Subjects
Guarantee

100% satisfaction guarantee Referencing style guarantee No plagiarism guarantee Your work would never be resold Free amendments guarantee Work free from grammer mistakes
Features

Financial Statement Analysis Bellway

INTRODUCTION:

 

This report is all about the financial analyses of a real estate company named Bellway Plc. It is one of the major residential property developer companies operating in British (Bellway, 2010)1. Bellway is listed on London Stock exchange which has the experience of more than fifty years to develop the English economy. The report is focused on analyzing Bellway form different perspectives and it also compares those analyses with a benchmark competitor company Telford Homes Plc.



PREVIEW

The report is all about the financial analyses of Bellway Company. It is compared with the previous year and a choose benchmark of Telford Homes Plc in the same economy. The report ends with a sound conclusion. The company has the better liquidity position, a good solvency position, is more efficient in operations but has lesser amount of profits and not the best of the investor statistics to invest in the Bellway Company stock comparing the Telford’s shares. Analyses are being discussed throughout the report but the calculations are given in the end of the discussion. 

Our financial analyses of Bellway Plc and its benchmark are divided on five categories of ratios which are activity, liquidity, solvency, profitability and investor ratios (Pearson Publications, 2009).

 

Liquidity Analyses:

 

This liquidity ratio focuses on the company’s ability to meet its short term obligations. This is something that how quickly the Bellway Plc assets are converted into cash. The level of liquidity good for the company health differs from industry to industry. To judge the liquidity of the companies we have analyzed them on the historical records of two years 2008 & 2009 and also compared the Bellway Plc liquidity with one of its major competitor in the same economy.

 

Current ratio which is the result of dividing the current assets by the current liabilities of the company is 4.95 for year 2008 (Telfordhomes, 2009) which means it can meet its current obligations about 5 times form its current assets, it indicates towards the good liquidity position of the company. It just further improves to 5.31 in the year 2009. Comparing with its benchmark it is outstanding as Telford Homes Plc has only 1.31 and 1.35 in the year 2008 and 2009 respectively. Bell way current ratio is about four times better than the Telford’s.  

 

Te next of our liquidity ratio is Acid test Ratio which excludes the inventory from the current assets and divide it by the total current liabilities of Bellway plc. Acid test ratio for the year 2008 and 2009 for Bellway are 0.4862 and 0.3852 which means Bellway can only meet its 38.52% of current liabilities form its current assets if inventory is not treated as current asset. The ratio is deteriorated comparing the last year of 0.4862. As every industry has its own standards of liquidity we can’t say that this liquidity position is bad because there is a lot of inventory required when you are in the business of construction. To judge the liquidity position of we compare by the benchmark’s liquidity in asset test the Telford’s Acid test is only 0.1003 & 0.1434 in the respective years of 2008 and 2009. So, Bellway is still having a sound liquidity position.

 

Activity Analyses

 

In this section we have calculated the ratios of the companies which estimate or analyze the operating efficiency of both of he companies. The comparison is made between the two companies and their last year performance.

 

The first of our efficiency ratio is stock turnover which evaluates that how many times the whole company’s inventory is sold in a single year. The answer is Stock Turnover 0.4925            & 0.6022 for Bellway and 0.5004     0.4452 (Wei, 2004) for Telford Homes in the year 2009 & 2008 respectively. Where we can see that Bellway Plc’s stock efficiency has decreased in the latest year and Telford’s efficiency has improved comparing in last year performance of its own. In year 2009 Telford has a better stock turnover comparing the Bellway’s.

 

 

 

In the similar way stock turnover in days has also deteriorated for Bellway but improved for Telford and in year 2009. Bellway has 741 days of stock turnover comparing the 729 days of Telford stock to be converted into revenues. Both of the companies have slow and less efficient stock turnover ratios it takes about 2 years for both of the companies to convert their stock into cash but even then Telford has the better efficiency in it.

