Financial Statement Analysis – A.G. Barr

Introduction

A.G. Barr p.l.c. is based in United Kingdom it maufacture, distribute, and sell soft drinks. A.G. Barr. operates in carbonates and H2O. Company has a broad scope of brand’s which includes IRN-BRU, Rubicon, Barr Brands, KA, Strathmore, Simply, Tizer, D’N’B, St. Clement’s, Findlays and Abbott’s. Company besides has some partnership trade names which includes Orangina, Rockstar and Snapple. The fabricating country located in United Kingdom. Findlays Limited, subsidairy of A.G. Barr P.l.c. , is engaged in Rubicon Drinks Limted and natural mineral H2O every bit good as the industry and distribution of soft drinks.

Schweppes International Limited is besides a franchise spouse of A.G. Barr p.l.c in United Kingdom, authorized for industries and sells Orangina. It besides has coaction with Rockstar Inc. in the United States to sell and distribution of energy drink, Rockstar trade name in Ireland and United Kingdom. The undermentioned pie-chart represent market portion of soft drinks and low Calorie drinks. They scheme have developed in a manner to deliever long term growing in value and concentrating on nucleus trade names and markets, trade name portfolio, path to market, partnerships, efficient operations, people development, sustainablity and duty.

Financial Review

The concern public presentation throughout 2013 of A.G. BARR has perform good in U.K soft drinks market particularly in 2nd half of the fiscal twelvemonth with dual digit growing rate. The economic conditions in the nucleus market sections survied troubles in 2012, every bit good as the increasing cost of publicity consequence borders. A.G.BARR growing rate for volume and gross increased more quickly so the market in carbonates autonomic nervous systems still sections.

The overall growing of softdrinks experient carbonates growing rate of 3.8 % in value but decreases in footings of volume, showed growing of 1.9 % with avolume worsening 1 % . In 2013 A.G. BARR carbonates volume increased by 6.0 % and gross increased by 7.1 % . On the other manus stills besides performed better with a growing of 4.3 % in gross and 4.1 % in volume. In add-on to delievering a growing higher so the market and much of the build plan associated with their new production and storage installation at Crossley Road, Milton Keynes.

The Milton Keynes site is an of import plus for future concern developments. Adverse whether status in 2012 wedged soft drinks class harmonizing to Nielsen research, reflects 0.7 % diminution while to volume grew by about 3 % . Conumer engagement in the carbonates class has remained at high degree supported by price-driven publicities across the chief trade names.

Ratios analysis over the last 3 old ages

1. Net income Margin:Harmonizing to the fiscal statements ended January 2013, Company declared a net income after revenue enhancement of ? 25.564 million which represent 10.76 % of its gross revenues. Current twelvemonth gross grew by about 7 % from anterior twelvemonth and 3.42 % on the footing of mean growing rate from the last three twelvemonth. Net income before revenue enhancement and exceeding point in 2013 increased by 4.3 % but net income border was somewhat reduced in 2013 as comparison to 2012, due to higher cost of goods. In 2012, observed as a clime of continued economic uncertainness and increasing cost. Despite these challenges company ‘s net income before revenue enhancement and exceeding point increased by 6.2 % from 2011. In 2011, Net income before revenue enhancement increased by 13.3 % from 2010. In 2011 AG Barr observed 10.4 % growing in gross as comparison to 7 % in UK soft drink market.
2. Current ratio:step the fiscal stableness of a company to pay its current liability. Harmonizing to the fiscal statement, in 2013 current ratio represent 1.31 ( in times ) therefore company has adequate to pay its fiscal duty. Current ratio in 2012 represent 1.46 ( in times ) which shows that company fiscal stableness in 2012 is better among 2011 and 2013.
3. Quick ratio:steps the fiscal stableness after subtracting stock lists and postpaid disbursal because they can non be easy converted into hard currency at just value. Quick ratio show clearer image so current ratio, the company’s fiscal stableness in 2012 of holding 1.043 ( in times ) as comparison to average 0.9 ( in times ) in the remainder of twelvemonth.
4. Working capital:is defined as the fiscal ability of a company to pay its short term duty. Working Capital is an of import factor used to mensurate its fiscal wellness. Working Capital Management is the scheme of a company to keep efficient degrees of both plus and liabilities to better their net incomes. It is calculated as current assets minus current liabilities. It involves direction of stock lists, hard currency, histories collectible and history receivable. Working capital is required to back up the twenty-four hours to twenty-four hours concern operation it is treated as life blood for smooth and effectual concern operations. Working capital in 2013 and 2011 is less as comparison to the 2012. In 2012 company has ? 20.934 1000000s more than its liabilities. Therefore in 2012 company has managed their twenty-four hours to twenty-four hours operations efficaciously.
5. Dividend:A.G. Barr’s efficient public presentation through the twelvemonth enabled them to administer per portion dividend. In 2012 company’s profitableness reflected in its dividend, declared ? 25.96 per portion, which is high through the remainder of old ages.
6. Inventory turnover ratio:measures the figure of times the company sold its stock list throughout the twelvemonth. AG Barr have stock list turnover of 6.51 ( in times ) in twelvemonth 2013 which means that company has 1.84 month of supply of stock list on manus. In 2012 and 2011, company has 2.02 ( in times ) and 2.05 ( in times ) months of supply of stock list on manus.
7. ROE & A ; ROA:Tax return on equity in 2013 is greater so return on plus by 12.55 % across the twelvemonth it means that company is using its plus absolutely every bit good as optimising its debt efficaciously. It besides shows that direction is bring forthing good consequence from shareholders’ investing.
8. Account receivable turnover:Account receivable shows recognition policy of a company harmonizing to which mean clip allow to client to pay their debt. In 2013, 12.64 yearss took to retrieve their recognition gross revenues. Among the three twelvemonth, in 2012 company was retrieving their gross revenues rapidly at the rate of 7.70 yearss as comparison to the remainder of old ages.
9. Operating Hazard:can be defined as the more the proportion of fixed cost and lower variable cost is said to be high runing purchase. A ratio which is normally used to find the consequence of operating purchase at given degree on the firm’s potency earning is calculated by spliting, % alteration in EBIT by % alteration in Gross saless.
10. Fiscal Hazard:is the usage to debt in it is calculated by spliting % alteration in EPS by % alteration in EBIT. Financial hazard is non dependent on gross revenues because whether a company has high or low gross revenues it has to pay fix involvement. By ciphering fiscal purchase of AG BARR it appears that merely 1 % alteration in EBIT, Earning per portion would alter by 0.93.
11. Preparation of fiscal statement:Fiscal statements of A.G. BARR p.l.c. have been prepared in conformity with International Financial Reporting Standards ( ‘IFRS’ ) as adopted by the European Union. They have been prepared under the historical cost accounting regulations except for the derivative fiscal instruments and the assets of the Group pension strategy which are stated at just value and the liabilities of the Group pension strategy which are valued utilizing the projected unit recognition method.

