Financial Analysis Report

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Table of Contents
INTRODUCTION2
COMPANY PROFILES3
HMV GROUP PLC3
THE GAME GROUP PLC3
VERTICAL ANALYSIS4
HMV4
GAME5
HMV VS GAME5
TREND ANALYSIS6
HMV6
GAME7
HMV VS GAME7
HMV: FINANCIAL POSITION VERTICAL AND TREND ANALYSIS8
GAME: FINANCIAL POSITION VERTICAL AND TREND ANALYSIS11
HMV VS GAME12
PROFITABILITY13
GROSS PROFIT, MARK UP AND NET PROFIT MARGIN13
HMV13
GAME13
RETURN ON CAPITAL EMPLOYED14
PYRAMID RATIOS15
RETURN ON EQUITY16
EFFICIENCY17
RECIEVABLES, PAYABLES AND INVENTORY PERIODS17
ASSET AND INVENTORY TURNOVER19
CASHFLOW RATIOS20
CASHFLOW ADEQUACY20
OPERATING CASH CYCLE21
GEARING22
DEBT RATIO AND INTEREST COVER22
INVESTMENT RATIOS23
PRICE EARNINGS AND DIVIDEND COVER23
EARNINGS PER SHARE24
DIVIDEND YIELD RATIO24
HMV25
SEGMENTAL ANALYSIS26
HMV26
GAME28
LIMITATIONS30
BIBLOGRAPHY31
APPENDIX32



INTRODUCTION
For investors to invest in a company a full analysis of the entity must be done to ensure that a good investment is made. This report analyses two companies, namely; HMV and The Game Group plc over the past three years (2009, 2010 and 2011). A brief explanation of the companies will be addressed explaining their position in the industry. Most of the analysis is numerical and a large proportion is presented graphically. Brief descriptions of findings will be included.  

COMPANY PROFILES
HMV GROUP PLC
HMV Group is the UK’s leading specialist retailer of filmed entertainment, games, music and portable digital technology products, with a portfolio of live entertainment venues and music festivals. HMV operates from entertainment stores and websites in the UK & Ireland, Hong Kong and Singapore. The brand also extends into entertainment-related experiences, including ownership of live music venues and summer festivals across the UK and related ticketing activities (Anon 2012). THE GAME GROUP PLC

The Game group is Europe’s leading specialist PC and video games retailer. They are the only company in the sector to be listed on the London stock exchange. Worldwide it has over 1300 stores trading under two brands, namely: Game and Game station. Online it has three brands namely; game, game station and game play (Anon 2012).  

CONSOLIDATED INCOME STATEMENT

Continuing operations
VERTICAL ANALYSIS
PERCENTAGE OF NET SALES
200920102011

Revenue100.00%100.00%100.00%
Cost of sales-92.20%-92.02%-93.64%
Gross profit7.80%7.98%6.36%
Administrative expenses-4.31%-4.27%-5.13%
Group trading profit3.50%3.71%1.23%
Share of post-tax profits of joint venture accounted for using the equity method0.01%0.01%-0.09% Group operating profit3.51%3.72%1.14%
Finance revenue0.06%0.02%0.02%
Finance costs-0.43%-0.33%-0.93%
Profit before taxation3.13%3.42%0.23%
Taxation-0.87%-0.98%-0.50%
Profit from continuing operations2.26%2.44%-0.28%
VERTICAL ANALYSIS
HMV

From the analysis we can see that profits such as the group trading profit, operating profit and profit from continuing operations have declined over the years. Costs have increased such as cost of sales and in the overall the company has increased its debt finance while its finance revenue fell by 66.7% in 2010 and became constant from there.


GAME
INCOME STATEMENT

CONTINUING OPERATIONSVERTICAL ANALYSIS
PERCENTAGE OF NET SALES
200920102011
Revenue 100.00%100.00%100.00%
Cost of sales 73.79%72.20%73.70%
Gross profit 26.21%27.80%26.30%
Other operating expenses 19.79%22.80%24.55%
Operating profit before non-recurring costs 6.75%5.35%2.66% Non-recurring costs -0.33%-0.35%-0.91%
Operating profit 6.42%5.00%1.75%
Finance income0.09%0.03%0.02%
Finance costs -0.44%-0.28%-0.35%
Profit before taxation 6.07%4.75%1.42%
Taxation 1.73%-1.34%-0.46%
Profit for the year attributable to equity holders of the parent 4.33%3.41%0.96%

The vertical analysis of Game shows an overall decrease...
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