Britain Manufacturing Sector - Business Performance at Britvic PLC - Case Study Example

?REPORT ON FINANCIAL PERFORMANCE OF BRITVIC A Brief Overview Manufacturing Fast Moving Consumer Goods (FMCG) Sector: The Britain Fast Moving ConsumerGoods or the Manufacturing sector lost momentum considerably during February 2013 since the output, new orders, and employments suffered a downturn. The sector encountered a sharp reduction in the purchasing activities during 2012. Preference for reduced stock holding and a lower new order has led to a sharp cut in purchase activities. The deceleration in the manufacturing sector owes its root to the high rate of job shedding marked from July 2011 which was highest during 2012. As a cascading effect the production activities suffered. There were reports of spare capacity which in turn resulted into massive employment cut during 2012. New exports reduced considerably. As a result the growth in the manufacturing sector or FMCG sector has fallen steeply during 2011 to 2012 (Chartered Institute Of Purchasing and Supply, 2 April, 2013). Manufacturing activities lifted a bit higher towards the end of 2012 but rate of expansion was marginal and weak. The reasons behind it were cost inflation acceleration in Eurozone and rise in average input price hitting an eight month high (Chartered Institute of Purchasing and Supply, January 2013). The downturn UK economy was suffering came to an end during December 2012 with level of production and new orders rising at a faster rates. Reportedly highest gains were made by Britain’s consumer goods producer. It has been predicted if the recoveries in the overseas market continue to build during then Britain exporters are expected to make out huge profit out of it (Chartered Institute of Purchasing And Supply, December 2012). A Brief Summary of Company Business and Principal Activities: Founded in 2005, Britvic Plc has been one of the leading soft drinks companies of Europe with a diversified portfolio and market leading brand such as Robinsons, J2O, tango and Drench in GB; MiWadi, Club and Ballygowan in Ireland; Teisseire, Fruite and Pressade in France. The country mainly operates from three countries namely Great Britain, Ireland and France. It has got a dominant export market in countries like Finland, Netherlands, Norway, Denmark and Sweden. In addition to this they export in other 50 countries and has got brand franchisee in United States, Australia and Malta. The Company believes in growth through organic and international expansion. The company has grown so much in the short span due to great strategic planning. “Their ambition is to grow their group together EBIT margin by an average of 50bps per annum from2009-2013” (Britvic plc, n.d.). They follow an expansion of 2-3% every year. The company gives prime focus in closing distribution gaps in all routes to market. Britvic started acquiring independent still business since 2010.They acquired Friute business in France with leading brand such as Teissiere and Pressade. This was followed by the prime acquisition of A.G. Barr during September 2012. The company’s excellent performance during this short span demonstrates their ability to grow in business and create shareholders wealth (Britvic plc, n.d.). An Overview of Financial Performance Data and Ratios: SNAPSHOT OF FINANCIAL POSITION OF BRITVIC PLC NAME FORMULA CALCULATION 2012 2011 Net Profit Ratio (Net Profit/ Net Sales) 0.061703822 0.061937984 Return On Capital Invested (Adjusted Net Profit/Capital Employed) 0.118501529 0.118545994 Price Earnings Ratio (Market Value Of Share/ Earning Per Share) 15.2941176 Data Insufficient Current Ratio (Current Asset/Current Liability) 1.02425876 0.984615385 Capital Gearing Ratio (Equity Share Capital/ Fixed Interest Bearing Funds) 0.327546089 0.327983252 Debt Equity Ratio or Long Term Borrowing Ratio (Total Long Term Debts/ Shareholders Fund) 8.439577039 9.055292259 (Tracy, 2012) The above table gives a snapshot of the company’s financial position during the two fiscal years. The net profit ratio didn’t suffer any change within the two fiscal years. But the revenue had eroded down from ?1290 to ?1256 during 2011-2012. Net Profit Ratio was not on the higher side in both the fiscal year. This indicates that the company didn’t have much cost benefit over its competitors resulting into low profitability. Capital employed ratio show the relationship between adjusted net profit and the capital employed. It indicates the efficiency of management through overall performance of the company. ROI of Britvic was on the average side but steady. The dividend payout accounted for ?29.9 in 2012 which was ?28.3 in 2011 but the net profit was lesser in 2012 than 2011. Earnings per share have decelerated by 2.05% from the previous fiscal year. Number of employees had improved in 2012 owing to the merger deal with A.G. Barr which made the earnings per share fall from 2011-2012. Price earnings ratio is as an assessment tool to the investors. It’s a yardstick which decides whether to invest in the company or not by analyzing the appreciation per value of share. The PE ratio for 2012 was 0.15 which indicates the market value of every one pound of earnings is 15.29. The earnings per share were ?23.8 and market value was ?364. Technically the share prices should have been ? (15.29*23.8) =?363 which is same as the prevailing rate. Current Ratio in both the years is average which indicates a moderate liquidity position. Capital gearing ratio is constant and towards the lower side indicating the company is taking lower risk. It is prominent from the figure that the company is a low geared firm. The debt accounted to 84% in 2012 and 90% during 2011 with respect to shareholders fund. Theoretically higher debt equity ratio indicates poor position of firm with lower liquidity. My Conclusion to the Financial Prospect of the Company: Britvic plc has gone through a recent acquisition so there is a downturn in the revenues. The PE ratio is satisfactory and possibility of rise in share prices is there. The company is recommended to lower down its debt equity ratio if that fits the policy of the company. Capital gearing ratio maintains a dividend uniformity which the company should continue with. So it can be concluded the company is in a sound position and is expected to perform better in future with farther acquisition. References 1. Britvic plc, (n.d.) available at http://www.britvic.com/company-profile/financials/track-record.aspx (accessed on June 22, 2013) 2. Chartered Institute Of Purchasing And Supply, (2 April, 2013), Return To Contraction Of UK Manufacturing Sector In February, available at: http://www.markit.com/assets/en/docs/commentary/markit-economics/2013/Mar/GB_Manufacturing_ENG_1303_PR.pdf (accessed on June 22, 2013) 3. Chartered Institute of Purchasing And Supply, (January 2013), Global economic growth at nine month high in December, available at: http://www.markit.com/assets/en/docs/commentary/markit-economics/2013/jan/GLOBAL_Composite_ENG_1301_PR.pdf (accessed on June 22, 2013). 4. Chartered Institute of Purchasing And Supply, (December 2012), Manufacturing production and new orders expand in December, available at: http://www.markit.com/assets/en/docs/commentary/markit-economics/2013/jan/GB_Manufacturing_ENG_1301_PR.pdf (accessed on June 22, 2013) 5. Tracy A, (2012), Ratio Analysis Fundamentals, Ratioanalysis.net Read More