This study will critically analyze the fiscal and non-financial public presentation and overall fiscal wellness of Bodypower athleticss PLC by utilizing current market information and different ratios. The study has been conducted for the twelvemonth ended 30 September 2008. The surveies systematically compare and evaluate the fiscal place of the proposed company to the old old ages of the same company and by external beginning. SWOT analysis have been analysed in order to place future chances of company.
Bodypower athleticss PLC is engaged in fitness equipment retailing in UK. The company overall fiscal public presentation is good but non satisfactory in comparing to past available informations and rival. The net income border of the company has been decreased because of the recession in UK economic system, so company needs effectual schemes and policies to reconstruct its image in the competitory market. The study besides contains some recommendations for the proposed company.
Bodypower Sports PLC, once known as Bodypower Sports Limited, is a British private company engaged in the retail distribution of fittingness equipment in the United Kingdom. Bodypower Sports PLC has been merchandising since 1994 and is the largest provider of specializer fittingness equipment and has the largest salesrooms in the United Kingdom. The company offers branded fittingness equipment such as treadmills, egg-shaped trainers, rowing machines, exercising motorcycles, upper organic structure trainers, hoofers, quiver preparation, and accoutrements. It besides offers gym equipment, packaging equipment, table tennis tabular arraies, trampolines, commercial and sport equipment. In add-on, the company provides sole popular fittingness trade names from the United States such as Bodysolid, Vectra, Powertec, and Octane Fitness.
Bodypower athleticss PLC offers the widest pick of quality trade names under one roof and at sensible monetary values with bringing across the UK in the fastest possible clip.
Analyse and measure the fiscal & A ; non-financial concern public presentation of Bodypower athleticss PLC for the period ended Sep. 2008.
Critically analyse the public presentation, place and overall fiscal wellness of Bodypower athleticss PLC utilizing accounting statements and current market information.
Fiscal analysis of the Bodypower athleticss PLC one-year studies by utilizing different ratios.
Discuss fiscal constructs and their impact upon corporate coverage on the fiscal and non-financial public presentation of Bodypower athleticss PLC.
To place the future public presentation of the Bodypower athleticss PLC, on the footing of historic and current information.
To analyze the public presentation of Bodypower athleticss PLC in comparing to another company ( i.e. Life fittingness ( UK ) limited )
Fiscal analysis of company one-year study:
Atrill, P. And McLaney, E. ( 2006, p.168 ) stated that “ Financial ratios provide a quick and comparatively simple agencies of measuring the fiscal wellness of a concern ”
Appendix 7 shows the P/L history and fiscal statement of Bodypower athleticss PLC for the old ages 2006-2008. Harmonizing to Atrill, P. And McLaney, E. ( 2005, p.25 ) “ the aim of the major accounting statements is to supply a image of the overall fiscal place and public presentation of the concern ” .
Atrill, P. And McLaney, E. ( 2005, p.197 ) stated that “ Fiscal ratios can be used to analyze assorted facets of fiscal place and public presentation and are widely used for planning and control intents. They can be really helpful to directors in a broad assortment of determination countries, such as net income planning, pricing, working-capital direction, fiscal construction and dividend policy ” . ( Appendix 8 shows the expression of used ratios ) .
This ratio used to place the return on capital employed of the concern. Atrill, P. And McLaney, E. ( 2005, p.199 ) writes that “ Businesses by and large exist with the primary intent of making wealth for their proprietors. Profitability ratios supply an penetration to the grade of success in accomplishing this intent ” .
As ROCE express the relationship between the net net income generated during a period and the mean long-run capital invested in the concern during that period. Here we can see the diminishing tendency in ROCE ratio.
Now the inquiry is that why net income has been decreased over the last three old ages?
First the Bodypower athleticss PLC uses loan finance and have to pay against these loans i.e. stockholder financess increased by ? 1889 1000 over the period of last three old ages. ( Beginning: www.fame.bvdep.com ) . Inflation is the 2nd factor which consequences in high cost of production and hence lessening in net income border.
