2/28/2015

ANURAAG ABRAHAM PETER, 1468260

AAND

MOTORS ANNUAL REPORT

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.

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.

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

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.

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.

PRESENTATION: