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“the Kitchen Shops” Financial Analysis. June 2011. Content. 1. “The Kitchen Shops” Budget implementation analysis 2. “The Kitchen Shops” Financial ratios analysis 3. Shops profitability analysis. 1. “The Kitchen Shops” Budget implementation analysis. Revenue - June.

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content
Content

1. “The Kitchen Shops” Budget implementation analysis2. “The Kitchen Shops” Financial ratios analysis

3. Shops profitability analysis

revenue june
Revenue - June
  • In June the consolidated turnover indicators show higher results than planned in the budget (+8%);
  • However, the turnover is higher only in two cities:
    • In London + 9.8%;
    • In Bristol + 7.7%;
    • But in Cardiff revenue is lower by 1.2% than was planned (the similar trend was also in previous month).
slide6

Gross Profit- June

  • Gross profit indicators also show higher results than was planned in the budget, however, due to the lower than planned markups (250%), here difference is +4%;
  • Average Mark-up differs in different cities:
    • It is higher in Bristol – 280%;
    • In Cardiff – 220%;
    • In Birmingham – 260%.
slide8

Net profit- June

  • Net Profit is significantly higher than was planned in the budget (£22,262 vs. £11,185).
  • Such high net profit is connected with significantly lower sales costs than was planned (-21%):
    • Bonuses -20% (-£5,600);
    • Gross salaries - 25% (-£3,200);
    • Internal Training -7% (-£340);
    • Etc. (logistics, depreciation).
net profit june
Net Profit - June
  • However, administration costs arehigher than was planned in the budget (+11%), which mainly is connected with unexpectedly high office staff travel expenses this month.
  • Despite of the fact that sales costs are significantly lower this month, there are several positions that are overspended comparing to budget.
conclusions
Conclusions
  • In June the consolidated turnover indicators show higher results than planned in the budget (+9%);
  • However, due to lower than expected markups (250%) gross profit indicators show a difference of 6%;
  • Net Profit this month is significantly higher than planned in the budget (£22,262 vs. £11,185);
  • Such high net profit is connected with significantly lower sales costs than were expected (-21%).
balance sheet ratios
Balance Sheet Ratios
  • Current ratio increased in June;a result of an increase in Current Assets, (+10.2%),that was higher than the increase in Current Liabilities (+1.5%);
  • Such a rapid increase in Current Assets is primarily connected with:
    • Increase in Accounts Payable (+11.1%);
    • Increase in Accounts Receivable (+9.9%);
  • Liquid Assets to Salesratiohas not changed significantly this month and remains stable at an average level of 4.17% for the last three month.
income statement ratios
Income Statement Ratios
  • Gross Margin Ratio decreased from 40.5% in May to 39.7% in June and reached the lowest point in the last six month;
  • This is a result of lower markups this month (250% vs. 258%);
      • Such a low markups are associated with high discounts this month (average discount rate reaches 30.2%);
  • Howeverthe Net Margin Ratio increased from 18.3% to 19.2%, due to a significant reduction in sales costs compared to May;
      • Mostly due to decrease in marketing and logistics costs

(-30% and -15%).

operating and financial risk
Operating and Financial Risk
  • Lower markups this month affected Operating Leverage (OLE) negatively: OLE decreased from 2.88 to 2.79 this month;
  • The Financial Leverage (FLE) number continued to hold, on average, higher than 1.However, due to significant repayment of debt during the last three months the ratio has had a tendency to decrease and in June it dropped from 1.23 to 1.20.
revenue and gross profit for the shops
Revenue and Gross profit for the Shops
  • This month the highest revenue is in “Palace” (the same as in May);
  • Intensive marketing campaigns and large discounts significantly affected “Plaza” revenue in June and this month it is at second place in revenue;
  • However, large discounts lowered mark-ups, hence in Gross profit, “Plaza” is only in third place;
  • ‘”A.L.B” revenue is lower this month than usual, which is a result of reconstruction of the shop which took 1 week (06/21 -06/28);
  • “Best” again has the lowest revenue and Gross Profit.
net profit of the shops
Net profit of the Shops
  • “Palace” is in first place with a profit of – £150,563;
  • “Dream” also showed high results;
  • “A.L.B” has a very low net profit resulting from relatively low revenue this month;
  • “Best” again has a negative net profit.
conclusions1
Conclusions
  • “Palace” is in first place in all charts;
  • Due to intensive marketing campaigns and large discounts, “Plaza” is in second place in the revenue chart this month;
  • But “Plaza” is only in third place in gross profits due to large discounts & lowered mark-ups;
  • ‘”A.L.B” revenue and net profit is lower this month than usual which is a result of reconstruction at the shop which took 1 week (06/21 - 06/28);
  • “Best” again shows poor performance.