INTERNATIONAL PLC ORD 10P
Ratios	2014	2015	2016	2017
Net Profit Margin	6.55%	8.42%	9.52%	7.11%
Current ratio	1.06	2.30	2.43	1.72
Quick ratio	0.35	0.94	1.13	0.87
Return on assets	20.86%	13.72%	13.38%	9.60%
Debt ratio	1.93	2.91	2.42	2.02
Interest coverage ratio	34.51	50.44	47.08	9.44
EPS	0.31	0.41	0.47	0.39

The company falls under the sector General Retailers, whose overall performance is evaluated with the help of above ratios. The overall ratios are mainly used in detecting the financial condition and position of the organization, which could improve the returns of the investor. The net profit of the organization has relatively improved over the fiscal years, which is supported by current ratio and quick ratio of the organization. Moreover, the return on assets have declined due to the hi accumulation of assets conducted by the organization. However, the increment in assets directly affected the overall debt ratio of the company, which increased over the period of four fiscal years. Likewise, the interest coverage ratio of the organization has declined, which is due to the high debt that is accumulated by the organization and the interest that is being paid (Londonstockexchange.com, 2018). However, the EPS of the organization has improved and they’re getting a higher income that is being generated by the organization over the period. Therefore, it could be understood that investment in the organization is a viable approach for investors, which could increase returns from investment.

Sectors	Companies	Profit	Profit%
Gas, Water & Multi Utilities	PENNON GROUP PLC ORD 40.7P	33,630.00	5.82%
General Retailers	INCHCAPE PLC ORD 10P	2,511.00	1.99%
Software & Computer Services	COMPUTACENTER PLC ORD 7 5/9P	21,384.00	5.43%
Software & Computer Services	FDM GROUP (HOLDINGS) PLC ORD 1P	123,500.00	14.61%
General Retailers	SPORTS DIRECT INTERNATIONAL PLC ORD 10P	879.20	1.55%
Total	181,904.20	9.10%

The above table mainly defects the overall reading data which was conducted from 5th March to 29th March. The above table literally indicates the overall performance and profits that was generated from each stock and the portfolio. From the valuation it could be understood that the maximum returns are provided by Software & Computer Services sector, which is at the levels of 14.61%. This relatively indicates the highest return that is generated in the short trading sphere. Moreover, the second largest return was provided from Gas, Water & Multiutilities, which was relatively conducted due to the increasing demand for investment in the sector. Likewise, the third largest return from investment is also from Software & Computer Services sector, which relatively indicates the power of service sector within UK.  Nevertheless, the returns provided from general retailers is a relatively low in comparison to other investments actors. This is due to the decline in value of retailers, which has been filled by excessive competition. In this context, Brooks (2015) stated that with adequate portfolio construction investors are able to reduce the risk and generate high returns from investment. Davis (2016) further added that with the help of technical and fundamental analysis investors can detect investment opportunities, which could increase their returns while reducing risk from investment.

After the commencement of the trading days relevant profits that is accumulated from investment is 9.10%. this relatively indicates the overall strength of the portfolio for generating higher returns from investment. The overall profit generated from the treat is at the levels of 181,904.20, is conducted from an investment of 2 million. Hence, it could be assumed that the portfolio satisfies the investment strategy, which could eventually help in generating higher returns from investment.

The mean investment strategy is to maximize the overall returns from investment during a short period of trading. The overall stocks were chosen on the basis of ratios and their share price performance. Companies that was selected for the trading purpose adequately met with the investment strategy of providing higher returns from investment. However, some of the stocks performed outstanding in comparison to other stocks, due to the increment in overall performance of the organization. the share price performance is relatively affected by capital market and performance of the organization over the period (Ma, Pan & Zhang, 2017). Nevertheless, the evaluation of the dishes indicated that the company’s overall performance was adequate, which would radically improve performance of the portfolio. After evaluating the trading performance, it could be understood that the chosen shares performed adequately in the market by increasing the maximum returns from investment and supported the investment strategy.

Conclusion:

The overall assessment a relatively indicate the viable approach of the portfolio, which is created for trading. This portfolio has a relatively provided higher returns from investment during the trading sphere, which indicates that the overall method used for selecting a stock is adequate. In addition, the trading performance of the portfolio has provided returns of 9.10%, which relatively indicated the high profit that could be generated during the short trading span. Moreover, adequate evaluation of the economic conditions in UK is conducted, which relatively helps in drafting the overall portfolio. The sectoral analysis also helped in detecting the viable investment options, which helped in completing the creation of portfolio. However, the overall portfolio provided adequate profitability from Investments, which relatively increased the overall portfolio value during the trading period. this relatively indicates the viability of the investment that was conducted during the trading phase.

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