Financial Analysis of Tyman PLC

This assignment requires a financial analysis of Tyman PLC. Students must utilize financial ratios such as the current ratio, debt-to-equity ratio, and interest coverage ratio to assess the company's financial health and performance. The analysis should be based on publicly available information about Tyman PLC, including their website and provided resources.

Business Analysis
Report

TABLE OF CONTENTS
INTRODUCTION ..........................................................................................................................3
Background of the study..............................................................................................................3
Problem statement.......................................................................................................................4
Aims and objectives.....................................................................................................................4
Research questions.......................................................................................................................5
Significance of the study..............................................................................................................5
LITERATURE REVIEW................................................................................................................5
Theories of ownership structure and firm value .........................................................................5
Financing......................................................................................................................................7
Types of corporate finance...........................................................................................................8
Difference between internal and external financing....................................................................9
Impact of ownership structure on financial performance..........................................................10
METHODOLOGY .......................................................................................................................11
Method and model.....................................................................................................................11
Data............................................................................................................................................14
FINANCIAL STATEMENT ANALYSIS....................................................................................15
Ownership concentration...........................................................................................................18
Leverage analysis.......................................................................................................................19
Liquidity ratio analysis..............................................................................................................20
Profitability ratio analysis..........................................................................................................21
Investor Ratios...........................................................................................................................22
CONCLUSION .............................................................................................................................23
Discussion..................................................................................................................................23
Limitations.................................................................................................................................24
Conclusion ................................................................................................................................24
REFERENCES..............................................................................................................................26
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INTRODUCTION
Background of the study
This business analysis report includes comparative appraisal of the two organizations that
are operating in similar sector. The organizations selected for comparative study are Kier Group
plc Group plc (LSE: KIE) and Tyman plc (LSE: TYMN). Kier Group plc Group plc is listed in
Construction and Materials sector. Both firms are operate in sectors such as - construction, civil
engineering, support services and property management sector (Brealey et.al, 2012). Kier Group
plc is regarded as one of the major construction, services as well as property group that is
engaged in building as well as civil engineering, support services, development of land, public
and private house building as well as Private Finance Initiatives and is headquartered in
Tempsford Hall, Sandy, Bedfordshire. The company is also constituent of FTSE 250 Index. Kier
Group plc has four specialized divisions, these are called Kier Group plc construction, Kier
Group plc services, Kier Group plc Residential and Kier Group plc property (Coles, Lemmon
and Meschke, 2012). It was founded in the year 1928. It is regarded as the fourth largest UK
construction company after Balfour Beatty, Carillion and Laing O' Rourke. The company is
carrying out its operations in wide range of sectors like defense, education, health, housing,
transport, industrial and utilities. The group provides employment to 24000 individuals within its
operations spread over UK, the Caribbean, the Middle East, Hong Kong as well as Australia. It is
a listed company that made a net profit of £29.5 million in the year 2015. Its operating income
for the year 2015 was £103.7 million. The vision of the firm is to “become world class, customer
focused organization which makes investment in, builds, maintains as well as makes renewal of
the places where people reside, play and work”. Kier Group plc possesses multiple core
competencies (Embrechts, Klüppelberg and Mikosch, 2013). It has competencies in asset
management, structured finance, affordable housing, project development, partnerships and joint
ventures.
The other organization used for comparative analysis is Tyman plc. This company is one of the
international suppliers of the engineered components to the doors and windows manufacturing
industry. As on December 31, 2015 the group had 20 manufacturing facilities across eight
countries. The products of the firm can be seen in homes as well as buildings across the globe
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(Tyman plc Plc, 2016). The company has worldwide manufacturing as well as distribution
operations covering North America, Europe, Asia as well as Australasia. The manufacturing
decision making is based on the differentiation of its product offerings from the competition.
This is achieved through offering customers with higher quality of products at economical price
(Engel, Fischer and Galetovic, 2013). Further it is delivered in accordance with the desired
specification within specified time in an effective manner. The group manufactures higher
quality supplies of the wider range. Further it has established itself within the developed markets
as one stop shop for its clients. It offers the manufacturers with the components that is required
by them for making doors or windows (Tanzi, 2016).
The board of directors of the company are entrusted with the responsibility of overall leadership,
strategy development as well as control over the group for the purpose of attaining its strategic
objectives (Esty, 2014). The group is carrying out operations through three divisions. These are
Amesbury Truth (North America), ERA (UK and Ireland) as well as Schlegel International.
