This report has been prepared to analyze the financial performance of a company. In this report, many related aspect to the performance and profitability of the company has been examined to give a better result to the related party. A financial analyst is the one who performs a research, study and analysis over internal and external financial matters of a company to analyze the performance of the company to make a better decision regarding investment or divestment from the company for the clients. Financial advisors are the professionals who conduct the research over various companies for their clients to offer them the best advice towards a company’s financial and non financial condition.
In this report, a research has been conducted over dairy crest group plc to identify the profit condition, earning performance, dividend factor, financial liquidity, financial stability etc. further, company’s financial report has also been analyzed to understand the performance of the company and reach over a conclusion. The corporate governance policy of the company has also been evaluated to analyze the strategy and mission of the company.
For conducting this study, dairy crest group plc has been taken into consideration. Dairy Crest Group plc is a dairy foods company which is engaged in the production and dealing of milk and various dairy products in the UK, Ireland, and globally. This company has operated its business in two divisions which are Foods and Dairies. The Foods segment includes mostly branded spreads and chesses sold via many stores. It contains the U.K. Spreads, French spreads, the St Hubert and Italian spreads. Company has diversified its business as well as the geographical location. The market base of the company is also high. The main brand of the company is Cathedral city. The dairies segment of the company operates in the liquid milk business. This brand process and deliver the organic, flavoured, fresh conventional milk to many of the retailers in the state. It produces and deals in cream, flavoured milk and milk powders.
The financial data of the company has been analyzed to make a better decision about the performance and profitability of the company. For conducting this research, 5 years data has been taken into consideration (Vogel, 2014). In this section of this report, profitability condition, dividend analysis and earning situation of the investor has been analyzed to understand the performance of the company as well as the return to the stakeholders by the company. Through the annual report (2016, 2015, 2014 and 2013) of the company and the Morningstar (2017), it has been analyzed that the profitability condition was quite better in 2013 and 2014 but due to market breakdown the performance of the company has been lowered in 2015 and 2016. Through the net profit of 2017, it has been found that the net profit of the company has been enhanced from last year but it would take some time to the company to make it more satisfactory (White, Sondh, & Fried, 2005).
Further, the earnings of the company has been analyzed and found that the same situation has taken place with the profitability ratio of the company as well. It has been found that earning condition was quite better in 2013 and 2014 but due to market breakdown the company has lowered the return to the shareholders in 2015 and 2016. Through the earnings amount of 2017, it has been found that the earnings of the company has been enhanced from last year but it would take some time to the company to make it more satisfactory for the investors as the current earning is just GBP 0.27 per share (Brammer, Brooks & Pavelin, 2006).
Additionally, the dividend paid by the company to its shareholders has also been analyzed to identify the total amount given by the company to its shareholders. It has been observed that the dividend amount is enhancing rapidly from last 5 years as in 2013, company has paid GBP 27 million to the shareholders and currently, in 2017, company has paid GBP 31 million to the shareholders. It depict that the return offered by the company is quite impressive for the shareholders and thus the investors could invest their amount in the company even the position of the company is not better (Van Horne & Wachowicz, 2008).
Lastly, ratio analysis has been performed over the company to identify the profitability position, earning situation and dividend payout ratio of the company. It has been analyzed through performing a study over the profitability ratio that the operating profit margin of the company has been enhanced from last years and due to that net profit of the company has been managed by the company. Further, the net profit margin of the company has been lowered from last year due to many operating expenses (Higgins, 2012). ROCE, return on equity and return on total assets have also been analyzed to evaluate the profitability position of the company and found that the same changes have taken place into these ratios as well (Öcal, Oral, Erdis & Vural, 2007).
Further, dividend payout ratio and earnings ratio of the company depict about the total earnings of the company in comparison of total profit and total dividend paid to the stakeholders. It has been analyzed that the dividend amount has been enhanced by the company at the same time earnings of the company has been lowered.
|
Profitability Ratios |
2017 |
2016 |
2015 |
2014 |
2013 |
|
Operating Profit Margin |
0.117505995 |
0.106635071 |
0.02406015 |
0.033069734 |
0.009406657 |
|
Net Profit Margin |
0.091127098 |
-0.267772512 |
0.015037594 |
0.035945363 |
0.039073806 |
|
Return on Capital Employed |
0.1 |
0.1 |
0.1 |
0.1 |
0.0 |
|
Return on Equity |
0.527777778 |
-0.843283582 |
0.068965517 |
0.173010381 |
0.175895765 |
|
Return on Total assets |
0.068222621 |
-0.169924812 |
0.025348542 |
0.062034739 |
0.054878049 |
|
Dividend payout ratio |
0.815789474 |
-0.265486726 |
1.45 |
0.56 |
0.5 |
|
Earnings ratio |
0.027 |
-0.073636364 |
0.011666667 |
0.027692308 |
0.028571429 |
(Morningstar, 2017)
Financial stability and liquidity:
The financial data of the company has been analyzed to make a better decision about the performance and profitability of the company. For conducting this research, 5 years data has been taken into consideration. In this section of this report, financial stability and liquidity position of the investor has been analyzed to understand the performance of the company. Through the annual report (2016, 2015, 2014 and 2013) of the company and the Morningstar (2017), it has been analyzed that the financial stability condition was quite better in 2013 but due to market breakdown the performance of the company has been lowered in 2014, 2015 and 2016. Through the changes into the debt and equity of the company in 2017, it has been found that the stability of the company in concern of finance has been enhanced from last year (Shapiro, 2008).
