MS7SL800 - Assignment - 1 - McBride
MS7SL800 - Assignment - 1 - McBride
MS7SL800 - Assignment - 1 - McBride
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Table of content
1. Introduction……………………………………………………………………………..……3
1.1 McBride Company…………………………………………………………………...............3
1.2 PZ Cussons Company………………………………………………………………………………3
2. Ratio analysis comparison for McBride and PZ Cussons Company for last 5 years...….4
2.1 Performance ratio……………………………………………………………………………………...4
2.2 Profitability ratios…………………………………………………………………………………..…4
2.3 liquidity ratios………………………………………………………………………………...….……6
2.4 Efficiency ratios………………………………………………………………………………...….….7
2.5 Investor ratios…………………………………………………………………………………....……9
2.6 Gearing ratios………………………………………………………………………………..………10
9. Conclusion………………………………………………………………..………………….19
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1. Introduction.
Aim of this report is to interpret the financial performance of Mc Bride PLC for last 5 years benchmarking
competitor Pz Cussons PLC to make better decisions for future.
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2. Ratio analysis comparison for McBride and PZ Cussons Company for last 5 years
Mcbride PZ Cusson
(Figure 3)
Purpose of ratio is to monitor effectivity of company in using its Capital to create profit.
Useful for investors.
Positive and Higher better and should be higher than capital cost.
McBride PLC Return on Capital employed value is on a positive note and comfortably above and
equal to the industry average of 12% and the Pz Cusson rate of 5.90% (SimplyWallStreet, 2020)
40% 40%
39%
38% 38%
37%
36% 36% 36%
35%
35%
34% 34%
33%
32%
30%
2019 2018 2017 2016 2015
McBride PZ Cusson
(Figure 4)
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Minor Fluctuations reflects both companies managing costs well.
McBride PLC 6% rise in Cost of sales in 2019 had caused Gross profit ratio deduction, though
revenue had grown by 5%.
McBride has to be more conscious about rising Cost of Sales.
Pz Cusson PLC compared to Mcbride reducing the cost of sales and maintains a healthy gross profit
ratio.
6.00% 6.34%
5.71%
4.61% 4.83%
4.00% 3.69%
2.00%
1.38%
0.00%
2019 2018 2017 2016 2015
McBride Pz Cusson
(Figure 5)
Purpose of Ratio is to monitor the control over costs of the company. Operating profit ratio
determines the profits the company makes after paying for variable costs.
In both companies due to poor cost management the operating profit ratio is degrading.
McBride noted a 16% growth in selling and distribution cost in 2019 and the raw material costs.
(to be discussed)
Mc Bride PZ Cusson
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(Figure 6)
Purpose of ratio is to monitor actual profits over sales. High net profit margin means company is
more efficient. In net profit margin calculations all profits are included.
2018 Mcbride Net profit margin degraded due Sales decline of 2% to prior year (Figure 13).
2019 the revenue of McBride increased by 5% prior year. Based on that Profit margin increased,
comparatively to PZ cusson poor revenue performance due to sales decline in Africa region.
Current Ratio
Current Ratio
2.00
1.80 1.86
1.60 1.67
1.40
1.20
1.09 1.05 1.09
1.00 1.01
0.85 0.88 0.90 0.86
0.80
0.60
0.40
0.20
0.00
2019 2018 2017 2016 2015
McBride PZ Cusson
(Figure 7)
Purpose of ratio is to monitor the companies’ ability to pay short term debts. (Liquidity).
Standardized current ratio is 2:1.
McBride Current ratio is above 1 for last 5 years which is effective since Mcbride into retail
industry.
Compared to Mcbride, PZ Cusson is having issues with regard to current ratio. Pz Cusson Current
assets degrades gradually and that had caused a current ratio of below 1 for PZ Cusson, except in
year 2019.
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ACID Test Ratio
McBride PZ Cusson
(Figure 8)
Purpose of ACID Test ratio is to identify capability of companies’ liquid assets to pay its current
liabilities. If a company’s ACID test ratio is lower than Current ratio it means current assets of
company is relying on the inventory.
Mcbride ACID test ratio is below 1 from 2016 to 2018 which means the Mcbride current assets are
more relying on inventories.
2019 Mcbride ACID ratio has grown since Current liabilities decreased by 7%, similar incident
caused for PZ Cusson also.
McBride PZ Cusson
(Figure 9)
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Both companies’ Earnings per share is significantly degrading which is unfavorable. Low Earnings
per share means investors have less concern on investing over the company.
Reason for degrading of Earnings per share in both companies is the percentage decrease of Net
profit. Refer figure 13 and 14.
