Financial Analysis - Ted Bakers - Case Study Example

Table of Contents Executive Summary 2 Introduction 3 SWOT Analysis 4 Inter-firm & Industry analysis 7 Profitability Analysis 7 Inter-Firm Profitability Ratios Analysis 8 Income Statement Analysis 15 Common Sized Income Statement 15 Common size Income Statement analysis 15 Horizontal Income Statement Analysis 16 Industry Analysis 17 Passport Brands Inc vs. Industry 17 Ted Bakers plc vs. Industry 17 Conclusion 18 Bibliography 19 Appendix A 21 Appendix B 24 Appendix C 26 Executive Summary It is extremely important for an investor to carry out a thorough comparative analysis between two firms as well as the industry in order to select the most optimal portfolio. This assignment includes a similar sort of analysis normally conducted by investors while they choose to invest in companies in order to create a portfolio. Financial ratio and SWOT analysis have been in the assignment. The study reveals that Ted Bakers should rather be chosen by investors in order to be included within the portfolio instead of including passport Brands. The underlying reason behind this choice is the return on equity promised by the former. In addition, the SWOT analysis revealed that Ted Baker holds an advantageous position when compared to its competitors whereby it can augment its profits and increase the returns to the investors. The study concludes that investors should rather opt to invest in Ted Bakers as: The company has proven to be more profitable as demonstrated by its return on equity. The higher ROE of Ted bakers have been stimulated due to greater RNO ratios. The company has lesser financial obligations as shown by the FLEV ratios and therefore the company can translate the revenues to profits without incurring much expense. Ted Baker has lower NBC ratios which indicate that the company does not incur much cost while servicing its debt obligations. In that way the managers are able to guarantee maximum return to the shareholders. As far as turnover ratio and operating margin is concerned, Ted Bakers has exhibited a better performance than Passport brands due to improved asset utilization and expense control. Introduction Analysis of a company’s financial position is one of the most fundamental activities conducted by internal as well as external stakeholders in order to have a good idea of the performance demonstrated by their company of choice. According to Gibson (2012), the underlying reason behind such analysis is that it allows investors to adjudge the prospect of a company in terms of its ability of generate returns for them (Stoltz, 2007). This statement justifies the importance of financial analysis and why it should be considered by investors before making any form of investment. Financial statements are one of the most important ingredients for financial analysis. This is because the figures in the statements depict the financial performance of a company. The information provided within the financial statements paves a way for a thorough comparative analysis between companies which allows investors to choose the company with the best prospect within the portfolio (View, 2007). This is precisely the reason why the researcher has decided to conduct an inter-firm and industry analysis in this paper with the help of financial analysis. Company financials have been taken into consideration while calculating financial ratios over the last five years. Two companies Ted Baker plc and Passport Brands belonging from the US and the UK respectively have been considered for analysis in this study. SWOT Analysis Both Ted Bakers Passport Brands have their own strengths, weaknesses, opportunities and threats. These factors are induced largely due to the internal and external environment that they operate in. One of the major strengths of Ted bakers is that the company has been able to generate higher revenues every year and they have successfully translated those revenues in the form of greater profits. A comparative financial analysis between Ted Bakers and Passport Brands reveals higher revenue and profitability figures for the former. Such stable figures provide ample scope to the managers to develop and expand in the industry. In addition, Ted Bakers has been able to benefit from lower labor cost as a result of the technological advancements induced in their operations. In that way the organization is able to devise more expansion strategies due to lower operational