Financial Analysis & Valuation of TREATT PLC

1.
Introduction
The following report focuses on six companies from the plastics/materials industry,
from which one of them have been taken and recommended to you, to invest in. The
information used by our consulting group to make the decision, was based on the
annual reports of the past four years. In our choice we considered a wide range of
criteria based on the financial performance of the companies as well as on qualitative
criteria. The chosen company, TREATT, will be presented after the introduction.
Below we present a brief of each of the peer companies.
CARCLO PLC (Bloomberg ticker: CAR:LN – Market Cap: £m 96.2)1
CARCLO plc was established in 1924. It established a world-leading position in the

manufacture of card clothing when it acquired The English Card Clothing Company in
1979.
PLANT IMPACT PLC (Bloomberg ticker: PIM:LN Market Cap: £m 22.47) 2
PLANT IMPACT plc is a United Kingdom-based company engaged in research,

development and commercialization of crop enhancement products.
PLASTICS CAPITAL PLC (Bloomberg ticker: PLA:LN Market Cap: £m 46.54)3
PLASTICS CAPITAL is a niche manufacturer of specialist plastic products.

Approximately 45% of its sales are made outside the UK to more than 80 countries.
1
See appendix 1 for more information about this company
2
3
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ITACONIX PLC (Bloomberg ticker: ITX:LN Market Cap: £m 17.71)4
ITACONIX is a UK-based chemicals company that specialises in designing, developing

and formulating novel polymers to improve the performance of existing consumer
products within the fast moving consumer goods (FMCG) and other industrial
markets.
ZOTEFOAMS PLC (Bloomberg ticker: ZTF:LN Market Cap: £m 155.45)5
ZOTEFOAMS is a world leader in cellular materials technology. Is headquartered in

Croydon, UK, with additional manufacturing sites in Kentucky and Oklahoma, USA.
1.1. TREATT: Making the world taste better
After doing an intensive research that took into account both quantitative and
qualitative aspects of the six companies, our team has come to the conclusion that
TREATT PLC is the best choice to invest in. TREATT is a company with a vast trajectory
in the chemicals sector, founded in 1886 and with emphasis on three main business
units: Ingredient applications, Flavour ingredients and Fragrance ingredients. TREATT
deals with customers in more than 90 countries around the world.
1.2. Perspectives and development
Regarding perspectives, TREATT plans to increase its growth in the citrus market,
where they already have an important presence. Tea is also a sector the company is
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5
2
focusing its growth on whether looking to develop a new ready to drink ice tea or an
adapted blend for a new product launch.
To increase growth, the company plans to relocate their manufacturing operations

to a purpose-built site. This will be one of the biggest changes the company will do in
the last 50 years. Also, during 2017 the company improved its internal structures to
get the most of the knowledge through the business. The main changes consisted in
developing new positions such as product category, managers and customer insight
groups.
1.3. SWOT Analysis
All the companies have been analysed using the SWOT technique, which takes into
account the strengths, weaknesses, opportunities and threats. This can offer a
different view of them, a view that is not quantitative but yet can help, along with
the quantitative indicators, to gain a sound understanding of the companies as a
whole. The following is the SWOT analysis the consulting group build up for TREATT.
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1.3.1. Strengths
Skilled workforce
TREATT believe their most important asset is people, therefore they do great efforts
to hire the most qualified people and to retain their talent. Also, with over 370
experts working across the globe, TREATT deliver a truly integrated service.
Global manufacturing facilities
TREATT offers a worldwide presence. With facilities in the UK, US and Kenya, the
company has the power to distribute its product across 90 countries.
Experience
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The SWOT analysis regarding the other companies can be consulted on appendix 7.
3
TREATT has more than 100 years of experience, this has allowed the company to root
deep relationships with their clients and their environment. Because of this, many of
the most talented people in the materials industry work for the company, allowing
TREATT to be at the forefront of the industry.
1.3.2. Weaknesses
High gearing
The company has increased its financial obligations due to an industrial development
loan repayable by fixed quarterly instalments over 20 years ending on 1 July 2021.
1.3.3. Opportunities
Potential expansion opportunities in China
China represents a growth opportunity as it is the largest market in the Asian

continent. TREATT knows it and has been working towards increasing the market
share in this country. That is why during 2016 the company opened a new enlarged
representative office in the area of Shanghai.
1.3.4. Threats
Short term volatility in exchange rates
The weakness of sterling against the currencies in which TREATT trades might have
negative impact in the company’s profitability. This risk might increase due to the
large revenue flows that come from TREATT’s US branch, which is growing steadily.
Brexit
With the decision of the UK to leave the EU, there might be increases or decreases
applied to both import and export tariffs. All of this depends on the outcome of trade
negotiations.
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1.4. Balanced Scorecard7
Our group has used a balanced scorecard methodology to evaluate the chosen
criteria in order to make a decision that includes the qualitative as well as the
quantitative results of each one of the companies analysed.
The first step consisted in choosing the criteria that would be applied to evaluate the
performance of the companies after all the necessary adjustments were done. Then,
weights were assigned to each one of the criteria so the sum of all the weights would
equal 100%; the weights are a reflection of the importance the group gave to the
chosen criteria. As each one of the group members had different views regarding the
importance of the criteria, an average was used as definitive result.
Then, a score from 1 to 5 was given to the criteria to each company; the score reflects
the performance the companies had on each aspect. And finally, using the weights
and the scores, a weighted average was calculated for the criteria in each one of the
companies.
Table 1 Weight given to each criteria

Criteria Nikos Panos Petch Jerry Warren Juan Avg
ROCE 8% 12% 10% 10% 10% 10% 10%
ROSF 8% 12% 10% 10% 10% 10% 10%
Net Profit 10% 8% 10% 10% 10% 9% 9%
Inventory days 7% 8% 6% 7% 6% 7% 7%
Cash Conversion 9% 9% 6% 7% 6% 9% 8%
Current Ratio 8% 8% 10% 7% 6% 7% 8%
Quick Ratio 8% 8% 10% 7% 7% 9% 8%
Gearing 9% 9% 9% 9% 9% 9% 9%
Dividend cover 10% 9% 10% 9% 10% 10% 10%
Earnings per share 13% 9% 10% 11% 11% 9% 10%
SWOT 9% 11% 11% 13% 16% 14% 12%
Total 100% 100% 100% 100% 100% 100% 1.00
As shown in table 1, the highest weight was given to the SWOT analysis because it
tries to consider important aspects of the company that cannot be easily measured.
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For more information regarding Balanced Scorecard, please see Appendix 7.
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Table 2 Scores given to each company/criteria
Ratio Carclo PLC Zotefoams PLC Plastics Capital PLC Plant Impact PLC Itaconix PLC Treatt PLC
ROCE 3 4 2 1 1 5
ROSF 3 4 1 1 1 5
Net Profit 2 4 1 1 1 5
Inventory days 3 2 3 5 1 1
Cash Conversion 3 1 2 5 5 1
Current Ratio 5 3 2 4 5 4
Quick Ratio 5 2 2 4 5 2
Gearing 2 4 2 5 5 3
Dividend cover 4 3 2 0 0 5
Earnings per share 4 4 2 1 3 4
SWOT 2 4 4 2 1 4
Table 3 Final balanced score card outcome

