A company is always being evaluated on the basis of its financial performance. A company, which has a good financial health is considered to be good in operations and management. A company with a healthy financial condition can capture the market more than others with less healthy financial conditions. To evaluate any financial conditions of any firm ratio analysis is the best way to evaluate them. Ratio analysis refers to the calculation of the different structure of the firm. When calculating any ratio, it focuses mainly on two variables related to it. There are mainly four types of ratio analysis being calculated in considering a firm’s financial health. These are Liquidity, Efficiency, Gearing, and Activity ratios. These measures the company’s profitability and how much they are capable of generating much profit. Here, we are going to discuss the Kingfisher Plc financial statement analysis. Analysis of the company's ratios. This report is designed to discuss the ratio analysis of Kingfisher Plc over the year from 2016 to 2018. From the beginning, we are going find the corporate objectives of the Kingfisher Plc, and their changes over the last three years, and will try to discuss the reason behind the changes in the overall corporate objectives over the last three years. Secondly, we will compare the financial ratios of Kingfisher Plc with the other company having the same qualifications as Kingfisher Plc's. Here, for the comparison, we choose Travis Perkins PLC as it has similar quality to the Kingfisher Plc. And finally, we will discuss the opportunities and the obstacles of the firm and the reasons behind these opportunities and obstacles. This report is designed to provide the overall procedures in comparing two similar quality firms against each other on the basis of their financial statement analysis known as ratio analysis.
Kingfisher Plc is a British based multinational retailing company having the headquarter in London, with other regional offices established all over the United Kingdom and in The Republic of Ireland in places like Dublin, Edinburgh, and Cardiff. It is known as the largest home improvement retailing business in Europe, and third largest in the world. The company was founded in 1982 from the buyout by the Woolworths chain by Paternoster Stores Ltd.
· To become the chief home development firm in the world.
· Focusing on expanding market as well as improving services.
· Kingfisher Plc. has a five-year plan which started in 2016/17, which is expected to deliver a £500 million sustainable annual profit uplift by the end of Year 5, over and above ‘business as usual'. Until the second year of the plan has done excellently by achieving the key strategic milestones. It is currently developing improved training programmers and engagement schemes for their colleagues.
· Increased number of stores from 1176 to 1300 around the globe.
· Building a home improvement academy for the employee for the betterment of services.
· Increased sales from 28% (in 2016/17) to 32% (in 2017/18).
As a part of the business, any company has to have to wait for the opportunity and grab it when the time is perfect. Key opportunities of the Kingfisher Plc.
· Teaming up with Shelter, the UK's leading house charity. In a new partnership, it can help the people to improve their homes and ultimately to improve their life.
· New country development has opened a new opportunity for the Kingfisher Plc as a part of developing that country's housing.
Following an in-depth review of Kingfisher’s businesses, alongside detailed studies of our customers’ home improvement needs, we announced the ONE Kingfisher transformation plan in January 2016. This plan will leverage the scale of the business by creating a unified company, where customer needs always come first. Kingfisher Plc. has a five-year plan which started in 2016/17, which is expected to deliver a £500 million sustainable annual profit uplift by the end of Year 5, over and above ‘business as usual'.
Kingfisher Plc's gross profit margin in the year 2016, 2017 and 2018 is 37.30%, 37.20%, and 36.90% respectively. Based on the gross profit margin, a company is considered good and efficient when the gross profit margin is at an increasing rate. The more gross profit margin is good for any company. Here, The Kingfisher Plc’s gross profit margin is in a decreasing rate but that’s not too bad rate after all. Also, the competitor company Travis Perkins Plc’s gross profit margin decreases over the time period. Their gross profit margin is 29.79%, 29.62% and 29.60% in the year 2016, 2017 and 2018 respectively. But in comparing both companies, Kingfisher Plc's gross profit margin is better than its competitors.
Operating profit margin is an efficiency calculation of a firm. Here, at the time of analyzing the operating profit margin of the Kingfisher plc, they achieved an operating profit of 6.60%, 6.70% and 5.90% in the year 2016, 2017 and 2018 respectively. Which seem fluctuation over the time. But the rate of the gross profit margin is too low in percentage. Again, analyzing the operating profit margin of the Travis Perkins Plc’s operating profit margin we observed that their profit margin increases over the time from 1.60% to 4.60% in the year 2016 to 2018. But if we compare both the company we see that their Kingfisher plc has achieved a better operating profit margin against its competitor company Travis Perkins Plc.
Stock days outstanding refers to the number of days a company holds its inventory before the next order.
Creditors days outstanding for the Kingfisher Plc was 75 days, 72 days and 74 days in the year 2016, 2017 and 2018 respectively. On the other hand, the Travis Perkins Plc’s creditors days outstanding was 77 days and 81 days in the year 2016 and in 2017 & 2018 respectively. It seems they both have maintained their creditors days outstanding efficiently. But comparing both the company we can see that Kingfisher Plc has done a better job than its competitor, as fewer days are better.
Kingfisher Plc is one of the renowned companies in the world. It's been operating for more than 36 years. It’s been a long in the business world to run a firm. Based on the financial performance analyzed in this report, we can say that the company has well in its business operation. Some of its ratios has met its expected performance. But all the ratios are not up to the mark. So, in some areas, the company have to do better to get the expected results. On the other hand, the company can consider the joint venture with other company. By this, it can gain another business area and more customers. But before going for joint venture the company should consider that they have gearing ratios, net profit margin, gross profit margin, operating profit margin and stock days outstanding are way better than its competitors and as well as a healthy finding in the calculations, that should be maintained after joint venture. If they think that these ratios are going to be affected after going for a joint venture, then they could face losses in their business operations. So, the clause and rules should be taken into consideration before for a joint venture.
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