cost which in turn contributes towards the increasing profit margin. Nevertheless, alongside these strengths lies the intensely competitive European market which has proven to be a barrier towards the company’s development and as a result has been regarded one of the company’s biggest weaknesses. Besides that the management attributes have proven to be another weak link of the otherwise successful organization. The managers have failed to establish a stable relationship with the employees which in turn have led to several trade disputes within the organization thereby hindering the organization’s potential to prosper. In addition to that, Ted Baker’s limited size range for its clothing products has been severely criticized. This has proven to be one of the major weaknesses for the company precisely because the company is not being able to fulfill the size requirements of many customers. Alongside that Ted Bakers also lacks any maternity and teenage range. As a consequence, many customers return unsatisfied which in turn has affected the company’s revenue stream. Lack of marketing campaigns has affected the brand awareness of Ted Bakers severely. Given the fact that the company does not advertise its products, the brand is unknown to many people. Nonetheless, the consistently increasing purchasing power of European population is a sportive sign for the company as they are the potential customer base which can become a sustainable source of revenue and henceforth profit for the company. The European market is considerably large which provides the manager of Ted Bakers with ample opportunities to market and place its products appropriately with the underlying aim of attaining sustainable competitive advantage. As far as the threats are concerned, the increasing prevalence of Chinese companies in the textile industry can be considered as a big challenge for the likes of Ted Bakers. Chinese companies are benefiting from the cheap labor available in their home country which in turn has increased their textile production by a drastic level. They have started exporting textiles at a lower price with the underlying objective of becoming the market leader. The entry of new smaller companies from other parts of the world has also proven to be a barrier in the path towards expansion and development for Ted Bakers. The international market has become receptive to textiles manufactured by countries like China and this has become a growing threat for Ted Bakers. As far as the strengths of Passport brands is concerned, word of mouth promotion of the company’s products is the first contender in this category. The company has gained increased market coverage due to its marketing strategies which in turn has boosted the brand’s word of mouth promotion not only in the physical world but also in the digital domain such as social media platforms. Effective marketing strategies have allowed the firm to attain a robust source of competitive advantage against its competitors and thus enabled the company to survive in this intensely competitive business environment. In a similar manner the company’s customer relationship management strategies have also proven to be highly effective. The strategies have enabled the managers to enhance its brand image and awareness which in turn has provided the company with ample scope to reinforce market penetration. As far as weaknesses are concerned, lack of product innovation is one integral aspect associated with the company in this category. The managers have not been able to devise an appropriate product innovation strategy which has deteriorated the company’s position in the market. The invariable economic scenario in the UK has proven to be another weakness for Passport brands. Inflation has resulted in an increase in the cost of goods which in turn has augmented the cost of sales for Passport Brands. This has affected the company gross margin substantially. Such an economic scenario has put the company in a disadvantageous position as in order to fulfill its promise of maximizing shareholder returns the company might have to sell its products at a premium price. This in turn may deteriorate satisfaction level of customers. Besides that an inappropriate market segmentation strategy has restricted the company’s options of optimal market penetration. In addition, the company’s limited product range has affected its revenue stream considerably which in turn restricts its scope of translating