Question (2700 words)
Britvic plcvs AG Barr plc
You work for a company specialising in providing services to food and drink manufacturers. Your company is considering bidding for a major contract supplying Britvic plc. The contract is of significant size and will be for at least 5 years and the future success of your company is likely to depend on the continuation of both Britvic and the contract itself, if the contract is won. Write a report advising your commercial director on the financial performance, stock market performance and financial strength of Britvic. You should uses the CORE Strategic Financial Analysis approach and compare Britvic’s performance with that fo AG Bar plc( a current major customer of your company and commonly uses as a benchmark). Recommend whether you think a competitive bid for the contract would be a good move of your company/
- Please provide an executive summary
- Answer the questions by using the following approach : CORE approach
C: Context
- External context using STEP (Political, Economic, socio-cultural, technological)
- Internal (context of how the company is organised :
- Little of company past
- -Divisional structures
- -Who owns the company ? (A shares or B shares) ?
- -Characters and backgrouds of key members of the management
O : Overview
( give the big picture of what is going on before diving into the detail-> are we looking at a growing, stagnating or declining company ? Comparing actual numbers with last year can be useful. -> Focus on the income statement, statement of account of financial position and cash flow statement
- Did sales turnover grow last year?
- Did operating profit rise?
- Did earnings for the shareholder rise?
- Did the company increase its dividend payments to shareholders?
- Did the market capitalisation of the company rise?
- Has operating cash flow improved?
- Did capital expenditure increase?
- Has debt increased?
- Is the company employing more people?
R : Ratios (Ratio calculated on excel sheet 1) ->
- Performance ratios address the issue of how well management performed with the resources at their disposal over the year.
- Working capital examines the efficiency of management of inventory, debtors and creditors.
- Liquidity and solvency ratios focus on the level of financial risk (short-term and long-term) the company has taken on.
- Finally the shareholder ratios consider the company from the investor’s angle. This final set will be developed further in Lesson 9.
- Ratios needs to be used both calculating and interpreting
E : Evaluation
Bring the information from the three earlier sections in order to draw a logical conclusion and recommend a decision to the rest of the management team.