Third, depreciation of the equipments in stock consequences in diminishing ratio. On the other manus recession in the U.K. has cut down the disbursement power of the general multitudes. All these factors consequences to diminish in net income border of the bodypower athleticss PLC. i.e. net net income border of the proposed company was 11 % in 2006 and decreased to 10.10 % in 2008. ( Beginning: www.fame.bvdep.com ) . Hence the Company has been able to borrow at a lower rate of involvement than its rate of ROCE.
“ Ratios may be used to mensurate the efficiency with which peculiar resources have been used within the concern. These ratios are besides referred to as activity ratios ” . Atrill, P. And McLaney, E. ( 2005, p.199 ) .
Atrill, P. And McLaney, E. ( 2005, p.212 ) stated that “ The gross revenues gross to capital employed ratio ( or plus turnover ratio ) examines how efficaciously the assets of the concern are being used to bring forth gross revenues gross ” .
Net assets turnover ratio was 4.11 % in the twelvemonth 2006 but subsequently the ratio decreased to 3.36 % ( 2007 ) , once more in 2008 it decreased upto 2.09 % which is approx. twice than 2006 ratio. Less gross revenues gross was generated for each ? 1 of capital employed since 2006.
Why assets turnover has been decreased over the last three old ages?
Current assets used during the twelvemonth 2006 were ? 3374 1000 ( 2007: ?4650 1000 ) and in the twelvemonth 2008 assets reduced to ? 3664 1000 ( beginning: www.fame.bvdep.com ) . This lessening in current assets consequences lessening in production and hence consequences in autumn of efficiency ratio.
Harmonizing to Atrill, P. and McLaney, E. ( 2005, p.216 ) the current ratio compares the liquid assets ( that is, hard currency and those assets held that will shortly be turned into hard currency ) of the concern with the current liabilities.
Investorglossary ( 2009 ) study says that “ Current ratio is balance-sheet fiscal public presentation step of company liquidness. Current ratio of more than 1.0 agencies, that a company ‘s short term assets exceed its short term liabilities ” .
Current ratio was 1.26 times ( 2006 ) and has been increased to 1.52 times ( 2007 ) , but once more drop down to 1.02 times ( 2008 ) . All ratios over the last three old ages were more than 1.0 % which means that company`s short term assets exceed its short term liabilities. Which is a good mark, but the ratios are non stable and fluctuate over the period of last three old ages.
Why liquidness ratio keeps on fluctuating over the last three old ages?
Bodypower Sports offers “ Buy now pay subsequently ” strategy to its clients for 6 to 36 months which means that clients can purchase fitness equipments with merely 10 % of sedimentation ( beginning: www.Fitness-Superstore.co.uk ) , so due to economic recession some client uses this option and some purchases on hard currency, hence this creates fluctuations in the ratio but strong hard currency flow ( i.e. addition from 178 thousand ( 2006 ) to 1341 1000 ( 2007 ) means that creditors due will be met easy. ( Beginning: www.fame.bvdep.com )
Atrill, P. and McLaney, E. ( 2005, p.199 ) . stated that “ fiscal geartrain is the relationship between the part to financing the concern made by the proprietors of the concern and the sum contributed by others, in the signifier of loans. The degree of geartrain has an of import consequence on the grade of hazard associated with a concern. Gearing is, hence, something that directors must see when doing funding determinations. Gearing ratios tend to foreground the extent to which the concern uses loan finance ” .
Gearing ratio increased more than three times in 2008 ( 57.37 % ) , in comparing to 2007 ( 14.71 % ) . The company has increased the adoption for investing and enlargement intent which is good for the turnover of the company but the lone disadvantage is that the company will hold to pay high involvement on such high adoptions, which will consume its net income.
Why company has been decreased or increased its adoption?
