Robert Wiseman’s Dairies: Analysis on Financial Performance 2008 - 2009
The revenue generated increased by 4.54 % from £ 847.7 million to £ 886.2 million in 2009. Of course, as you know high (or increased) revenue doesn’t necessarily mean success in business. However, in this year we can see that RWD’s operating profit has increased from £ 35 147 in 2009 to £ 50 292. Now this is probably due to more efficient cost handling but also was reflected by the changes in cream prices over the second half of the financial year. The new prices drove generated cream revenues higher than the first half and then anticipated which helped increase the profit even more.
In terms of liquidity the Group shows a 23.6 % increase in actual cash generated for the year : £ 83.1 million. This is a sign of high ability of the firm to convert its assets into cash and prove of reliability and future success: the company not only generated higher revenue but also an even higher amount of cash from it (compared to the last financial year). This could be because RWD has tighter credit terms for its customers or collects more frequently its trade receivables. Both ways this proves that the company is in a good financial position and consistent growth.
If we take a closer look in the firm’s profitability we can also see satisfactory results. The operating profit margin has increased from 4.14 % in 2009 to 5.67% in the last year which shows that more of the company’s sales are kept in profit. This shows that RWD has adopted better and more effective cost cutting measures that will promise growth in the long-term.
Also in order to help you decide for supplying RWD with certain goods we should examine the company’s ability to pay its current short-term obligations (the money you will receive) with their current assets. In the overall good condition of the company its measures of the current ratio for both 2009 and 2010 is below 1 (0.76 and 0.69 respectively) which is an indicator that the company has more current liabilities to pay than current assets to cover them. This, however, is due to large investments in plants, technology, and research and development made during these years. This measure is not a reason to doubt the company’s strong position because RWD seems to be more and more efficient in the use of its capital investments. With return on capital employed of 25.61 % (compared to 17.47 % in 2009) they seem to have used more wisely their investments and, therefore, obtained bigger returns from them. With these measures we can see that in time the firm will obtain profits and cover its debts and payables. As a measure of profitability, return on capital employed shows yet again progress for RWD.
Furthermore, if we take a look at the debt ratio measures for the last and previous financial year we see that since it is below 1 the company overall holds more assets than debts. The ratio has remained
