Dairy crest analyse

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Change: 74,5 – 68 = 6,5 = 9,6% → RISE.

Share Price: (Earnings Per Share * P/E Ratio)

In 2013: SP = 6 * 14,60 = 88

In 2014: SP = 36 * 11,90 = 428

Change: 428 – 88 = 340 = 386,4 % → RISE.

Dairy Crest Company increases their operating profit by £6,5m from £68m during 2012/2014 to £74,5m during 2013/2014; it is an increase of 9.56%.

The total equity has decreased by £18m (5,86%) to £289.4m largely due to a reduction in retained profits.

The increase in Dairy Crest’s turnover of £9.4m to £1,391m in the 2013/14, the company's gross profit increased as well by £6,8m to £75,2m as the cost of sales increased by £2,6m to £1315,8m.The gross profit fell marginally from 27% in 2012/13 to 25,23% in 2013/14 due to the increased cost of sales.

The capital employed has fallen marginally by - 4,86%, It was in 2012/2013 £493,4m and in 2013/2014 £469,4m. This reflects Dairy Crest's predominance in commodity liquid milk trading.

The current ratio, a financial ratio that measures whether a firm has enough resources to pay its debts. It compares current assets of the business to its current liabilities, has increased by 0,108 from 1.49 to 1.598 during the 2013/14.

It improved due to a reduction of the total debt of £147m from £354m in 2012/13 to £207m in 2013/14.

The gearing ratio for the company Dairy Crest increased by 0,65% from 37,70% in 2012/13 to 38,35% in 2013/14. This gearing ratio is higher than the average for the industry, which means that Dairy Crest could be more vulnerable to deteriorations in the economic cycle than the other purchasers of milk.

Dupont analysis technique:

Asset Turnover

1,73

1,39

24,29%

Sales

1391

1381,6

Assets

806

995

X

Net Profit Margin

3,59%

3,40%

5,66%

Net Income *

50

47

Sales

1391

1381,6

X

Equity Multiplier

2,79

3,24

-13,96%

Assets

806

995

Equity

289,4

307,4

=

ROE

17,28%

15,29%

13,00%

Dupont analysis is a technique that enables to measure the ROE using a gross value of assets instead of net assets value in order to get the most out of the assets. This technique the Return on Equity is measured and affected by three things:

- Firstly, asset use efficiency, measured by asset turnover (sales and assets).

- Secondly, operating efficiency, which is measured by net profit margin (net income and sales).

- Thirdly, financial leverage, measured by the equity multiplier (assets and equity)

This method allows investors to identify the reason of the total ROE variation. In fact, if there is an increase of asset turnover or profit margin then this means that there is a good company management. Additionally, the increase of the amount of financial leverage indicates that investing in the company is a risky action.

ROE is a measure of efficiency; in deed, rising ROE suggests that a company is increasing its ability to generate profit without needing as much capital. It also indicates how well a company's management is deploying the shareholders' capital. And the Return On Equity of Dairy Crest in 2013/2014 is 17,28% and it’s under Industry average which is 19%, despite the fact that the ROE of 2013/2014 increases by 13% from 15,29% during 2012/2013 to 17,28% during 2013/2014.