Ratio Carclo PLC Zotefoams PLC Plastics Capital PLC Plant Impact PLC Itaconix PLC Treatt PLC
ROCE 0.30 0.39 0.20 0.10 0.10 0.49
ROSF 0.30 0.39 0.10 0.10 0.10 0.49
Net Profit 0.19 0.37 0.09 0.09 0.09 0.47
Inventory days 0.20 0.13 0.20 0.34 0.07 0.07
Cash Conversion 0.23 0.08 0.15 0.38 0.38 0.08
Current Ratio 0.38 0.23 0.15 0.30 0.38 0.30
Quick Ratio 0.40 0.16 0.16 0.32 0.40 0.16
Gearing 0.18 0.35 0.18 0.44 0.44 0.27
Dividend cover 0.38 0.29 0.19 0.00 0.00 0.48
Earnings per share 0.41 0.41 0.21 0.10 0.31 0.41
SWOT 0.24 0.49 0.49 0.24 0.12 0.49
3.21 3.31 2.12 2.42 2.39 3.71
1.5. Key features
Figure 1 Historic revenue
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Table 4 Key features
Product Innovation Future Developments
Major drive to reduce sugar in soft UK site relocation

drinks Targeting strong growth in China
Launching new tea varietals in global Enhanced customer facing technical
ready to drink market infrastructure in US
Expanding High Impact Chemical uses Increased headcount investment in
Launching new Natural Aqueous revenue driving areas
Distillates
Process reviews to further enhance
innovation
UK Site Relocation Trading outlook
Land, buildings and move costs: £20m - Positive FX impact of stronger US Dollar
£26m Significant increase in sales from China
Capital projects held back over the last Improved cash performance to
three years: £3m - £5m continue prior to relocation
Upgraded plant and machinery and
new technologies: £3m - £5m
Less: Disposal of current site: (£5m)
2. Detailed Section
2.1. Accounting Analysis

In this section, we will provide the important information of our companies that
relate with accounting changes. Every company has their own decision-making and
judgement based on their nature of business, transactions and services as a result
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there is difference in accounting record. Therefore, it is very important to understand
the accounting policies and practices to analyse the financial statement and make
proper comparisons between companies, which comes from various industries. In
addition, identification of red flags and any relevant issues are essential to forecast
an impact of the business operations in the future, as well as adjustments in some
items have to be taken into account before conducting the financial analysis.
2.1.1. Key accounting Policies

2.1.1.1. Basis of Preparation
TREATT and its competitors prepare the company statement in accordance with
International Accounting Standards (IAS), International Financial Reporting Standards
(IFRS) and IFRS Interpretations Committee (‘IFRS IC’), in accordance with the
Companies Act 2006. For the company group, including the parent company and its
subsidiaries (together referred to as the ‘Group’) is required to prepare the
consolidated financial statement. The financial statements have also been prepared
under the historical cost convention without a fair value basis. These financial
statements present areas of share-based payments, any financial instruments,
consolidated financial statements, joint arrangements, disclosure of interests in
other entities, revenue from contracts with customers and leases.
Their financial statements have been prepared in Pounds Sterling and all values are
rounded to the nearest thousand (£’000) unless otherwise indicated. Transactions in
currencies other than Pounds Sterling are recorded at the rate of exchange at the
date of transaction. Assets and liabilities in foreign currencies are translated into
Pounds Sterling in the balance sheet at the year-end rate. Income and expense items
of the Group’s overseas subsidiaries are translated into Pounds Sterling at the
average rate for the year.
2.1.1.2. Revenue recognition

Revenue is measured at the fair value of the consideration received, excluding
discounts and VAT. Revenue from the sale of goods is recognised in the Income
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Statement when the significant risks and rewards of ownership have been
transferred to the buyer, usually on dispatch of the goods or on proof of acceptance
by the customer. However, it may not be appropriate to recognise all the revenue
immediately, where goods are supplied and when title does not irrevocably pass on
delivery. Revenue recognition is dependent on contractual terms which all peer
companies have used similar revenue recognition basis.
On the other hand, TREATT and PLASTICS CAPITAL have different revenue recognition
in which revenue represents amounts receivable net of trade discounts, VAT and
other sales-related taxes during the period. Additionally, CARCLO uses the
“percentage of completion method” to determine the appropriate amount of
revenue. However, there are some minor differences in revenue recognition among
all peer companies that we should not consider this adjustment based on the limited
information.
2.1.1.3. Property, plant and equipment (PPE)

Property, plant and equipment is stated at cost less accumulated depreciation and
impairment losses. When parts of an item of property, plant and equipment have
different useful lives, those components are accounted for as separate items of
property, plant and equipment. The cost of assets under construction includes the
cost of materials and direct labour, and any other costs directly attributable to bring
the asset to a working condition for its intended use.
Depreciation is provided on all property, plant and equipment where all peer
companies have used “the straight-line basis” to write off the cost of the asset, less
estimated residual value. The depreciations are reviewed annually. The depreciation
rate of each companies are as follows:
Table 5 Depreciation
Company Depreciation (estimated useful lives)

TREATT PLC • Buildings: 50 years
• Plant and equipment 4-10 years
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Company Depreciation (estimated useful lives)
ZOTEFOAMS PLC • Buildings 20 years
• Plant and equipment 5–15 years
• Fixtures and fittings 3–5 years
CARCLO PLC • Buildings 2.0% -5.0%
• Plant and equipment 8.33% -33.33%
PLASTICS CAPITAL • Buildings 3%
PLC • Plant and equipment 10-20%
• Fixtures and fittings 10-50%
• Motor vehicles 25%
PLANT IMPACT PLC • Laboratory and office equipment 33.3%
• Motor vehicles 33.3%
• Leasehold improvements 10.0%
ITACONIX PLC • Short leasehold equipment 5 years
• Plant and equipment 4 years
• Computer and office equipment 3 years
Source: Company Annual report
2.1.1.4. Intangible assets

TREATT has two significant intangible assets: goodwill and other intangible assets.
Goodwill is recognized as asset and is measured at cost less any accumulated
impairment losses. Goodwill is reviewed for the impairment at least annually. Any
impairment is recognised immediately in the income statement and is not
subsequently reversed. All six companies present the intangible assets in
amortization by using the straight-line basis to write off the cost of the asset, or other
amount substituted for cost less its residual value, ranging from two to twenty years.
Amortization is recognized in profit or loss over the estimated useful lives of

intangible assets, other than goodwill, from the date that they are available for use,
since this most closely reflects the expected pattern of consumption of the future
economic benefits in the asset.
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Table 6 Amortization of Intangible Assets
Company Amortization
(estimated useful lives of the intangible assets)
TREATT PLC AG • Software licenses 4 years
• Lease premium 85 years
ZOTEFOAMS PLC • Marketing 5–15 years
• Customer 2–10 years
• Technology 5–20 years
• Software 3–10 years
• Capitalised development 3–10 years
CARCLO PLC • Patents and development 10 years
• Customer related intangibles 7–10 years
• Computer software 3 to 5 years
PLASTICS CAPITAL PLC • Trademarks 5–20 years
• Intellectual property rights 7 years
• Distributor and customer relationships 7–15
years
• Technology 5–7 years
PLANT IMPACT PLC • Capitalised development not exceed 20 years
ITACONIX PLC • Intellectual property 13 years
Source: Company Annual report
2.1.1.5. Impairment policies

