The A G BARR January 2015 Financial Statement Analysis - Case Study Example

Name Course Code Professor’s Name Date The A. G. BARR January 2015 Financial Statement Analysis Introduction The chairman of A. G. BARR in January 2015 noted that the financial performance of the company had been excellent since it recorded a double digit growth so much earlier before the market performance in totality could been determined. The chairman further reckoned than the results were due to the company’s commitment to be committed to offering a talented and committed team, differentiated brands, excellent execution, and a clear strategy (A. G. BARR 9). The company was in a good position to grow because it distributes powerful brands to an expandable consumption market. The company grows by focusing on how to deliver the values that it creates. A. G. BARR seeks to outgrow the competitors by embracing a strong culture of execution through mechanisms that could include backing the assets and owning its own brands. The January 2015 financial statement depicts the advances of the company to understand the tastes and needs of its customers. The diversity and consumer base of the company has grown as a result (A. G. BARR 10). The key performance indicators for the company show that the turnover growth is positive based on the extent to which the value of the recorded revenue has increased in the previous financial periods. The average revenue for every case the company sales are as well positive (A. G. BARR 13). A. G. BARR executed successfully its business and strategy model in the 12 months prior to the January 2015 financial year. The company fulfilled its objective to deliver a shareholder value that is always sustainable. The company outperformed many others in the soft drinks market by recording revenue growths of 2.7 percent by the January 2015. This paper discusses the manner in which A. G. BARR is a promising company to invest in since even the total pre-tax profit increased by 10% (A. G. BARR 14). The Excellence of the Company In the highlights of the company, A. G. BARR reported that it aimed at recording the best loved brands in Britain through innovation. The market conditions before the year 2015 were difficult but the company managed to deliver a financial performance that could be regarded as excellent. In addition, the company aims at building a required platform to ensure that it maintains a growth that is long-term, sustainable, and profitable. In 2014, A. G. BARR grew its turnover by +2.7% amounting to £260.9m. The underlying earnings for each share increased by 28.25p, which is an equivalent of a +4.6% increase. The amount of cash flow arose by £40.6m, which is a +7.7% increase. The profit before tax rose by £41.9m, an equivalent of 10.0% (A. G. BARR 1). Clearly, the company is focused on improving its international recognition and admiration. A. G. BARR featured one of its brands, IRB-BRU on the major Commonwealth Games Opening Ceremony of Glasgow in 2014 (A. G. BARR 2). The company strategically positioned a gigantic Forth Road Bridge that was made up of the cans used for the IRN-BRU product. The company as well designed a new IRN-BRU that is sugar free in 2014 and the design is close to IRN-BRU’s line (A. G. BARR 3). In the Commonwealth Games, the Strathmore brand of drinking water from the company was in the field, widely used by the supporters, games staff, and athletes viewed by many people (A. G. BARR 4). The company’s niche product and drink Rubicon grew by 3.4% to imply a solid performance for the year 2014. The company continued to benefit from the investment in its brands and its aim to continue focusing on the mainstream customer repertoires increased (A. G. BARR 5). The company as well proceeded to launch a potent product that it named BARR Xtra Cola. The launch of the product was favored by drive o the company to aim at value for money, quality, and innovation (A. G. BARR 6). A. G. BARR as well is geared towards enhancing and developing its partnerships. The company partnered with Rockstar, which leads in developing new flavors. The Dr. Pepper Snapple Group launched a new partnership with the company that led to the development of the product named Snapple in Europe and, especially, the United Kingdom (U. K.) (A. G. BaARR 7). The chairman, Nicolson, John R. noted that the management team of the company is committed and talented. The company has a clear strategy, differentiated brands, and an excellent execution. As such, the results of the company reflect the benefits that the company has accrued from the attributes (A. G. BARR 8). Company Progress Nicolson reported as chairman that 2014 was a year with a performance that was excellent in the company’s business. The total soft drinks market performance was well behind the sales revenue and profit growth before tax a double digit growth. The business made an important and positive growth in 2014. A. G, BARR is driven towards long term success. The company seeks to build assets while improving margins to promote growth based on its brands that are well supported. The 2014 financial statements show that the year was strong (A. G. BARR 8). The key performance indicators for the company showed that its EEBITDA margin was 18.8%, operating margin at 16.1%, Gross Margin at 47.3% and total turnovers growth was at 2.7% (A. G. BARR 12). The performance highlights were positive since the turnover