Ratio Analysis of French Connection Plc.

Topics: Financial ratios, Balance sheet, Generally Accepted Accounting Principles Pages: 13 (3816 words) Published: August 25, 2013
EXECUTIVE SUMMARY-
French connection group is a U.K based Fashion clothing and accessories manufacturer, retailer and wholesaler with operation all around the world. The report makes an attempt to analyse its financial statements; performs a ratio analysis in form of industry comparison analysis and comparing company’s current year’s performance with previous years; and identifies and measures its key performance indicators. Findings-

* Income statement highlights negative profit of 10.5 million GBP for the year ending 2012 with decrease of 298% when compared to previous year’s profit which was 5.2 million GBP. The loss is registered despite absence of any long-term liabilities. * The ratio analysis shows poor profitability, poor use of human-capital, good liquidity position, high asset efficiency and longer cash operating cycle as compared to previous year. However, the cash operating cycle is shorter than the industry average.

* Key performance indicators are Sales increase in wholesale channel, Gross Margin, Consumer Confidence index, Return on Shareholders’ fund and Employee Satisfaction.

Please Note:
* Since, the company does not have any long-term Liabilities; we do not calculate interest cover, solvency and capital gearing ratios. Further, looking at extravagantly high direct and indirect costs, we take some special ratios employee per to understand the cost expenditure in a better way.

* Companies considered for calculating industry averages are Debenhams Plc., Monsoon Plc. and Next Plc. Since, the annual published accounts of Monsoon Plc. and Debenhams Plc. are only available till 8/2012, we consider these data and for other two companies we take annual data published as on 1/2013.

TABLE OF CONTENTS

Sr. no.| CONTENTS| PAGE no.|
1)| Introduction| 4|
2)| Comparison of Financial statement | 5-8|
| * Balance sheet| 5-6|
| * Profit and Loss| 7-8|
| * Cash flow| 8|
3)| Ratio Analysis| 9-14|
| * Explanation| 9|
| * Industry comparison and previous years comparison figures| 10-11| | * Interpretation of the firms ratio’s| 12-14|
| * Limitation of ratio analysis| 14|
4)| Key Performance Indicators| 15-17|
| * Explanation| 15|
| * Aims and risk faced by the firm| 15|
| * Identifying company’s K.P.I’s| 15|
| * Measuring and evaluating K.P.I’s| 16-17|
| * Limitations of K.P.I’s| 17|
| References| 18-19|
| Appendix| 20-22|
| Note: Explanation and Discussion included in the main analysis itself.| |

Introduction –
French connection is a U.K based fashion Clothes and accessories retailer and wholesaler. It was initiated in 1972 by Stephen Marks, based in London and listed on London Stock Exchange. Its famous for the use of acronym “FCUK” in advertisement campaigns in early 2000’s which successfully upped its profile. It has its main operations in Europe and North America with growing business in Asian and other countries. It uses varied distribution system all around the world like joint-venture in China and Hong Kong, retail stores and e-commerce in North America etc. Its product ranges also includes toiletries, home ware, Fragrances etc. Apart from FCUK other brands owned by French Connection are Toast, Great Plains and YMC all catering to different audiences. However FCUK accounts for 88% of the Groups revenue. * French Connection Group Plc. (2013) Online.

French Connection Plc. Financial statements
FIGURES IN THOUSAND GBP.
Balance Sheet
ITEMS 20122011Difference% change
Fixed Asset:
Land & Building80060020033.3%
Other Fixed Assets49006500(1600)(24.6%)
Intangible Assets4002400(2000)(83.3%)
Investments74007900(500)(6.33%)
Total Fixed Assets1350017400(3900)(22.1%)

Current Assets:
Stock & W.I.P4150046900(5400)(11.5%)
Trade Debtors1090011100...

References: * French Connection Group Plc. (2013) Online.
Other Fixed Assets 4900 6500 (1600) (24.6%)
Intangible Assets 400 2400 (2000) (83.3%)
Investments 7400 7900 (500) (6.33%)
Total Fixed Assets 13500 17400 (3900) (22.1%)
Current Assets:
Stock & W.I.P 41500 46900 (5400) (11.5%)
Trade Debtors 10900 11100 (200) (1.8%)
Bank & Deposit 28500 34200 (5700) (16.67%)
Other Current Assets 12800 15400 (2600) (16.9%)
Investment 100 100 0 0%
Total Current Assets 93800 107700 (13900) (12.9%)
Long Term Liabilities:
Trade Creditors 19700 23800 (4100) (17.2%)
Short Term Loans 1900 2600 (700) (26.9%)
Other Current Liabilities 21300 22700 (1400) (6.17%)
Total Current Liabilities 42900 49100 (6200) (12.6%)
Profit (Loss) Account 47000 58300 (11300) (19.4%)
Other Reserves 5300 5400 (100) (1.85%)
Total Shareholder’s Funds 62700 74100 (11400) (15.4%)
Source- FAME 2013, Balance Sheet of French Connection Group PLC, Online.
ITEMS 2012 2011 difference % change
Turnover 197300 216000 (18700) (8.7%)
Cost of Sales 102700 112200 (9500) (8.5%)
Gross Profit 94600 103800 (9200) (8.86%)
Adm Exp 108900 108800 100 .092%
Other Operating Income 6500 8500 (2000) (23.5%)
Net Interest 200 900 (700) (77.7%)
Profit (Loss) Before Tax (10500) 5200 (15900) (300%)
Taxation 500
Profit (Loss) After Taxation (10500) 4700 5800 123%
Extraordinary Item 600
Profit (Loss) for the Period -10500 5300 (15800) 298.11%
Dividends -1000 -1600 6 00 37.5%
Retained Profit (Loss) -11500 3700 (7800) (210.8%)
Total Operating Lease Rental 27300 26800 500 1.87%
Remuneration 41100 42600 (1500) (3.5%)
EBITDA -4000 6300 (2300) (36.5%)
Number of Employees 2444 2558 (114) (4.46%)
ITEMS 2012 2011 DIFFERENCE % CHANGE
Net Cash in (out) flow Operating Act -3700 900 (2800) (311%)
Increase (Decrease) Cash & Equiv. -5700 200 (5900) (2750%)
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