The carrying amounts of the Group’s assets are reviewed in each statement of
financial period, where there is an indication it may be impaired. If any such
indication exists, the assets’ recoverable amounts are estimated. For goodwill, assets
that have an indefinite useful life and intangible assets that are not yet available for
use, the recoverable amount is estimated at each year at the same time. Impairment
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losses are recognised in the income statement by which the asset’s carrying amount
exceeds its recoverable amount.
2.1.1.6. Provisions
A provision is recognized if, as a result of a past event, the Group has a present legal
or constructive obligation that can be estimated reliably, and it is probable that an
outflow of economic benefits will be required to settle the obligation. Provisions are
determined by discounting the expected future cash flows at a pre-tax rate that
reflects current market assessments of the time value of money and the risks specific
to the liability. The unwinding of the discount is recognized as finance costs.
2.1.1.7. Operating leases

Payments made under operating leases are recognized in profit or loss on a straight-
line basis over the term of the lease. Lease incentives received are recognized in profit
or loss as an integral part of the total lease expense, over the term of lease.
Contingent lease payments are accounted for, by revising the minimum lease
payments over the remaining term of the lease when the lease adjustment is
confirmed.
2.1.1.8. Employee benefit

The calculation of defined benefit obligations is performed annually by a qualified
actuary using the projected unit credit method with actuarial valuations, being
carried out every three years and updated at each balance sheet date. Obligations
for contributions to defined contribution pension, plans are recognised as an expense
in the Income Statement as incurred. The Group’s net obligation in respect of defined
benefit post-employment plans, including pension plans, is calculated separately for
each plan by estimating the amount of future benefit that the employees have
earned in return for their service in the current and prior periods.
2.1.1.9. Income tax and deferred tax

Income tax expense for the year comprises current and deferred tax. Current and
deferred tax are recognized in profit or loss, except to the extent that they relate to
items recognized directly in equity or in other comprehensive income. Current tax is
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the expected tax payable or receivable on the taxable income or loss for the year.
Deferred tax is recognized in respect of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts
used for taxation purposes.
2.1.2. Accounting Flexibility

Accounting flexibility principle states that an accounting information system should
be able to adapt to changes in the company based on its needs, operations, and
management. TREATT has adopted different accounting flexibility, which operated
based on the “significant accounting policy judgement”. To be specific, TREATT’s
management uses judgement in deferred tax assets. At the balance sheet date,
TREATT had a deferred tax asset in relation to its pension liability, and the company
had a specific plan in place to reverse the deficit and so this deferred tax asset has
been recognized. It shows the flexibility that appears in the financial statements
which could be suitable to match the condition of TREATT.
2.1.3. Quality of the company’s disclosures

TREATT offers regular and clear disclosures that the directors’ statement pursuant to
the Disclosure and Transparency Rules. For their financial statements, which
prepared in accordance with IFRS as adopted by the EU, give a true and fair view of
the assets, liabilities, financial position and profit of the Group and Parent Company
and the undertakings included in the consolidation taken as a whole. It shows
transparency and clarity for the public to get criteria from these statements. On the
other perspective, the Strategic Report which contained in the annual report,
includes a fair review of the development and performance of the business and the
position of the Group and the undertakings included in the consolidation taken as a
whole. It also published together with a description of the principal risks and
uncertainties that they face, which reflects its impartiality and reliability to a certain
extent.
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2.1.4. Red flags
TREATT financial statement significantly changed in goodwill. The company’s
goodwill remained stable around 1.1 million pounds from 2013 to 2015, while it
experienced a major increase to 2.7 million pounds in 2016. We went through the
financial statement report and we found that goodwill arising on consolidation
represents the excess of the cost of the business combination as result to increase
the goodwill in 2016. Moreover, the acquisition of interests in joint ventures or
subsidiaries was 1.68 million pounds in 2016 which was impacted from the business
combination, consistent with the increasing of goodwill. Therefore, we should take
further concern about risk from business or operation of company that TREATT
acquired. For another issue, post-employee benefit provision was dramatically
increased from 1.59 to 7.4 million pounds during period 2013 to 2016. Due to the
post-employee benefit rose from changing of actuarial valuations assumption by a
reduced discount rate from 4% to 2.6%; TREATT had to set the provision of post-
employee benefit that it will be the company’s expense in the future.
2.1.5. Adjustments
To have a good view of the company business performance, TREATT and its peer
company’s financial statements were reviewed to classify whatever transactions or
items which occur based on nature of business to make the proper comparison and
then we can decide to choose the best one to invest. We decided to make the
adjustment in unusual or abnormal items that it does not directly affect the company
performance. Moreover, the operating leases (commitment and contingence
liability) which are off-balance sheet, are considered to be taken into account as
operating lease on balance sheet to know any company’s liabilities that it will affect
to the financial ratio.
2.2. Financial Analysis

In this part, we are going to analyse each and every company based on ratios we
obtained from the financial statements from 2013 to 2016. However, as it was
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mentioned above, some adjustments were made in order to make the financial
statements comparable.
2.2.1. Profitability
Table 7 Profitability ratios

2013 2014 2015 2016
Net Profit 9.24% 9.53% 10.00% 10.72%
Gross Profit 23.74% 22.69% 22.09% 23.17%
ROCE 17.03% 18.24% 19.12% 17.41%
ROSF 24.95% 26.23% 25.90% 25.38%
Revenue £'000 74.10 79.19 85.93 88.04
Source: Own elaboration based on Annual Reports year 2013 to year 2016.
Return on Capital Employed (ROCE)
ROCE is a fundamental measure of business’s performance, which expresses the

relationship between the profit generated by the business and the long-term capital
invested in the business. As we observe from figure 2, the ROCE ratio of TREATT is
significantly higher than the industry average. More specifically, throughout the
years, TREATT’s ROCE is at around 18% compared to industry’s which from barely
positive percentage (3.5%) in 2013, drops significantly in year 2014 and the remaining
years rises to 6% approximately. The above can be explained by the gradual increase
of profit before interest and tax of TREATT and the growth of revenues at the same
time, but by a smaller margin. On the other hand, the industry average is affected by
the substantially small figures of CARCLO, ITACONIX and PLANT IMPACT, which all 3
of them are making loss for the majority of our 4-year analysis.
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Figure 2 Return on Capital Employed
Return on Shareholders’ Funds (ROSF)
This ratio shows the relationship between the profit generated by the business and
the equity capital invested in the business. Figure 3 illustrates that, again, TREATT’s
figures our larger than the industry average. For the whole period, TREATT has been
slightly increasing their net profit and thus the ROSF ratio increases as well (25% in
average). In contrast, the ROSF ratio of the industry follows the same pattern as the
ROCE, starting off at 3.6%, then dropping down to -12% and for the last 2 years
climbing up to 9%.
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Figure 3 Return on Shareholders Fund
Net Profit Margin
This ratio represents the difference between revenue and the all other costs including
cost of sales, operating expenses, interest and taxes. It helps us compare the overall
performance of the business. It is easily noticed from the Figure 4. Below, that our
company has a stable, but rather small, increase in the Net Profit Margin and it is
about 10% during this period; this is generated by the growth in their net profit as
well as their revenues. When it comes to analysing the peers’ ratio, we removed the
companies ITACONIX and PLANT IMPACT in order to be comparable. Thus, we
observe that in 2013 the Net Profit Margin is at roughly 3%, then it drops to -7% and
for the last 2 years reaches its peak at almost 5%.
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Figure 4 Net Profit Margin
Source: Own elaboration based on Annual Reports year 2013 to year 2016. HIDDEN:
ITACONIX and PLANT IMPACT
Gross Profit Margin

