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WHITBREAD PLC BUSINESS PERFORMANCE
The report evaluates the financial performance of the Whitbread Plc, a leading restaurant in UK. The evaluation reveals that the share price of the company improve between 2014 and 2015, and the business performance in overall increased between the two years. However, the company liquidity is facing crisis. Compared to one of its main competitors, Restaurant Group plc, Whitbread Plc performed relatively well, except in managing its liquidity where Whitbread Plc slightly performed well. In overall, the analysis reveals that Whitbread Plc performed 2015 results were better than that of the 2014, and had better financial performance than its competitors in many aspects.
Financial performance of a company is determine by comparing current performance with past performance, as well as the performance of the rival companies. This reports looks at the liquidity, and financial performance of Whitbread PLC, which is a parent company of Costa Coffee. The financial performance is compared with the past performance of the company, and the performance of the Restaurant Group PLC. The Restaurant Group plc is one of the main competitors of Whitbread PLC and is constituent of FTSE 250 Index and it runs more than 350 public houses and restaurants (LSE, 2015).
Analysis of the Whitbread Plc Current Performance, Financial Position and Liquidity
The first part of this segment compares the performance of the Whitbread PLC with historical performance of the company. The second part looks at the position of the Whitbread PLC financial performance when compared with that of the Restaurant Group plc. The financial year of Whitbread PLC ends at February while that of the Restaurant Group plc ends at the December. For this reasons, this report will compare the financial period ended at December 2013 and December 2014 for Restaurant Group plc (given as financial year 2013 and 2014), with that of the one that ended February 2014 and February 2015 for the Whitbread Plc (given as years 2014 and, 2015). Both periods represent the financial statements for the same period.
In 2015, Whitbread Plc generated a total revenue of £ 2608 million compared to £ 2294 of the year 2014. This resent a sales growth of 13.68%. The operating cost in 2014 was £ 1905 million which slightly increased to £ 2110 in 2015, representing an increase of 10.78%. This lead to a growth of 22.89% growth in operating profit from £ 389 million in 2014 to £ 497.5 in 2015 (Whitbread PLC, 2015). In overall the net income of the company grew from £ 323.4 million in 2014 to £ 366.1 million in 2014, representing a net growth of 13.2%. as illustrated in Figure 1.0 (in the appendix) the growth in profit moved in tandem with the growth in share price of the company which closed at £ 5005 on January 2015, compared to the closing price of £ 3751 on January 2014. This that the investors have confidence in Whitbread Plc (Yahoo Finance, 2015a).
The gross profit margin of the company was 0.17 in 2014 and 0.19 in 2015 showing improvement in the profit of the company without considering indirect costs. The net profit margin for the company was 0.14 in 2014 which was the same in 2015. This shows that the company made £ 0.14 per every £1 of sales in the two years (Vandyck, 2006). The ability to cover cost for the company did not change between the two years. The return on assets and return on equity for the year 2014 was 0.1 and 0.18 respectively. In 2015 return on assets and return on equity was 0.1 and 0.18 respectively. This shows that the ability of the company to turn assets into profit remained the same in the two years, while the return on the shareholders’ investment slightly increased from £ 0.18 per every £ invested to £ 0.19.
The current ratio for the Whitbread Plc in 2014 was 0.41 while in 2015 it was 0.28. In both years the company did not have ability to meet its short term debt should they have fallen due. The liquidity of the company reduced between the two years which is also by the reduction in net cash flow from £ 1.9 million in 2014 to £ – 38.5 million in 2015. The excess of cash out flow over the cash inflow for the company between the two years was mainly caused by the Purchase of property, plant and equipment which amounted to £ 286.3 million in 2014, and increased to £ 518.5 million in 2015. As a result of this acquisition the company assets increased by11.54% to £ 3733.8 million up from £ 3347.5 million. In overall the profitability of the company increased between the two years while the liquidity decreased. This shows that the company is performing well in the market, but does not have an optimal cash management strategy.
The noncurrent assets of the company increased from £ 3150 million to £ 3568.3 million. This means that the operation of the Whitbread…………………