Interpreting Financial Accounting Information Coursework Investment Appraisal of T & S Stores Plc Greggs Plc

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Module M07118

Interpreting Financial Accounting Information

Coursework

Investment Appraisal of

T & S Stores Plc

Greggs Plc

Contents

Table of Figures

Graph 1: Gross Profit Margin        

Graph 2: Expenses / Sales Ratio        

Graph 3: Total Asset Turnover        

Graph 4: Liquidity Ratio        

Graph 5: Stock Holding Period        

Graph 6: Gearing        

Graph 7: Return on Equity        

Graph 8: Earnings per Share        

Graph 9: Price / Earnings Ratio        

Graph 10: Dividend Cover        

Graph 11: Dividend Yield        

Graph 12: Turnover History and Projected Sales        

Graph 13: Profit before Tax History and Projected Profits        

Graph 14: Turnover / Profit History and Projected Trends        

1. Introduction

This report aims to provide detailed analysis on T & S Stores Plc and Greggs Plc, and to provide recommendations on which company to invest in. It will compare the recent years trading results compared to the previous year and also a comparison between the two companies.

T & S Stores Plc is a retailer concentrating on the convenience stores, newsagent, and corner shop market. T & S Stores Plc most popular retail outlets are Dillions Newsagents, One Stop Community Stores and Day & Nite Stores.

Greggs Plc is the leading UK’s leading retailer specialising in sandwiches, savouries and other bakery related products, with a particular focus on takeaway food and catering. Greggs Plc trade under two names, which are Greggs, and Bakers Oven.

2. Profitability and Performance

2.1 Return on Capital Employed

This ratio concentrates on the efficiency with which the capital employed has been used to generate profits.

Table 1: Return on Capital Employed

* Workings and formulae in appendix

Both companies have a significantly high return on capital employed (ROCE), compared to industrial averages of 8.13% in 2001 and 8.91% in 2000. Both T & S and Greggs have a ROCE three times high than the industrial averages. This suggests that both companies have been using their funds effectively to achieve profits. However further analysis will be needed, as the ROCE could be high because both companies have mark-ups higher than other retailers in this sector.

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2.2 Operating Profit Margin

This will measure the any changes in the mark-up and indicate the company’s control on expenses. Or in effect how the companies turn their sales into profits.

Table 2: Operating Profit Margin

* Workings and formulae in appendix

At first glance, Greggs seem to have an operating profit margin (OPM) just less than double that of T & S. However both companies are still achieving higher than industrial averages.

2.3 Gross Profit Margin

 This ratio reflects the mark-up made by the company.

Graph 1: Gross Profit Margin

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