 

Receivable turnover is another activity ratio lets us know that how many times receivables of the company have been converted to cash in a single year. Bellway has Receivable Turnover 16.379 & 37.571 and Telford has 11.723 &7.661 in the year 2009 and 2008 respectively. Bellway seems to have relaxed the receivable policy and have done more sales on credit comparing last years as its ratio is decreased from 37.5 to 16.3 in a year but it is still better than the benchmark of 11.7 in the year 2009. The similar is case with the receivable turnover in day which has increased comparing from last year but still it has lesser number of days comparing the benchmark company 22 to 31.

 

Trade payable turnover ratio of Bellway is extremely large worth 1055.646853 in 2008 but it is only 2.424 in 2009 comparing 2.916 for Telford in the year 2009. The similar ratio in days is too small to explain in days worth 0.35 day in 2008 but has 150.57 days to pay its creditors in year 2009. Trade payable in days is 150.57 days for Bellway and comparing 125.16 for Telford. IN this way Telford is more efficient for its creditors to pay its payables in lesser days.

 

Profitability Analyses:

 

These analyses contain the ratios measuring the profitability of the Bellway Plc and compare and contrast with the benchmark and last year profitability performance. Gross Profit Margin of the Bellway is 12.74% & 21.21% and 13.83% & 17.59% (Subramanyam, 2008) for Telford for year 2009 and 2008 respectively. We can see that the GP position of the company has significantly fallen down comparing last year of about 8% difference. Similar is case with the Telford but it maintains better gross profit comparing the Bellway which is only about 1% difference. So, Bellway also shows healthy gross profit.

 

The similar is happened with the Net Profit Margin as with Gross profit margin. It is 2.97% net profit to the company comparing last year of 10.40% and 2.83% of Telford current year 2009. It seems to have a little setback in the real estate or housing sector in the 2009 where both of the companies’ profit margins have been reduced.  Return on capital employed tells the same story as the net profit and gross profit margins. It is reduced to 2.97% in year 2009 comparing 10.40% of net profit margins in year 2008. Bellway has 2.97% of year 2009 ratio but Telford profit margins are slightly lesser comparing Bellway.  

 

 

 

Solvency Analyses:

Solvency ratios calculate the long term stability of the company. These ratios measure the ability of the Bellway Company to pay its long term debts (. Gearing or Debt to Total Capital ratio for Bellway in year 2009 is 9.39% and for 2008 is 22.76%. According to the ratio company has significantly improved its long-term solvency position in 2009. Comparing the benchmark ratio zero, Telford doesn’t have any debt in its capital structure.

 

Investor Analyses:

These analyses analyze the company from different perspectives and let the investor knows to invest in the company shares or not. Earnings per share (EPS) of the company are 17.70 which are reduced comparing last year 104.20 but better than the competitor of 8.10 which is also deteriorated comparing last year of 12.10. Price earnings ratio (P/E) of the Bellway is 41.53 (Mayer, 1969) comparing last year 5.59 and the benchmark’s ratio of 13.58 in 2009 and 19.09 in year 2008. Bellway is better from EPS but not by P/E ratio. It is better to invest in Telford but not bad to invest in Bellway either because it has a sound EPS. Bellway has also better dividend cover ratio of 1.9 comparing Telford’s 1.47. It pays lesser amount of dividend means it is investing the remaining income and has more opportunity to grow in future.     

 

 

 

    Ratio Analysis

 

 

 

 

Competitive company

 

Bellway

 

Telford Homes Plc

 

2009

2008

 

2009

2008

Current assets

1,306,157

1,667,745

 

192,246

201,066

Current liabilities

246,147

336,901

 

142,572

153,098

 

 

 

 

 

 

Current Ratio

5.31

4.95

 

1.35

1.31

Current assets

1,306,157

1,667,745

 

192,246

201,066

Inventory

-1,211,351

-1,503,936

 

-177,941

-179,113

Current liabilities

246,147

336,901

 

142,572

153,098

Quick Ratio (Acid Test Ratio)

0.3852

0.4862

 

0.1003

0.1434

Inventory

1,211,351

1,503,936

 

177,941

179,113

CGS

596,680

905,745

 

89,044

79,756

Stock Turnover

0.492573994

0.602249697

 

0.500413058

0.4452831

Days

365

365

 

