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Contents

COMPANY OVERVIEW ..................................................................................................................... 1

ANALYSIS OF SHORT TERM ASSET MANAGEMENT RATIOS ............................................................ 3

ANALYSIS OF CAPITAL STRUCTURE ................................................................................................. 6

PROFITABILITY RATIOS .................................................................................................................... 9

PART B ........................................................................................................................................... 13

SHARE PRICE BEHAVIOR................................................................................................................ 13

CONCLUSION ................................................................................................................................. 14

COMPANY OVERVIEW
Britvic Plc is one of Europe's leading soft drinks companies having 3280 employees. It is an enviable portfolio of market leading brands, such as Robinsons, J2O, Fruit Shoot, Tango and Drench in GB, MiWadi, Club and Ballygowan in Ireland, and Teisseire, Fruit and Pressade in France. They also have exclusive bottling agreements with PepsiCo in the UK and Ireland for global brands such as Pepsi and 7UP (Plc, 2014) . The total revenue recorded in the last financial reporting year of September 29, 2013 was 1.32B along with total assets of the company having 1.05 B. The market capitalization for the company is 1.7 B. Britvic Plc. is rated below average in market capitalization category among related companies. Market capitalization of Beverages industry is currently estimated at about 141.57 B. Britvic claims roughly 1.7 B in market capitalization contributing just under 2% to stocks in Beverages - Soft Drinks industry. Currently, the price to book ratio is 35.06 (Library, 2013). Britvic has a manufacturing base both in the UK and Ireland, producing carbonates, stills and plain water in both countries. A well-invested production base is at the heart of their strategy to be the supplier of choice. They aim to manufacture soft drinks to the highest standards and to take a leading role in within the industry (Bloomberg, 2013). Quality is a basic business principle for Britvic, they consistently provide their external and internal customers with products and services which fully meet their expectations of Quality, Safety and compliance with Legislation. They have an excellent future opportunities for growth since as their strategy is to:

1. Leverage scale in markets through various strategies 2. Investing in their owned brands 3. Maximizing PepsiCo Partnership 4. Delivering quality in kids, Family and Adult segments.

ANALYSIS OF SHORT TERM ASSET MANAGEMENT RATIOS


The table below shows the value of Debtor Days, Creditor Days and Stock days. For the year 2012/13, the average collection period (Days Sales Outstanding) was 72 days and the average days payable outstanding was 228 days as shown in the table.
Value, days Turnover ratio 2009/10 2010/11 2011/12 2012/13 1 Receivables turnover (days sales outstanding) or Debtor Days 65 (average trade and other current receivables divided by average daily revenue*) Accounts payable turnover (days payable outstanding) or Creditor Days 216 (average current payables divided by average daily purchases) Inventory turnover (days inventory outstanding) or Stock days 48 (average inventory divided by average daily cost of sales) 50 48 46 7.5 7.9 -2 207 218 208 1.7 1.8 -8 68 74 72 5.6 5.1 +7 2 3 4 5 Ratio Ratio 2009/10 2012/13 Change, days (col.5 col.2) 8

Debtor Days for 2013 = 266.1+257.4/2 * 365 Divided by 1321.9 = 72.22 = 72 days

Stock Days for 2013 = 90.8 + 73.8 / 2 * 365 Divided by 646.9 = 46 days Creditor Days = 381.5 + 357.2 / 2 * 365 Dividend by 646.9 = 208 Days

The current and quick ratio are demonstrated below:

Value Liquidity ratio Change 30.09.2010 Description of the ratio and its (col.5 recommended value 30.09.2009 30.09.2012 30.09.2013 col.2) 30.09.2011 (averaged)
2 3 4 5 6 7

1. Current ratio (working capital ratio)

0.89

0.99

1.02

0.92

The current ratio is calculated by dividing current assets by current liabilities. It indicates a +0.03 company's ability to meet short-term debt obligations. Normal value: 2 or more. The quick ratio is calculated by dividing liquid assets (cash and cash equivalents, trade and other current receivables, other current financial assets) by current liabilities. It is a +0.02 measure of a company's ability to meet its short-term obligations using its most liquid assets (near cash or quick assets). Acceptable value: 1 or more.

