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Whitbread 5 Years Financial Analysis

2321 words - 10 pages

A evaluation of the financial performance of Whitbread plc since 2008/2009 based on an analysis of its Cash Flow Statements



  The main business strategy over this period
  Horizontal & vertical analysis for the cash flow statement
  Financial statement analysis (for each year)
  Cash flow analysis
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Nowadays there are approximately 2,500 hotels, restaurants and coffee stores in the UK. In terms of overseas business, there are 1000 Costa shops among 28 countries. Unlike Costa, its oversea Premier Inn hotels still at the beginning stage of expansion, the first international hotel was opened in Dubai in 2008. Presently, it owns six oversea hotels in India and the Middle East (Whitbread 2013).

From 2008 to 2013, thanks to the proper strategy implemented by Whitbread, its total revenue constantly increases year by year from £1,334.6 million (Whitbread 2009: 2) to £2,030.0 million (Whitbread 2013: 3). In order to enable shareholders to have clear information in regard to the company’s performance, since 2008 it has adopted the underlying profit measure (Whitbread 2009:


18). Consistent with the revenue trend, the underlying profit also has experienced a steady rise from £228.2 million (Whitbread 2009: 2) to £356.5 million (Whitbread 2013: 3).

The firm is expanding its presence every year with the appropriate rate. Contending with tough economic circumstances from 2008 to 2010, the company gives priority to cost efficiency, such as the £25 million cost reduction program and some of its business are operated as joint sites (Whitbread 2009: 18). Thus, the pace of expansion was throttled down during this period. Due to the aforementioned strong performance, Withbread modified its strategy. In 2011/12, the rate of expansion has begun to accelerate, for example, the Coffee Nation was purchased for £59.5 million and launched Costa Express, the self-serve coffee bar (Whitbread 2012: 7). In 2012/13, there is 2,560 Costa Express in the UK (Whitbread 2013: 6). Furthermore, a scrip dividend alternative was introduced in 2008/2009 and the company has adopted this measure during the following five years. That means the company has granted its cash flow in order to ensure sufficient capital for its expansion. In all, it seems that Whitbread has operated properly during these five years. The detail analysis is illustrated in the succeeding paragraphs.

2. Horizontal & vertical analysis for the cash flow statement1


The cash flow statement contains the cash inflow and outflow information for different segments, basically divided into operation, investment and financial activities. It clearly shows how the company controls its cash for the entire year and for each part. Cash from operation is highly related to the product process and the company’s profits. Then the investment is mostly used for improving the operation process and gain more profits. Furthermore, financial activities provide the money for the investment. Later the money from the operation tries to cover that used in other two parts.

The horizontal analysis (available in Appendix 1) measures how each segment preforms this year compare to last year, and there are some typical points that need to be focused. In the investment


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