the revenue into greater profit margins. As far as opportunities are concerned, the recent acquisitions made by the company in South America and Asia can certainly be considered as the Passport Brand’s stepping stone towards success. Not only will these acquisitions allow the company to expand globally but will also allow them to tap unexplored market and gain fast movers advantage. In addition the firm can also benefit from the cheaper source of labor from the South American and Asian countries which in turn will improve the company’s profit margin. Besides that the liberalization of the market in Europe as well as the prevalence of the free market economy in majority of the European countries provide ample scope to Passport Brands to expand its business in the European market. The unfavorable economic scenario in the US induced by the increasing rates of interest is a major threat to the prosperity of Passport Brand. This means that the company will incur higher interest expenses if is seeks funds from external sources. Therefore, an increasing rate of interest reduces the company’s scope of funding its operations through a cheaper source of capital. Such invariable economic circumstances may hinder Passport Brand’s operations and may affect the company’s profit margins in the future. Inter-firm & Industry analysis The financial statements of both Ted Bakers and Passport Brands were prepared according to the researcher’s convenience. The financial figures were categorized into two segments namely income and expenses from financing activities and operational activities. These segmented financial statements were then considered for the financial analysis of both the aforementioned companies. The segmented financial statements enabled the researcher to make a precise analysis of Ted Bakers and Passport Brand’s financial position. Primarily financial figures from balance sheet and income statement were used for the porpoise of conducting the financial performance analysis. The underlying reason being the appropriateness of these two reports in depicting the financial performance of companies. Besides that the researcher has also used the return on equity (ROE) model in order to compare the returns generated for shareholders by both the companies. Profitability Analysis In order to conduct inter-firm comparative analysis, the researcher has evaluated the financial and accounting figures of Ted Baker and Passport brand reported in their respective financial statements. By analyzing the financial position of Ted Baker and Passport Brand the researcher was able to assess the ability of the companies to maximize value for the shareholders (Wahlen & Brown, 2010). The financial ratios of both the companies have been reported in table 1 of appendix A. These ratios were calculated using the reformulated financial statements and reflect the extent to which these companies have generated profit over the last five years. The profitability figures for both the companies have been compared with the help of graphical figures which enabled the researcher to analyze the performance trend over five years. As a result the researcher was able to prepare a detailed report for a prospective investor. Inter-Firm Profitability Ratios Analysis Figure 1 given below depicts that Ted Baker has proven to be considerably profitable when compared to Passport Brand. This implies that potential investors should expect to earn greater returns by investing in Ted Baker rather than investing in Passport Brand primarily due to the superior return generating potential of the former. The profitability ratios of both the companies have been determined through financial figures that drive the profits of a company (Sinha, 2009). Return to common equity holders has served as one of the primary determinant of a company’s ability to generate profit for the shareholders in this report. This ratio depicts the return realized by investors on their capital investment towards a particular company. The figures have been reported accordingly in table 1 of appendix A. Figure 1: ROCE The ROCE figures of both the companies represent a far superior performance demonstrated by Ted Baker over the last five years when compared to passport Brand. Ted Baker has kept its promise of maximizing value for the shareholders. That is why its investors expect the company to continue to exhibit a consistent performance in the future. The ROCE of Ted Baker has rather