- February 15, 2018 at 11:14 am
It seems to have gone a little quiet on this forum unfortunately.
The industries will change for the November submission period, but they have not yet been announced. As far as I know they won’t be announced until at least after the current submission period closes.
I hope that helps.February 16, 2018 at 8:45 am
Wow that’s late thought I can start the research early. Thank you ObuwankenobiMarch 3, 2018 at 6:10 pm
Sorry to trouble you, but I’d appreciate guidance on my enquiry. Please can you help?
Thank you.March 4, 2018 at 9:26 am
@obuwankenobi -sorry I missed your query. You are right that intercompany loans are really ‘noise’ so just restate the figures against the comment “with intercompany loans eliminated” against them.
Regarding your query: “do I have to perform comparisons against a different company (such as Premier Inn/Whitbread), or could I benchmark Travelodge against industry sector averages for those three years?” You could use industry averages if these are available and, as you no doubt have realised this may get round the problem if you cannot hive off Costa from the Whitbread figures. However you could still bring in Premier inn for some comparisons e.g. occupancy rates, average spend per room etc if these KPIs are available for both companies, so you may then have the best of both worlds -so to speak.
And yes, mention the limitations of your approach.March 7, 2018 at 2:57 pm
For the current May submission, i had choose Hilton and Marriot for hotel industry topic 8, but for the moment, annual report for year end 2017 is not available yet, so instead of using annual report for year end 2015,2016,2017, can i use annual report for year end 2014,2015,2016?March 7, 2018 at 11:09 pm
Hi @trephena, i need help!! can i choose Kelogg’s Company or Almarai Company for topic 8?March 10, 2018 at 3:00 pm
I am in a similar situation with Travelodge, and I am using 2014, 2015, and 2016. As far as I know, we are now in a period of time where if 2017 results are published, we do not have to use them but may do so if we wish.
Personally I would not (at least for a full analysis) and if anything maybe make a small reference to them if they give an indication of an outcome from a specific event from the period under review.
O.March 10, 2018 at 3:33 pm
@furqan.90 – did u pass the obu comparing those 2 from food industry, if so i am facing some problems too and if u have time can u share some thought with me through ur email or any other way thanksMarch 10, 2018 at 3:37 pm
I was wondering if you be so kind as to offer a little more guidance to me?
I am at the stage where I have done some KPI analysis, PEST, Porter’s 5 and a SWOT, along with an environment timeline to give myself a fairly broad view of the company and what was going on in the wider economy over the period. So now I am thinking of how I bring that together, draw some conclusions from it, and present it to the reader in a logical and ordered fashion.
That’s where I feel a little stuck!
For example, I’ve been putting the SWOT together as I’ve been reading about the company in chronological order. I can identify weaknesses and opportunities (say) early on in 2014, and by the end of 2016 the company has turned those weaknesses into strengths and exploited those opportunities! Obviously that’s great for the company, but it feels like it’s hard for me to add value to it. In fact it could almost look like I skipped to the end and saw what they did, then go back to the start and say “They should do this…”.
So I’m cautious of my RAP turning into a story of what the company did without offering any further insight. Therefore I have what I guess is writer’s block on how to get started.
Would you say the following is a good approach?
1. A short narrative of major events leading up to the period under review to give a little context to where the company is, and what it itself wants to achieve (taken from the BOD report).
2. A PEST/Porter’s 5/SWOT analyses at the beginning of the period to look into more detail regarding the company and its environment.
3. A narrative of the actions the company took in pursuit of their declared strategy over the three years, and the reactions they had to any external events, and link these to the KPIs (in an appendix).
4. A comparison of this performance (the KPIs) to those of a comparator.
5. An updated PEST/Porter’s 5/SWOT analyses at the end of the period to summarise the new position/environment of the company.
6. A conclusion, where I offer an opinion on how well or badly the company really did vs. their comparator, how well they achieved the aims they set out in their strategy, and offer ideas on how they can continue?
How does that sound?
O.March 14, 2018 at 9:31 pm
@obuwankenobi – You seem to be on the right lines. However I notice that you haven’t mentioned any standard ratio analysis. Whilst I encourage use of strategies, application of models and KPIs you do still have to perform some conventional ratio analysis.
