Finances to investigate into Scottish and Newcastle

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Zinc finances are looking to invest money into a medium to large sized company that is doing well. I have been employed by Zinc finances to investigate into Scottish and Newcastle plc and produce a business report which will consider the objectives, organisational structure, culture and communication channels. Scottish and Newcastle plc is Britain’s leading beer company and one of the worlds’s leading and biggest brewers with breweries all over the world.

It all started in 1749 when William younger brewery was established in Leith, Edinburgh. As the company expanded William younger II acquired the abbey brew house in 1803. In 1811 john barras died leaving the brewery to his son at this stage the company was estimated at  30,000, John Barras Jr later took over the Tyne brewery. William McEwan established his fountain brewery in the village of fountainbridge, Edinburgh; the business began in a very small way and set out to establish products both in the home market and overseas.

By the century McEwan had nearly 90% of the beer trade in the North East of England, a flourishing trade in Scotland and a valuable export trade to Australia, South Africa, New Zealand and India. In 1890 Newcastle breweries was launched with its up-to-date brewing facilities at Tyne brewery. John Barras formed the backbone of Newcastle Breweries, which was formed together with Carr Bros & Carr, J. J. & W. H Allison and Swingburne & Co. Also in this year William Younger Company Limited became a plc and opened up new premises in the Canongate, Edinburgh.

At this time the company’s output accounted for 25% of the ale produced in Edinburgh. On the death of William McEwan the running of the brewery fell to his nephew, William Younger, who opened up their first plant for bottling chilled and carbonated beer. William Younger and William McEwan merged in 1931 to form Scottish Brewers ltd, McEwan Younger which handled military and export trade was also formed in this year. In 1960 after huge success Scottish brewers and Newcastle breweries merged to form today’s Scottish & Newcastle breweries ltd which later turned into a plc.

Scottish and Newcastle continued to expand taking over many breweries and also entering new markets and today owns John Smith’s, Courage, Waverley, Beamish ; Crawford. They also own regional and trade companies, wholesale businesses, 150 lodges across the UK, 3 breweries in France, Belgium and 2 in Portugal, bar; restaurants, pubs and the company is still expanding with customers all over the world. Scottish and Newcastle currently employs over 40,000 people in the UK ; Europe and has 63,000 shareholders, some 18,000 of whom are its employees. Last year was one of its most successful years with 427. 5 million profits before tax, this showed a 4. 6% increase compared to the previous year.

The company invested capital expenditure across its business last year alone. Because Scottish and Newcastle plc is a large company and owns many small and larger business which it brands and gives them their own identity, I have decided to investigate one of its business called City Limits located in Romford. Scottish and Newcastle took over City Limits and developed it to their liking to penetrate a certain market. OWNERSHIP City Limits is owned by Scottish and Newcastle which is a plc.

Being a public limited company means that its shares are traded on the stock exchange; the public can buy and sell shares. The company is owned by the shareholders but it is run by a board of directors and managed by managers who make the decisions. It also means that Scottish and Newcastle have to publicise their accounts as this is required by law. Scottish and Newcastle is in the private sector because it’s directly in private ownership. Scottish and Newcastle trades its shares on the stock exchange and has many share holders, this enables it to raise finances for the expansion and growth.

Due to the number of share holders it is far much easier for Scottish and Newcastle to raise money. In order to do this Scottish and Newcastle employs a merchant bank to manage the operation, which is known as a flotation. A flotation cost can be high running into millions of pounds for the largest issues. Scottish and Newcastle pays its share holders a share of the profits in the form of dividends, normally twice a year. Its employees and directors are paid wages or salaries in addition to any dividends on their shareholdings.

Also in a plc you can have sleeping partners, this means that you can invest money in Scottish and Newcastle plc and not have any input in the way the company is run but still receive your dividends at the end of the financial year. Unlike in a sole trader were you don’t have to register setting up a plc takes a lot of time and trouble to register, as you have to send off two documents; the memorandum of Association and the Article of Association once the register of companies receives these it send a certificate of incorporation, which means that the company can start up business and all this takes time.

Scottish and Newcastle plc was affected by this when it first opened up in 1749. It is easy for Scottish and Newcastle to get investors because shares are protected by limited liability. This means that if I invested money in the company and became a shareholder and the company went bust, I would only lose the money I invested, while a sole trader might have lost their property. Being a plc means that Scottish and Newcastle plc is more recognised by both other companies and the public, it also gets free publicity of its share prices in the financial times paper which is a nation-wide paper.

It is also easy for Scottish and Newcastle plc to borrow money from the lenders i. e. banks and its charge a lower interest rate compared to a sole trader. In some cases, the directors elected may not respect shareholders interests and this could lead to a decrease in dividends. This might cause the shareholders to divest leaving Scottish and Newcastle plc with less money. Also because Scottish and Newcastle reinvest a large percentage of their profit back into the business, this causes conflict between the shareholders and the managers as shareholders want more dividends yet managers want to reinvest the money.

One of the main disadvantage that Scottish and Newcastle plc have compared to other businesses like sole traders is that there business matters can not be kept private as they are required by law to publicise there accounts in order for potential share holders to know where the company stands and whether its worth investing money in it. However this could also be an advantage as if there profits are high many people would want to invest money in Scottish and Newcastle, which means that they raise more finances through the sale of shares.

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