2. Quick ratio (acid-test ratio) 0.72 0.76 0.83 0.74

Current Ratio 2013 = 463.7 / 504.5 = 0.92

Quick Ratio 2013 = 463.7 90.8 / 504.5 = 0.74

The current ratio was 0.92 at the end of the period analyzed; that is only +0.03 higher than on the first day of the period. The value of the ratio is atypical and is in the area of critical values on the last day of the period analyzed (29.09.2013). The values of the current ratio were not acceptable during the whole of the period.

On 29.09.2013, the quick ratio was equal to 0.74. For the entire period reviewed, the quick ratio rose only by 0.02. The ratio increased during almost the whole of the period, but the rate decreased at this period. The value of the quick ratio can be considered as an unacceptable one on 29 September, 2013. This means, Britvic Plc. has either too many current liabilities or not enough liquid assets to satisfy the mentioned liabilities. The current liabilities of the company exceeds its current liabilities which shows the deteriorating or even no working capital of Britvic Plc. From the above tables, we can conclude that the company Britvic Plc asset management fluctuates as it is evident from the inventory turnover which increased from 7.5 to 7.9. This shows that the company is trying to put its inventory available for sale so that no more inventory is left as higher inventory can lead to drastic results in the performance of the business. Apart from that, receivable turnover shows that the credit policy is extending the days to receive the payment from its customers. It might be to generate more sales but it can prove to be ineffective in certain cases like bad debts. More than that, Britvic Plc is able to repay its suppliers without any reluctance. The current and

quick ratio shows ineffectiveness of Britvic plc. This can only be made effective through following ways: 1. Strict credit policy 2. Paying off current liabilities 3. Selling unproductive Assets 4. Increasing Shareholders funds

ANALYSIS OF CAPITAL STRUCTURE


The debt-to-equity ratio and debt ratio are the main coefficients describing financial stability. The ratios are similar in their meaning and indicate a relationship between two main sources of capital: equity and borrowed capital. The difference between the ratios is that the first one is calculated as a relationship of the borrowed capital (liabilities) to the equity, while the second ratio is calculated as a relationship of the liabilities to the overall capital (i.e. the sum of equity and liabilities).

The debt-to-equity amounted to 24.99 at the end of the period analysed. On the last day of the period analyzed, the debt ratio was equal to 0.96. For the period reviewed, it was verified that the debt ratio reduced somewhat (by 0.04).

The value of the debt ratio for Britvic Plc. indicates an excessive percentage of liabilities on the last day of the period analysed (30.09.2013), which equaled 96.2% of total capital. It is believed that liabilities should not be more than 60%. If not, dependence from creditors increases too much and the financial stability of the company suffers. When the structure of capital is normal,

the debt ratio is 0.6 or less (optimum 0.3-0.5). During the whole of the evaluated period, the debt ratio kept a value outside the normal range

2009 1 Debt-to-equity ratio (financial leverage) 2

Change (col.52010 2011 2012 2013 col.2) (averaged) 3 4 5 6

Value

Description of the ratio and its recommended value

-342.4

5.64

A debt-to-equity ratio is calculated by taking the total liabilities and dividing it by shareholders' equity. It is the key financial 26.65 24.99 +367.39 ratio and used as a standard for judging a company's financial standing. Normal value: 1.5 or less (optimum 0.43-1). A debt ratio is calculated by dividing total liabilities (i.e. longterm and short-term liabilities) by total assets. It shows how much the company relies on debt to finance assets (similar to debt-to-equity ratio). Normal value: 0.6 or less (optimum 0.3-0.5). This ratio is calculated by dividing long-term (non-current) liabilities by equity.