So start the findings and analysis with the application of the PEST and SWOT as at 2014. You can then go on to integrate the financial results in with the factors from the models (the SWOT and PEST) as the factors and strategies that the company has employed will without doubt underlie the performance figures.
The KPIs are intended to supplement the main financial ratios (profitability and liquidity mainly) but you should also bring in gearing and investor ratios in your findings. So you use the trends in the KPIs alongside relevant ratios and bring in the strategies and strengths and weaknesses along the way.
You should arrange the information under the main ratio categories. It is difficult to prescribe exactly what to discuss as it depends on what you have found from your analysis (and the extent of the detail that is available) but it needs to tie facts together rather than be just a string of figures and percentages.
For example under profitability you would normally have some appropriate graphs and this needs to be accompanied by suitable commentary such as “Although GPM was fairly static at the start of 2014 it has increased steadily from X to Y over the 3 year period . During this time there has been a concerted effort to improve room occupancy rates and margins by upgrading rooms to appeal to the highly profitable business market sector. This seems to have been a successful strategy as the GPM has increased year on year by an average of x%. Occupancy rates have also increased by n% partly because of the increase in business customers and also because of special promotions designed to appeal to attracting families at weekends and during the summer when business traffic is low.”
It probably won’t be necessary to formally do an updated SWOT at the end as you should have covered the components of this in your commentary. Using the points from the SWOT and PEST to illustrate the changes in the trends of performance is far more effective and shows that you can use all the information gathered together with ratio analysis in a thoughtful manner rather than just mechanically stating results.
In your conclusion you can summarise the main findings and cover the aspects you suggest above, whilst also showing how you have achieved your project objectivesMarch 18, 2018 at 8:46 pm
Many thanks for your comprehensive response. I don’t know where you find the time to answer so many questions – but I’m eternally grateful for it!
I did indeed neglect to mention ratio analysis separately, however I was considering them; in my mind I had lumped them in with KPIs in general.
That is one thing I’ve been keen to try and do as I think of how I can organise all the data. After reading your RAP Guide Part 1 I’ve taken on board your assertion that the business and financial results are inter-related. In fact I’m trying to even not separate them in my RAP; for instance, I want to try and put them alongside each other in the results rather than separate analyses.
For example, as I look at Revenue growth I’d also like to show RevPAR at the same time. Revenue growth is great, but is it being achieved just because there are more rooms or is it because they’re filling the rooms more efficiently? My aim is to use the financial ratios as a base, bring in a KPI if it is relevant, then move onto other ratios and repeat (grouped as, say, profitability, gearing etc.).
As I continue I’m finding other points that I would appreciate clarity on, if you’ll indulge me?
1. I can find some comparative figures for Premier Inn (such as revenue) as it is listed separately in Whitbread’s accounts. However I can’t find a figure for gross profit as they lump that in with their restaurants (although Costa is separate). However I will then be able to find other comparative figures, such as RevPAR, occupancy etc. So my question is: does it matter if I don’t have a comparative figure for some Travelodge results (gross profit, EBITDA, ROCE and gearing spring to mind), and can I just use comparators where I can find them? And then just state the lack of availability of data is a limitation?
2. As an extension to question 1, I have other bits of industry data (no-Premier Inn) that I can bring in at selected points where it is available. Surely that’s fine to do to try and add a bit more of a complete picture?
3. Whitbread’s accounts run to the end of February each year and Travelodge is as per the calendar year. Therefore to compare (say) Travelodge 2014 with Premier Inn, Whitbread’s 2015 results would be a closer approximation (having March – December 2014 within them). So my question is, can I match Travelodge’s 2014, 2015 and 2016 with Whitbread’s 2015, 2016 and 2017, noting the 3 month difference. Or do I have to pro-rata Whitbread’s accounts?
I hope all that makes sense; I’m about a third of the way through a delicious Rioja….
