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Greggs, is one of the top bakery retailer in the UK, it has been working for the last 70 years, and more than 1400 shops are being operated across UK. Greggs have 375 delivery vehicles, and around 19000 employees. Greggs are planning to add nearly 600 more shops and looking further to add 6000 more jobs.

Greggs staffs are highly skilled, they have 289 Master Bakers, and roughly of 2,254 combined years of experience in baking field. Greggs bakeries hand finish millions of stuff each week, especially icing, to hand twisting their yum yum doughnuts and hand crossing their hot cross buns. Greggs believe that they are different because they make and bake mainly of their own food from scratch, their 'wheat to eat' proposition. Greggs work force are passionate about baking and take great pride in their food. Each product is watchfully prepared to give their consumers excellence and freshness at immense worth prices.

Kennedy McMeiken was nominated as company chief executive on August, 1st 2008. Kennedy was retail director of J Sainsbury plc. Kennedy had spent around 14 years in operations with on Tesco as well. Richard Hutton working as a finance director at Greggs. He has career experience with Procter & Gamble before he joined Greggs in 2006.

Bacon rolls have given a increase to returns at bakery group Greggs, and the company is now adding croissants. According to Greggs, total sales for the 39 weeks to the start of October had climbed by 2.6%, with like for like sales up 0.5%, in spite of the rough trading conditions. Like many other businesses, retail and non retail, it cautioned the difficult environment was likely to continue, with consumer spending continuing to be constrained and inflationary pressures building. The recent poor weather has badly damaged business of Greggs, the High Street bakery chain.

Ratio Analysis

In accounts, Ratio analysis is where financial ratios are calculated from the information given in the company's financial statements. By analysing a company's financial ratios it can give a person an excellent picture of the performance of the company. Different sets of ratios are used to interpret different sides of the company's performance and in this report we will see this. The financial analysis of a company is usually done under three categories of ratios and these are financial ratios, investment ratios and performance ratios.

Performance ratios

We will now look at the performance ratios of Greggs, the underlining factor of these ratios is regarding profitability.

Return on Capital employed (ROCE)

ROCE is the key ratio and if only one ratio were to be calculated then this would be it. This ratio measures how efficiently the assets are used to generate profit. As we can see the percentage in 2008 was 26% which was lower than the previous year of 30%. This reflects badly for the company because it shows that it has not grown over the year. The company has not performed well in the financial year and this may be off putting for potential investors who may come in and want to make the company even bigger.

Asset turnover

This ratio is used to measure how efficiently the assets are being used to generate sales. When it comes to this ratio, the higher the number the better. Again we can see from the ratio above the figure was higher in 2007 than 2008 and this again suggests that the company under performed in 2008 in comparison of the previous year, something the company will be concerned about.

This ratio measures how efficient the sales are in generating profits. By calculating the ratios we can see that the percentage has dropped by just under 1% from 2007 and 2008. This suggests again that the performance levels have decreased for Greggs over the last year and this is damaging for the company.

Gross profit is the difference between what the traded goods cost to buy and what the company has sold them for. The higher the gross profit margin the better it is for the company. From Greggs figures we can see that in 2007 the gross profit margin was 62.3% and in 2008 it went to 61.7%. This shows that the gross profit margin was lower in 2008 compared to 2007 and this means that the company made less money in 2008. This will be concerning for Greggs.

This ratio measures the number of days the stocks take to turn-over. The above figures show that in 2007 it took 16 days for the stocks to turnover whereas in 2008 it takes 2 days longer and the stock turnover is 18 days. The quicker the goods are sold the more money is brought into the company and even thought the change is minimal over the year it will still have an effect on Greggs.

This ratio measures the average period of time in days that credit customers take to pay. We can see that in 2007 it was 12.3 days and in 2008 it is 13.1 days. This suggests that in 2008 people are taking longer to pay off their debts in comparison to 2007 and this is bad for the company. The quicker Greggs collect its debts the quicker the company will grow.