It is a measure of profitability in buying/producing and selling goods before any other
expenses are taken into account. Figure 5 shows that this is the only ratio so far where
TREATT’s figures are close to the industry’s (not including ITACONIX because it heavily
affects the overall trend). More explicitly, TREATT’s ratio starts at almost 24% in 2013
and for the next 2 years decreases to 22.5% on average and in 2016 goes back up to
23.2%. On the other hand, it is important to notice that the industry throughout this
period increases their gross profit extensively (approximately 75% in 4 years) and the
revenues grow as well; this results in changing the ratio from 19.2% in 2013 to 22.5%
in 2016.
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Figure 5 Gross Profit Margin
2.2.2. Liquidity
Table 8 Liquidity ratios
Current Ratio
This ratio presents healthy figures along the 2013-2016 period. During 2014, despite
the 28% increase in the current liabilities, mostly explained because of the request of
short term borrowings, the ratio decreased slightly due to an increase in the work-in-
progress inventory (12m 2014 vs 8m 2013). From 2014, the ratio sets upon its four-
year average mainly because of the decrease in borrowings (-76% 2015 vs 2014 and
-14% 2016 vs 2015). Compared with the industry average, TREATT’s current ratio
performs widely well.
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Figure 6 Current Ratio
Quick Ratio (Acid Test)
Quick Ratio is relatively lower than Current Ratio, mainly because the inventories of
TREATT constitute almost the 60% of the current assets. This ratio also presents
consistent and increasing results throughout the four-year period, although TREATT’s
inventory level is high, so are the cash and trade receivables balance. Is important to
notice that, although TREATT has deposits in banks, the maturity is less than 1 month.
The company performance in this ratio is below the industries’.
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Figure 7 Quick Ratio
2.2.3. Efficiency / Working Capital
Table 9 Efficiency ratios
Inventory Turnover (Stock Turnover)
It measures the average period for which stocks are being held. The Inventory
Turnover ratio illustrates many changes among these financial years, mainly because
of the variations on the cost of sales. It can be observed from the chart below that
TREATT’s position compared to its peers seems to be unfavorable, as it has the
highest ratio almost every year. However, this can be easily explained by the fact that
this company has by far the lowest cost of sales all over the years. The Inventory
Turnover Days ratio of TREATT not only remains steadily above the industry’s
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average, with a peak of 170 days in 2014, but it also does not show any significant
differences from year 2013 to 2016.
Figure 8 Inventory Turnover
Receivable Turnover
This ratio calculates how long, on average, credit customers take to pay the amounts
that they owe to the company. We can notice from the chart below that this specific
TREATT’s ratio is between the lowest, showing in this way the company’s efficiency
in collecting cash over a specific period. It does not display again any dramatically
changes among the years, as it slightly increases from 66 days to 75. The slightly but
gradually rise in the Receivables Turnover is due to the growth of revenues. In fact,
the proportion of growth of trade receivables and this of revenues was exactly the
same between the last years, and that is why the Receivables Turnover ratio remain
the same in this period.
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Figure 9 Receivable Turnover
Payable Turnover
It estimates the average time it takes a business to settle its debts-liabilities with
trade suppliers and it is a useful indicator for measuring the liquidity position of a
business. It can be easily noticed from the chart below that TREATT’s ratio, does not
show any significant fluctuations among the years, as it illustrates a tiny increase from
73 to 77 days. From the fact that every year it is almost the same with the industry’s
average, we can conclude that TREATT does not indicate any cash flow problems and
simultaneously there is no concerns for low liquidity issues. One more noticeable
fact is that ITACONIX rocketed almost to 670 days in 2016, while the other companies,
except PLANT IMPACT, do not indicate any considerable fluctuations.
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Figure 10 Payable Turnover
2.2.4. Financing ratios
Gearing Ratio (Leverage)

Table 10 Gearing Ratio
Company Year 2013 Year 2014 Year 2015 Year 2016

ITACONIX 0.03 0.0043 0.0004 0.26
CARCLO 0.08 0.37 0.34 0.41
PLANT IMPACT 0.02 0.05 0.14 0.20
PLASTICS CAPITAL 0.34 0.38 0.35 0.48
TREATT 0.32 0.30 0.26 0.31
ZOTEFOAMS 0.21 0.20 0.27 0.24
INDUSTRY 0.17 0.22 0.23 0.32
Gearing Ratio is a financial ratio which indicates the company’s operating risk from
using external capital or long-term borrowing. The ratio measures the relationship
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between long term debt and equity which means that the higher proportion of debt,
the higher leveraged and this will lead to higher risk of business. Our analysis shows
the gearing ratio after adjusting the operating leases, we found that TREATT has a
respectable management in gearing ratio. TREATT’s ratio were above industry,
however, the gearing ratio had remained constant around 0.3 from the prior year
which mainly came from no significant changed in long-term debt and equity. In
conclusion, TREATT has higher equity than long-term liability meaning that the almost
company’s assets come from owner.
Figure 11 Gearing Ratio
Gearing Ratio
0.6
0.5
0.4
0.32 0.3 0.31
0.3 0.26
0.2
0.1
0
Year 1 Year 2 Year 3 Year 4
ITACONIX CARCLO PLANT IMPACT PLASTICS CAPITAL

TREATT ZOTEFOAMS INDUSTRY
Interest Cover Ratio (ICR)

Table 11 Interest Cover Ratio
Company Year 1 Year 2 Year 3 Year 4

ITACONIX 27.38 39.0500 40.7400 110.57
CARCLO 4.05 13.85 2.28 4.20
PLANT IMPACT - 29.56 0.00 - 12.11 - 111.00
PLASTICS CAPITAL - 0.50 - 2.66 1.42 0.58
TREATT 9.30 10.41 11.61 13.42
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ZOTEFOAMS 275.43 49.89 63.26 32.60
INDUSTRY 47.68 18.42 17.87 8.40
High ICR suggests that the company has the ability to pay its interest obligation from
the operating profit. The capacity to pay its debt is an important factor for
shareholder and investment’s view. Moreover, it can reduce concern from creditor
when the company decides to extend their credit term. From Table 11, although,
TREATT’s ICR was by far lower than industry in year 1, the ICR had experienced an
increase from 9.3 to 13.4 times during the last 4 years which was higher than industry
at the end of 2016. The high ICR of industry from 2013 to 2015 mainly came from
ZOTEFOAMS and ITACONIX so that the lower ICR of TREATT is still classified as a
decent performance as it shows that the company has the capacity to repay interest
from the operating profit.
Figure 12 Interest Cover Ratio
Interest Cover Ratio