365

365

 Stock Turnover in days

741.0054217

606.0609112

 

729.3974327

819.70316

Days

365

365

 

365

365

Revenues

683,813

1,149,541

 

106,662

96,777

Receivables

41,749

30,596

 

9,098

12,631

Receivable Turnover

16.37914681

37.57161067

 

11.72367553

7.6618637

Trade Receivable Turnover in days

22.28

9.71

 

31.13

47.64

Days

365

365

 

365

365

Purchases

596,680

905,745

 

89,044

79,756

Payables

246,147

858

 

30,534

51,591

Payable Turnover

2.42407992

1055.646853

 

2.916224537

1.5459286

Creditors Payable Turnover in days

150.57

0.35

 

125.16

236.10

Gross Profit

87,133

243,796

 

14,750

17,021

Revenues

683,813

1,149,541

 

106,662

96,777

Gross Profit Margin

12.74%

21.21%

 

13.83%

17.59%

profit After Interest

 

 

 

 

 

interest cost

 

 

 

 

 

Income Before interest

 

 

 

 

 

Net Profit before tax, interest and dividends (EBIT) /

45,579

185,035

 

5,290.00

6,428

Total equity attributable to shareholders of the Company

965,078

714,500

 

50,305.00

48,853.00

Total Debt (Debentures and loans)

100,000.00

295,000.00

 

127000

100,000

Total Capital Employed

1,065,078

1,009,500

 

177,305

148,853

Return on capital employed

4.28%

18.33%

 

2.98%

4.32%

 

 

 

 

 

 

Revenues

683,813

1,149,541

 

106,662

96,777

Total Assets

1,349,938

1,697,000

 

192,877

201,973

Total Asset Turnover

50.66%

67.74%

 

55.30%

47.92%

 

 

 

 

 

 

Earnings per share (EPS)

17.70

104.20

 

8.10

12.10

Share Price

735

582

 

110

231

Price earnings ratio (P/E)

41.53

5.59

 

13.58

19.09

Dividend

10,697,000

51,364,000

 

2,061,000

3,498,000

Number of shares

114,949,883

114,615,661

 

38,750,000

38,750,000

 

0.0931

0.4481

 

0.0532

0.0903

Share Price

735

582

 

110

231

Dividend Yield

0.01%

0.08%

 

0.05%

0.04%

Net income

20,301.00

119,509

 

3,023

4,497

Dividend

10,697

51,364

 

2,061

3,498

Dividend Cover

1.90

2.33

 

1.47

1.29

Total Debt (Debentures and loans)

100,000.00

295,000.00

 

18

0

Total Capital Employed

1,065,078

1,296,150

 

50,323

48,853

Gearing or Debt to Total Capital

9.39%

22.76%

 

0.04%

0.00%

Net Profit before tax, interest and dividends (EBIT)

45,579

185,035

 

5,290.00

6,428

interest cost

20,712

20,712

 

6,425

7,400

Interest Cover Ratio

2.20

8.93

 

0.82

0.87

Net income

20,301.00

119,509

 

3,023

4,497

Revenues

683,813

1,149,541

 

106,662

96,777

Net Profit Margin

2.97%

10.40%

 

2.83%

4.65%

 

REVIEW:

Bellway Plc is a financially sound company. It is one of the major contributors of housing development in the British housing sector. The company has a sound liquidity position which is better than the benchmark company Telford Homes Plc as indicated by both of the liquidity ratios. Bellway is less solvent comparing the benchmark company which doesn’t have any debt in its capital structure. But it still has a sound solvency position which is even better than the last year analyses of 2008. Bellway is more efficient in its business operations as indicated by the stock turnover, total assets turnover, receivable turnover and payable turnover ratios. Bellway has lesser amount of profit as compare to the benchmark company Telford Homes Plc as we have seen in the gross profit and net profit margins. If we have the choice to choose one stock then Telford Homes is a better stock to invest in but statistics of Bellway Plc are not bad form investment point of view too.

Unique Characteristics
Log in & Sign up
Discount

We are running some amazing promotions on our website by offering discounts from 5% to 15%.

We Accept:






Follow us on: