Financial Analysis of Mitchells & Butlers 2007 Annual Report

2107 WordsMay 3, 20109 Pages
Title Page Date: 12/12/09 The following report is designed for the purpose of a business analysis. I have chosen to analyse Mitchells & Butlers PLC by firstly, looking closely at the annual report produced by the company over a two year period and secondly, by researching their financial activities further than the annual report explains. I will compare and contrast ratios to help give the reader a better understanding of the company’s profitability, liquidity, activity and leverage. Summary In my analysis of Mitchells and Butlers PLC accounts for the years ending 2007 and 2008 I found that the Group has a very complex financial structure. Especially with the occurrence of a financial disaster which ended in the loss of…show more content…
The bank also advised the companies to do this, two weeks prior to the investment being made as the hedges could take some time to execute. The hedges were purchased mid July, by the end of July the credit crunch had kicked in and the bank withdrew its credit approved terms. Both companies were left with hedges in place but no investment to back them against. M & B held onto their hedges until January 2008 hoping for an upturn in the market. By January 2008 it had become apparent that this was not going to happen and M&B disposed of them. Using them would have been very risky, especially since finance director Naffah had already been let go. “At the end of last financial year, an exceptional accounting loss of £155m post tax was booked in respect of the hedges. The above settlement of the majority of the hedges results in a further £119m post tax exceptional loss which will be taken in the current year,” the company said in a statement. Looking equally bleak is M&B’s current ratio4 of 0.888:1 in 2008 and 0.391:1 in 2007. Many believe that businesses must have a current ratio of at least 2:1 to survive, proving Michells & Butlers as an unorthodox company. Unbelievably it functions with a negative working capital6, this is due mainly to the company keeping stock levels impeccably low and thus giving the acid test a similar result with a

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