O.March 19, 2018 at 10:43 am
In many respects your approach sounds excellent but I would caution against combining the models totally in with the financial analysis (subtle difference between this and inter-relating). Do a formal application of the SWOT and PEST and then lead on to the financial analysis drawing on the factors from the models to show the connections as you discuss ratios and the KPIs. The layout for the financial analysis should be: heading, clear graph, discussion/ commentary (arranged under subheadings if required ).
1. You are going to have to compare Travelodge’s GP with something -whether it is against an industry average or Premier Inn (stating the limitations) if only to ‘tick the box’ that you have covered GP ! However RevPAR and industry specific KPIs should be used as much as poss to supplement ‘conventional’ ratio and shows you really are making sense of the data (as opposed to adopting a rote approach). The financial structure (reliance or otherwise on loan capital) is another essential as well as some investor ratios but EBITDA and ROCE could be omitted
2. Yes, any additional information that supports the commentary discussions is desirable (as long as it is adequately referenced). This is essentially what good critical analysis and a mature approach is all about !
3. I don’t think this 2 month time difference is material. Jan -Feb are dead months in the UK hospitality trade – in contrast to December which is one of the peak months. So don’t bother with the hassle of pro-rating
Rioja – you sound like my kind of person (the only white that passes my lips is champagne or a good prosecco! ). If you live in West Surrey or East Hampshire I might just have invite myself round….
PS I’m off to Japan very shortly so won’t be around to answer queries for a couple of weeks, however tutors from The Learning Luminarium will be helping out during my absence.March 19, 2018 at 1:55 pm
I’m starting my topic 8 RAP on Nestle(main reason being that it’s the major player in the food industry and operates at a huge scale)
However Nestle publishes it’s group statements in CHF and most competitors have a different currency. I do realize that this can be controlled by using the ratios but other than that is there anything I should be looking out for due to different currencies?
Secondly Nestle is huge the scale of the business cannot really be compared to any other competitor say Unilever, in addition to that Nestle is a purely food manufacturing business but Unilever also deals with cleaning agents and personal care products. how do I address this issue?
Also in the section where we have to mention the limitation to information available can some one please tell me what would the limitation be in terms of international listed companies that have so much published around them?
ThanksMarch 24, 2018 at 3:10 pm
Let me try to see if we can help.
1) Currency issues are considered quite secondary within the report. The ratios used will be fine. There are some rare occasions where analysis of the currency itself is meaningful – eg a devaluation of the currency or a surging of the currency. You could then examine how competitiveness and profitability was impacted.
2) yes, to find a good competitor for Nestle is difficult. In fact, it may be argued that you have to just find the closest fit (ie the best of the worst). If you can isolate Unilever’s food division, that would be good. If not, have you thought of other companies like Mondelez?
3) limitation of information available usually refer to the inherent limitations from doing secondary research. They include things like objectivity of sources, reliability of facts etc
We hope this helps!
The Learning LuminariumApril 4, 2018 at 5:28 pm
Hi @ LearningLuminarium ,trephena and the OT mentors,
I am very close to summarizing my financial analysis but I need some help on my Ratios. I have calculated and thoroughly analysed the following ratios for Airbus :
1 – Sales Ratio ( analysed the sales/orders/deliveries )
2 – For Profitability : Operating Profit Margin Ratio
3 – For Liquidity : Current Ratio
4 – Debt-to-Equity Ratio
5 – Dividend Payout Ratio
I know there are more common ratios that I am not calculating such as :
P/E Ratio, Return on Equity , ROE , ROCE .
Please can you guide me if my ratio are sufficient ? Am i missing something ? Will they object that I didnt cover something. please can you help on this.
Thanks so muchApril 8, 2018 at 9:45 am
Depends on how well you are discussing these ratios and integrating the business and financial analyses.
“Please can you guide me if my ratio are sufficient ? Am i missing something ? Will they object that I didnt cover something.”
Some ratios are interrelated e.g. I believe Boeing has engaged in a share buy back programme and therefore this would impact not just on the investor ratios but also potentially on gearing and liquidity. You would be missing something if you did not recognise this fact and discuss the implications (and also how this might affect comparisons)April 8, 2018 at 4:02 pm
Hello @trephena , did you enjoy your trip to Japan? I’ve never been myself, but it’s on my list of places to visit. Did you get to see the cherry blossoms blooming?