growth that had been recorded in the previous period was less than the one recorded in January 2014. A. G. BARR recorded a free cash flow of £40.6m, which represents the net cash flow when the non-cash exceptional items, dividend payments, shares, and borrowings have been excluded from the net cash flow. The employed return on capital was at 24.0%. The return on capital represents the invested capital percentage. The performance on the capital is positive since it represents the non-current period end while excluding balances that are based on any provision minus the current assets. The company gained a £41.9m profit before the exceptional items and tax (A. G. BARR 13). The revenue growth prior to January 25, 2015 outperformed the soft drinks market comfortably by its 2.7% increase within 12 months. The company experienced a 10.0% increase in the total pre-tax capital and the operating margins were enhanced. The company drew many benefits from its improvements in structural operations. It achieved the benefits by making the cost of goods environment more benign, and improving the overhead cost control and overhead cost control. The company declares that in continues to invest in the core brand equities, operating infrastructure, executional capability, and innovation in the long term. Market Performance Towards the end of the financial period, the company plunged into a deflationary phase. However, the value growth increased by 0.4% with a volume decline of 0.2% as reported by Nielsen on measuring the United Kingdom soft drinks market. The weather was exceptionally warm in the prior year and it led to important developments in the 12 months. The volume of the carbonates experienced a 1.3% drop to follow the strong growth that had been seen in the prior year. However, the value of the carbonates increased by 1.0%. The volume growth for the still category reached 0.8% and the value declined marginally by 0.2%. The water category overtook the cola and drove the overall market as it became the largest category in volume and it was its first time to lead. The value of the energy sub-category grew to 4.1%. However, fruit juice, sports, and dilutes experienced significant declines. The areas that had traditionally been growing became available to become difficult to grow further. The statements imply that the preferences of the consumers are changing when taking into account all the preferences of all the soft drinks. The areas that are becoming appealing to the consumers to improve the growth of A, G. Bar through making differentiated brands are growing. In the 12 months prior to January 25, 2015, A. G. BARR reported that in grew all the core brands. The most significant growth was in the brands Snapple and Strathmore that showed a growth of 35%. The company recorded a robust performance on its carbonates as well driven by the still category. The growth reached 5.7%. It also recorded a 5.2% growth in Rockstar, which had grown by 60% in the previous year. Company Strategy A. G. BARR developed its strategy well in the financial period. The company focused on the opportunities for growth. The strategies focused on creating a meaningful value to the shareholders. The key areas that the company focused on include sustainability and responsibility, people development, efficient operations, partnerships, route to market, brand portfolio, and core brands and markets. The company continued to develop a program dubbed “Fit or the future” that was meant to internally support the overall ambitions or growth by executing key development projects and business improvement modalities. In the period, A. G. BARR successfully delivered multiple projects and initiatives in all the areas that it strategically focused on (A. G. BARR 14). Core Brands, Markets, and Innovation All the core brands grew in 2014 for A. G. BARR. The entire geographical platform continued the continued performance. The company managed to grow the sales by about 60% in Wales and England. It improved in the total international sales by 3.5%. The company’s position in Scotland grew in sales by 1.2% percent and it remained strong. The company reckoned that it would still be geared towards maintaining its future potential for growth in the United Kingdom and on the potential for the international segment that is increasing in its business. The total invoiced sales for IRN-BRU recorded a growth of 1.6% when the frozen products are included and the sugar free products contributed majorly. The sponsoring or the Glasgow 2014 Commonwealth Games significantly benefited the IRN-BRU brand’s growth. In the promotion, the company directed a lot of brand activity, consumer communication, and proportion. Consumer engagement was enhanced positively by the games activity. Consumer driven contact and the social media played a role that was increasingly important for A. G. BARR’s brand equity and ongoing development. The company strengthened the core consumers and brands by selling almost 1 million British Pounds the ice cream IRN-BRU sterling pounds (A. G. BARR 16). The York shire and Lancashire regions specifically recorded significant performance for IRB-BRU in Wales and England. The sales increased by 5.6% across Wales and England. In the market, Sugar Free grew by over 20%. Furthermore, A. G, BARR aimed to grow the levels of brand awareness and distribution into Wales and England in the following year. The