Percentage changes and Index number5
Industry sectors and competitors analysis6
Financial strengths and weaknesses of Primark8
Where Primark would be ranked financial within its sector on the LSE9
Forecast Primark’s 2011 post tax profits10
Techniques (ratio analysis) evaluation12
Corporate governance recommendations13
At present, the Primark Ltd has 162 stores located in the UK, Spain and Ireland. They are subsidiary of Penney Brand Company which is based in England and recently announced it has hired its 25,000th person among its stores (Nagdeman, 2009). According to a recently research, the Primark company rose its selling space by 65% in the past 12 months, which is clearly showing how successfully these stores are being and ever-expanding. With regards to products and services it is very obvious to see demand has increased quickly in recent years trading. This may because the Primark Ltd is dealing in a fashionable market but with affordable clothing for everyone in the mainstream market at the moment (Yun, 2008).
This report will concentrate on the financial analysis of Primark. To begin with, the trend analysis is used to analyse the financial situation of Primark from 2006-2010. Additionally, ratio analysis technique is provided to analysis the financial performance of Primark by comparing with Next Ltd and New Look Ltd. Besides, financial strengths and weaknesses will be indicated. Furthermore, by using the industry sector index to explain where Primark would be ranked financially on the LSE will also provide in this research. Moreover, forecast the 2011 post-tax profits will be illustrated. Evaluate the techniques and recommend the corporate governance structure will be reflected at the end of this research.
The financial result in 2010 is well ahead of market expectations showing importantly rose revenue and profit. By improving net profit margins, a strengthening order book which has increased and reduced net loans rarely. During 2006 and 2010, the total current liabilities have increased sequentially (from 923.3 million Pound to 1126.81 million Pound). In addition, the number of employees experienced a gradually rise during this time (from 13144 to 23707). It is clearly to show that the influence of the Primark company in UK is expanding rapidly and the Primark company are becoming generally strong and stable global market with activity in the UK, Sweden, the USA and the Middle East particularly good (Yun,2008). The total turnover for 2010, plus our share of joint ventures and associated undertaking, increased by 10% to 1985.74 million Pound generating adjusted profit before interest and tax of 191.9 million Pound at net margin of 9.0%. Adjusted profit before tax increased by 300% to 151 million Pound. Basic and fully diluted earnings per share were 44.9p and 51.3p respectively (Bloomberg, 2011). From 2006 to 2010, the profit after tax reached the bottom point at 14.71 million Pound in 2008 and increased to the highest point at 191.9 million Pound in 2010 (Bloomberg,2011). Specifically, the total trend of the profit after tax was fall between 2006 and 2008. And then, it experienced a dramatically increase after 2008. On balance sheet, the total fixed asset of the Primark Ltd was fluctuated during this time. It dropped to the bottom point at 2006 (948.4 million Pound), and increased to the highest point at 2010 (1075.55 million Pound). Specifically, the biggest change was cash at bank part. It have become more than six times than before (from 3.96 million Pound to 20.88 million Pound). There was not big change in other parts (Bloomberg, 2011). The total of cost of Primark increased gradually from 2006 to 2010, and the cost in 2010 (724.64 million Pound) has nearly doubled than the cost in 2006(1599.64 million Pound). However, the...