followed an upward trend over the last five years. On the contrary, the ROCE figures of Passport Brand have followed a downward pattern during the same time frame. As a consequence, investors who have invested their capital behind Ted baker should expect to earn greater returns compared to investors who have invested in the shares of Passport Brand (Brigham & Houston, 2009). ROCE for both the companies have been derived from profit driving factors of both the companies. The analyses of financial liability leverage (FLEV) also depict Ted Baker’s ability to generate greater ROCE when compared to Passport Brand. Return on Net Asset is another determinant of a company’s profitability (Warren, 2001). That is why the researcher has considered evaluation this ratio in order to analyze the financial position of both the companies. According to Ingram & Albright (2009), RNOA is the quantifier of a company’s ability to generate profit by utilizing its assets. As is evident from figure 2 given below that Passport Brand’s RNOA decreased drastically between 2011 and 2014. This highlights that the company has not been able to utilize its assets effectively which in turn has deteriorated its net income. On the other hand, Ted Baker’s RNOA has stayed relatively stable which in turn shows that the company has used its assets effectively in order to keep its income level steady. In that way they are able to restore the confidence of the shareholders by conveying their ability to keep up to the promise of generating greater returns. The RNOA figures for both the companies have been reported in table 1 of appendix A. Figure 2: RNOA According to Rajasekaran & Lalitha (2011) optimal asset allocation and utilizaiton is one of the fundamental determinants of sustinable competitive advanatege. This theory has proven true for Ted Bakers as is evident from the company’s RNOA figures depicted in figure 2 given above. Financial leverage ratio also referred to FLEV ratio is a measure of a company’s debt obligations with respect to its shareholders’ equity (Stittle & Wearing, 2008). It provides a good representation of a company’s capital structure as to how much of the company’s operations are funded using equity and how much is funded using equity (Wahlan, Baginski, & Bradshaw, 2010). As a consequence a higher value would indicate that a company is due to pay greater amounts of obligations (Woelfel, 2009). Incurring a greater FLEV ratio will affect a company’s net income severely thereby deteriorating the comprehensive income attributable to shareholders (Graham, 2007). Figure 3: Financial Leverage ratio As is evident from figure 3 given above the FLEV values of Ted Baker is considerably lesser than that of Passport Brands. In fact the value for Ted Bakers has remained largely stable when compared to that of Passport Brand. This shows that Passport Brand had a greater exposure to debt obligations than Ted Bakers (Sondi & White, 2007). This plugged a hole in the company’s profit margin which affected the profitability ratios significantly (Costales, 2008). In fact having such a mammoth exposure to debt obligations increases the company’s chances of being insolvent (Gibson, 2012). However, the same cannot be said for Ted Baker as its FLEV has stayed relatively low and stable which in turn has enabled the managers to boost the earnings (Stickney & Weil, 2009). Spread ratio is considered as another significant driver of a company’s profitability (Buffett & Clark, 2008). It depicts the difference between operating assets profitability and the cost of external capital (Moyer, 2012). Therefore a greater differential margin implies that a company has successfully retained a major proportion of its income after paying off its debt obligations from external borrowings. The Spread figures for both the companies have been reported in table 1 of appendix A. Figure 4: SPREAD Figure 4 given above depicts that the spread ratio of Ted Baker is comparatively higher than that of Passport Brand. This implies that Ted Bakers have been a able to retain a major proportion of its income as a result of lesser debt obligation amounts compared to Passport Brand. This highlights that Ted Baker has borrowed from cheaper source of capital which is why it had lesser debt obligations (Dandago, 2009). However, the same was not true for Passport Brand. The invariably rising interest rate consumed a major proportion of the company’s income which is why the differential