company successfully delivered on its previous objective to grow ahead of its total growth the Sugar Free brands. The company managed to reduce its sugar content to exceed the pledge for the Government Responsibility Deal. The company as well declared that it aims to reach the targets of its responsibility deal targets by continuing to drive its portfolio development, product, and innovation plans. The performance of fruit juice had been poor in the financial period and it lead to a decline in the pricing and promotional activities. Nevertheless, Rubicon delivered a performance that recorded a 3.4% increase. The carbonates showed a robust performance along the portfolio of Rubicon with a growth of 8.1%. A 1.5% growth would reflect the juice market’s challenges in total. Increased brand investments kept on driving the penetration of Rubicon into the consumer repertoires in the mainstream market. The company focuses on innovation as a key mechanism for its potential for long-term growth. It launched the Rubicon brand in January 2015 to be one of the chilled flavor categories to follow the Coconut Water brand that it had previously launched. The strategy is important for the company because it attracts new consumers as it broadens the brand appeal to the occasions in shopping that are wider. Some consumers only choose juice drinks and or chilled juice. The markets that face consumer activity and specific brands would support the brands offered including Lychee, Guava, and Mango in the chilled Rubicon (A. G. BARR 17). The combination of value for money, quality, and innovation had enabled BARR’s flavored carbonates to grow year after year steadily. The company has stayed ahead of the market growth in carbonates because its growth is over 6%. A. G. BARR successfully launched Xtra Cola and it developed new formats and flavors, which helped in the development of the company’s strength. The growth of Strathmore was over 20% in the period in which its performance was outstanding. The brand’s benefit from the support of the commonwealth games is evident. Many athletes in the games enjoyed the brand and they interacted with it from all the aspects of the event. The company partnered with Scottish Rugby as well and it consequently strengthened the brand’s performance. It also launched the brand Strathmore Twist into the category of flavored water that was growing to expect a more robust future growth. A. G. BARR as well enhanced and developed its partnerships. Following the outstanding performance of the previous year, the company experienced a further growth in Rockstar. It appreciates its objective to facilitate innovation for the growth. It launches new concepts such as the Rockstar Energy Waters that combined the two important factors of energy and flavored water. The company as well extended partnerships to Scandinavia through the territory basis of Rockstar. The combination of the markets with the highly potential markets would encourage a portfolio with a partnership approach that is very successful (A. G. BARR 18). The company’s brand portfolio was excited by the Orangina brand in July 2014. The company partnered with the Dr. Pepper Snapple Group and they created a new brand Snapple on the wide European basis and the United Kingdom. The potential for A. G. BARR was very positive from the transfer of brand management to its business. Even though it was from a small base, the Snapple Sales of A. G. BARR grew by 35% in the United Kingdom. Therefore, the company had many exciting opportunities that would be utilized for growth from the brands in the existing portfolio that were geared to spread outside the United Kingdom in combination with the growth that would be profitably driven by the Snapple brand. The competition that exists between channels and outlets in the United Kingdom’s retail market are in a phase with significant changes. The competition between channels and outlets is growing and overlapping increasingly. The company focused on growing its “go to market strategy” to develop its competence and capability on a wider platform to diversify routes increasingly and manage multiple platforms to the route for it to reach the requirements for market success. The company invests in people, assets, and technology to ensure that it has a competitive advantage. The company is geared towards delivering a growth sustainable enough rom the in-market execution, which it regards as a vitally important tool in the process (A. G. BARR 19). Financial Review For A. G. BARR in January 25, 2015, all the key financial measures were positive to indicate a relative improvement in reference to the previous year. The company continued to record a reputation and performance delivery in the group’s track record as it established its strong governance of its finance. The increase in the Earnings per Share underlying was 28.25p, the return to assets increased to 24% up 155bp, the free cash flow increased to 24% up £2.9m, and the pre-exceptional items or profit before tax increased to £41.9m up 10.0%. In addition, the net margin increased by 16.1% up 100bp and the revenue increased to £260.m by 2.7%. The company successfully achieved 12 years of back to back profit growth. The bottom and top line annual growth compounded in five years reached 8.4% in profit before tax and 6.5% in turnover. The company claims that it made the achievements due to its business model that is