FINANCIAL ANALYSIS

Financial Analysis

Abstract

Five year performance analysis of Associated British Food plc is done in this assignment. The technique I have used in this assignment include ratio analysis using charts and tables, competitor analysis, and after analysing the financial performance of the company conclusion is drawn by highlighting the key strengths and weaknesses.

Introduction4

Discussion5

Revenue & Net Income Analysis5

Dividend per share & Earnings per share Analysis6

Profitability Ratio7

Creditor days payable9

Shareholders & Long Term Solvency Ratio10

Long Term Solvency11

Operating Profit Margin12

Competitors Analysis13

Conclusion14

Introduction

The company I have selected for the assignment is Associated British Foods plc, listed on London Stock Exchange (LSE). Basic operations of business include processing and manufacturing of food worldwide. The core segments of the operations covers sugar, retail, ingredients, grocery and agriculture. The company not only operates in the United Kingdom but covers Europe for textile retailing, and rest of the world it serves all the remaining four segments. The company operates in food industry and therefore faces strong competition from its competitors. The revenue which is reported in the year 2012 is around 12.82 billion (GBP), whereas the net income in that particular year is almost 612 million (GB) (ABFplc, 2013). Due to multiple segments company covers smart market share of the total market.

Various techniques have been used in this assignment to analyse the financial and non-financial performance of the company. The technique I have used in this assignment include ratio analysis using charts and tables, competitor analysis, and after analysing the financial performance of the company conclusion is drawn by highlighting the key strengths and weaknesses.

Discussion

Revenue & Net Income Analysis

The bar chart below shows the revenue position over the past five years. The trend is very clear from the graph, which reflects that the there is a positive increasing trend in the revenues of the company throughout the last five years. In 2012, the revenues are reported to be around 12.252; this has increased to almost 10.37% from the previous year.

However, the change in net income (see chart below) in the respective year is not significant enough. The reason behind could be the increase in the cost of goods sold as the percentage of sales of the company, which resulted in the minor changes in the net income for the year. So, analyzing the cost of goods sold showed that the COGS as a percentage of sales is around 75.84, i.e. 76% in 2012. This is really a huge cost, which needs to be cut down in the future.

Dividend per share & Earnings per share Analysis

The chart below shows the heights regarding the dividend per share over the past five years. The growth rate over the past five years regarding dividend per share is around 15.15%. This could be considered as the strength for the Associated British Food PLC, because not many have announced dividend in the food industry. The dividend payout ratio for the company is reported to be around 37.91%; which is significant payout ratio as compared to the industry ...