margin decreased drastically for Passport brand between 2013 and 2014 (Lewis & Pendrill, 2006). The net borrowing cost (NBC) figures also reveal a similar scenario that has been explained through the analysis of spread ratio. The NBC for Ted Bakers is substantially lower when compared to the same figures generated by passport Brand. This indicates that Passport Brand is incurring a greater debt expense which in turn is decreasing its profit margin (Khan & Jain, 2010). The NBC figures for both the companies have been depicted in table 1 of appendix A. Figure 5: Net Borrowing Cost ratio (NBC) The operating profit margin and asset turnover figures for both Passport Brand and Ted bakers has been analyzed as a measure of second level ROCE decomposition. Operating profit margin is a measure of a company’s profits after it has paid off all operating expenditures. An increasing value of operating profit margin indicates that organizational managers have successfully implemented effective cost control plans thereby reducing the operational costs substantially (Wahlan, Baginski, & Bradshaw, 2010). This in turn helps the company to translate a maximum proportion of its revenues into profits (Narang & Jain, 2007). Figure 6 given below shows that Ted Baker’s operating profit margin has stayed relatively stable over the last five years whereas the value decreased drastically for passport Brand. This means that Ted Bakers has a greater control over its cost of operations while Passport Brand has lacked the same ability (Berman, 2008). Moreover, the rising cost of labor interests have contributed to decreasing operating profit margin for Passport brand. Table 1 provided in appendix A includes the profitability evaluation of Ted bakers and Passport Brands. The analysis reveals that the profit margin ratio of Ted Bakers has been comparatively higher than that of Passport Brands. This implies that Ted bakers will be able to distribute a greater income to the owners when compared to Passport Brands. As a result of this the return on capital employed of Ted Bakers is greater than Passport Brands. Figure 6: Profit Margin In a similar manner, the asset turnover of a company serves as a fundamental determinant of the firm’s ROCE. The ratio determines a company’s ability to generate sales by utilizing its assets optimally (Siddiqui, 2006). In other words it can be said that a higher asset turnover indicates greater operational efficiency (Vandyck, 2006). The asset turnover values of both Passport Brand and Ted Baker have reported in table 1 of appendix A. The graphical reorientation has been provided in figure 7 given below. As is evident from the figure 7, Ted Baker’s asset turnover increased gradually during the five year time frame whereas the values fluctuated significantly for passport Brand. It implies that Ted Baker has been able to use its assets effectively and generated greater sales when compared to values reported by Passport Brand (Brigham & Houston, 2009). The greater sales generated by Ted Bakers has contributed to the company’s increasing profitability between 2010 and 2014. Figure 7: ATO Income Statement Analysis In order to analyze the financial performance of the two companies the accounting figures reported within the income statement was considered. The analysis was conducted over a period of five years using common size income statements and horizontal trend. By doing so, the researcher was able to analyze the fluctuations in the accounting figures reported within the financial statement. Common Sized Income Statement The common sized income statement of both Ted Bakers and Passport brands depict the financial position of the companies. This has helped the researcher to comprehend the financial performance exhibited by these companies over the last five years. The accounting figures reported within the income statement have been compared with respect to the sales revenues generated by the respective companies in order to determine the extent to which the two companies were able translate revenue into profit. Common size Income Statement analysis After a thorough comparative analysis of the financial reported within the common sized income statement both the companies it was learn that the Ted Bakers profitability increased while Passport Brands profitability decreased gradually over the last five years. This trend for both the companies is evident from the income that has been attributed to the respective