This study is focused on making comparative analysis of both the companies so that investors
can make informed decisions in terms of picking the company that provides them with better
returns. In order to develop better understanding of the underlying companies we have performed
financial statement analysis for both the businesses so that a better picture emerges regarding the
most profitable retail organization in UK.
Industry overview
The construction, civil engineering, support services and property management sector for
the UK economy is considered as greater boon. It is regarded as one of the largest sector of the
UK economy. It creates, builds and maintains the workplace wherein the organization operates
and flourish (Gaunt, 2014). The industry had been significantly hit hard across the world since
the recession in 2008, it was a declining sector in several developing economies. The industry is
showing promising improvement which has favourably influenced companies operating within
this particular sector. Effect on share price of both companies
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Stock prices fluctuate primarily as a function of market force i.e. demand and supply for
a particular stock. Demand is generated by investors perception of an underlying company’s
value increase in future and earnings is most important factor in building this perception. Other
factors like investors’ sentiment, attitude and expectation also affect the stock price. Tyman plc
and Kier Group plc to a significant level are influenced by the changes in the prices of the stock
(Gitman and Zutter, 2012). This reflects that in case the company has declining stock prices that
it would be able to make lesser investment in new assets. Increase in stock price will tends to
enhance the reputation of the company for its ability to be profitable over a long course of time
and will enhance the value of the company. One way that the lenders and financiers makes
judgment regarding the health of the organization is by means of its stock price.
There is potentially a huge impact of Brexit in the future on the industry as well as these
companies. The companies would not be able to carry out free trade and this could significantly
impact revenue of these companies.
Problem statement:
The major issue that we will address in this report is “need of investors”. This envisages
analyzing the market sector (retailers), the outcome of analysis will help investors to make
investment decisions to maximize their returns. We will evaluate two companies by carrying out
comparative analysis of Kier and Tyman plc, which are operating in retail sector (Letourneau,
2015). The study will portray the strengths as well as weaknesses as well as evaluate the
financial position of both the businesses. This can be regarded as an effective measure that can
determine the position of the organizations within the industry. The financial position will be
analyzed from both the profitability and liquidity aspects so investors may determine investment
suitability for long and short time horizons.
Aims and objectives
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The aim of the present study is: To carry out comparative analysis between two
companies i.e. Kier Group plc and Tyman plc.
Objectives:
 To compare financial performance of the two organizations
◦ analyze the ownership structure as well as value of the companies i.e. Kier Group plc
as well as Tyman plc
 To assess the impact of ownership structure on financial performance
 To identify the areas where improvement can be made
Research questions
 What is the ownership structure as well as value of the firms for both Kier Group plc and
Tyman plc?
 How ownership structure affects financial performance of the organizations?
 What can be alternative ways of improving performance of businesses?
Significance of the study
The present study entails to make comparison of the two organizations is significant in
terms of assisting the investors in making decision regarding the choice of the company that
would yield greater profits in return for investment. (Pickard, 2012). The present study may also
help scholars who wants to carry out in depth investigation for their own sake. On the other hand
this report can be used by some engineering firms in gaining knowledge regarding the trends that
are emerging within the particular sector (Rasinger, 2008). Along with this, it can be used for the
purpose of making analysis of the areas where its competitors can bring improvement. This study
can assist in conducting comparative analysis in an effective manner.
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LITERATURE REVIEW
Ownership structure is one of the aspects of this analysis therefore it was considered worthwhile
to review some theories on ownership structure.
Theories of ownership structure and firm value
Ownership structure possesses value for corporate governance as it can influence the
incentives of the managers and also the efficiency of the organization to a greater extent. The
ownership structure is defined by the means of distributing equity in relation to the votes as well
as capital but also through the identity of the equity owners. In accordance with the views of
Embrechts, Klüppelberg and Mikosch, (2013) it has been indicated that there are several theories
relating to ownership structure. If we consider agency theory, it highlights that potentially three
can be a wider gap between the ownership and control of the larger organizations that arises from
the decline in the equity ownership. Some specific situations may provide incentive to the
executives for pursuing their own interests rather than maximizing the shareholders return.