300
200
100
9.3 10.41 11.61 13.42
0
Year 1 Year 2 Year 3 Year 4
-100
-200
ITACONIX CARCLO PLANT IMPACT PLASTICS CAPITAL

TREATT ZOTEFOAMS INDUSTRY
2.2.5. Investment ratios
26
Table 12 Investment ratios
Earnings per share ratio
This ratio measures the potential benefit that shareholders derive form the
profitability of a company in which they have invested, irrespective of actual dividend
distributions, and it constitutes a key indicator of corporate performance from a
shareholder perspective. As an overall trend, TREATT’s Earnings per Share ratio
gradually increased during the last 4 financial periods, mainly because of the growth
that it is noticed in the company’s net profit. For instance, the considerable difference
between 2014 and 2015 is due to the changes of company’s net profit, which has
more than double its number, climbing from 2.464 to 5.721. We can also observe
from the chart below that it remains below the industry’s average during the first 2
financial years, but in next years it reaches its peak at 0.11£, much above the
industry’s average. Moreover, we must mention that also CARCLO and ZATEFOAMS
indicate attractive figures over the last 2 financial years.
Figure 13 Earnings per share
27
Price/Earnings ratio
The significance of this ratio is to compare the benefit derived from owning a share
with a cost of purchasing such a share. This ratio is highly associated with the
previous one as it illustrates exactly the opposite change. From the chart below, it
can be easily observed that during the first 2 years, TREATT’s ratio dropped from
105.7£ to 21.29£, mainly because of the devaluation in market’s price per share.,
However, it indicates an increase of 28%, enchasing in this way the company’s market
confidence and its future prospects. We must also mention that the average has
been adjusted so that the effect of PLASTICS CAPITAL is removed as it was affecting
the overall trends.
Figure 14 Price/Earnings ratio
28
2.3. Conclusion
TREATT seems to be more attractive than its peers in the industry in most of the
cases.In our analysis, we have taken into account not only quantitative aspects that
should be considered, but qualitative aspects as well. During the process, we firstly
created a scorecard based on important aspects, which was obtained from the
financial statements throughout the last 4 years. From this scorecard, it was clear
that TREATT outperformed its competitors in the industry. Further, after the
accounting analysis, in which we analysed the key accounting policies, the accounting
flexibility, the quality of the company’s disclosures we noticed that TREATT is a
healthy company. Then, we conducted a financial analysis in which we calculated
financial ratios, after doing the adjustments on the financial statements, for each
category throughout the years. We found out that TREATT’s figures are higher
compared to the peers of the industry and has great investment potential.
All things considered, it is easily recognised that TREATT is a company with potential
and therefore, an excellent investment choice.
29
3. References
CARCLO (2017). Annual report and accounts 2017 Available at:

http://www.CARCLO.co.uk/~/media/Files/C/CARCLO-v2/investor-docs/results-and-
presentations/annual-report-2017.pdf
[Accessed 28Oct. 2017]
CARCLO (2016). Annual report and accounts 2016. Available at:

presentations/ar-2016.pdf
[Accessed 28Oct. 2017].

presentations/interim-2015.pdf

presentations/CARCLO-ra-2014.pdf
PLANT IMPACT PLC (2016). Annual report and accounts 2016. Available at:
http://www.plantimpact.com/~/media/Files/P/Plant-Impact/reports-and-
presentations/2016/ar-2016.pdf
presentations/2015/plant-impact-ar-2015-web-151113.pdf
30
presentations/2014/pi-annual-report-2014.pdf
presentations/2013/pi-annual-report-16-months-ending-july-20131.pdf
PLASTIC CAPTAL PLC (2016). Annual report and accounts 2016. Available at:
http://www.plasticscapital.com/wp-content/uploads/2017/07/Annual-
Report_2016.pdf
Report_2015.pdf
Report_2014.pdf
Report_2013.pdf
TREATT (2016). Annual report and accounts 2016. Available at:
31
https://www.TREATT.com/content/5-investor-relations/1-financial-results-
presentations/annual-reports/20161129-TREATT-annual-report-
2016/TREATT_ar_2016_web.pdf
TREATT (2015). Annual report and accounts 2015 Available at:

2015/TREATT_ar_2015.pdf
TREATT (2014). Annual report and accounts 2014Available at:

2014/TREATT_annual_report_2014.pdf
TREATT (2013). Annual report and accounts 2013 Available at:

presentations/annual-reports/20130405-TREATT-annual-report-2013/TREATT-
annual-report-2013.pdf
ITACONIX (2016). Annual report and accounts 2016. Available at:

http://ITACONIX.com/wp-content/uploads/ITX-AR16-FINAL.pdf
ITACONIX (2015). Annual report and accounts 2015. Available at:

http://ITACONIX.com/wp-content/uploads/166858-Revolymer-Annual-Report-
PFP.pdf
ITACONIX (2014). Annual report and accounts 2014 Available at:
32
http://ITACONIX.com/wp-content/uploads/2014-annual-report.pdf
ITACONIX (2013). Annual report and accounts 2014 Available at:

http://ITACONIX.com/wp-content/uploads/2013-annual-report.pdf
ZOTEFOAMS (2016). Annual report and accounts 2016. Available at:

http://www.ZOTEFOAMS.com/wp-
content/uploads/2017/04/26470_ZOTEFOAMS_AR16_Int-1.pdf

http://www.ZOTEFOAMS.com/wp-content/uploads/2015/11/546_Interim-Report-
2015.pdf

http://www.ZOTEFOAMS.com/wp-content/uploads/2015/12/525_Annual-Report-
and-Accounts-2014.pdf

