FIN1FSA HI-TECH GROUP OF AUSTRALIA - Financial Analysis Assignment Solution

INTRODUCTION

HiTech Group is an Australian leading specialized ICT firm that provides the Australian and International organizations with talented pool of employees and deliver the IT services in best possible way (HiTech Group of Australia, 2019a). The company aims at giving the clients what they want by matching their needs with candidates’ talent profile. HiTech uses its successful and proven business model for recruiting the top ICT professions within various industries (IBISWorld, 2019).

HiTech Group of Australia has more than 25 years of experience in the consulting and recruitment industry within which it has developed a diverse client database. It was first incorporated in 1993 and listed on Australian Securities Exchange on 17th April, 2000 with its ASX code of HIT (HiTech Group of Australia, 2019a). The main services provided by HiTech Group of Australia include placement of Information & Communications Technology (ICT), provision of permanent staff, aiding in contracting sales and marketing services and guidance in office support. It also provides its services to Federal and State Government departments with their ICT departments (HiTech Group of Australia, 2019a).

This report is presented to analyze the risks and success factors faced by HiTech Group of Australia along with detailed analysis of its financial statements for the recent year. Furthermore, this report will also evaluate the accounting strategy of HiTech, the industry within which it operates, company’s notes to the financial statement and overall performance of HiTech Group of Industry. The parts below will provide the detailed industry analysis, competitive strategy analysis, nature of financial statements, performance analysis, analysis of the notes to financial statement, evaluation of accounting strategy and recasting of the financial statements.

RISK AND PROFIT POTENTIAL OF HITECH LTD

This part of the report will be based on industry and competitive strategy analysis. Risk and profit potential of HiTech Group of Australia will be evaluated as well.

INDUSTRY ANALYSIS

HiTech Group of Australia is currently operating in the ICT recruitment industry. The overall industry will be analyzed using Porters’ Five Forces. The model analyzes the collective strength of the five forces i.e. competitive rivalry, buyers’ power, suppliers’ power, barriers to entry and threat of substitute products (Dobbs, 2014). All the five forces enable the researchers to determine the profit potential of the industry. The model also helps in understanding the strategic implications of the firms within the industry (Dobbs, 2014).

FORCE	LEVEL	DESCRIPTION
Threats of Entry	High	With low barriers to entry in the recruitment and consultancy industry in Australia, the threats of new entry are high. New competitors are easily able to penetrate into the market for competing with the existing firms and capturing market share (Wilson, 2017). The barriers to entry in recruitment industry of Australia can exist as a result of government regulations, high start-up cost and industry regulations (Future People, 2019). Currently there are over 7,462 agencies working in the industry with employment of 165,400 staff and revenue of $15 billion (IBISWorld, 2019).
Bargaining Power of Suppliers	Moderate	The main inputs into recruitment business are the candidates and the staff members. As the staff cannot be restricted to only one firm, so they are free to move to a rival, client or even set up own consultancy firm (Wilson, 2017). Hence, the bargaining power of suppliers is considered to be moderate to high as well in the industry with freedom of staff and candidates to move from one firm to another.
Bargaining Power of Buyers (Clients)	High	Buyers of the industry are the clients who need recruitment or placement services by the HiTech Group of Australia. Upon analysis, it is found that the bargaining power of clients is a significant force in determining the current and future recruitment industry’s structure (KPMG, 2016). The fees paid by clients is set by competition in the open market and are paid directly by the employers who receive the services (KPMG, 2016). Hence, due to presence of several agencies, market setting of fees and lower switching cost, the bargaining power of the clients is high.
Competitive Rivalry	High	The Australian recruitment sector is dominated by several small and medium agencies with only a few large organizations. The four largest recruitment agencies of Australia hold around 14% of the total industry revenue (KPMG, 2016). This indicates that large chunk industry’s revenue comes from the small-medium recruitment agencies. Hence, the competitive rivalry is high in the industry.
Threat of Substitute	Moderate	There are number of substitutes to the traditional recruitment services. The candidates/clients can find jobs through personal contact, word-of-mouth, press advertisements, internal promotions, staff loyalty programs, social media (Facebook, LinkdIn, Twitter) and even through e-commerce consultancy firms (CIMA Global, 2019).