Within the theory the shareholders of the owners as well as the responsibility of the higher level
authority needs to solely for the purpose of making sure that the interest of shareholders are
being met in an effective manner (The theory emphasizes that the shareholders; who are the
owners and management both have the responsibility to ensure that that shareholders’ interest are
met effectively). The management has the responsibility of managing the organization in a
manner r that results in maximizing the shareholder's return. These collective efforts can result in
improving the profitability figures as well as cash flows. As per the views of Brealey and etal.
(2012) it has been argued that executives do not carry out business operations for increasing the
returns to the shareholders. The theory of agency was designed to explain the principal agent
relationship. As such this was regarded as the key factor that makes determination of the
organizational performance in an effective way. An agency relationship is regarded as the
agreement wherein one or more individuals (i.e. shareholders) engages another person or persons
( e.g. management) for performing some services on their behalf that includes delegation of
certain decision making authority to the agent. The major problem the conflicting interests of the
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managers and shareholders. In some situations the manager run the business operations for
achievement of his personal goals instead of increasing the returns for the shareholders (Kumar
and Phrommathed, 2005). It implies that the executive available excess free cash flow for
fulfilling the personal interests rather that enhancing the shareholders return. The major
challenge faced by the shareholders is ensuring that such excess cash flow is not invested in
projects that are unprofitable or possess negative net present value. According to Millet-Reyes,
(2013) such cash flows are required to be returned to the shareholders in the interest of the
shareholders, when these cash flows are diverted in other projects this is regarded as Agency
costs. Higher agency cost occur because the executive has more information of the operations
and their activities cannot be monitored closely. Enterprise value is considered as the total value
of the organization; which is the economic measure demonstrating the market value of the
organization. It is referred to as the sum of claims by all the claimants, creditors as well as
shareholders.
Impact of ownership structure on financial performance
There is greater impact of ownership structure on the financial performance of the business. The
separation between ownership and control impacts the efficiency of the operations. Several types
of ownership structure Exist. In accordance with the views of Shiller, (2013) it includes a sole
proprietorship where the entity owned as well as managed by a single person. The major
advantage of this form of organization is speed of decision making while the disadvantage s will
include sustaining the loss individually and the ability to raise additional capital.. As per the
views of Coles, Lemmon and Meschke, (2012) the ownership structure such as partnership can
also assist the business in enhancing its performance to a greater extent. Under partnership f two
or more persons carryout operations of the business jointly in order to attain common goal. As
compared to sole proprietorship in partnership business activities can be carried out with much
more effectiveness. It has benefit in terms that losses of the entity are shared between/among the
individuals in accordance with the proportion in which they have invested capital.. Major
disadvantage with a partnership is that the partners’ personal wealth is exposed towards
settlement of business liabilities. In partnerships not every partner takes an active role in
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management and such are called sleeping partners. But all partners are able to participate in the
profit and losses of the entity.. This is considered inappropriate on the part of the individual who
are actively carrying out activities within the business, therefore those are compensated by way
of salaries for the extra work that they are putting in. Another form of organization is limited
company and as per the views of Engel, Fischer and Galetovic, (2013) limited company has
certain other pros and cons that affects the operations of the business.. In case of limited
company the operations of organization are usually carried out on larger scale.. Major benefit of
limited company is that though profits are shared and losses are restricted to the extent of their
shareholdings. Shareholders are owners of the company whose money is being used by the
company for carry out operations and to make further investment. This is the cheapest form of
financing and has least distress during hard times for the company.
Financing
Financing refers to the act of offering funds by individuals or institutions for facilitating
the activities of business, helping them make purchases or making investment. In financial
statement analysis the impact of debt and equity form part of our analysis. Financing activity is
pivotal in any economic system as it provides access to organizations that are not able make
purchases of raw materials, trading products or incur capital expenses from their own capital.
Businesses are usually financed through equity or debt. In accordance with the views of Gaunt,
(2014) Debt is required to be paid back at the same time it is cheaper because of tax
considerations, can be acquired with less hassle than increasing capital. In contrast to debt
equity is not required to be paid back periodically as it provides ownership to the shareholders
and claims on future earnings. In hard times periodic payment on debts can add to the distress of
a company while in worst case scenario equity holders are entitled to residual value of the
company. Our debt to equity ratios will analyze the reliance of each of the company on debt /
equity and what is the likely financial impact.