shareholders over the last years by both the companies. As far as the income attributable to common shareholders of Ted Bakers is concerned, the value has augmented from 8.25% of the net sales revenue generated in the year 2010 to 8.49% in 2014 as is depicted in the table given above. On the contrary, Passport Brand’s income attributable to shareholders followed a downward pattern decreasing drastically from -2.56% of sales revenue generated in 2010 to 42.04% in 2013. As a consequence, shareholders perceive Ted Bakers to be more promising when compared to Passport Brand. They believe that Ted Bakers has a better chance of increasing the returns to shareholders compared to its competitor Passport Brand (Refer to table 2 and 3 in appendix A). Horizontal Income Statement Analysis In order to conduct horizontal analysis of the income statement for both the companies, financial year 2010 was considered as the base year. This helped the researcher to track the movements of the accounting figures over five years using 2010 as year 1. Even the horizontal analysis reveals similar results to that of common sized income statement analysis. The study shows that Ted Baker has performed considerably better than passport Brands. This is evident from the increasing comprehensive income attributable to shareholders for ted Baker and Passport Brands. Although Passport Brands generated substantially high net income in the year 2013, it was not enough to subdue the consistent performance demonstrated by its peer Ted Baker. Ted Baker’s profitability ratios have improved consistently over the last fovea years and as such reveals that the company is more reliable in terms of having the ability to maximize the returns for the shareholders in the coming years when compared to Passport Brand (Refer to table 4 & 5 in appendix B). Industry Analysis Passport Brands Inc vs. Industry The researcher has also performed a comparative analysis of the profitability ratios generated by Passport Brand against that of the peer companies in the US apparel industry. The profitability ratios have been calculated and appropriately reported in table 7 of appendix C. A comparative analysis has revealed that the industry average figures are considerably better than that of Passport Brand. The industry average ROCE is substantially greater than Passport Brand and this has been the trend over the last five years between 2010 and 2014. This implies that while the industry on average has provided greater return to the shareholders, Passport Brand failed to keep up to this promise. Ted Bakers plc vs. Industry In a similar manner, Ted Bakers has also been analyzed against the peer companies operating in the same industry. The financial performance of Ted Baker is identical to the performance exhibited by the industry in an average. Even though Ted Baker failed to outperform the industry average, its financial performance stayed relatively stable over the last five years. The calculation of Ted Baker’s financial ratios and its comparison against the peer has been accordingly reported in table 6 of appendix C. Ted Baker’s ROCE has complimented the average ROCE generated by the industry. Such an identical performance implies a very effective and optimal performance demonstrated by Ted Baker which has contributed towards the maximization of shareholders’ returns. Conclusion Having conducted a thorough comparative financial performance analysis, investors are recommended to invest in Ted Baker’s shares and include this company within the portfolio of other companies. The underlying reason behind this fact the company has better prospects than that of Passport Brand not only because it has greater product range and market coverage, but also because of its ability to keep up to its promise of maximizing the value for shareholders. The break down analysis of the financial figures of both Ted Baker and Passport Brand reveals that the former has depicted a far superior performance over the last five years compared to the latter. Although Passport Brand has performed relatively better in some of the competitive markets by getting access to cheaper sources of labor and raw materials, but the SWOT analysis has revealed that the company lacks the ability to generated greater returns for the shareholders. Its product and marketing strategies are not as effective as Ted Baker which in turn has affected the company’s profit margin. Given the fact that wealth maximization is the primary purpose of all investors when they consider investing in a portfolio of companies, a rationale investor should invest in Ted Baker’s shares instead of Passport Brand. Bibliography 1. Berman, H. J. (2008). Ratio analysis: a technique for financial management in hospitals. 