Question 1: What is (are) the principal activity(ies) of this business?
Serving both the United States and United kingdom, Established in Ireland, the Green core group is one of the leading convenience food business’s in the world . The convenience food divisions provides a wide range of chilled, frozen and ambient foods to major retail, manufacturing and food service companies. Specifically in the UK, Greencore provides sandwiches, Italian chilled meals, branded chilled meals, chilled non-dairy desserts, chilled sauces, cooking sauces and pickles and Christmas cakes.( See Greencore Food to go UK) In the US Greencore is best known for providing “grab and go” packaged food options (sandwiches, salads, sushi, entrees and desserts) in grocery stores and convenience chains. (see Greencore Food to Go US) Although Greencore sells their product lines to customers such as grocery stores in bulk they also have a refrigerated logistic team that can provide fresh items on an order basis. Greencore now holds the title as the worlds largest sandwich manufacturer. This positions Greencore as one of the highest in the ready meal sector and also has a research and development lab to create new opportunities in their product line.(See Greencore Ambient Grocery and Frozen foods)
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 Auditor’s count of the financial statements of a company is paramount as it is a line of defence to check and recheck financial claims by the company’s top management. This is always done before any public filing for the benefits of investors, shareholders and analysts alike. In the case of Greencore the analysts have concurred the financial filed are true and are in accordance with IFRSs as adopted by the EU. The outcome of the findings is within line of a company that is not inflating their financials or accruing losses illegally. Apart from normal risks associated with normal filing, it shows Greencore in a particularly positive light. Given the thoroughness of their findings as the work done to make sure that all risks of misstatements as well advise given to Greencore to strengthen their position have allowed the outcome of the auditor’s report to positively substantiate the findings. (see Greencore independent auditor’s report)
Question 3: Compute the following ratios, using the table provided below as a template:
(See Greencore Financial Statements)
Question 4 Comment and reflect upon the ratios and percentage changes in items computed in your answers to questions 3 and 4.
As per the ratio analysis above it is clear that the ROE for Greencore increased by over 10 % between 2012 and 2013 and is currently over 9% higher than the industry average. Based on these comparisons Greencore is making good use of investments made by shareholders in the company. In regards to Gross profit margin % the trend was flat as sales did not grow substantially to yield a higher amount in Gross profit. It is however important to note that the gross profit % for green core is over 20% higher than its competitors in the industry.
While considering the Net Profit margin it is clear that 3% more of the revenue made it to the bottom line from 2012 to 2013. It is valid to note that sales also increased approximately by 3%, the 2013 net profit margin of 6% is double that of the industry average. The current ratio of the company is less than a 3rd of the industry average and in 2013 is .45 which is a point of concern in terms of Greencore being able to meet its short term obligations.
The current inventory turnover has moved from 15 to 16 which seems like not a big change but being that Greencore is in edible foods it is important to research what ramifications this might have on the future quality issues of the company. Greencore however is well under the industry average of 50 days. Compared to the industry Greencore is able to meet payments to their supplier in a very timely manner most likely because of the nature of their business. The gearing ratio presents Greencore as a low leveraged business and is within the industry average. Based on the stock prices provided the PE ratio dropped slightly from 2012 to 2013 mainly because of the high payout of £18 per share in 2013. (See Greencore Financial Statements)
As per the table on increases in the previous section that operationally Greencore is showing positive strides that while the company Sales between 2012 and 2013 increase by 3.03%, the Operating profit jumped by over 19% which is high rate when compared to other investments. This reveals to us the level of control that Greencore has over its expenses which allows it to make the best of it revenues. The share price which is influenced by a number of factors it is also influenced by performance as per the chart above the Share price has increased by almost 82% ending the year at £145.5 which is a soaring investment for any investor in the marketplace. (See Greencore Financial Statements)
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).
The DuPont Analysis was developed by DuPont during the 1920s for its own use is now used by many firms to evaluate how effectively assets and equity are used. Below is the calculation related to ROE for Greencore during the 2012 and 2013 financial years. This will allow us to figure out which factor has the highest weighting in the company’s financial fitness.
As per the Analysis above, the percentage of Net income to Equity increased from 17.7% to 28.46% due to Net Income doubling and could have been a higher increase but was restricted to 10% as equity also increased by over 25%. In the next part of the analysis you see that net Income/ pre tax income does not show a strong increase as the level of pre tax income increased to a similar standing to that of sales. In this case the benefit of higher column economies of scale are not being seen by the company and could be a decipher on concentrating on higher revenues. (See Greencore Financial Statements)
The same theme is seen in the next section which is Pre Tax income/EBIT, the result shows an increase of over 13% even though the increase in pre tax income was higher. The fourth part of the calculation i.e. EBIT/Sales shows over a 1 % increase even though sales increased by over 3%.Sales had a strong role to play with over 1.14% of Total Assets. Since the margins are not large in this line it is common to see it increase as a proportion to sales. Sales increased from 2012 to 2013 from 1161930 to 11987099 which is over 3% hence moving the net income over assets by 3.6%. This analysis shows us that Greencore could do a better job of using its assets in a more effective manner. The very last part of the formula related to Assets over equity. In 2013 you notice a decrease in Assets and equity marginally increased. The ROE analysis shows that Greencore is not able to get the most out of its equity in the company and is still highly dependent on assets. (See Greencore Financial Statements)
REFERENCES
Greencore Group, 2013, Bringing Convenience to good Food 2013 Annual Report, Greencore Group, Ireland