You would always be welcome to drop by for some Rioja, although it might be a little bit of a trip; I’m based in Cheshire.
Thank you for the further advice you have given. I took it upon myself to query OBU directly regarding the assumptions I was having to make with Whitbread and they were very helpful. It seems that they are quite relaxed provided you fully explain what you are doing and your justifications.
I’ve made some good progress I feel and I’m currently getting stuck into Part 3. I’ve completed PEST and done most of SWOT – although I’m a little unsure of how much detail with the latter as most of the opportunities and threats were identified in PEST if not discussed as such. I don’t want to end up repeating myself.
What seems clear to me so far is that, whereas initially I was concerned about using up to 7,500 words, now I’m concerned I’m going to struggle to fit everything in to that word count! I’m just going to plod on, see where it ends up, and then go back and cut words where I can.April 9, 2018 at 5:55 am
Japan was brilliant and the trip surpassed our expectations in most respects. If you do plan to go let me know as there are a few tips I can pass on but would suggest booking way in advance if you choose Cherry Blossom season as flights and hotels fill early. Tthe advantage is we got a brilll deal on business class seats by booking almost a year ahead and going via a European gateway hub. Most hotel prices are about London prices (I don’t do real budget – more mid-market accommodation) so overall our 14 night stay cost a total of about 4.5 to 5k per person for everything (flights, meals, hotels, rail pass) but might have been slightly cheaper if we had spent less time in Kyoto, which is horrendously expensive.
Glad you contacted OBU direct as students often get so uptight about some issues over which they could chill more.
Regarding the SWOT and PEST: read all those CEO and directors’ reports and identify the strategic decisions (which will usually be connected to the factors from them) and relate them to results bearing in mind (a) the time lag (so start with the written reports for the year BEFORE your first year of study) and (b) recognise that strategies and policies may cover several years.
When you finish as you suggest, go back and edit. You will be able to cut a lot of the drivel from parts 1 & 2 as I doubt that, apart from objectives and limitations, markers waste much time reading those as they probably skim those bits and cut to the chase of Part 3. OBU does tend to be hot on word count and will fail if it is abused
Hmmmm Cheshire is a bit far from me as I rarely go north of Brum these days -though not a native Southerner I have, I confess, become an honorary one! However I often get an invitation to the graduation ceremony (along with other selected external tutors as we are useful as an ‘academic rentacrowd’ to swell the numbers for the platform party – the lot that parade in their caps and gowns of various colours at the start and end of the spectacle) so may catch up with you there in June – and you can buy me a drink then!April 9, 2018 at 3:24 pm
Thanks so much for the reply. I appreciate it.
I aim to explain lesser ratios in more depth to explain the significance of each. This also brings me to another similar second-thought, though I know it may not have been strictly specified in numbers. But if I just mention 2 Strengths.. would that sound less ? I know there can be many many more but I just explained 2 , in depth. Please, i would like to know your opinion on this please.
Thank you very much for the tips and guidance always .April 10, 2018 at 12:14 am
See if you can discover a few more strengths. Often these (depending on the company) can be things like strong brand, market leader, global operations, high investment in research and development, or might even include areas they have received awards for like corporate governance or CSR.April 10, 2018 at 7:42 pm
Well, if I manage to graduate I’ll be sure to look out for you there! At the moment it feels like I keep coming up against constant bumps that are hindering my writing. I’ll definitely get on with your SWOT suggestions, thanks.
This evening I’ve been trying to wrestle with the capital structure of Travelodge and I feel like I’m being a complete idiot!
So at the very top you have a company based in Luxembourg called Anchor Holdings SCA (AH). I believe these are the original lenders who took a debt/equity swap in 2012 when Travelodge was struggling.
AH own the parent company of the Travelodge group, which is Thame & London Ltd (T&L), who produce group consolidated accounts. The company that basically does all the work in the group is Travelodge Hotels Ltd (THL), and between THL and T&L are a series of holding companies. They all seem to just lend money to each other which as I alluded to a few weeks ago I believe is just background noise.