Mcbride PZ Cusson
(Figure 10)
McBride PZ Cusson
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(Figure 11)
Purpose of ratio is to monitor annual value of dividend in relation to market value.
The increase in dividend yield ratio of both companies is favorable.
Both companies are meeting the Dividend yield UK industry average of 4.0%. This means
Dividend Yield of both companies are favorable. (Dividend Yield-FTSE 100, 2020)
3.00 3.09
2.93 2.95
2.50
2.25
2.00 2.12
1.98
1.57 1.64
1.50 1.47
1.00
0.50
0.00
2019 2018 2017 2016 2015
McBride PZ Cusson
(Figure 12)
Purpose of ratio is to identify number of times that company can pay dividend to its shareholders.
Growing dividend cover ratio is favorable for Investors. Mcbride’s dividend cover ratio increased
significantly since 2017.
Compared to PZ cusson dividend cover ratio, the Mcbrides Dividend cover ratio growing
significantly which is favorable to attract investors.
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3. Horizontal Analysis Comparison of Income statements for Mc Bride and PZ Cusson
(Figure 13)
(Figure 14)
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4. Vertical Analysis Comparison of Income statements for Mc Bride and PZ Cusson
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5. Comparison of Balance Sheet for Mc Bride and PZ Cusson
Current liabilities
Account payables and accrued expenses -10% 4% 7% 5% 0%
Borrowings 0% 11% 30% -14% 0%
Current tax Liability 1% 26% 100% -22% 0%
Total current liabilities -7% 10% 1% 0%
Equity
Issued share capital 0% 0% 0% 0% 0%
Share premium account -10% -9% -7% -6% 0%
Other reserves 13% 15% 21% 25% 0%
Accumulated loss 4% -4% 8% -192% 0%
Equity attribute to shareowners of the company -5% 6% -7% 20% 0%
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PZ Cusson Horizontal Analysis of Balance sheet.
Current liabilities
Account payables and accrued expenses -2% -30% 25% -3% 0%
Borrowings -99% -15% -9% 51% 0%
Current tax Liability 30% -11% 4% -43% 0%
Total current liabilities -56% 4% 15% 0%
Equity
Issued share capital 0% 0% 0% 0% 0%
Share premium account -2% 4% 3% 8% 0%
Other reserves 0% 3% 5329% -42% 0%
Accumulated loss 1% 27% 253% -39% 0%
Equity attribute to shareowners of the -3%
company 0% -14% 11% 0%
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McBride Vertical Analysis of Balance sheet.
Current liabilities
Account payables and accrued expenses 284% 299% 302% 263% 300%
Borrowings 68% 64% 61% 44% 61%
Current tax Liability 12% 11% 9% 4% 6%
Total current liabilities 369% 379% 376% 318% 379%
Equity
Issued share capital 29% 27% 29% 26% 32%
Share premium account 115% 121% 140% 140% 178%
Other reserves 109% 91% 83% 64% 62%
Accumulated loss -152% -139% -153% -132% 173%
Equity attribute to shareowners of the company 100% 100% 99% 99% 99%
(Figure 19)
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PZ Cusson Vertical Analysis of Balance sheet.
Current liabilities
Account payables and accrued expenses 38% 38% 53% 36% 41%
Borrowings 0% 54% 63% 59% 43%
Current tax Liability 7% 5% 6% 5% 9%
Total current liabilities 46% 101% 123% 101% 96%
Equity
Issued share capital 1% 1% 1% 1% 1%
Share premium account 120% 119% 114% 94% 96%
Other reserves 9% 8% 8% 0% 0%
Accumulated loss 19% 18% 14% 3% 6%
Equity attribute to shareowners of the94%
company 94% 93% 91% 91%
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6. McBride PLC Year on Year Performance Comparisons.
Revenue growth in McBride PLC (Figure 13) has contributed from Different regions, especially
from Asia’s contribution of £21.4 Million in 2019 with 9.2% Progress express results of
promotional and sales contracts gains with key customers. (Mcbride, 2019)
The 6% growth in Cost of Sales 2019 for McBride PLC (Figure 13). Direct Raw material,
packaging and energy cost increased by further net £6.6 Million (1.9%) prior year and direct labor
increased £1.1 million due to effect of labor cost inflation. (Mcbride, 2019)
Significant growth of Distribution cost which impacted negatively on both companies Operating
profits. McBride distribution cost increased by £6.5 Million to prior year (13.3%) and so as the Pz
Cusson. This Distribution cost increased due to transport capacity issues and tight labor market for
Drivers.
Net profits increased in McBride due to growth of Sales as discussed though there is an increase in
direct and indirect costs in the year 2019.