6th ed. London: Prentice Hall. 2. Brigham, E. F., & Houston, J. F. (2009). Fundamentals of financial management. Mason, OH: South-Western Cengage Learning. 3. Buffett, M. & Clark, D. (2008). Warren Buffett and the Interpretation of Financial Statements. 7th ed. Hoboken N.J: Wiley. 4. Costales, S. B. (2008). The guide to understanding financial statements. 4th ed. London: Palgrave Macmillan. 5. Dandago, K. I. (2009). Advanced accountancy: theory, method and application. 4th ed. London: Financial Times. 6. Fridson, M. S., & Alvarez, F. 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Appendix A Table 1: Drivers of profitability (ROCE)     2014 2013 2012 2011 2010 ROCE Passport Brands -5.02 0.15 0.49 0.51 -0.31 TedBaker 0.22 0.21 0.23 0.20 0.20 First-Level Decomposition   RNOA Passport Brands -2.61 0.13 0.39 0.37 -0.04 TedBaker 0.19 0.19 0.23 0.21 0.21     FLEV Passport Brands 0.90 0.32 0.34 0.55 1.95 TedBaker 0.20 0.07 0.00 0.00 -0.04               SPREAD Passport Brands -2.68 0.07 0.28 0.24 -0.14 (RNOA-NBC) TedBaker 0.16 0.16 0.52 0.70 0.28     NBC Passport Brands 0.07 0.06 0.11 0.13 0.09 TedBaker 0.03 0.03 -0.29 -0.49 -0.07     Second Level Decomposition   PM Passport Brands -0.42 0.04 0.08 0.09 -0.01 TedBaker 0.09 0.08 0.09 0.08 0.08     ATO Passport Brands 0.16 0.27 0.21 0.23 0.25 TedBaker 0.46 0.42 0.40 0.40 0.39 Table 2: Passport Brands Common size Income Statement   01/26/2014 % of Revenues 01/28/2013 % of Revenues 01/29/2012 % of Revenues 01/30/2011 % of Revenues 01/31/2010 % of Revenues Operating Income           Revenues 100.00 100.00 100.00 100.00 100.00 Cost of sales 69.25 58.76 58.23 60.68 64.85 Gross margin 30.75 41.24 41.77 39.32 35.15 Operating expenses 64.92 33.89 32.86 32.09 35.74 Other operating income (expense) -7.13 0.01 -2.10 0.03 -0.44 Operating income from sales(before tax) -41.30 7.36 6.81 7.25 -1.04 Taxes           Tax as reported 0.21 3.42 -1.41 -1.30 0.00 Other tax adjustments           Tax benefit on net interest 0.00 0.00 0.00 0.00 0.00 Operating income from sales (after tax) -41.51 3.93 8.22 8.55 -1.04 Dirty surplus items           Equity Earnings 0.00 0.00 0.00 0.00 0.00 Operating Income (after tax) -41.51 3.93 8.22 8.55 -1.04 Financing Expense (Income)           Interest expense 0.57 0.78 0.53 0.91 1.53 Interest income 0.04 0.01 0.01 0.01 0.00 Other interest adjustments           Net interest expense 0.53 0.76 0.52 0.90 1.52 less Tax benefit from Net Interest Expense           Preferred dividends           Net Financial Expense (after tax) 0.53 0.76 0.52 0.90 1.52 Minority interest           Comprehensive income to Common -42.04 3.17 7.70 7.64 -2.56   01/26/2014 % of Revenues 01/28/2013 % of Revenues 01/29/2012 % of Revenues 01/30/2011 % of Revenues 01/31/2010 % of Revenues Operating Income           Revenues 100.00 100.00 100.00 100.00 100.00 Cost of sales 34.07 35.14 34.87 35.07 37.54 Gross margin 65.93 64.86 65.13 64.93 62.46 Operating expenses 56.35 55.64 55.51 55.72 53.60 Other operating income (expense) 2.02 2.05 3.21 2.74 2.84 Operating income from sales(before tax) 11.61 11.27 12.83 11.95 11.69 Taxes           Tax as reported 2.88 3.11 3.70 3.65 3.40 Other tax adjustments           Tax benefit on net interest 0.00 0.00 0.00 0.00 0.00 Operating income from sales (after tax) 8.73 8.17 9.13 8.30 8.29 Dirty surplus items           Equity Earnings 0.00 0.07 0.09 0.05 0.05 Operating Income (after tax) 8.73 8.24 9.22 8.35 8.34 Financing Expense (Income)           Interest expense 0.25 0.10 0.03 0.09 0.20 Interest income 0.01 0.00 0.02 0.01 0.10 Other interest adjustments           Net interest expense 0.24 0.09 0.02 0.08 0.11 less Tax benefit from Net Interest Expense           Preferred dividends           Net Financial Expense (after tax) 0.24 0.09 0.02 0.08 0.11 Minority interest           Comprehensive income to Common 8.49 8.14 9.21 8.30 8.25 Table 3: TedBaker common size Income statement Appendix B   01/26/2014 GBP 01/28/2013 GBP 01/29/2012 GBP 01/30/2011 GBP 31/1/2010 01/31/2010 GBP Operating Income % % % % %   Revenues 166.69 141.24 122.95 107.16 100.00 152.66 Cost of sales 151.30 132.21 114.22 100.10 100.00 57.31 Gross margin 175.94 146.67 128.20 111.40 100.00 95.36 