Further, the liquidity position of the company has been analyzed and found that the same situation has taken place with the liquidity position of the company as well. It has been found that current ratio of the company was quite better in 2013 but due to many changes by the company in its capital structure, the situation of the company has been lowered in 2014 and 2015 (Jensen, 2005). Through the ratio of 2016 and 2017, it has been found that the company is not utilizing the resources at their full and thus the cost of the company is enhancing very rapidly.
For analyzing the liquidity and stability condition of a company in a better way, ratio analysis has been conducted and various ratios have been analyzed over liquidity and stability of the company. Current ratio of the company depict that currently company is not utilizing all of its resources and thus company is required to manage the resources whereas the liquidity position of the company has been improved. The quick ratio of the company depict that company is still required to work on its liquidity (Bartram, Brown & Fehle, 2009).
Further, the stability ratio of the company depict that the debt of the company is quite high than the equity of the company. It depicts that the stability position of the company is quite risky as company is required to manage the equity and debt in such a manner that the return could be higher in lower risk. Further, it has also been identified that is the debt position of the company has not been lowered than there are high chances of the company to be faced the bankruptcy (Brigham & Daves, 2012).
|
Liquidity ratio |
2017 |
2016 |
2015 |
2014 |
2013 |
|
Current ratio |
2.25 |
1.344827586 |
1.965909091 |
1.598425197 |
1.489949749 |
|
Quick ratio |
0.645833333 |
0.689655172 |
0.829545455 |
0.732283465 |
0.967336683 |
|
Working capital |
120.0 |
80.0 |
170.0 |
152.0 |
195.0 |
|
Stability ratio |
|||||
|
Capital structure ratio |
2017 |
2016 |
2015 |
2014 |
2013 |
|
Debt- equity |
6.736111111 |
3.962686567 |
1.720689655 |
1.788927336 |
2.205211726 |
|
Interest coverage ratio |
6.125 |
5.625 |
4 |
4.6 |
0.65 |
(Morning star, 2017)
Thus it has been analyzed that the liquidity as well as the stability position of the company in concern of finance is not in the favour of the investor as the risk level of the company is quite high in concern of stability and the company is not utilizing the maximum of the available resources which adds the extra cost to the company.
Company’s financial report has also been analyzed and found that from last 5 years. Company has faced many changes into its operations, strategies, policies, structure etc and thus it has impacted over the company financially. The financial report of the company depict that the revenue of the company has been decreased on a high level from last year’s due to economy breakdown, changes into the policies of the company, many internal factors and external factors of the company (Brigham & Ehrhardt, 2013). It has been analyzed that the COGS of the company has been managed by the company to make the operating and net profit better. The other factors of income statement of the company depict that the company has managed to make so many changes into its final reports to enhance the performance and position of the company.
Further, the balance sheet of the company has also been analyzed and found that the current assets of the company have been lowered from last 4 years this has taken place due to many changes into the policies of the company, many internal factors and external factors of the company as well as due to economy breakdown (Annual report, 2017, 2016, 2015, 2014). Further, it has been observed that the non current asset is quite same. No more changes have taken place into this section. The liability and the equity of the company have also been analyzed to understand the financial performance of the company (Morningstar, 2017). It has been observed that the liability of the company has also been reduced with the total current assets of the company and it has also been analyzed that no more changes have taken place into the total liability of the company. Equity position of the company depict about the lower equity from last 4 years (Brigham & Houston, 2012).
Lastly, cash flow statement has been analyzed and found that the cash flow of the company has been negative in current year due to various cash outflow than the total inflow.
Corporate governance policy is the system of practices, rules and processes that helps a company to manage the performance of the company and control over the operations of the company. Essentially, it involves the interest of the company in concern of its many stakeholders like management, customers, financiers, community, government, shareholders, suppliers etc. as the corporate governance also offers a framework to meet the objectives of the company.
