This report will analyse Greggs’ 2010 annual report on the purpose of evaluating the company’s current operating condition and providing suggestions of improvement to the company’s management team. According to ASB'S Statement of Principles for Financial Reporting, the selected information will be provided to the following users: shareholders, loan creditor group, analyst-adviser group, employees, customers, suppliers, government and the public. Then, based on the key ratio calculations, the company’s financial performance is to be evaluated from two parts: profitability analysis and liquidity analysis. For the profitability analysis, the profitability ratios go up. It is mainly because the sale increases through adding the variety of goods. In addition, the liquidity analysis will show that the company is in a good position even though liquidity ratios are low. The main reason for that is strong cash flow. Besides, this report will evaluate the company’s future development in both positive aspects and uncertainties that recognise this company as a going concern. Finally, this report presents several recommendations in two areas: improving operating performance and preparing a better financial report.
Scope of the report3
1 Users of accounts3
1.1.1 Earning per share and dividends per share3
1.1.2 Business performance4
1.1.4 Other information for shareholders6
1.2 Loan creditor group7
1.3 Analyst-adviser group8
1.8 The Public11
2 Assessment of performance11
2.1 Profitability analysis12
2.1.1 Gross profit percentage increase12
2.1.2 Pre-tax profit and after tax profit percentage14 2.2 Liquidity analysis15
2.2.1 Short-term operating position15
2.2.2 Capital finance situation16
2.2.3 Strong cash flow17
2.2.4 Future commitments18
3 Going concern evaluation19
Scope of the report
Greggs, the home of fresh baking, is the leading bakery retailer in the UK (Company overview, 2012). Based on its high reputation and customers’ loyalty, its state of operation has been mainly being positive since it was founded. Referring to the annual report in 2010, this report will analyse Greggs’ financial performance in three main parts: first is the user analysis; then, according to its key ratios in the past five years, the profitability analysis and liquidity analysis are provided separately to evaluate its operating condition, to explain the possible reasons, and to point out its potential problems. Besides, the going concern evaluation for the company’s future development will include in this report.
1 Users of accounts
1.1.1 Earning per share and dividends per share
Earning per share and dividends per share are both priorities for shareholders. In this aspect, shareholders in Greggs should be happy for the continuing growth.
• The dividend “for the year is 18.2 pence (2009: 16.6 pence), with an increase of 9.6 per cent.” (Annual Report and Accounts 2010, 2010; p6)
• Diluted earning per share increased from 34.0p (2009) to 37.3p (2010). (Annual Report and Accounts 2010, 2010; p18)
• In total, £29.9 million return to shareholders through buybacks and dividends paid in 2010.
• The company “maintains the exceptional record of dividend growth for the 26th consecutive year since 1984.” (Annual Report and Accounts 2010, 2010; p6) This statement indicates that Greggs is a “trusted, valued and respected” (Annual Report and Accounts 2010, 2010; p4) company which offers a sustainable and healthy returns to the shareholders.
• All these results reflect the “progressive dividend policy...