Corporate Finance and its significance for the two companies:
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Short term survival and an entity’s ability to meet its working capital needs are assessed by
reviewing the liquidity ratios while effects of long term financial health, financing and
investment are dependent on sources of the funds that a company resorts to, and gearing ratios
and its ability to generate interest and profit determine the related impact.
Types of corporate finance
McLean and Pontiff, (2016) have argued that corporate finance differs considerably
around the globe. Corporate finance envisages transactions that results in creating new equity
structure or the shareholder base as well cover the related issues, underwriting, purchase or
exchange of the equity as well as debt. Many types of corporate finance exist. (Wilmott, 2013)
its classification to a greater extent is dependent on the time frame for which organization
requires the finance. This includes short term finance which involves bank overdraft. Under this
the firm can make withdrawal of the greater amount than what actually is present in the bank
account. The role of bank overdraft is effective in assisting the organization to meet its short
term obligations with greater effectiveness.. Corporate finance is effective in addressing the
financial decisions which the firm takes and the tool as well as analytical devices which can be
employed for taking those decisions (Zopounidis and et.al, 2015). Corporate finance is regarded
as the key segment of finance associated with maximization of the corporate value and at the
same point of time decreasing the financial risk factors of the organization. As per the views of
Gippel, (2015) corporate finance does not possess similarity to managerial finance that makes
analysis of the financial decisions of every organization rather than corporation solely. Corporate
finance is the area of finance that deals with the sources of funds as well as capital structure of
the corporation. In addition to this it also involves the actions that are being taken by the
manager for the purpose of increasing the organizational value to the shareholders. Moreover it
involves the tools as well as analysis that is utilized for the purpose of allocating financial
resources (Zopounidis and et.al, 2015). The term corporate finance as well as corporate financier
are interrelated with investment banking. This implies that it has major role towards evaluating
the financial requirements of the organizations and raise suitable kind of capital that matches the
needs of the firm. In accordance with the views of Wilmott, (2013) it has been observed that the
common sources of finance that can be used by the organizations in order to raise its capital
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includes debt capital, equity capital as well as preferred stock. The corporations depends on
borrowed funds as an investment source that can assist in survival of the ongoing business
operations as well as assist in bringing long term growth of the organization. Debt can be in
various forms. This includes loan from bank, notes payable, or corporate bonds that are being
issued to the public. Bonds result in the firms making payment of coupons (interest) on regular
intervals on the amount of capital borrowed till the debt reaches its maturity (Rasinger, 2008).
The firms can also make use of equity capital for the purpose of raising capital. The firm can
make sale of its shares to the investors of the organization (private equity) in order raise its
capital.
Difference between internal and external financing
Internal and external finance relates to the firm engaging in activities from the funds generated
from within the company and getting funds from outside. According to Gitman and Zutter,
(2012) such is regarded as the key as well as an essential difference among both the two options
of funding. When the firm makes utilization of the internal finance that it has the advantage of
existing supplies of capital from profits and other sources (Letourneau, 2015). However external
finance includes usage of finance that is new to the organization. This is from outside sources
that can assist in funding the activities that have been planned out but cannot be carried out
through the internal revenue generation and reserves. Internal and external financing approaches
have their own merits as well as demerits. Many organizations take into account internal as well
as external finance but they start by first exploring the internal options. One of the major issues
of using internal funds is that decrease in reserves renders the company vulnerable in situations
requiring immediate cash. On the other hand relying on external finance may mean going for
debt or giving up the control. The firm can obtain funds in variety of manner, one way is through
issue of shares to the general public so that adequate amount of funds can be acquired which
could then be invested in future growth.
Looking at the differences between the two approaches we may find that in internal financing the
firm does not require to make payment of any cost in obtaining funds. The existing are utilized
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for meeting the financial needs of the firm. However in accordance with the views of Esty,
(2014) there can be higher cost in acquiring funds from external sources. This involves direct
costs as well as reputational costs resulting from lawsuits that may negatively impact the
corporate credit rating of the company. External financing sources involves loan from bank,
leasing, hire purchase, issue of shares, bank overdraft as well as other. It includes greater amount
of cost that can be in form of rent, dividend as well as interest. This adds to the overall cost of
the running the business leading to significant reduction in the profitability of the organization..
The major advantage of external source financing is assisting the firm in satisfying its long term
obligations and achieving its goals by capturing opportunities for growth and development over
longer time horizon.