Corporate governance policy of dairy crest group plc has been analyzed and found that the corporate policy has been prepared by the company in such a manner that the goals and objectives of the company could be achieved (Corporate governance policy, 2017). It has been analyzed that the governance policy has been prepared by the company in such a manner that every issue could be resolved easily and this has been prepared before taking the stakeholders like management, customers, financiers, community, government, shareholders, suppliers etc. into the consideration.
Through conducting this research, many financial and non financial factor of the company have been analyzed to make a better decision for the investors to invest into the company. A financial study has been performed over the company to investigate the financial and non financial report of the company. For this report, annual report of the company has been analyzed and at the same time, ratio study has also been conducted.
It has been analyzed through this study that the performance of the company is not at all good. Company has suffered many losses in last 3 years due to which the turnover of the company has been reduced and it directly impacted over the operating profit and net profit of the company. It has also been analyzed that the earnings of the company is quite lower as most of the amount is paid by the company to its stakeholders to attract the, to invest into the company. Further, it has also been analyzed that the dividends are good although the liquidity and stability position of the company is not good. Lastly, it has also been found that the debt of the company is quite higher than the equity of the company and it makes the operations of the company more risky.
Through this study, it has been found that the performance of the company is not at all good and the earnings of the company is quite lower as most of the amount is paid by the company to its stakeholders to attract the, to invest into the company and the liquidity and stability position of the company is not good. Thus it is recommended to the investor to not to make an investment into the company as the operations of the company has been lowered and the turnover of the company has been reduced and it directly impacted over the operating profit and net profit of the company. Thus there are more chances of the company to be bankrupted and so the investors are not advised to invest into the company.
Conclusion:
Through this study, it has been concluded that the financial and non financial both the factors of the company are not in the favour of the company. The performance of the company has been lowered very rapidly from last 3 years due to many changes into the policies of the company, many internal factors and external factors of the company as well as due to economy breakdown. Thus it could be concluded that there are more chances of the company to be bankrupted and so the investors are not advised to invest into the company.
References:
Annual Report. (2014). Dairy Crest Group Plc. Retrieved from https://www.dairycrest.co.uk/~/media/Files/D/Dairy-Crest-Group/documents/annual-report-2014.pdf as on 25 Aug 2017
Annual Report. (2015). Dairy Crest Group Plc. Retrieved from https://www.dairycrest.co.uk/~/media/Files/D/Dairy-Crest-Group/documents/annual-report-2015.pdf as on 25 Aug 2017
Annual Report. (2016). Dairy Crest Group Plc. Retrieved from https://www.dairycrest.co.uk/~/media/Files/D/Dairy-Crest-Group/documents/annual-report-2016.pdf as on 25 Aug 2017
Annual Report. (2017). Dairy Crest Group Plc. Retrieved from https://www.dairycrest.co.uk/~/media/Files/D/Dairy-Crest-Group/documents/annual-report-2017.pdf as on 25 Aug 2017
Bartram, S. M., Brown, G. W., & Fehle, F. R. (2009). International evidence on financial derivatives usage. Financial management, 38(1), 185-206.
Brammer, S., Brooks, C., & Pavelin, S. (2006). Corporate social performance and stock returns: UK evidence from disaggregate measures. Financial management, 35(3), 97-116.
Brigham, E. F., & Ehrhardt, M. C. (2013). Financial management: Theory & practice. Cengage Learning.
Brigham, E. F., & Houston, J. F. (2012). Fundamentals of financial management. Cengage Learning.
Brigham, E., & Daves, P. (2012). Intermediate financial management. Nelson Education.
Corporate Governance policy. (2017). Dairy Crest Group Plc. Retrieved from https://www.dairycrest.co.uk/investors/corporate-governance.aspx as on 25 Aug 2017
Higgins, R. C. (2012). Analysis for financial management. McGraw-Hill/Irwin.
Jensen, M. C. (2005). Agency costs of overvalued equity. Financial management, 34(1), 5-19.
Morningstar. (2017). Dairy Crest Group Plc. Retrieved from https://financials.morningstar.com/cash-flow/cf.html?t=DCG®ion=gbr&culture=en-US as on 25 Aug 2017
Öcal, M. E., Oral, E. L., Erdis, E., & Vural, G. (2007). Industry financial ratios—application of factor analysis in Turkish construction industry. Building and Environment, 42(1), 385-392.
Shapiro, A. C. (2008). Multinational financial management. John Wiley & Sons.
Van Horne, J. C., & Wachowicz, J. M. (2008). Fundamentals of financial management. Pearson Education.
Vogel, H. L. (2014). Entertainment industry economics: A guide for financial analysis. Cambridge University Press.
White, G. L., Sondh, A. C., & Fried, D. (2005). Analysis of Financial Statement. Analysis
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