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Assessed summative assignment
Answer both questions below.
The Purple Graphic Company Ltd (PGC) was established in 2011 by Neil Winterton, who owns 100% of the share capital. The company designs logos and branding, visual layouts for publications, advertisements, packaging, etc, for nationwide corporate clients. The company currently operates out of rented premises in the south west of England. The business has grown rapidly since inception and is regarded as one of the leading up-and-coming graphic design agencies in the UK.
The existing team comprises Neil and another four employees (the company out-sources all of its book-keeping to a local firm of accountants):
Neil, aged 48 has worked in graphic design since leaving university as a graphic design graduate. Before establishing his own company, Neil was a partner in a leading London firm of graphic designers for eight years.
Janet, aged 40 and Andrew, aged 37, have also worked in graphics since graduating in graphic design. Both Janet and Andrew were employed by Neil in his previous partnership.
Ravinder, aged 31, a graphic design graduate who joined the company in 2013, having worked in two other graphic companies previously.
Katie, aged 23, graduated with a first class degree in graphic design from a highly regarded university in 2013.
The success of the business has led to two main issues which require bank funding:
The company has outgrown its current office space and wishes to purchase larger premises in a similar location.
Neil wants to take on an additional five employees, doubling the existing head count. The additional employees will be used to meet existing demand and continue the growth momentum of the company. Within these additional employees, Neil intends to employ some designers specialising in graphics for web design, as he has identified this as a gap in the current skill base of the company and also a 2014 graduate currently on a placement with the company.
You are a relationship manager with a major corporate bank and met with Neil and his accountant recently to discuss his plans for the business. He has identified new office premises he wishes to purchase at a cost of £347k.
Facilities currently in place are:
Overdraft £30k – to bridge the funding gap, ie payment of creditors, employees and other office costs, etc, pending receipt of debtor monies. Design contracts are typically broken down into stages, with invoices raised at each stage following client approval.
Longer-term finance for asset purchase originally over 4 years, residual debt £12k.
Assignment continues on page 3.
Page 3 of 6
Assignment continued.
Neil has requested funding going forward for the following:
£60k working capital, ie an increase of £30k.
£35k longer-term finance to fund the purchase of office equipment for the new staff and premises. This is in addition to the current term lending.
£250k to assist with the purchase of the new premises. The residual monies will come from cash in the business and an additional director’s loan of £40k.
The latest set of accounts for the business are on pages 4-6, together with a profit and loss forecast for 2016.
Required:
(a)
Provide a lending assessment of the request for finance, including a detailed financial and non-financial analysis of the business using a structured approach.
Within your assessment, detail the questions you would raise with Neil when considering the proposition.
(35 marks)
Note: the financial analysis should consider the historic figures and the forecast profit and loss account.
(b)
Recommend an appropriate package of facilities to meet the company’s needs, clearly explaining your rationale.
(15 marks)
(Total – 50 marks)
Note: present your answer in a report format.
Word count: Maximum 4,000 words including quotations and in-text citations.
Appendix begins on page 4.
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