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Financial Resource Management - BAM 502
Financial Resource Management - BAM 502
Financial Resource Management - BAM 502
Resource
Management
Assignment
Financial Resource Management –BAM 502
BALAMURUGAN CHINNIAH
K0961097
11/15/2010
Executive Summary
This assignment contains the Financial Management report of J D Wetherspoon Plc, which is
presented to one of its competitor Mitchells and Butlers Plc. Critical analysis is done on the
historical and future performance of J D Wetherspoon with the help of the following ratios.
Investor’s ratios
The report tells about the various strategic measures taken by J D Wetherspoon for its
survival in the market.
1. Introduction ...................................................................................................... 4
4. Ratio Analysis.................................................................................................... 5
........................................................................................................................ 5
5. Conclusion....................................................................................................... 13
6. References ......................................................................................................14
7. Appendix..........................................................................................................15
Mitchells and Butlers Plc was founded in 1898 by the merger of two Midlands family
businesses, its runs more than 2000 managed pubs, bars and hotel in United Kingdom with
the headquarters in Birmingham, United Kingdom. After various joint ventures and
acquisition in 2003, it separated its pubs, bars and restaurants from Six Continents Plc and
was listed in the London Stock Exchange as Mitchells and Butlers Plc It owns several brands
of pubs namely Harvester, Sizzling Pub Co, Ember Inns, O’Neill’s, Town pubs and few more
in UK. It also operates its business in Germany. The company operates with Miller and
Carter, Castle, Vintage Inns, Babylon, Lakota and few more concepts. It has around 40,000
employees.
The company was founded in 1979 by Tim Martin. They are the leading pub operators
in the UK. It runs around 770 eating and drinking establishments in Wales, England and
Scotland with the headquarters in Watford, United Kingdom. It operates with low prices and
long opening hour’s functions. It also operates the Lloyds No.1 brand. The company
pioneered in having non-smoking areas in pubs before the introduction of Health Act 2006. It
also operates nearly around 16 hotels in total with the name Wetherspoon Hotels. They have
modernised/refurbished the looks of their pubs with respect to the market changes. It has
around 20,000 employees.
Figure2 shows the comparison between ROSCs of M&B Plc and JDW Plc
JDW purchased its own share for about 3.8 millions during the financial year 2008. The
company decided to do this, in specific to cancel the 2.7% share capital issue in the beginning
of the financial year 2008. This eventually pushed up the ROSC from going down, which in
return increased the free cash flow up by 42%. This was a just in time action taken by the
company in-order to retain its shareholders. This decision helped them in diverting the cash
flow from final dividends of 2009 to debt reduction (Anon 2008, p.6).
EPS value is high for JDW in 2009 when compared to M&B and the vice-versa in the year
2007 and 2008.
A high value of PE ratio shows the strong investor confidence in the company and its future.
Table 4 indicates that the JDW has a strong investor confidence when compared to M&B,
which also shows that JDW has good future growth. JDW has changed its way of working
This PE ratio determines the share value of a particular company in the market.
Normally an interest cover ratio of value 2 is said to be very low and a minimum of 3 times is
considered to be low. The value of interest cover is low in case of the two companies. This
implies that M&B has no chances of paying its debt with the help of its profit when compared
to JDW, which can try to pay its debt, which may or may not happen. The formula used to
calculate this ratio is
Interest Cover Ratio = Profit Before Tax and Interest / Interest Charges
The annual report 2009 of JDW claims that the company has committed credit facilities, and
they are constantly aiming in to maintain the flexibility in funding by keeping the committed
credit lines available at any time (Anon 2009, p.11).
This comparison shows that M&B maintains good creditor payment period, which increases
its credit limits. Formula used to calculate this ratio is given below,
Creditors Payment Period = Trade Creditors/Purchases * 365 .
5. Conclusion
Thus after a critical analysis with the help of the ratios, JDW has a like to like growth in
mere future with few drawbacks in the working capital management and structure capital.
2008-annual-report.
pdf
annual-report-2007.
pdf
j-d-weth-r-a-09-revis
ed.pdf
Calculations