simple and well executed. The Group’s strategy of the company remains to be focusing on driving the market share and distribution to all segments in the business. The results of the strategy are positive and can be proven by the increase of £6.8m in turnover and volume increases to more than 53m cases up 2.1%. The company combines favorable commodity markets, efficiency driven by capital investments, tight cost control, and operational gains to offset the intense promotional activities of the competitors (A. G. BARR 23). The net finance charges were £0.2m lower that those recorded or the previous year at £0.2m with the elimination of the operating net debt. The charge of taxes was at £8.6m, which was higher by £2.5 when compared to the previous year. The equivalent effective tax rate would be at 22.3%. The increase was, as such, 4.5pp, which is a reflection of rates in deferred tax that it enjoyed in the previous years. The earnings per share increased by 4.6% as it were at 28.25p. The increased tax charge’s impact diluted the strong operational performance. The balance sheet of the Group showed strengthening as the overall net assets grew to be £156m representing a 1% growth. The company recognized the pension adjustment of IAS 19 to offset the expansionary capital expenditure that had been significant. The main highlights in the balance sheet showed 155bp increase or 24.0%, a £10m increase in the non-current assets, and increase in inventory by 4.5%, a 4 to 69 day increase in trade receivable, a 25 to 47 day increase in the trade receivable days, a 6.9% revenue with £18.0m of total capital investment, a £18.5 m deficit in the valuation of triennial pension, and a year-end net cash position. A. G. BARR experienced a positive cash flow generating £40.6m, which represented a £3m increase from the year before. The exceptionally lower cash outflows and strong EBITDA was responsible for the increase. The company invested in long-term assets with more than £14m while distributing £13m as dividends to the shareholders. The year was closed with a £10.4m - £25.4m net cash balance in offsetting a £15.1m overdrafts and bank borrowings (A. G. BARR 19). Performance in the Previous Year The statement of 2014 by the chairman Hanna as well expressed a very impressive growth. The statement as well reported that the results of the Group performed excellently to exceed the total soft drinks of the United Kingdom. The company had showed growth in the exceptional items and profit before tax by 9.6%. The total sales of the company had risen to £254.1m or 6.9%. The year had been eventful because the company had terminated the merger that had been proposed to be undertaken with Britvic plc. Both boards had failed to agree on the competition commission and eventual clearance. The chairman had as well reported in the previous year that the business only aimed at prioritizing the Britvic deal’s potential distraction. She had stated that the company did exactly what it had aimed to do by controlling costs, seeking efficiency gains, driving the sales fundamentals, and building brand equity. The year had as well shown a financial year strong enough to facilitate the following year’s growth. The efforts to deliver the company’s financial plans, it engaged in several initiatives for improvement as it stated in its operational review. The company had aimed at maximizing the shareholder value and delivering a performance in the business that would be sustainable. A. G. BARR had experienced a time exciting enough to drive towards a growth that is sustainable. The company had aimed at creating a reliable platform for future growth. The chairman as well notes that the company had completed the Milton Keynes warehousing facilities and new production. The completion marked an important indication for the scope, capacity, flexibility, and capacity for future growth (A.G. BARR[b] 1). Performance in the Following Year The company reported by January 25, 2016 that the 2015 was a successful year even though it had been challenging for the company’s business. The markets had experienced significant changes and the pace for the development of tastes, shopping and communication, and habits and preferences continues to increase. In 2015, A. G. BARR grew in the total Group revenue from £260.9m in 2015 to £258.6m. The increase in statutory profit was at £41.3m, increasing from the previous £38.6m, which is a magnanimous increase of 7.0%. The company as well continued to give its cost base a tight control to ensure that it achieved advancement in its operating margins. The company implemented and implemented a more effective business model. It offered more investment to its footprint of supply chain. In addition, in the first year of owning the Funkin business, the business included a profit performance strong enough to accrue benefits. However, in 2015 the market performance encountered several challenges. The underlying purchasing power of the consumers that had been previously improved did not benefit the market for soft drinks in the United Kingdom. The year experienced a performance that would not be expected from the previous year’s analysis due to retail competition, poor summer weather, and the general price deflation that had been experienced. The value of market growth would decline with volume flat by 1.8%. The stills became up in volume terms but their value decreased by 2.0% and the