http://www.ZOTEFOAMS.com/wp-
content/uploads/2015/12/476_19768_ZOTEFOAMS_AR13_Bookmarked.pdf
33
4. Appendix
Appendix 1. CARCLO PLC, 5 years share price
Source: London Stock Exchange online
Appendix 2. PLANT IMPACT PLC, 5 years share price
34
Appendix 3. PLASTICS CAPITAL PLC, 5 years share price
Appendix 4. ITACONIX PLC, 5 years share price
Appendix 5. ZOTEFOAMS PLC, 5 years share price
35
Appendix 6. SWOT analysis, TREATT PLC.
Source: own elaboration
36
Appendix 7. Balanced Score Card Methodology
In order to make a decision that takes into account both quantitative and qualitative
aspects of the company we believe to be worth investing in, we designed a balanced
score card. This methodology allowed us to compare the six company’s performance
along the five year period. The process is described as the following:
Step one: Select the appropriate indicators based on relevance and impact in an
investment decision:
Quantitative indicators: We used the adjusted ratios we considered were the most
influential:
• Profitability ratios: ROSE, ROSF, Net profit margin and Gross profit margin.
• Liquidity ratios: Current ratio and Quick ratio.
• Working Capital ratios: Inventory Turnover, Receivables days and Payables
days.
• Financing ratios: Gearing and Interest cover ratio.
• Investment ratios: Earnings per share and Price/Earnings ratio.
Qualitative indicators: SWOT analysis of each company.
Step two: give a weight to each one of the indicators in order of importance, so the
sum of all must be 100%
Step three: Rank the indicators’ figures from the best (5) to the lowest (1) based on
the performance.
Step four: Determine the total weighted ranked score.
Step five: Chose the company with the best overall score.
Appendix 8. Industry Ratio Analysis
37
2013 2014
PLASTIC PLASTIC
ITACONI PLANT ZOTEFO ITACONI PLANT ZOTEFO
CARCLO S TREATT CARCLO S TREATT
X IMPACT AMS X IMPACT AMS
CAPITAL CAPITAL
Profitability
ROCE 0.06 -0.32 -0.65 -0.01 0.17 0.08 -0.27 -0.35 -0.39 -0.03 0.18 0.05
ROSF 0.05 -0.33 -0.63 -0.02 0.25 0.08 -0.55 -0.35 -0.32 -0.05 0.26 0.04
Gross Profit 0.07 -0.65 0.67 0.36 0.24 0.26 0.07 0.12 0.71 0.35 0.23 0.26
Net Profit 0.04 -10.01 -1.08 -0.01 0.09 0.07 -0.21 -4.2 -0.27 -0.03 0.1 0.04
Liquidity
Current Ratio 4.33 7.63 1.69 1.27 3.07 2.86 1.11 7.28 1.11 1.27 2.72 3.17
Quick Ratio 3.08 7.56 1.68 0.99 1.18 1.77 0.81 7.17 1.09 1.01 0.97 2.1
Efficiency
Inventory days 54 71 3 58 153 89 50 85 10 58 168 93
Receivables days56 205 66 76 66 81 54 110 52 92 67 96
Payables days 38 133 291 84 73 22 35 127 364 88 72 30
Cash Conversion72 143 -222 50 146 148 69 68 -302 62 163 159
Financing
Gearing 0.08 0.03 0.02 0.34 0.32 0.21 0.37 0 0.05 0.38 0.3 0.2
Interest Cover 4.05 27.38 -29.56 -0.5 9.3 275.43 13.85 39.05 0 -2.66 10.41 49.89
Investment
Earnings per share
0.06 0.1 -0.03 0.03 0.06 0.08 0.08 0.08 -0.01 -0.01 0.07 0.05
Price/Earnings
4673.43
Ratio 739.8 -7.58 3953.13 105.7 2308.86 1131.87 649.35 -23.8 -13813 21.29 2123.21
Dividend cover 1.8 0 0 0.64 1.99 1.54 2.77 0 0 1.28 2.16 0.98
Dividend yield 0% 0% 0% 2% 61% 0% 0% 0% 0% 3% 273% 0%
38
Appendix 8. Industry Ratio Analysis (Continued)
2015 2016
PLANT PLASTICS ZOTEFO PLANT PLASTICS ZOTEFO
CARCLO ITACONIX TREATT CARCLO ITACONIX TREATT
IMPACT CAPITAL AMS IMPACT CAPITAL AMS
Profitability
ROCE 0.04 -0.35 -0.02 0.03 0.19 0.09 0.09 -0.29 -0.11 0.02 0.17 0.09
ROSF 0.07 -0.17 0.01 0.03 0.26 0.09 0.18 -0.4 -0.08 -0.01 0.25 0.1
Gross Profit 0.08 0.07 0.78 0.34 0.22 0.32 0.09 0.19 0.78 0.32 0.23 0.36
Net Profit 0.02 -1.43 0.03 0.02 0.1 0.09 0.06 -20.06 -0.1 -0.01 0.11 0.1
Liquidity
Current Ratio 3.87 6.63 5.59 1.18 3.34 2.4 11.27 6.22 3.37 1.2 3.32 1.61
Quick Ratio 2.85 6.54 5.52 0.93 1.43 1.69 8.56 6.09 3.35 0.91 1.49 1.05
Efficiency
Inventory days 53 52 45 52 141 99 56 334 10 55 162 122
Receivables days 48 93 94 77 75 110 57 84 105 86 75 119
Payables days 33 109 229 76 60 48 43 654 162 0 77 48
Cash Conversion 68 36 -90 53 156 161 70 -236 -47 141 160 193
Financing
Gearing 0.34 0 0.14 0.35 0.26 0.27 0.41 0.26 0.2 0.48 0.31 0.24
Interest Cover 2.28 40.74 -12.11 1.42 11.61 63.26 4.2 110.57 -111 0.58 13.42 32.6
Investment
Earnings per share 0.1 0.01 0 0.04 0.11 0.11 0.12 0.07 -0.01 0.02 0.11 0.12
Price/Earnings Ratio 1258.97 5230.77 417.24 2757.14 14.32 3158.72 1120.76 378.42 -56.71 8100 18.99 1856.62
Dividend cover 2.06 0 0 -0.59 2.85 2 3.24 0 0 0.33 2.74 2.2
Dividend yield 0% 0% 0% 4% 250% 0% 0% 0% 0% 4% 207% 0%
39
Appendix 9. ITACONIX PLC
Year1 Year2 Year3 Year4
2013 2014 2015 2016
before adjustment after before adjustment after before adjustment after before adjustment after
Income statement
Revenue 0.53 0.53 1.02 1.02 1.25 1.25 0.29 0.29
Cost of Revenue 0.87 0.87 0.9 0.9 1.16 1.16 0.23 0.23
Gross profit -0.34 -0.34 0.12 0.12 0.09 0.09 0.06 0.06
Operating profit -5.48 -5.48 -4.35 -4.35 -3.67 -3.67 -4.96 -4.96
interest expense -0.19 -0.19 -0.11 -0.11 -0.09 -0.09 -0.05 -0.05
profit before tax -5.28 -5.28 -4.3 -4.3 -3.59 -3.59 -5.64 -5.64
Profit for the year -5.28 -5.28 -4.3 -4.3 -1.79 -1.79 -5.72 -5.72
Statement of Financial Position