Poor performance from PZ Cusson with decrease in Net profits due to poor performance in African
region in terms of sales with 6.4% below par to prior year revenue of African region. (Pz Cusson,
2019)
Balance Sheet.
McBride Balance sheet 2019 overall net debt increase by £6.6m due to high working capital. There
is an increase in cash and cash equivalents of 23% prior to 2018, due to disposal of PC liquids
business and £1.6m cash received from disposal of manufacturing site in Italy. There is a -6%
decrease in receivables which means the company had collected its debts.
2018 there is 55% Cash and cash equivalents decrease in McBride plc due to £10.4million paid to
acquire Danlind. The Danlind acquisition increased borrowing of 2018 to 32% for McBride under
non-current liability.
Overall the Current ratio of the McBride PLC is at a rate of 1:1 which is fairly fine the industry
concerns.
Above are major financial information and transaction occurred with regard to McBride There are several
favorable and unfavorable transactions occurred for company last few years.
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7. Future Growth Plans of McBride and Financial Review
Future strategy for McBride is Repair, Prepare and Grow. (Mcbride, 2019) McBride has been
involving in the Preparing section for a future growth.
1. Asia performance increase from break even
2. Exit from loss making Pc Liquid business
3. Reducing loss making Aerosols business into single site.
(Mcbride, 2019)
(Mcbride, 2019)
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Financial Review of McBride PLC with regard to Future growth.
Above are some of examples for strategy implications in McBride PLC. Followings are some of financial
interpretations of McBride with regard to Growth strategies of above.
According to Annual report 2019 the future plan is to reach ROCE of 25% - 30% which is far
ahead than the current ROCE performance of McBride. (Figure 3)
Cost management would be an issue for McBride future strategies. As discussed there is a
significant increase is direct costs and indirect costs of McBride.
Ex; Cost management plans.
ACID test ratio (figure 8) will be an issue for McBride since liquid assets are underperforming,
when implementing mentioned growth strategies liquid assets, (cash in hand) would be an added
advantage for an Organization. *noted increasing inventories. (figure 17)
Increasing revenue of McBride would be an advantage when performing above growth strategies.
(figure 13)
Concerning to current investor performance of McBride (figure 9, 10, 11, 12) it reveals fairly
positive signs for investors to invest more on McBride plc for future growth.
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8. Limitations in Ratio and trend analysis.
Ratios calculated on accounting data not according to market performance. Inflation or any real
market condition had not taken into consideration in above calculations other than Pz Cusson
benchmark.
Global events (non-financial) are not taken into consideration. The impacts of the Brexit.
There are no standard definitions for ratios. When calculating Gearing ratio there are two ways
given for the calculation.
Ignores qualitative factors of the company. Where company McBride costs may be reduced due to
the attitudes of the employees which is not taken into accounts.
Difficult to select correct base year in trend analysis.
9. Conclusion.
Overall financial performance of McBride is favorable according to findings of report. Several important
factors to be noted,
Effective cost management would be important.
Hope I have addressed your concern, if in need of further information please be kind enough to contact
Thankyou
(Finance Manager)
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References
*Includes all the Annual reports of both the companies from year 2015 to 2019
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Annexures.
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McBride Financial statements 2017/16
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McBride Financial Statements 2015
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Financial Statements PZ Cusson 2019/2018
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Financial Statements Pz Cusson 2017/16
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Financial Statements Pz Cusson 2015.
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Excel Workings.
Profitability Ratios
Liquidity ratios
Current ratio
Ye ar Curre nt as s e ts Curre nt liabilitie s Ratio
2019 258 237.2 1.09
2018 269 256.4 1.05
2017 244.6 241.3 1.01
2016 240 219.6 1.09
2015 225.4 120.9 1.86
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ACID test ratio
Year Current assets Inventory Current liabilities Ratio
2019 258 95 237.2 0.69
2018 269 88.9 256.4 0.70
2017 244.6 78.8 241.3 0.69
2016 240 75.7 219.6 0.75
2015 225.4 66.8 120.9 1.31
Investor Ratios
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Pz Cusson Workings.
Profitability Ratios
Liquidity ratios
Current ratio
Year Current assets Current liabilities Ratio
2019 346.9 207.9 1.67
2018 399.5 470.9 0.85
2017 506 575.9 0.88
2016 500.4 553.7 0.90
2015 413 479 0.86
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ACID test ratio
Year Current assets Inventory Current liabilities
Ratio
2019 346.9 131.9 207.9 1.03
2018 399.5 132.6 470.9 0.57
2017 506 163.3 575.9 0.60
2016 500.4 150.5 553.7 0.63
2015 413 163.7 479 0.52
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