This ratio measures the average length of time in days that a company takes to pay its own suppliers. The above ratio shows that in 2007 it took Greggs 93.8 days to pay it suppliers and in 2008 it took Greggs 95.2 days. This is not a good sign for Greggs because if Greggs is unable to pay its suppliers on time then there is a risk they may lose that supplier and that would be very damaging for the company.

This ratio measures the earnings, for example profits which are attributable to each ordinary share. The results from the above ratio show that EPS decreased from 342.8p to 336.7p from 2007 to 2008. The higher this ratio is means the higher the company profits are for the year. So we can see that the company profits suffered in 2008 compared to 2007 because the EPS is lower.

Price Earnings Ratio.

March 2008 - PE 11.6

Price earnings ratio is the market price of the ordinary share divided by the EPS. If the PE is high then the market expects the company to grow whereas if the PE is low then the market doesn't expect the company to grow.

Dividend Yield

March 2008 - 3.8%

The dividend yield is measured by the dividend per ordinary share divided by the market price per ordinary share.

Dividend Cover

Year to March 2008

Profit on ordinary activities after taxation 45.1m

-------------------------------------------------- = ----------------- = 0.30

Ordinary (equity) dividends 147.9m

Year to March 2007

Profit on ordinary activities after taxation 49.4m

-------------------------------------------------- = ----------------- = 0.33

Ordinary (equity) dividends 145.5m

The dividend cover measures how much of the profits have been paid out as a dividend.

Return on Equity (ROE)

Year to March 2008

Profit on ordinary activities after taxation 45.1m

---------------------------------------------------- = ------------- = 3.34%

Equity shareholders' funds 13.5m

Year to March 2007

Profit on ordinary activities after taxation 49.4m

---------------------------------------------------- = ------------- = 3.65%

Equity shareholders' funds 13.5m

The ROE measures the return on the capital employed from the perspective of the ordinary share holder.

Financial Status Ratios

Working capital Ratio

Year to March 2008

Current assets 39.2m

--------------------------- = ------------- = 0.53

Current liabilities 73.9m

Year to March 2007

Current assets 41.4m

-------------------------- = ------------- = 0.53

Current liabilities 77.1m

This ratio is the main liquidity ratio. If the ratio is less than one then the company has a negative working capital and this is the case with Greggs. This means that they will not be able to cover short term payments which are very concerning for Greggs. We can see that the result is the same for both years.

Quick Assets Ratio

Year to March 2008

Current assets-Inventories 39.2 - 12.1 27.1

------------------------------------- = --------------------- = ----------- =0.36

Current liabilities 73.9 73.9

Year to March 2007

Current assets-Inventories 41.4 - 9.9 31.5m

------------------------------------- = -------------------- = -------------- =0.40

Current liabilities 77.1 77.1m

This ratio is an alternative liquidity measure.


Year to March 2008

Long-term Debt + preference shares 2.4 + 0 2.4

-------------------------------------------- = ------------------- = ------------ X 100 = 1.35%

Total Assets less Current Liabilities 250.4 - 73.9 176.5

Year to March 2007

Long-term Debt + preference shares 2.4 + 0 2.4

-------------------------------------------- = ---------------------- = -------------X 100= 1.4%

Total Assets less Current Liabilities 238.2 - 77.1 161.1

This is the balance sheet measure of solvency. Gearing expresses the proportions of the financing of the business that derives from borrowing, as opposed to equity share capital.

Interest Cover

Year to March 2008

Profit before taxation and interest 45.152m

----------------------------------------- = ------------------------ = 5.50

Interest payable 8.2m

Year to March 2007

Profit before taxation and interest 49m

-------------------------------------------- = --------------------- = 115.0

Interest payable 0.426m

This is the profit and loss measure of insolvency.


This report consists of the calculations of the financial reports of Greggs in 2007 and 2008. By analysing the key figures we can see that Greggs has gone downhill from 2007 and 2008. We can see that the return on capital employed has decreased which is a major factor for the company. The company's gross profit margin has also decreased which is deemed very important for the company aswell.