The sum of fixed assets was 1947 1000 ( 2006 ) and decreased to 1900 1000 ( 2007 ) because of reduced in borrowing ( pitching ratio ) by the company i.e. 23.22 % ( 2006 ) to 14.71 % ( 2007 ) . But once more company has increased its borrowing up to 57.37 % and invested on its fixed assets i.e. sum of fixed assets increased from 1900 1000 ( 2007 ) to 6960 1000 ( 2008 ) ( beginning: www.fame.bvdep.com ) . This is a important fiscal load on company and can increase the hazard of the concern going bankrupt, nevertheless most concerns are geared to some extent.
Benchmarking of the Bodypower athleticss PLC: ( External Comparison )
Why we need external comparing?
“ In a competitory environment, a concern must see its public presentation in relation to that of other concerns runing in the same industry. Survival may depend on the ability to accomplish comparable degrees of public presentation. Thus a really utile footing for comparing a peculiar ratio is the ratio achieved by similar concerns during the same period ” . Atrill, P. And McLaney, E. ( 2005, p.200 ) .
Bebbington, J. and others ( 2001 ) stated that “ the best manner to travel about understanding company fiscal coverage Numberss is to give them a context by: uniting Numberss – normally in the signifier of ratios, looking at any tendencies through clip in these Numberss and comparing different companies and/or individual companies with the industry to which they belong ” .
Harmonizing to Britton, A. and Waterston, C. ( 2006, p.191 ) “ we need benchmarks against which we can compare current public presentation, fiscal position and investing potency ” .
Now here, foremost we will analyze the turnover, net income and loss after revenue enhancement of Bodypower athleticss PLC in comparing to another company ( i.e. Life fittingness ( UK ) Limited ) covering in the same fittingness equipments.
The turnover of Life Fitness ( UK ) Limited is more than Bodypower Sports over the last three old ages.
The first ground is that the Life Fitness ( UK ) Limited is working in more than 29 states of the universe and has internationally established. It is good renowned by peoples and increasing its concern twenty-four hours by twenty-four hours. ( Beginning: www.lifefitness.com ) .
On the other manus Bodypower Sports is working within the U.K merely. Second the Bodypower Sports PLC offers inexpensive monetary values and claims that client can`t finds the low monetary values than the monetary value they offer ( beginning: www.fitness-superstore.co.uk ) . That`s why its turnover value is less than the rival but still the turnover of Bodypower Sports PLC is increasing at good gait in comparing to its past public presentation ( i.e. from 10,839 thousand ( 2006 ) to 14,673 1000 ( 2008 ) .
Net income of the Life Fitness ( UK ) Limited has been ab initio increased in 2007 and so fell down in 2008. The grounds of decreasing net income are high cost of input due to internationally recognized and U.K economic recession. In comparing, the net income of Bodypower Sports has been increased bit by bit over the period of last three old ages ( i.e. from 835 thousand ( 2006 ) to 1,037 1000 ( 2008 ) ) .
Overall net income of Life Fitness ( UK ) Limited is higher than Bodypower Sports but public presentation of our proposed company is satisfactory compared to competitor because our proposed company is UK based and have merely 6 largest salesrooms within UK in comparing to Life Fitness ( UK ) Limited which is working more than 29 states. ( Beginning: www.lifefitness.com ) .
Atrill, P. And McLaney, E. ( 2005, p.200 ) stated that “ In a competitory environment, a concern must see its public presentation in relation to that of other concerns runing in the same industry. Survival may depend on the ability to accomplish comparable degrees of public presentation. Thus a really utile footing for comparing a peculiar ratio is the ratio achieved by similar concerns during the same period ” .
ROCE ratio of the Bodypower athleticss PLC is diminishing over last three old ages but in instance of Life fittingness ( UK ) limited, first it has been increased up to 34.35 % ( 2007 ) and so fell down to 22.34 % ( 2008 ) . As Life Fitness ( UK ) Limited is working internationally and have the information of cheep natural stuff markets, so they can utilize their resources expeditiously. ( beginning: www.lifefitness.com ) .Although in the twelvemonth 2008 the public presentation of Life Fitness ( UK ) Limited was non good in comparing to 2007 but its satisfactory than our proposed company.