carbonates decreased by volume and value by c.1.5%. Water continues to lead in giving the company growth even though it was offset by some carbonate areas, sports drinks, dilutables, and fruit juice. The subsector for carbonated energy only grew in volume y 1% in volume but in was flat in value (A. G. BARR[c] 9). Key Financial Indicators In spite of the difficult market conditions in the 12 months prior to January 25, 2015, A. G. BARR recorded positive growth in the key financial indicators. The brands produced by the company in the United Kingdom are leading and they include Strathmore water, Rubicon, and IRN-BRU. The important points include the 10.0% to £41.9m increase for the ordinary activity before the exceptional items and tax. The profit increased from the £254.1m of 2014. The Orangina brand’s loss incurred reduced the total turnover to 2.7% from the 3.3% that would have been achieved when it is excluded. The company enjoyed a particularly strong growth from Strathmore water in the stills segment followed by all the other core brands including Rubicon, BARR, and IRN-BRU. The company gained a financial position that is evidently robust. It showed a 24.0% increase in ROCE. The cash flow substantially underying arose to £40.6m. At the period end, the net cash position improved and it was at £2.1 net debt in 2014. The company also experienced an increase of 4.6% in the earnings underlying per share to reach 28.25p, which had been reported to be at 27.02p in 2014. The company also saw a positive progress across the Group in systems, infrastructure, and assets investment. Even though it later failed, the company’s aim to acquire Funkin Limited was predicted to be an opportunity to provide a category of new growth as from February 2015. For each share, the total proposed dividend increased to 12.12p from 9.01p per share, which would represent a 10.0 increase within the period. The chief executive proceeded to note that the company would continue to spearhead its focus of the people, assets, and people in the long-term (BARR [A.G.] PLC, 1). The Rise in Profits The A. G. BARR Company experienced a rise of the annual profits in a healthy manner, which would be mostly attributed to the Strathmore brand water. The increase in tax o £41.9m representing a 10% increase as reported by the Cumbernauld-based company provided the evidence for the growth. The outperformance of the Strathmore, Rubicon, BARR, and IRN-BRU core brands would be responsible for the increase of total turnover to £260.9m that represents 2.7%. The company warned against the market of soft drinks in the United Kingdom and prepared itself by being appealing to the consumers and developing differentiating brands. The Strathmore sales grew by over 20% and the sponsorship of the Glasgow 2014 Commonwealth Games boosted the growth. Most part of the profit was gained from Wales and England, where the sales increased by 5.6%. The sales as well increased by over 20% due to the brand’s version of a sugar-free product. The company oared 12.12p per share of the year’s total dividend above the 9.01p that had been recommended by the board. The financial results that would be experienced in the following year reflect the statement of Roger White, the chief executive, where the company was to expect challenging market conditions in the overall market conditions (Scotland Business, 1). Conclusion In the 12 months prior to January 25, 2015, A. G. BARR reported an excellent financial performance with a double digit growth. A. G. BARR executed successfully its business and strategy model in the 12 months prior to the January 2015 financial year. A. G. BARR grew its turnover by +2.7% amounting to £260.9m. The company is focused on improving its international recognition and admiration. The performance highlights were positive since the turnover growth that had been recorded in the previous period was less than the one recorded in January 2014. A. G. BARR reported that in grew all the core brands. The strategies of the company focused on creating a meaningful value to the shareholders. The company managed to grow sales by about 60% in Wales and England. The combination of value for money, quality, and innovation had enabled BARR’s flavored carbonates to grow year after year steadily. All the key financial measures were positive to indicate a relative improvement in reference to the previous year. In the previous year, the efforts to deliver the company’s financial plans drove it to engage in several initiatives for improvement as it stated in its operational review. In the following year, by January 25, 2016, the company reported that the 2015 was a successful year even though it had been challenging for the company’s business. As such, A. G. BARR is a promising company to invest in relation to its likelihood to continue growing its profitability. Works Cited A. G. BARR (a). Straight talking, Forward thinking, Results driven. Annual Report and Accounts January 2014. Web. 2nd March 2016. . A. G. BARR (b). Strong from the Inside Out. Annual Report and Accounts January 2016. Web. 2nd March 2016. . A. G. BARR. Building Brands that People Love. Annual Report and Accounts 24 March 2015. Web. 2nd March 2016. . BARR (A.G.) PLC. Final Results for the year Ended 25 January 2015. Web. 2nd March 2016. . Scotland Business. IRN-BRU maker AG BARR Reports Strong Rise in Profits. BBC News. Web. 2nd March 2016. . Read More