Total Noncurrent Assets 0.36 0.36 0.31 0.68 0.34 0.34 11.07 11.07
Total Current Assets 18.38 18.38 13.89 13.89 11.7 11.7 9.83 9.83
Total Assets 18.75 18.75 14.2 32.95 12.04 12.04 20.91 20.91
Total Current Liabilities 2.31 0.1 2.41 1.82 0.09 1.91 1.71 0.05 1.76 1.58 0 1.58
Operating leases 0.1 0.1 0.09 0.09 0.05 0.05 0 0
Total Noncurrent Liabilities 0.35 0.14 0.49 0 0.05 0.05 0 0 0 4.87 0.3 5.17
Operating leases 0.14 0.14 0.05 0.05 0 0 0.3 0.3
Total Liabilities 2.66 0.23 2.9 1.82 0.15 1.96 1.71 0.06 1.77 6.45 0.3 6.75
Total Equity 16.08 0.23 16.08 12.39 0.15 12.39 10.32 0.06 10.32 14.45 0.3 14.45
Investment Ratios
Earnings per share -0.1 -0.08 -0.01 -0.07
Price/earnings ratio -739.8 -649.4 -5,231 -378.4
Dividend yield 0 0 0 0
Dividend cover 0 0 0 0
40
Appendix
Appendix10.
11. TREATT PLC
2013 2014 2015 2016
Income statement
Revenue 74 74 79.19 79.19 85.93 85.93 88.04 88.04
Cost of Revenue 56.5 56.5 61.22 61.22 66.96 66.96 67.64 67.64
Gross profit 17.6 17.6 17.97 17.97 18.98 18.98 20.4 20.4
Operating profit 6.94 6.94 7.63 7.63 8.74 8.74 9.55 9.55
interest expense 0.74 0.74 0.73 0.73 0.74 0.74 0.7 0.7
profit before tax 5.13 5.13 5.5 5.5 7.78 7.78 8.29 8.29
Profit for the year 2.29 2.29 2.46 2.46 5.72 5.72 5.48 5.48

Total Assets 52.68 52.68 57.37 57.37 58.43 58.43 70.6 70.6
Total Current Liabilities 12.4 12.4 16 16 13.4 13.4 16.4 16.4

Operating leases 0 0 0 0
Total Noncurrent Liabilities 12.75 12.75 12.6 12.6 11.76 11.76 17.02 17.02
Operating leases 0 0 0 0
Total Liabilities 25.24 25.24 28.61 28.61 25.24 25.24 33.41 33.41
Total Equity 27.44 27.44 28.76 28.76 33.19 33.19 37.19 37.19
Investment Ratios
Earnings per share 0.06 0.07 0.11 0.11
Price/earnings ratio 105.7 21.29 14.32 18.99
Dividend yield 0.61 2.73 2.5 2.07
Dividend cover 2.33 2.58 2.94 2.94
41
Appendix 11. PLASTICS CAPITAL
2013 2014 2015 2016
Income statement
Revenue 32.46 32.46 39.58 39.58 50.8 50.8 65.79 65.79
Cost of Revenue 20.76 20.76 25.6 25.6 33.69 33.69 44.66 44.66
Gross profit 11.69 11.69 13.98 13.98 17.11 17.11 21.13 21.13
profit before tax 1.04 1.04 -0.15 0.89 1.38 1.38 1.66 1.66
Exceptional items 1.31 1.31 1.31 -1.13 0.36 -0.36 0.91 -0.91
Profit for the year 0.88 1.31 -0.43 -0.25 1.31 -1.38 1.22 0.36 0.86 0.54 0.91 -0.37

Total Noncurrent Assets 26 26 33.07 33.07 30.93 30.93 37.43 37.43
Total Assets 40.69 40.69 52.66 52.66 53.14 53.14 64.49 64.49
Total Current Liabilities 10.63 11.56 14.48 15.39 17.77 18.81 21.15 22.5
Operating leases 0.93 0.93 0.91 0.91 1.04 1.04 1.35 1.35
Total Noncurrent Liabilities 6.97 11.75 11.83 15.9 9.05 14.22 17.5 23.44
Total Equity 23.09 23.09 26.35 26.35 26.32 26.32 25.84 25.84
Investment Ratios
Earnings per share 0.03 -0.01 0.04 0.02
Price/earnings ratio 3,953 13,813 2,754 8,100
Dividend yield 0.02 0.03 0.04 0.04
Dividend cover 0.64 1.28 0.59 0.33
42
Appendix 13. ZOTEFOAMS PLC
2013 2014 2015 2016
Income statement
Revenue 44.63 44.63 48.95 48.95 53.87 53.87 57.38 57.38
Cost of Revenue 33.02 33.02 36.19 36.19 36.6 36.6 36.84 36.84
Gross profit 11.62 11.62 12.75 12.75 17.27 17.27 20.54 20.54
Operating profit 4.16 0 4.16 5.25 1.27 3.98 6.33 0 6.33 7.65 0.24 7.4
profit before tax 1.04 1.04 -0.15 0.89 1.38 1.38 1.66 1.66
Exceptional items 0 0 1.27 1.27 0 0 0.24 0.24
Profit for the year 3.16 0 3.16 3.34 1.27 2.07 4.8 0 4.8 5.7 0.24 5.45

Total Assets 53.69 0 53.69 63.37 0 63.37 76.21 0 76.21 91.48 0 91.48
Total Current Liabilities 6.93 0.4 7.33 7.82 0.8 8.62 13.15 0.7 13.85 21.58 0.56 22.14
Total Noncurrent Liabilities 7.75 10.3 8.32 3.56 11.88 11.93 7.41 19.35 13.51 4.67 18.18
Total Equity 39.01 39.01 47.23 47.23 51.12 51.12 56.38 56.38
Investment Ratios
Price/earnings ratio 2299 2133 3154 1855
Dividend yield 0.0002 0.00016 0.00011 0.00015
Dividend cover 1.5 1 2 2.2
43
Appendix 14. PLANT IMPACT PLC
2013 2014 2015 2016
Income statement
Revenue 1.93 1.93 2.5 2.5 4.51 4.51 7.21 7.21
Cost of Revenue 0.48 0.48 0.71 0.71 0.97 0.97 1.58 1.58
Gross profit 1.44 1.44 1.79 1.79 3.54 3.54 5.64 5.64
Operating profit -1.51 -1.51 -0.73 -0.73 -0.29 -0.29 -1.39 -1.39
interest expense 0.03 0.03 0 0 0.02 0.02 0.01 0.01
profit before tax -1.96 -1.96 -0.85 -0.85 -0.25 -0.25 -1.22 -1.22
Profit for the year -1.71 -1.71 -0.67 -0.67 0.12 0.12 -0.71 -0.71

Total Assets 3.43 3.43 3.19 3.19 11.55 11.55 12.23 12.23
Total Current Liabilities 0.7 0.7 1.02 1.02 1.67 1.67 2.62 2.62
Total Noncurrent Liabilities 0 0.54 0.06 0.49 1.36 1.79 0.97 2.15
Operating leases 0.54 0.43 0.43 1.18
Total Liabilities 0.7 1.24 1.08 1.51 3.03 3.46 3.59 4.77
Total Equity 2.74 2.74 2.11 2.11 8.52 8.52 8.64 8.64
Investment Ratios
Earnings per share -0.03 -0.01 0 0
Price/earnings ratio -7.58 -23.8 459.73 -56.72
Dividend yield 0 0 0 0
44
Appendix 15. CARCLO PLC
2013 2014 2015 2016
Income statement
Revenue 97.27 97.27 107.5 107.5 118.97 118.97 138.28 138.28
Cost of Revenue 90.72 90.72 99.71 99.71 108.94 108.94 125.78 125.78
Gross profit 6.55 6.55 7.79 7.79 10.03 10.03 12.5 12.5
profit before tax 5.29 5.29 7.12 7.12 8.75 8.75 11.02 11.02
Profit for the year 3.6 3.6 -21.94 -21.94 2.2 2.2 8 8

