Financial Analysis And Report Of Dominos Pizza Finance Essay

This study is commissioned to analyze the current and old Short-Term Liquidity, Capital Structure and Solvency, Operating Efficiency and Profitability of Dominos Pizza Group Limited. The method used in analyzing includes, current ratios, liquidness ratios, net income border, gross border, return on capital employed, pitching ratio, involvement screen, stock turnover, debitor yearss and creditor yearss.

The consequences of the analysis depicts that Dominos Pizza Group limited is runing good with consistent growing in turnover, net income border but with a really high pitching ratio.

The major countries of concern are the stock turnover, debitor yearss and creditor yearss which need effectual and efficient direction. Therefore it is recommended that the aggregation period for debitors and the payment period for creditors and the stock turnover should be monitored and improved.

The analysis besides has its ain restrictions which includes the inaccessibility of comparative information from the mirror company, SHS pizza Limited.

Analysis

Short-run Liquid

Current Ratio ( x )

Company

2009

2008

2007

Domino ‘s Pizza

0.69

1.01

0.92

SHS Pizza Ltd

0.18

0.22

1.29

This provides the part of the current liability of Dominos Pizza Group which can be settled with its current assets net incomes. This shows the ability of Dominos to run into its short-run debt contracts with the available current liability as the autumn due.

From the above tabular array, Dominos Pizza Group had a current ratio of 0.69 in 2009 as compared to the 1.01 and 0.92 in old ages 2008 and 2007 severally. The 0.69 in twelvemonth 2009 shows that Dominos is non liquid plenty to run into its short term debt duties as at 2009 despite it being better than the SHS Pizza Ltd at 0.18 times in the same twelvemonth. With its superb public presentation in twelvemonth 2008 at 1.01times, in 2007 it went somewhat below its ability to cover the current liability with its current assets at 0.97 times unlike the SHS Pizza ltd which had a better public presentation in ratio of 1.29 times in 2007. ( Tracy J, 2008 P287 ) .

Liquidity Ratio

Company

2009

2008

2007

Domino ‘s Pizza

0.64

0.97

0.85

SHS Pizza Ltd

0.12

0.16

1.17

The ability for Dominos Group to refund short-run creditors out of its available entire hard currency is less than the general threshold of 1.00. In 2007, Dominos had a liquidness ratio of 0.85 and increased to 0.97 in 2008 but fell drastically in 2009. Relatively, its mirror company, the SHS Pizza limited performed better being able to cover its short term liabilities to the full by 1.17x in 2007. However, SHS Pizza ltd besides had a drastic autumn from 1.17x in 2007 to 0.16x and 0.12x in 2008 and 2009 severally. ( www.advfn.com )

Capital Structure and Solvency

Gearing ( % )

Company

2009

2008

2007

Domino ‘s Pizza

413.87

321.59

435.34

SHS Pizza Ltd

988.47

665.44

175.68

From the balance sheet of Dominos plc, it can be seen that it had a long term debt of 18million in 2007 which reduced further to 9million in 2007 and was finally cleared in 2009. On mensurating the sum of capital that is borrowed, the geartrain ratio for Dominos Pizza as at 2007 was 435.34 % falling somewhat to 321.59 % and 413.87 % in 2008 and 2009 severally. With this high geartrain, it indicates that the proportion of Dominos group borrowed capital is high. However its mirror company, the SHS Pizza ltd had a moderately lower pitching ratio of 175.68 % in 2007 increasing significantly to 988.47 % in 2009. These figures show how prone both Dominos Group and SHS pizza ltd is to fiscal hurt. Borrowing is a hazard to Dominos because of the associated high involvement payables and hence Dominos will be in a unsafe place if the involvement rate additions. ( www.bized.co.uk ) .

Interest Screen

Company

2009

2008

2007

Domino ‘s Pizza

62.00

30.25

41.72

SHS Pizza Ltd

n/a

n/a

n/a

Talk of involvement, the involvements cover for the Domino ‘s group has improved significantly over the last three old ages. In 2007 it had 41.72x but dropped to 30.25x in 2008, it subsequently got better in 2009 with a 62x screen. This is a good index that Dominos group is able to pay its involvement with its available operating net income. This important betterment could be as a consequence of effectual control of Domino ‘s disbursals and the consistent addition in turnover of 92,018 in 2007 to 128,076 in 2009. ( www.bized.co.uk ) .

Operating Efficiency

Stock Employee turnover

Company

2009

2008

2007

Domino ‘s Pizza

54.99

52.07

44.67

SHS Pizza Ltd

n/a

n/a

n/a

As at 2007, Dominos Pizza plc had a stock turnover of 44.67days. It began to increase to 52.07 yearss in 2008 and once more increased farther to 54.99 yearss in 2009. This means that it is keeping stock for longer than the old old ages and could accordingly increase the cost for keeping these stocks. It is hence of import that the Dominos Pizza Group improves on its stockholding period so as to cut down its associated costs. All other things being equal, as Dominos merchandises is nutrient and can easy botch, it is necessary that the stockholding period be reduced to avoid bulk waste of merchandises and as a consequence stuff costs.

