Abacus Distribution plc

With these acquisitions, it is believed that there would be a major thrust in the financial markets. This has also resulted in the consolidation of the product markets by Abacus and it is now positioned as the 5th largest distributor of electronic components in the industrial markets in Europe. (Annual Report and Accounts. 2006).The changes from GAAP to IFRS have brought about a major transformation in the treatment of Goodwill in accounting records. In the earlier accounting periods, goodwill was amortized through the profit and loss account, along with other intangible assets, but under IFRS, good will valuation is reviewed through a yearly goodwill impairment evaluation method. (Amortisation of Acquired Intangibles andCapital: On 30/9/2006, the Net Bank debt was to the tune of 61.4 Million due to the amounts of 12.1 million and also 1.8 million acquired from Deltron and Axees Technologies. A sum of 6.9 million was also paid towards purchase consideration for the acquisition of Axees Tech. (Cash flow and working capital. 2006).These factors have increased the operating capital requirements for the Company. During earlier years, the Deltron business had reduced working capital to such an extent that the needs of the customers were not being met, with the integration of these companies into the Abacus fold, the situation would improve considerably in future years. Since Abacus enjoys invoice discounting facilities with the banks, there are reduced pressures for the minimizing the debtors levels. However, there is further need for exercising greater control over the working capital needs, and to bring it down to lower levels once the integration is totally carried out.
The financial policy of the company has been to make sure that adequate financial resources are made available in a cost-effective manner. At Abacus, no speculative transactions are carried out and all foreign currency transactions are recorded at their projected levels.
Dividends: the dividends declared by the Company are as follows:
1. In the year 2002 – 9.7 Pence
2. In the year 2003 -10.2 Pence
3. In the year 2004 – 10.5 Pence
4. In the year 2005 – 7.2 Pence
5. In the year 2002 – 7.2 Pence (Annual Review and Accounts. 2006).
The fall in the dividend rate is a major matter of concern for the shareholders.
it is found that the dividend rate has remained unaltered in 2005 – 2006. The management feels that with increased operational performance, in future years the rate of dividend could be improved in future years.
Question 2
Market Value Added
The Market value added could be seen as the difference between the market value of Abacus stock – the equity capital of shareholders.
In this case, the market capitalization value is 53. 32M on 13.11.2007. (Abacus Group PLC. Holding(s) in Companies.( 2007).
The equity capital available to shareholders is 80.2M
Therefore the MVA = 80.2-53.32 = 26.88
(In the absence of market cap. figures for 2005 and 2006 the figures could not be provided)
Market Book Values
During 2004, EPS stood at 5.4 p (Abacus Group) (Abacus Group plc. 2004).
and the Book value of the share price=0.5p, therefore, the Market Book Value would be 5.4 X 0.5 =2.7
During 2005, the EPS stood at 14.1p (Financial review: earnings per share 2005).
and the Book value of the share price=0.5p, therefore, the Market Book Value would be 14.1x 0.5 = 7.05
(Note: In the absence of Market Value of Abacus share as on 30.11.2004 &amp. 2005, the calculation has been based on EPS valuation)
Again the Market book value could be Market Price per share/ Book value per share
In this case it is seen Market