Financial markets and their impact

Fiscal market is a market where an person and corporation can merchandise fiscal securities, trade goods. This tabular array shows categorization of market and instrument through which corporations can raise financess.

Raising financess from equity market may take the investor to believe that the company fiscal flexibleness is weak, and they are unable to acquire financess from Bankss or other beginnings. Stock issue leads to reduced net incomes per portion. Raising capital from foreign investor involves two chief hazards which are relevant for foreign investor. They include economic hazard and political hazard. Economic hazard is less in states with strong and stable economic system state of affairs.

On the other manus political hazard is linked with the economic stableness of a state. Political determination and policies plays an of import function in an economic system. Political hazard besides called crowned head hazard, the ability of a company to pay its foreign fiscal duty. Hazard is defined as uncertainness. The indicant of hazard and wages guide the investor that it would hold a possibility to loss some or whole of its investing, an investor may see bullish tendency on his investing.

Hazard and return are straight correlated. The more you take hazard, the more the likely return is, because investor demands extra return for extra hazard. In finance this relationship is known as the security market line. Common stock and corporate bonds are two plus categories. Corporate bond is a debt instrument and common stock is equity. Corporate bonds and, TFCs are issued by a corporation and sold to investors. Government bonds are less hazardous so corporate bonds.

Common stock is riskier so corporate bond because if an organisation goes bankrupt, common stock holders get last precedence until debt holders and preferable stock holder have received their assets. But common stock holders have the possibility to gain greater or lower return as comparison to stable return on corporate bonds.

Equally far as A G BARR, capital construction for the last two old ages shows that debt weight-age of the entire plus was 42.64 % and 50.44 % in 2012 and 2013 severally. So the company has raised fund through debt in order to run into the fiscal demand of company. One of the major benefits by utilizing debt funding is revenue enhancement advantage and adoption has a fixed return to stock holder. It has positive impact on the house but because company failed to command its operating disbursals, net net income in 2013 is less than 2012.

Future Prospects

A.G. BARR has observed a healthy public presentation in a market place impacted by the mixture of really hapless summer conditions conditions and the go oning economic challenges faced by consumer goods companies, particularly natural stuff cost force per unit areas and unpredictable consumer demand.

Looking in front it is dubious that these challenges will significantly alter, nevertheless they remain carefully confident that the combination of our established operating theoretical account, continued focal point on efficiency, constructing trade name equity, sound balance sheet and ability for growing prospect go forth them good placed to go on to construct on this public presentation. In the twelvemonth in front, they expect some lessening in the gait of input cost rising prices which we expect to be at a low individual figure degree. Current market pricing for PET is down twelvemonth on twelvemonth, fruit mush costs are lower but the cost of sugar remains persistently high

Decision

A.G. BARR has delivered strong fiscal public presentation in disputing twelvemonth markets. Their merchandises continue to react good to equity investors. They have driven strong growing in gross and volume and have continued to increase market portion across the soft drinks market. Product and supply concatenation invention enabled Numberss of consumers to their trade names. They are farther puting in assets, geting extra capacity that enables them to turn harmonizing to consumer demands and in line with the market gait. Following a ambitious 2011, last fiscal twelvemonth survived with strong in footings of operational public presentation.

Last twelvemonth reported growing in merchandises handiness and client service has improved and cost managed efficaciously. During 2012 the possible amalgamation received overpowering stockholder support. In 2013, financials reported net income before revenue enhancement increased to ? 35.0 million, showed 4.3 % addition from the old old ages. Net incomes per portion increased during the twelvemonth by 10.9 % .

Their balance sheet steps have improved, showed net assets of 130.6 million, during the twelvemonth company besides generated free hard currency flow to the house of  22.0 million. A.G. BARR p.l.c. group trade names, every bit good as their franchise trade name Rock star, showed 8.6 % growing. This public presentation is above every bit comparison to the market reflects that they continued chances to develop handiness, invention and distribution among their trade names. Their geographical growing rates grew by 4 % , and investing except U.K. grew by 12 % , demoing both of import long term growing chances and comparably of import portion from their trade names.

Mention

1. A.G. BARR p.l.c. Annual study 2013 pages 70 – 124 hypertext transfer protocol: //www.agbarr.co.uk/pdf/Final Results Announcement January 2013.pdf [ Accessed: 12th May 2014 ]
2. A.G. BARR p.l.c. Annual study 2012 pages 62 – 94 hypertext transfer protocol: //www.agbarr.co.uk/pdf/Final consequences proclamation January 2012.pdf [ Accessed: 12th May 2014 ]