1 - Introduction
To further our investigation into The Wineries Industry, we will be analysing the finances of Majestic Wine (MW), a large UK based plc, and applying the findings to our own global company. MW has been operating for 35 years with 211 stores in their network (Majestic Wine Warehouse Ltd, 2015). The company offers a different way for us to Merge and Acquire in California. Instead of producing wine, we could introduce a wine retail experience to consumers and source a wide variety of wine and sommelier knowledge to provide them, or buy out a company already operating in this manner. MW source their products from a variety of New and Old World countries, including France, Italy, New Zealand and California (Majestic Wine…show more content… 2.2 - The Income Statement, appendix 2
In 2014, the rate of inflation was at an all-time low since 2009 of 1.2% (BBC News, 2014), MW’s revenue increase for that year was 1.36% showing that they remained operating healthily. I have worked out that the number of basic shares for 2014 was 65,192,592 and the total dividends were 10,430,814. With their large amount of shares, MW could be liable to depending on shareholders making decisions about their business. According to The London Stock Exchange (2015), the return on investment in a stock from dividend yield is 3.82% for the fiscal year. This is quite a low return, which may suggest that the share is overpriced or that the dividends are likely to be higher in the future. Return on Equity was 18.3% ((23887000/90969000)*100) in 2014, shareholders earned 18% of their investment in the company back, showing an attractive level of investment quality. The Dividend cover is close to risky at 1.68 (0.27/0.16), the company can just about afford the dividends and the dividend pay-out ratio is low at 0.59(0.16/0.27), but has been stable indicating a solid dividend policy from the company. The cash dividend cover is also low at 1.74 (0.27/1.687).
2.3 - The Cash Flow Statement, appendix 3
In relation to the revenue and profits, MW’s Net Annual Cash Flow is low being negative £1,057,000 before the input of cash at the beginning of the year and foreign exchange differences. The total