METHODOLOGY
Methodology is referred as the manner in which related issues are investigated and
appropriately resolved. Many tools can be employed in order to get evidence and devise analysis
in order to respond to the research questions. Several tools have been used collect and analyze
the data. Method and model
Research philosophy
It is regarded as predominant concept that relates with knowledge development. Research
philosophy is comprised of knowledge which relates with the study and results in development
of background for investigation. Together these aspects lead researchers to look at things in
unique way. There are two types of Research philosophies i.e. Interpretivism and positivism.
The former can be defined as the one that assist in providing suitable justification relating with
the issue under investigation (Kumar and Phrommathed, 2005). With the assistance of such the
researcher can reflect the information which is relating with the problem under research. The
philosophy of Interpretivism is considered as the tool that focus on fruitful natures of the
individual participation with cultural as well as social life. On the other hand positivism is one
that makes generation of hypothesis which can be measured against the data. The present report
aims at making comparative analysis therefore the use of positivism philosophy is associated
with qualitative analysis.
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Research design
It is creating a suitable concept which can potentially be investigated. It is the entire
strategy that can be chosen with the aim to integrate several components under investigation in
logical way. It reflects that the issue in the research is addressed in an appropriate way
(Letourneau, 2015). Research design is regarded as the blue print that can be utilized in order to
collect, analyze as well as measure the data. Various kinds of research design include
descriptive, exploratory as well as explanatory designs. Explanatory design is effective for the
purpose of examining cause and effect relationship. The major aim of such is to investigate the
variables that results in emergence of specific behavior. In contrast to this exploratory research
design tends to develop hypothesis through examining data set and determines the relationship
among the variables. Descriptive research design is being utilized for the purpose of addressing
response to the questions that involve when, who, what, how that is being associated with
particular issue under investigation.
This comparative analysis study falls under descriptive research design as it assists in
making discovery of features of population. The justification to descriptive research is that it
uses tribulation tool that acts as an aid for the researcher in making sure the validation of data by
means of cross checking it from more than one source.
Research approach
It is the manner in which the investigation is conducted in forward direction. It may be
divided into two kinds, inductive and deductive approach (Rasinger, 2008). The former begins
with the statement and then the investigation is carried out in order to answer the same. The main
purpose is to concludes with the a ‘Yes” or “No” response. The deductive process begins from
the theory to research questions, to collection of data, findings to rejection or verifying the
questions that related to the investigation. On the other hand inductive approach is suitable in
enabling the research to move from specific situation in order to develop broad general ideas as
well as theories.
In the present study that aims at carrying out comparative analysis makes use of inductive
approach as the researcher will be able to make generalization which is empirical by nature. This
assists in determining the association as investigation is conducted. Further it includes patterns
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that relate with exploring the observation which can leads to development of explanation. With
the assistance of observation the issues of the decision making of investors can be sought in an
effective manner.
Research methods
Research method has crucial role in acting as an aid to the analyst in gathering large
amount of data with efficiency and effectiveness. Research methods have been divided into two;
qualitative and quantitative methods. Quantitative research lay emphasis on statistical tools and
techniques that can be used in order to gain appropriate solution for the underlying investigation
(McMillan and Schumacher, 2014). Through quantitative data less amount of time is needed for
the purpose of analyzing the information. In addition to this it assists the researcher in
demonstrating entire resultants by means of graphs and tables. Through quantitative data
knowledge can be attained with respect to the figures of data which has been gathered. On the
other hand qualitative research is suitable as it deals with determination of the issues and
develops knowledge of the phenomenon in the investigation. It offers response to the question
through analysis and intellect that relates with unstructured data. Such type of research is usually
in-depth study. In the present investigation quantitative method has been used. This is because
the study entails at making comparison between two organizations in an effective manner.
Ethical consideration
It is an important part to be taken into account by the analyst while carrying out the
investigation.. Through ethical norms the research can be completed in a morally correct manner.
While conducting the present report related with comparative analysis the ethical norms that are
required to be taken into account are enumerated in the manner stated as under: Restricted access: In the present study on comparative analysis secondary data has been
gathered from the studies that have been carried out in past on the particular subject
matter. The presence of such studies on several sites. Further the access to various cites
was restricted. In this aspect prior permission has been taken by the researcher for the
purpose of getting access to a specific site.
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 Confidentiality: It has been assured by the analyst that the data collected from financial
statements has not been shared with anyone who are not the part of investigation. The
anonymity principle reflects that researcher is required to ensure that participants remain
anonymous in the entire investigation.
