The report carries out a forecasting of the financial performance of Burberry Group Plc for the next five years including a sensitivity analysis to show how the valuation would be affected by the variation in the forecast. A recommendation on whether to buy or sell the share will be given…
In relation to the study the company which has been selected is Burberry Group Plc is a British luxury fashion house established in 1856 and listed on the London Stock Exchange since 2002. Its business’s mainline involves the sourcing, designing, manufacturing, and marketing of high-end clothing as well as non-apparel accessories for customer segments including women, men, and children. Customers can reach Burberry products through its diversified distribution network of retail, wholesale, digital and licensing channels operated in the United Kingdom and across the world. In the year 2012, Burberry was ranked the 82nd best global brand in the world with regards to its high operating value and such ranking has been improved for the past few years. Therefore, it is worth studying its financial information to see how its operation has developed causing increasing company’s value. For the purpose of carrying out a financial performance analysis of Burberry, the financial statements of the company pertaining to the last three financial years have been reformulated (See Appendix). The reformulation of balance sheet reveals the net operating assets (NOA) of the company, net debt, and net equity. On the other hand, the reformulation of income statement has revealed the recurring items and non-recurring or exceptional items in the income statement of Burberry. The income statement has been reformulated in two ways, i.e. full reformulation and basic reformulation. The basic reformulation does not include exceptional or non-recurring items in the income statement, whereas in full reformulation, each and every time has been included in the reformulated income statement.
The overall analysis of the income statement for Burberry pertaining to the last four financial years shows that the sales growth declined in 2010 in comparison with 2009, whereas the growth rate showed improvement on consistent basis in 2011 and 2012. The main reason behind this consistency in sales growth is considerable increase in the retail sales of the company in the last two years. In addition to this, as the company is also engaged in the wholesales, there is a insignificant increase in wholesales also noted, which has contributed to the growth in sales revenue to some extent.
Reformulated Income Statement (Full)
(Sales growth based on previous financial year)
As per the reformulated income statement, common size income statements for full and basic income statements have been prepared.
Common Sized Income Statement Based on Full Reformulation (Excludes Unusual Items ...
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