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Financial analysis of Burberry Company(FTSE 100 Company) - Assignment Example

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Financial analysis of Burberry Company(FTSE 100 Company)

fiscal year 2012/13 on market review and research that will be centered on important sites in Asia.2 Indeed, Burberry has turnout to be resilient. Since 2009, the company’s assets have grown by 43% and its equity has increased by 64%. The equity growth is mostly due its Retained Earnings that have more than doubled during the last four fiscal years of the company – from ?199.2 million in 2009 to ?507.1 in 2012. To fuel the continuing expansion of its operations in the last four years and to fund its working capital requirements, Burberry has not opted to issue additional common shares. Thus, its common stocks, at par value, have not increased in the course of the last four years. Instead, Burberry’s long-term liabilities have increased by almost 250% from ?35 million in 2009 to ?122.4 million in 2012. While Burberry has generally been operating as a profitable company, it incurred a net loss of ?6.0 million for the year ended 31 March 2009. In spite of the dire effects of the financial crisis that substantially crippled global giants that have considerable operations in USA and Europe, Burberry has generated operating profits that amounted to ?182.6 million for 2009. However, the non-operating expenses for 2009 ended up gobbling such profits made from the company’s operations. The total bulk of ?193.5 million was incurred mostly for booking impairment charges at ?129.6 million – the sum of ?116.2 million pertaining to the goodwill initially recognized for Burberry’s operations in Spain plus ?13.4 million for the stores established in the same country. In addition, negative goodwill has as well been credited at ?1.7 million for the formation of the Burberry Middle East joint venture. These procedures were conducted in compliance with International Financial Reporting Standards (IFRS) regulations that uphold International Accounting Standards (IAS) #36, which require the writing down of impaired assets and the recognition of impairment losses on goodwill and intangible assets.3 The foregoing matter aside, Burberry’s operations has delivered Earnings Before Income Tax (EBIT) that increased year-on-year from 2009 to 2013. In fact, the company’s EBIT in 2012 is 195% of the equivalent in 2009. The income statements below provide that while Burberry’s revenues increased by 54.57% from 2009 to 2012, its cost of sales increased by only 4.22%. This reflects an increased efficiency in the operations – sourcing, production and distribution. The balance sheets and income statements of Burberry for the years 2009 to 2012 reflect an overall uptrend of its income and, subsequently, its book value per share. The common-size balance sheets highlights the increasing share of Burberry’s equity vis-a-vis the decreasing share of its total liabilities in the total assets of the company. It means that the investment of creditors in the form of loans, etc. have through time become less than the worth of the company’s equity. While the company’s assets were represented as 51.68%-liabilities and 48.32%-equity in ...Show more

Summary

BURBERRY COMPANY: A FINANCIAL ANALYSIS Founded in 1856, Burberry Group plc is engaged in designing, sourcing, manufacturing and distributing luxury clothing, fashion accessories, watches and jewelry, shoes, bags, eyewear, perfumes for men, women and children using its own well-known “Burberry” brand…
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Financial analysis of Burberry Company(FTSE 100 Company) essay example
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