Debtor Collection ( yearss )

Company

2009

2008

2007

Domino ‘s Pizza

7.34

11.11

14.71

SHS Pizza Ltd

n/a

n/a

n/a

Dominos Pizza was able to acquire hard currency from its debitors within 14.71 yearss in 2007, in 2008 it was able to recover 11.11days whereas in 2009 was 7.34 yearss. From the above tabular array, Dominos Group has been able to keep a healthy betterment in its debitor ‘s aggregation yearss from 14.71days in 2007 to 7days in 2009. It is hence of import that clients of Dominos Pizza wage earlier so that this can be used to pay-off it trade creditors on clip as good.

Creditors Payment ( yearss )

Company

2009

2008

2007

Domino ‘s Pizza

23.84

21.54

21.40

SHS Pizza Ltd

n/a

n/a

n/a

Dominos Pizza Group has been able to keep a longer period in paying of its creditors. In 2007, it took approximately 21.40 yearss for Dominos Group to pay of its creditors. This farther increased to 23.84 yearss in twelvemonth 2009. If Dominos is able to acquire more recognition period, it will be able to utilize the available financess to keep growing until the payment period is dew. Despite it being a good concern pattern for Dominos Group to acquire longer payment period in settling its debt, it is besides ethical that it pays it debt on or before clip.

Profitableness

Employee turnover

The Domino ‘s Pizza has sustained turnover growing for the past three old ages lifting from 92,018 in 2007 to 128,076 in 2009. The turnover is wholly the sale made from the United Kingdom with a nothing gross revenues from oversees for the whole three old ages. The addition in gross revenues was fundamentally due to a higher demand of Dominos Pizza in the UK whereas the Zero gross revenues in the abroad is as a consequence of unknowingness of the Dominos Pizza in the oversees.

Net income Margin ( % )

Company

2009

2008

2007

Domino ‘s Pizza

24.05

18.43

18.32

SHS Pizza Ltd

n/a

n/a

n/a

www.fame.bvdep.com

From the tabular array above, the Dominos Pizza has been able to keep a net income border of 18.32 % in 2007 and turning farther to 24.05 % in 2009. This is as a consequence of the efficient control of the cost of gross revenues and other disbursals like the disposal disbursals for the past three old ages plus an outstanding addition in gross from 92,018 in 2007 to 128,076 in 2009. ( Kimmel PD, et’al ( 2008 ) Accounting p243 ) .

Gross Margin ( % )

Company

2009

2008

2007

Domino ‘s Pizza

41.05

39.74

39.94

SHS Pizza Ltd

n/a

n/a

n/a

Similarly, alterations in the gross border will be as a consequence of alterations in the Dominos Pizza group turnover and cost of goods sold. From the above tabular array and diagram, we can see that the twelvemonth 2007 had a gross border per centum of 39.94 % somewhat dropped to 39.74 % in 2008 and subsequently rose to 41.05 % in 2009. The cost of sale comprised of 60.6 % in sale as at 2007 and a 59 % in 2009.

In the same period there was no information disclosed for public usage for its mirror company, the SHS Pizza.

Tax return on Capital Employed ( % )

Company

2009

2008

2007

Domino ‘s Pizza

112.58

149.71

418.60

SHS Pizza Ltd

n/a

n/a

n/a

In 2007, Dominos Group had a good return on capital employed of around 418.60 % . Despite the little decrease, it continued to keep a higher than 100 % ROCE in the old ages 2008 and 2009 with 149.71 % and 112.58 % severally.

However utilizing the ratio pyramid, the merchandise of net assets turnover and the net income border will give us the Return on Capital Employed. This is depicted in the tabular array below ;

Calculation of the Return on capital employed

2009

2008

2007

Net Assetss Turnover

4.68

8.12

22.85

Net income Margin

24.05

18.43

18.32

Tax return on Capital Employed

112.55

149.65

418.61

Here, any alteration on the return on capital employed comes as a consequence of alteration in either the net assets turnover or the net income border. From the above, it is the changeless autumn in the net assets turnover from the 22.85 in 2007 to 4.68 in 2009 which contributed to the autumn in the ROCE from 418.6 % in 2007 to 112.5 % in 2009. On the other side, the net income border continued to keep betterment.

The averagely high public presentation in ROCE indicates that, Dominos make good usage of its assets good in net income creative activity. ( Bedward and Strdwick 2004 p53 )