Ratio Analysis Caffe Nero

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Ratio Analysis

A tool used to conduct a quantitative analysis of information in a company's financial statements. Ratios are calculated from current year numbers and are then compared to previous years, other companies, the industry to judge the performance of the company.

Financial performance based on may 2006 interim report

Caffè Nero Group plc, the leading independent UK coffee house operator of 282stores, which has been voted the top rated brand by consumers for the last six consecutive years. It had another year of solid progress, again achieving revenue and profit growth.

Its revenue gone up by 29% to £90.7 million where as in year 2005 it was £70.1 million. Earning before interest, tax , depreciation and amortization has increased by 38% to £15.6 million where as it as £11.3million in year 2005. Operating profit (before prior year goodwill write off) improved by 38% to £8.2 million where as in year 2005 it was £6.0 million). Over all Operating profit improved by 74% to £8.2m from £4.7million in 2005. Pre-tax profit has improved by 92% to £7.3m where as in year 2005 it was £3.8 million Earning per share grew by 25% to 6.60p where as in year 2005 it was 5.26p. Its present Cash balance is £7.1 million. Sales increased 29% to £90.7million from £70.1 million in 2005. Store Profit (EBITDA before central overheads) rose by 37% to £23.0million where as in year 2005, it was £16.8million. EBITDA, the critical measurement of cashflow profit, jumped 38% to £15.6m where as in year 2005, it was £11.3million. In addition, it has adjusted operating profit (before prior year goodwill write off) grew by 38% to £8.2million. Adjusted pre-tax profit (before prior year goodwill write off) rose by 44% to £7.3million from £5.1million in year 2005. Profit after tax climbed to £4.5m, representing a 28% increase. Basic earnings per share rose from 5.26p in 2005 to 6.60p in 2006, a 25% uplift. Over the past 12 months, the company's share price has risen 120%. All in all, this was a very respectable financial performance.

Analysts forecast for Caffe Nero – 2007

Collins StewartNumis SecuritiesKBC Peel HuntTeather & GreenwoodAltiumDKWShore CapitalAverage Sales (£m)108.1109.9107.4109.7109.9111.3-109.4
EBITDA (£m)18.51918.418.719.418.819.318.9
PBT (£m)910.
EPS (p)*
pre-IFRS2 option charge

As shown analysts forecast for caffe nero for the year 2007 shows a further rise in sales. As per Collins Stewart (world's second largest inter-dealer broker) has predicts caffe nero sales upto £108.1 million, earning before interest, tax, depreciation and amortizations (EBITDA) upto £18.5 million, profit before tax (PBT) upto £9 million and earning per share at 7.4. Same is in the case of Numis Securities, it is predicting a total sales of £109.9 million, EBITDA upto £10.1 million, PBT upto £10.1 million and EPS at 7.9. Various other stock broking firms has analysis financial position and overall market composition of caffe nero and has given their reports as per their point of view but on a average of all forecast of sales in 2007 can be £109 millions, earning before interest, tax, depreciation and amortizations at £18.9 million, PBT at £9.6 million and EPS at 7.7p. All these analysts forecasts are showing a very good strong growth of business of caffe nero in year 2007.

Ratio analysis of Caffe Nero

Capital Structure Ratio

Gearing ratio - In year 2004 gearing ratio was 52% where as in 2005 it goes down to 50%. This shows that the weight of the debt is decreasing for the company. The comparison between Caffe Nèro total long term debts of year 2004 with 2005 shows a direct increase by £4,369 million. So by this we cannot say that company is decreasing its total debt liability. However, gearing ratio is showing a decrease only because the profit made in year 2005 is up to £1,596 million which is added in calculating total equity where as in...
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