So I’ve mainly been interested in the parent, T&L and the company that does all the work, THL; furthermore, all this so far is really moot for most of the ratios until you come to debt.
When I look at THL, the subsidiary running the hotels, it has a healthy balance sheet with shareholder’s funds of £774.6m in 2014 (a mix of called up share capital at £300m, revaluation reserve and profit & loss account). It lists the leases as fixed assets. Within debtors there is £592.8m owed from other group companies, and within liabilities, there is £111.9m owed to other group companies. There is no debt to speak of.
Then, I go up to T&L, the ultimate parent. Its balance sheet shows a deficit of £78.1m for 2014, which is almost entirely accumulated losses. First off, the share capital is £1 (one million shares at £0.000001)! Up at this level you can see all the secured bank debt £394.3m and unsecured loan of £127.0m from AH in Luxembourg to fund the modernisation programme. But I can’t see any investment in the holding companies under assets. Up here I seem to have all the debt and no equity.
So I feel a bit stumped as I come to look at gearing. I don’t feel I can use THL here for this ratio as it looks like the company is being financed by debt held elsewhere in the group. But at the same time I can’t see how that has worked though to the consolidated balance sheet as I can see the (bank/investor) debt there but not the assets.
I feel like I’m missing something painfully obvious! I guess if the debtor/creditor loan balances in THL can’t be found up at T&L, it means that these loans in and amongst the holding companies cancel out on consolidation which proves it’s just background noise? So the whole show is completely financed by bank debt? Have I answered my own question? But where is the investment in subsidiary companies asset?
Arrrgh! Help! What am I missing?!April 11, 2018 at 3:56 pm
I have been considering Unilever as a competitor to Nestlé, and could find the Revenue and Operating Profits of Unilever’s food division. Other information like Total Assets are available only for the group as a whole? Do you suggest using the group figures where segmented data is unavailable?
Thanks in advance!April 12, 2018 at 12:28 am
@obuwankenobi – right put 20 June in your diary then!
Regarding your conundrum over debt and gearing: from what I recall about consolidated accounts (the topic I hated most and feared in exams!) all intercompany balances should cancel each other out on consolidation as you have recognised (though individual companies financial statements would normally show the amounts they owe or are owed to each other).
No matter. Don’t allow yourself to get bogged down in the nitty-gritty. If you can’t do a debt to equity ratio explain why and move on. Discussing profitability well, bringing in industry specific KPIs and showing strong links between the strategic factors from the models and performance will stand you in good stead. So focus on doing what you can do well rather than fretting about what you can’t!
What are you missing ? Chill time!April 12, 2018 at 6:51 pm
I don’t think I’ve properly chilled since sometime in 2009!
However I have taken something of a more relaxed view, especially since I read your post. I guess I’ve been concerned about running out out ratios; I can’t do shareholder as the company is privately owned, etc. ROCE seems perhaps a little redundant as it is primarily a leasehold business – they only really own fixture and fittings. At some point the suitability of the company itself comes into question!
Having said that, too many ratios and you just don’t have enough words to do any meaningful analysis. I’m really starting to appreciate what the Information Pack meant when it states that you *only* have 7,500 words, especially when it suggests you allocate so many to parts other than the actual analysis.
Looking again at T&L and THL, it is clear that it is almost entirely debt financed (bank, and later bonds). I could treat the investor loan note (at 17% interest!) as a pseudo-shareholder’s capital, as the bank has first lien on the senior debt, but I don’t think that’s the best option.
Instead I’m thinking of doing the Times Interest Earned ratio, as for an all debt business, it’s ability to meet its finance cost (lease interest and debt/bond interest) is perhaps a more useful measure of its health. In addition (or alternatively), I could do net debt to EBITDA to get a feel of just how long it will take to pay it off (and how that is changing over time). What do you think, are two necessary?
I believe I can jimmy a similar figure out of Premier Inn (albeit with some Costa included) as a bit of a comparison.
That would mean for analysis I’m therefore looking at Revenue (with a look at growth, market share, RevPAR and occupancy/ARR), Gross Profit, EBITDA (or maybe Operating Gearing), and TIE. And linking all that to PEST/SWOT and the Board’s strategy.
How does that sound?
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