Debt ratio (debt to assets ratio) 1 1 0.96 0.96 -0.04

Long-term debt to Equity Non-current assets to Net worth

-221.08

2.94

16.63 12.65 +233.73

-231.46

4.04

This ratio is calculated by dividing long-term (non-current) liabilities by net worth (equity) and measures the extent of a company's investment in low-liquidity non-current assets. This 17.39 14.65 +246.11 ratio is important for comparison analysis because it's less dependent on industry (structure of company's assets) than debt ratio and debt-to-equity ratio. Normal value: 1.25 or less. 0.94 0.93 -0.07 Calculated by dividing non-current liabilities by the sum of equity and non-current liabilities.

Capitalization ratio Fixed assets to Net worth

1.01

-90.44

1.37

6.38 5.27

This ratio indicates the extent to which the owners' cash is frozen in the form of fixed assets, such as property, plant, and +95.71 equipment, investment property and non-current biological assets. Normal value: 0.75 or less. +0.14 Current liability ratio is calculated by dividing non-current liabilities by total (i.e. current and non-current) liabilities.

Current liability ratio

0.35

0.36

0.38 0.49

In the chart below, one can see the structure of the company's capital:

According to common rules, non-current investments should be made, in the first place, with the help of the most stable source of financing, i.e. with the help of own capital (equity). The non-current assets to Net worth ratio shows if this rule is followed. The ratio amounted to 14.65 on 29 September, 2013, which is 246.11 higher than on 29.09.2009. On 29 September, 2013, the value of the ratio is unacceptable and is in the area of critical values.

The total liabilities of Britvic Plc. are divided in almost equal parts with non-current and current liabilities (50.6% and 49.4%, respectively). It is demonstrated with the current liability ratio, which equaled 0.49 on the last day of the period analyzed (29.09.2013).

The following chart demonstrates the dynamics of the debt and current liability ratios of Britvic Plc.

PROFITABILITY RATIOS

Value in % Profitability ratios 2009/10 2010/11 2011/12 2012/13


1 2 3 4 5

Change (col.5 col.2)


6

1. Gross margin. 2. Return on sales (operating margin). 3. Profit margin. Reference: Interest coverage ratio (ICR). Normal value: 1.5 or more.

55.1 -0.2 -4.2

51.4 8.7 4.5

50.3 8.6 4.6

51.1 8.2 4.7

-4 +8.4 +8.9

-0.1

3.5

3.5

4.2

+4.2

During the year 2012/13, the company gained gross profit and profit from operational and financial activities, which became a reason for positive values of all three profitability ratios

given in the table for this period. For the period analyzed (20092013), the gross margin lessened from 55.1% to 51.1% (-4%).

The profitability calculated by earnings before interest and taxes (Return on sales) is more important from a comparative analyses point of view. For the period from 2012 to 2013, the return on sales was 0.08 (or 8.2% per annum), and profitability calculated by net profit was 4.7% per annum.

To assess the liabilities that the company should repay for the use of borrowed capital, an interest coverage ratio was calculated. The acceptable value is deemed to be not less than 1.5. In this case, the interest coverage ratio was 4.2 during the year 2012/13, which is evidence of Britvic Plc.'s capability to pay interest on borrowed assets. It should also be mentioned that not all interest payments are necessarily included on the income statement and used to calculate

the indicated ratio. Interest related to investments in qualified assets is not included in the financial results (they are taken into account in the asset value).

Profitability ratios
1

Change Description of the ratio and its reference (col.5 value 2009/10 2010/11 2011/12 2012/13 col.2)
2 3 4 5 6 7

Value, %

Return on equity (ROE) 195.9 158.7

ROE is calculated by taking a year's worth of earnings (net profit) and dividing them by the average shareholder equity +158.7 for that period, and is expressed as a percentage. It is one of the most important financial ratios and profitability metrics. Acceptable value: 12% or more. ROA is calculated by dividing net income by total assets, and displayed as a percentage. Acceptable value: 6% or more.