Operating expenses 175.21 146.61 127.33 111.39 100.00 81.83 Other operating income (expense) 118.97 102.15 139.35 103.67 100.00 4.33 Operating income from sales(before tax) 165.44 136.16 134.91 109.55 100.00 17.85 Taxes         100.00 0.0 Tax as reported 140.92 128.86 133.67 114.99 100.00 5.20 Other tax adjustments             Tax benefit on net interest 0.00 0.00 0.00 0.00 0.00 0.00 Operating income from sales (after tax) 176 139 135 107 100.00 12.65 Dirty surplus items           0.0 Equity Earnings 0.00 198.67 232.00 114.67 100.00 0.08 Operating Income (after tax) 174 140 136 107 100.00 12.73 Financing Expense (Income)             Interest expense 210.42 67.75 21.17 48.21 100.00 0.31 Interest income 23.29 4.79 23.97 6.85 100.00 0.15 Other interest adjustments 0.0 0.0 0.0 0.0 0.00 0.0 Net interest expense 380.12 124.84 18.63 85.71 100.00 0.16 less Tax benefit from Net Interest Expense 0 0 0 0 0.00 0.0 Preferred dividends             Net Financial Expense (after tax) 380.12 124.84 18.63 85.71 100.00 0.16 Minority interest             Comprehensive income to Common 172 139 137 108 100.00 12.59 Table 4: TedBaker Income statement Trend Table 5: Passport Brands Income statement Trend   01/26/2014 USD 01/28/2013 USD 01/29/2012 USD 01/30/2011 USD 01/31/2010 01/31/2010 USD Operating Income % % % % %   Revenues 56.19 124.18 125.77 121.78 100 66.23 Cost of sales 60.01 112.51 112.93 113.95 100 42.95 Gross margin 49.16 145.70 149.45 136.22 100 23.28 Operating expenses 102.06 117.74 115.61 109.35 100 23.67 Other operating income (expense) 911.58 -2.19 601.29 -9.00 100 -0.29 Operating income from sales(before tax) 2,240.46 -881.72 -826.40 -852.69 100 -0.69 Taxes             Tax as reported 0.00 0.00 0.00 0.00 100 0.00 Other tax adjustments         0   Tax benefit on net interest 0.00 0.00 0.00 0.00 100 0.00 Operating income from sales (after tax) 2,251.51 -428.93 -1,008.21 -1,024.09 100 -0.69 Dirty surplus items             Equity Earnings             Operating Income (after tax) 2,251.51 -428.93 -1,008.21 -1,024.09 100 -0.69 Financing Expense (Income)         100   Interest expense 21.13 63.25 43.61 72.76 100 1.01 Interest income 834.70 579.00 249.70 327.15 100 0.00 Other interest adjustments             Net interest expense 19.51 62.23 43.20 72.26 100 1.01 less Tax benefit from Net Interest Expense 0.00 0.00 0.00 0.00 100 0.00 Preferred dividends             Net Financial Expense (after tax) 19.63 33.25 50.06 85.22 100 1.01 Minority interest             Comprehensive income to Common 922.92 -153.80 -378.24 -363.74 100 -1.70 Comprehensive Income to Common as per Thomson 922.92 -153.80 -378.24 -363.74 100 -1.70 Appendix C Table 6: Average ratios of TedBaker’s Competitors Table 7: Average ratios of Passport Brands’ competitors DRIVERS OF PROFITABILITY (ROCE)   2014 2013 2012 2011 2010 ROCE Cherokee 0.62 0.70 5.34 1.30 0.63 Coach 0.43 0.49 0.51 0.45 0.34 Sequential 4.2977 0.9310 -0.5099 0.1258 -2.7216 Superior 0.08 0.05 0.07 0.06 0.03 Tandy -2.5206 -0.1368 -0.4357 0.0291 -0.3972 Average 0.58 0.41 0.99 0.40 -0.42 First-Level Decomposition RNOA Cherokee 0.25 0.43 0.89 1.30 0.63 Coach 0.44 0.49 0.50 0.47 0.34 Sequential -9.698 2.486 -0.945 -0.093 -0.658 Superior 0.06 0.05 0.07 0.06 0.03 Tandy -1.053 -0.059 -0.257 -0.045 -0.382 Average -2.00 0.68 0.05 0.34 -0.01   FLEV Cherokee 1.49 0.65 5.02 0.00 0.00 Coach -0.03 0.01 0.01 -0.05 0.02 Sequential -0.428 -0.375 0.418 0.001 0.365 Superior 0.36 0.00 0.01 0.00 0.00 Tandy 1.191 0.442 0.566 0.226 0.000 Average 0.52 0.14 1.21 0.04 0.08   SPREAD Cherokee 0.24 0.41 0.89 0.00 0.00 Coach 0.42 0.51 0.54 0.41 0.40 Sequential -10.6142 2.3573 -1.1129 -96.1196 -0.8921 Superior 0.06 0.00 0.04 0.00 0.00 Tandy -1.2324 -0.1763 -0.3152 0.3269 0.0000 Average -2.23 0.62 0.01 -19.08 -0.10   NBC Cherokee 0.01 0.02 0.00 0.00 0.00 Coach 0.02 -0.02 -0.04 0.07 -0.06 Sequential 0.916 0.129 0.167 96.027 0.234 Superior 0.01 0.00 0.03 0.00 0.00 Tandy 0.179 0.117 0.058 -0.372 0.000 Average 0.23 0.05 0.04 19.14 0.03 Second Level Decomposition PM Cherokee 0.26 0.30 0.25 0.39 0.39 Coach 0.20 0.22 0.21 0.20 0.19 Sequential -1.5817 -1.0563 -0.0944 -0.0129 -0.0927 Superior 0.04 0.03 0.04 0.04 0.02 Tandy -0.1540 -0.0193 -0.1007 -0.0161 -0.1126 Average -0.246 -0.106 0.061 0.119 0.080   ATO Cherokee 1.04 0.69 0.28 0.30 0.63 Coach 0.46 0.45 0.42 0.43 0.57 Sequential 0.1631 -0.4249 0.0998 0.1392 0.1409 Superior 0.65 0.48 0.55 0.58 0.58 Tandy 0.1462 0.3274 0.3915 0.3600 0.2949 Average 0.49 0.30 0.35 0.36 0.44 Read More