Total Assets 132.95 132.95 115.43 115.43 126.3 126.3 160.27 160.27
Total Current Liabilities 34.18 23.5 10.68 27.52 17 44.52 33.43 18 15.43 46.88 54 -7.12
Operating leases 23.5 17 18 54
Total Noncurrent Liabilities 24.21 20.93 3.28 46.56 4.7 51.26 60 5.56 65.56 69.13 7.92 77.05
Operating leases 20.93 4.7 5.56 7.92
Total Equity 74.56 74.56 41.35 41.35 32.87 32.87 44.26 44.26
Investment Ratios
Price/earnings ratio 0.03 0.03 0.03 0.03
Dividend yield 0.01 0.02 0.02 0.02
Dividend cover 2.39 2.98 3.68 4.26
45
Contents
1. Introduction ..................................................................................................................... 1
1.1. TREATT: Making the world taste better ..................................................................... 2
1.2. Perspectives and development............................................................................... 2
1.3. SWOT Analysis ......................................................................................................... 3
1.3.1. Strengths .......................................................................................................... 3
1.3.2. Weaknesses ..................................................................................................... 4
1.3.3. Opportunities .................................................................................................. 4
1.3.4. Threats ............................................................................................................. 4
1.4. Balanced Scorecard ................................................................................................. 5
1.5. Key features ............................................................................................................. 6
2. Detailed Section .............................................................................................................. 7
2.1. Accounting Analysis .................................................................................................... 7
2.1.1. Key accounting Policies ................................................................................... 8
2.1.2. Accounting Flexibility .................................................................................... 13
2.1.3. Quality of the company’s disclosures ........................................................... 13
2.1.4. Red flags......................................................................................................... 14
2.1.5. Adjustments .................................................................................................. 14
2.2. Financial Analysis ...................................................................................................... 14
2.2.1. Profitability .................................................................................................... 15
2.2.2. Liquidity ......................................................................................................... 19
2.2.3. Efficiency / Working Capital .......................................................................... 21
2.2.4. Financing ratios ............................................................................................. 24
2.2.5. Investment ratios .......................................................................................... 26
2.3. Conclusion ......................................................................................................... 29
3. References ............................................................................................................. 30
4. Appendix ................................................................................................................ 34
46
List of figures
Figure 1 Historic revenue ......................................................................................................... 6
Figure 2 Return on Capital Employed .................................................................................... 16
Figure 3 Return on Shareholders Fund .................................................................................. 17
Figure 4 Net Profit Margin ..................................................................................................... 18
Figure 5 Gross Profit Margin .................................................................................................. 19
Figure 6 Current Ratio ............................................................................................................ 20
Figure 7 Quick Ratio ............................................................................................................... 21
Figure 8 Inventory Turnover .................................................................................................. 22
Figure 9 Receivable Turnover ................................................................................................ 23
Figure 10 Payable Turnover ................................................................................................... 24
Figure 11 Gearing Ratio ......................................................................................................... 25
Figure 12 Interest Cover Ratio ............................................................................................... 26
Figure 13 Earnings per share ................................................................................................. 27
Figure 14 Price/Earnings ratio................................................................................................ 28
List of tables
Table 1 Weight given to each criteria ...................................................................................... 5
Table 2 Scores given to each company/criteria ....................................................................... 6
Table 3 Final balanced score card outcome............................................................................. 6
Table 4 Key features................................................................................................................. 7
Table 5 Depreciation ................................................................................................................ 9
Table 6 Amortization of Intangible Assets ............................................................................. 11
Table 7 Profitability ratios ...................................................................................................... 15
Table 8 Liquidity ratios ........................................................................................................... 19
Table 9 Efficiency ratios ......................................................................................................... 21
Table 10 Gearing Ratio ........................................................................................................... 24
Table 11 Interest Cover Ratio ................................................................................................ 25
Table 12 Investment ratios .................................................................................................... 27
47

Financial Analysis &amp; Valuation of TREATT PLC

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Financial Analysis &amp; Valuation of TREATT PLC

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1.

CARCLO PLC (Bloomberg ticker: CAR:LN – Market Cap: £m 96.2)1

CARCLO plc was established in 1924. It established a world-leading position in the

PLANT IMPACT PLC (Bloomberg ticker: PIM:LN Market Cap: £m 22.47) 2

PLANT IMPACT plc is a United Kingdom-based company engaged in research,

PLASTICS CAPITAL PLC (Bloomberg ticker: PLA:LN Market Cap: £m 46.54)3

PLASTICS CAPITAL is a niche manufacturer of specialist plastic products.

ITACONIX is a UK-based chemicals company that specialises in designing, developing

ZOTEFOAMS PLC (Bloomberg ticker: ZTF:LN Market Cap: £m 155.45)5

ZOTEFOAMS is a world leader in cellular materials technology. Is headquartered in

1.1. TREATT: Making the world taste better

1.2. Perspectives and development

To increase growth, the company plans to relocate their manufacturing operations

1.3. SWOT Analysis

Global manufacturing facilities

Potential expansion opportunities in China

China represents a growth opportunity as it is the largest market in the Asian

Short term volatility in exchange rates

Table 1 Weight given to each criteria

Table 3 Final balanced score card outcome

1.5. Key features

Figure 1 Historic revenue

Product Innovation Future Developments

Major drive to reduce sugar in soft UK site relocation

2.1. Accounting Analysis

2.1.1. Key accounting Policies

2.1.1.2. Revenue recognition

2.1.1.3. Property, plant and equipment (PPE)

Company Depreciation (estimated useful lives)

2.1.1.4. Intangible assets

Amortization is recognized in profit or loss over the estimated useful lives of

2.1.1.5. Impairment policies

2.1.1.7. Operating leases

2.1.1.8. Employee benefit

2.1.1.9. Income tax and deferred tax

2.1.2. Accounting Flexibility

2.1.3. Quality of the company’s disclosures

2.2. Financial Analysis

Table 7 Profitability ratios

Return on Capital Employed (ROCE)

ROCE is a fundamental measure of business’s performance, which expresses the

Return on Shareholders’ Funds (ROSF)

Net Profit Margin

Gross Profit Margin

Table 8 Liquidity ratios

Quick Ratio (Acid Test)

2.2.3. Efficiency / Working Capital

Table 9 Efficiency ratios

Inventory Turnover (Stock Turnover)

Figure 8 Inventory Turnover

2.2.4. Financing ratios

Gearing Ratio (Leverage)

Company Year 2013 Year 2014 Year 2015 Year 2016

Figure 11 Gearing Ratio

ITACONIX CARCLO PLANT IMPACT PLASTICS CAPITAL

Interest Cover Ratio (ICR)

Company Year 1 Year 2 Year 3 Year 4

Figure 12 Interest Cover Ratio

Interest Cover Ratio

ITACONIX CARCLO PLANT IMPACT PLASTICS CAPITAL

2.2.5. Investment ratios

Earnings per share ratio

Figure 13 Earnings per share

Figure 14 Price/Earnings ratio

Financial Analysis & Valuation of TREATT PLC

Financial Analysis & Valuation of TREATT PLC