Return on assets (ROA)

-4.6

5.5

5.6

5.8

+1.2

Return on capital employed (ROCE)

-1

45.9

45.6

50.4

ROCE is calculated by dividing EBIT by capital employed (equity plus non-current +49.4 liabilities). It indicates the efficiency and profitability of a company's capital investments.

The return on assets climbed from -4.6% to 5.8% (+1.2%) significantly for the period analyzed (from 2009 to 2013). During the whole of the analyzed period, a constant increase in the return on assets was observed. At the beginning of the evaluated period, the return on assets was not normal, but later it was.

A key indicator of business profitability is the return of equity (ROE), i.e. return from money invested by the owners. For the year 2012/13, a return on equity was 158.7% per annum. And it

should be observed that such a high return on equity is a result of a low percentage of own capital (equity) of the total company's capital (3.8%).

The change in the main rates of return on assets and equity of Britvic Plc. is demonstrated in the following chart for the whole period reviewed.

PART B SHARE PRICE BEHAVIOR

The fluctuation is clearly observed from the above diagram as returns fall down during 2010 but kept on increasing from 2010 to 2011 and then it almost remained constant from 2011 to 2012 and then increased somehow till September 2013 (Focus, 2013).

When compared to FTSE 100 TR GBP, the annual return for Britvic seems more (Star, 2013) enhanced year by year. The growth prospective also seems to be more favorable for Britvic .

Year on year, both dividends per share and earnings per share excluding extraordinary items growth increased 3.95% and 13.09%, respectively. The positive trend in dividend payments is noteworthy since very few companies in the Beverages (Nonalcoholic) industry pay a dividend. Additionally when measured on a five year annualized basis, both dividend per share and earnings per share growth ranked in-line with the industry average relative to its peers.

CONCLUSION
The main financial state indicator values and Britvic Plc.'s activity results are classified by qualitative assessment according to the results of the analysis for the 4 years and are given below.

Financial characteristics with good values are indicated below:

high return on equity (158.7% per annum), which became mainly a result of low

percentage of own capital (equity);

During the last year, earnings before interest and taxes (EBIT) showed GBP 109

million, moreover, a positive dynamics compared with the data during the year 2011/12 (GBP +111 million) was observed;

The income from financial and operational activities (comprehensive income)

was GBP 62 million for the year 2012/13.

There is one characteristic with a marginally acceptable value obtained during the analysis return on assets showed 5.9% per annum during the year 2012/13.

Financial characteristics with negative values are the following:

the debt ratio has an unsatisfactory value (0.96) caused by a high percentage of

liability, (96.2% of total capital of the company);


a quick ratio was 0.74 (while the acceptable value is 1); the cash ratio is equal to 0.19 at the end of the period analyzed (a low cash at

hand required for current payments);

Net worth is less than the share capital (the difference makes GBP 8 million on

the last day of the period analyzed).

The following financial characteristics of Britvic Plc. have critical values:

the value of the non-current assets to net worth ratio equal to 14.65 can be

described as really atypical;


the current ratio (0.92) is significantly lower than the standard value (2); No working capital (current liabilities exceed current assets).

REFERENCES

Bloomberg, 2013. Bloomberg Quote. [Online] Available at: http://www.bloomberg.com/quote/BVIC:LN [Accessed Tuesday January 2013].

Focus, G., 2013. GuruFocus. [Online] Available at: http://www.gurufocus.com/financials/BTVCY [Accessed Tuesday January 2013].

Library, D., 2013. Digital Look. [Online] Available at: http://www.digitallook.com/cgi-bin/dlmedia/security.cgi?csi=104405& [Accessed Monday January 2013].

Plc, B., 2014. Britvic. [Online] Available at: http://www.britvic.com/ [Accessed Monday January 2014].

Star, M., 2013. Morningstar. [Online] Available at: http://tools.morningstar.co.uk/uk/stockreport/default.aspx?tab=0&vw=pf&SecurityToken=0P00007O1R]3]0]E0W WE$$ALL&Id=0P00007O1R&ClientFund=0&CurrencyId=GBP [Accessed Tuesday January 2013].