Good Report On Financial Information: Coursework Assignment

This coursework is to be prepared as an individual assignment. Each student is required to answer all questions below using the published information of Greencore Group Plc, which is provided as a separate pdf document on Blackboard. The coursework weighting towards the final module mark is 70%. Your work will be marked on the basis of a) the accuracy of your calculations, b) the quality of the analysis provided and, c) the presentation of your report, which must be prepared in a professional manner.
Please make sure that you also look at the notes to the financial statements to verify/obtain the correct figures for certain items (i.e. inventory, trade receivables, trade payables, etc). In case there are two sets of accounts, i.e. consolidated and company accounts, please use the group accounts for the calculations of the ratios. Where applicable, use the basic EPS figure. The closing share price on 27 September 2013 was 145.5p. The closing share price on 28 September 2012 was 79.98p.

Please use the following guidelines:

The report must be entirely your own piece of work. In particular, the University’s rules on plagiarism must be followed

Question 1:

What is (are) the principal activity(ies) of this business?
Greencore PLC is an international producer of convenience food products and is the largest sandwich manufacturer in the world. The company is headquartered in Ireland and offers wide range of food products to retailers and food service customers.

Question 2:

Comment on the outcome of the auditor’s report for Greencore Group Plc. Briefly discuss the importance the auditor’s report with respect to financial information.
The renowned audit firm, KPMG, serves as the external auditors of the company and their report has been duly included in the annual report of the company.
The auditors have stated that all the financial information in the financial statements are unmodified while the financial statements give true and fair view in accordance to the IFRS accounting standards so practiced in European Union. In addition, the auditors have stated that the financial statements also adhere to the GAAP accounting standards practiced in Ireland and have been prepared in accordance to the Companies Act and IAS 4 regulation.
Important to note, the report of external auditors carries great significance as it is only through the external audit of the financial statements, creditability of the financial information is established. It is the external auditors that ensure that all the information in the financial statements is true and is not manipulated. In this way, the shareholders of the company are assured that the financial statements do not carry any window dressing and they can endow their investment decisions using the financial statements.

Question 3:

Compute the following ratios, using the table provided below as a template:
Question 4
Calculate the yearly percentage change in the following items stating, in each case, whether the change is a rise or fall:

Sales

Operating Profit
Share Price: Sourced from Yahoo Finance
Question 5
Comment and reflect upon the ratios and percentage changes in items computed in your answers to questions 3 and 4.
Noted from the above calculations we can notice that the company has witnessed an appreciable surge in sales, operating profit and share price. However, in order to have an in-depth opinion over the financial position of the company, we conducted the ratio analysis and found the following results:
Liquidity Analysis: Referring to the current ratio of the company, the multiple increased from 0.45 to 0.53 indicating a strong liquidity position this year. However, when compared to the industrial average of 1.70, the results are highly unsatisfactory indicating that the company still needs to work a lot over its working capital position to be atleast in alignment with the industrial average.
Profitability Analysis: Referring to the profitability position of the company, although a marginal decline was witnessed in the gross profit margin that declined from 30.09% to 29.98%, however, the net profit margin provided a satisfied outcome as the multiple increased from 3.06% to 5.99%. In addition, the profit margins multiple were well above the industrial averages.
Even the shareholders of the company will be ecstatic to witness the ROE multiple jumping from 17.76% to 28.46% and surpassing the industrial benchmark of 19%.
Solvency Analysis: As for the solvency position, the gearing ratio of the company declined from 1.43 to 0.81 indicating that the company now operates under lower debt cloud, however, in comparison with the industrial average of 0.04, the multiple is yet again significantly high.

However, on the individual basis, reduced financial leverage indicates better solvency position for the company.

Efficiency Analysis: Our final step in the ratio calculation was to ascertain the efficiency position of the company. While the inventory turnover period declined from 24 days to 23 days indicating that it take less time for the company to process and sell their inventory, the major concern was the payables period that extended till 132 days as against the industrial average of 20 days only.
Thus, while the overall position of the company was encouraging and appreciable, it was only the high payables period that raised our concerns.

Question 6

Using the DuPont analysis technique, evaluate and comment on any changes in profitability (ROE) from 2012 to 2013. In particular, use the DuPont method to assess which aspects of the company’s performance have played a key role on the change in its profitability (if any).

ROE2012: (Net Income/ Revenue)* (Revenue/ Total Assets)* (Total Assets/ Total Equity)

= (35623/1161930)* (1161930/1018938)* (1018938/200519)
= 0.03* 1.14* 5.08
= 17.37%

ROE2013: (Net Income/ Revenue)* (Revenue/ Total Assets)* (Total Assets/ Total Equity)

= (71739/1197099)* (1197099/1018938)* (1018938/252047)
= 0.059* 1.17* 4.04
= 27.90%
As noted from the above calculations, we can notice that over a year, the company have improved profitability multiple with ROE surging from 17.37% to 27.90%. In addition, by decoding the ROE multiple we have found that the increased profitability has been sourced from higher net profit margins, better asset turnover and reduced financial leverage. This indicates an appreciable performance during the year.