 Proper citation of work: In the present report the work of several authors have been taken
into account. Through citation of work in appropriate manner ethical norms are taken into
account. Proper rephrasing of the information has been done by the researcher. Moreover
the content has not been pasted from anywhere.
Data
Data collection
Such is regarded as an effective toll that assist in conducting the research with greater
effectiveness. It demonstrates appropriate tool that can be utilized by the researcher in order to
gather data with the aim to attain targets of the research. There is existence of two kinds of
research tools. It is comprised of data collection by the means of primary as well as secondary
tool (Pickard, 2012). In the present study that makes comparative analysis secondary method
would be applied. Primary tool includes the data that has been gathered for the first time. With
the help of such fresh data is collected by the researcher on his own while carrying out the
investigation. It is collected by the researcher in order to conduct the investigation in an accurate
way. Collection of data can be done under primary method by the means of tools like focus
group, interview, questionnaire and survey. Through this detail insight can be drawn regarding
the opinions of the respondents.
Another method of data collection is secondary under which information is gathered by
the means of published studies. In addition to this secondary data is comprised of the data that
has been collected in past by other researchers for their analysis. It is referred to as second hand
tool. Under present study secondary data has been gathered in relation to the financial
information of the two companies.
Data analysis
After data collection through several sources another part is analysis of thesis which is
comprised of evaluation and analysis of the data which has been collected. Data analysis is
referred to as the process that assist in creating application that relates with statistical and logical
15

tool with greater effectiveness. This is being carried out in order to describe, condense, illustrate
and evaluate the information. With this the researcher can carry out inspection, transformation
and cleaning of data in order to draw valid conclusion from the investigation. This is comprised
of qualitative as well as quantitative methods (Silverman, 2010). In the present report that aims
at making comparative analysis use of quantitative tool has been used. Under this financial
statements of both the firms who be analyzed through the tool that is ratio analysis. This is
considered as an effective tool that can assist in quantifying the actual position of both the firm.
Thus through this an insight can be drawn regarding the financial status of the business. Thus
decision can be taken by the investor regarding selection of the best firm where investment can
be made by the business in an effective manner. This helps researcher in gaining better
understanding about both the organizations.
SWOT ANALYSIS OF TYMAN PLC
Strengths
 Decrease in cost associated with labor
 Domestic market
 Barriers of market entry
Weaknesses
 Tax structure
 Future profitability
 Investment in research and
development
Opportunities
 Expanding operations into the new
market
 Venture capital
Threats
 External business risk
 Financial capacity
 Changes in overall price
SWOT ANALYSIS OF KIER GROUP
Strengths
 Barriers of market entry
 Skilled workforce
 Rise in level of profitability and
revenue
 Strong distribution and sales network
Weaknesses
 Competitive market
 Future debt rating
Opportunities
 Introduction of new products and
services
 Global market
Threats
 Rise in level of competition
 Technological issues
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FINANCIAL STATEMENT ANALYSIS
KIER GROUP PLC
Ratios Formula 2015 (£m) 2014 (£m)
Ownership concentration
Earnings before interest and tax 39.5 15.4
Capital employed 1 0.6
Return on capital employed
Earnings before interest and
tax/ capital employed 39.5 25.67
Net income 5.5 10.7
Shareholder's equity 585.4 309.7
Return on Equity
Net Income/ Shareholder's
equity 0.0094 0.0341
Leverage analysis
Total liabilities 2,155.6 1,522.2
Total Assets 27,410 1,831.9
Debt Ratio Total liabilities/ Total Assets 0.079 14.969
Stockholder's equity 585.4 309.7
Debt to Equity Ratios
Total liabilities/ Stockholder's
equity 3.689 88.51
Operating income 60.9 34.3
Interest expense 15.6 14.2
Interest coverage ratio
Operating income/ Interest
expense 3.90 2.42
Profitability ratios
Gross profit 282.9 250.4
Operating profit 60.9 34.3
Net profit 5.5 10.7
Net Sales 3,275.9 2,906.9
Gross Profit Ratio (Gross Profit/ Net Sales) *100 8.64 8.61
Operating Profit Ratio
(Operating Profit/ Net Sales)
*100 1.86 1.18
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Net Profit Ratio (Net Profit/ Net Sales) *100 0.168 0.368
Liquidity ratios
Current Assets 1,527.1 1,176.7
Current Liabilities 1,355 1,078.1
Closing stock 737.8 470.4
Current Ratio
Current Assets / current
Liabilities 1.13 1.09
Quick ratio
(Cu. Assets - Cl. Stock)/Cu.
