Analytical Financial Review of Scottish and Newcastle

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Bradford University School of Management

Full Time MBA Finance & Accounting Assignment #1

Analytical review of the financial position and reporting of Scottish & Newcastle plc.

Tutor: Author: UBNo:

Alan S. Thomas Bl. 050xxxx

Table of Contents

Executive Summary of Conclusions ....................................................................... II 1 2 3 4 5 5.1 5.2 5.3 5.4 5.5 6 7 8 Introduction ..................................................................................................... II Description of the Company ............................................................................ II Analysis of the Operating and Financial Review ............................................ III Critical Appraisal of the Accounting Policies .................................................. IV Analysis of the Financial Strengths and Weaknesses .................................... IV Profitability .................................................................................................. IV Efficiency ..................................................................................................... V Liquidity ....................................................................................................... V Stability....................................................................................................... VI Investors‟ ratios .......................................................................................... VI Review of the Market Perception .................................................................. VII Conclusion .................................................................................................... VII Appendices .................................................................................................... XI

UB No: 050xxx

II

Prepare an analytical review of the financial position and reporting of a company listed on the London Stock Exchange based on the most recent published financial statements and other information available.

Executive Summary of Conclusions

This report analytically reviews the financial position and reporting of Scottish & Newcastle from an investor‟s perspective. The key findings are that 2004 was not a good year for its investors. Profitability was worse than industry average, the business was not operating efficiently. Liquidity and stability were healthy and appropriate for the industry. Although the investor ratios add to the negative picture the future looks brighter for the company, taking into account its strategy, the positive response from the analyst community, and the investors‟ confidence into the company.

1

Introduction

This report sets out to prepare an analytical review of the financial position and reporting of Scottish & Newcastle plc (S&N). After a brief description of the company and the standpoint from which the report is made the operating and financial review is examined. The paper then gives a critical appraisal of the accounting policies, analyses the financial strengths and weaknesses revealed by the financial statements, and reviews the market perception of S&N. The report is summarised and rounded off by a conclusion.

2

Description of the Company

S&N is the UK‟s leading brewery and has extensive operations across Europe where it is second, just behind Heineken (Datamonitor 2004). It has a presence in 14 countries in Europe and Asia and exports to more than 60 countries across the world. S&N is

UB No: 050xxx

III

headquartered in Edinburgh, UK, and is growing internationally by acquiring leading breweries in emerging markets (Scottish & Newcastle 2005).

This review is prepared from the viewpoint of an investor and shareholder. The individual concerns of a shareholder are influenced by the fact that his money is invested in the company. A shareholder is especially interested in dividends, earnings, the share price and ratios connected with these...
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