Bodypower Sports has assets deserving £10,624 1000 and Life Fitness ( UK ) Limited has assets of £19,912 1000 ( beginning: www.fame.bvdep.com ) . However the ratios of both companies have been diminishing continuously but public presentation of Bodypower Sports is good because company is doing high turnover while utilizing fewer assets in comparing to Life Fitness ( UK ) Limited. Our proposed company is using its fewer assets in more efficient manner than Life Fitness ( UK ) Limited.
Life fittingness ( UK ) limited borrowed more than Bodypower Sports PLC to use its concern which is good for the company because the company public presentation has been satisfactory in sense of paying its debts back i.e. the ratio decreased from 354.80 % ( 2006 ) to 80.37 % ( 2008 ) . On the other manus Bodypower athleticss borrowed 57.37 % in 2008 which was 23.22 in the twelvemonth 2006, this is the dismaying mark because increasing pitching ratio will cut down the company net income and company have to pay higher involvement rate against its adoptions.
From the above we are able to reason that Life Fitness ( UK ) Limited public presentation is satisfactory than our proposed company as it has international concatenation and broad market to use its concern.
Balance Scorecard ( Non-Financial ) :
Balance scorecard institute ( 2009 ) study says that the balanced scorecard is a strategic planning and direction system that is used extensively in concern and industry, authorities, and non-profit organisations worldwide to aline concern activities to the vision and scheme of the organisation, better internal and external communications, and monitor organisation public presentation against strategic ends.
There are four positions of balance scorecard. Bodypower athleticss PLC should follow these positions in order to derive mark accomplishments.
A stakeholder is any entity with a declared or imaginable involvement or interest in a policy
concern. The scope of stakeholders relevant to see for analysis varies harmonizing to the complexness of the reform country targeted. World bank ( 2009 ) studies that Stakeholder Analysis ( SA ) is a methodological analysis used to ease institutional and policy reform processes by accounting for and frequently integrating the demands of those who have a ‘stake ‘ or an involvement in the reforms under consideration.
Bodypower athleticss PLC has been adopted some schemes towards its stakeholders as follows:
Company offers good quality merchandises with warrant to the clients every bit much as possible harmonizing to their influence power. In bend clients are satisfied with the company services. ( beginning: www.fitness-superstore.co.uk/testimonials ) .
Company offers ”back to establish ” guarantee for less expensive strength to its clients. ( beginning: www.fitness-superstore.co.uk ) .
Company offers better environment and preparation to staff members to do certain that workers have alone cognition of the characteristics and benefits of gym equipments.
Impact of the alteration in accounting policies of the company:
UK GAAP is bases for ‘united land by and large accepted accounting rules ‘ . It is a widely accepted model of accounting regulations, criterions and processs. Bodypower athleticss PLC is utilizing the UK GAAP as accounting criterion. SORP ‘s is base for statements of Recommended Practice. These are the recommendations on accounting pattern for the industries.
What will be the impact if accounting criterions and conventions alteration?
It will take to alter in the rating of the assets, alteration in future prediction of a company and the similar. So, it will do hard to compare the company public presentation with other companies ‘ informations because of alteration in accounting methods. The company can non measure and analyze its public presentation under alteration accounting criterion within the U.K. The same will use for Bodypower Sprots PLC and all the companies which are supposed to follow the UK GAAP criterions and SORP`s.
In order to grok the significance to the full let`s take the illustration of this study i.e. in this study we have used the company information which has been calculated harmonizing to the UK GAAP, we compared this information with another company which is following the same accounting criterion. Now if the Bodypower athleticss PLC decided to alter its accounting method for the following twelvemonth it will be non possible to compare that values with company past public presentation and studies. Besides it will be hard for the stakeholders to place the company public presentation in relation to other companies which are utilizing UK GAAP accounting criterion.