Liabilities 0.58 0.661
Investor Ratios
Net Sales 3275.9 2,906.9
Total Assets 27,410 1,831.9
Total Assets turnover ratio Net Sales/ Total Assets 0.12 1.59
Net income 5.5 10.7
Dividend 41.4 29.3
Dividend Payout ratio Dividend/ Net income 7.53 2.74
TYMAN PLC
Ratios Formula 2015 (£m)
2014
(£m)
Ownership concentration
Earnings before interest and tax 15,576 11,904
Capital employed 8505 8505
Return on capital employed
Earnings before interest and tax/
capital employed 1.831 1.39
Net income 7691 9331
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Shareholder's equity 306,231 309,016
Return on Equity Net Income/ Shareholder's equity 0.025 0.03
Leverage analysis
Total liabilities 201,027 228,505
Total Assets 507,258 537,521
Debt Ratio Total liabilities/ Total Assets 0.39 xxxxx
Stockholder's equity 306,231 309,016
Debt to Equity Ratios Total liabilities/ Stockholder's equity 0.66 1.64
Operating income 22,499 18,937
Interest expense 6,353 4,696
Interest coverage ratio Operating income/ Interest expense 3.54 4.03
Profitability ratios
Gross profit 119,443 114,770
Operating profit 22,499 18,937
Net profit 7,691 9,331
Net Sales 353,425 350,899
Gross Profit Ratio (Gross Profit/ Net Sales) *100 33.79 32.71
Operating Profit Ratio (Operating Profit/ Net Sales) *100 6.37 5.39
Net Profit Ratio (Net Profit/ Net Sales) *100 2.18
2.66
Liquidity ratios
Current Assets 110,979 123,974
Current Liabilities 44,375 52,273
Closing stock 45,990 47,579
Current Ratio Current Assets / current Liabilities
2.
2.37
Quick ratio (Cu. Assets - Cl. Stock)/Cu. Liabilities 1.464 1.46
Investor Ratios
Net Sales 353,425 350,899
Total Assets 507,258 537,521
Total Assets turnover ratio Net Sales/ Total Assets 0.697 0.653
Net income 7,691 9,331
Dividend 14,565 10,926
Dividend Payout ratio Dividend/ Net income 1.89 1.17
From the above ratio analysis financial information of both the organizations that is Kier
Group plc and Tyman plc is being reflected. With this comparison among both the firms can be
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made with greater effectiveness. It is significant for the researcher as it would assist them in
making determination of the best organization can offer them suitable returns. The analysis of
the ratios for both the firm have been carried in the manner enumerated as under:
Ownership concentration
 Return on capital employed: This is an effective financial ratio that assists in measuring
the profitability as well as efficiency of the organization with the amount of capital
employed. It effectively determines how efficiently the firm can generate profit from
capital employed. It is a long term profitability ratio which reflects how assets of the firm
are performing while taking into account long term financing. Return on capital
employed of Kier Group plc was 39.5 in 2015. However this was 25.66 in the year 2014.
On the other hand Return on capital employed of Tyman plc was 1.83 in 2015. However
this was 1.39 in the year 2014. The increase in return on capital employed of Kier Group
plc is favorable. This implies that assets have been used more effectively in Kier as
compared to Tyman.
 Return on equity: Return on equity is net income of an organization during a year by
utilizing the stockholders equity. It is a measure of profitability of the stockholder's
investment. It reflects the net income as the percentage of shareholder equity. Return on
equity of Kier Group plc was 0.009 in 2015. However this was 0.034 in the year 2014,
this decline is consistent with decrease in net income in 2015. On the other hand Return
on equity of Tyman plc was 0.025 in 2015. However this was 0.030 in the year 2014.
There is decrease in both the companies that may be indication of a specific trend in the
industry in the year 2015. Though there is decline in the return on equity of both the
organizations but still the decrease in Tyman plc is lesser (17.58% decline in net income)
as compared to Kier Group plc (44.44% decline in net income year over year). This
implies Tyman was more resilient to the economic conditions and was able to manage
better. Further detailed analysis of each company’s product mix and external impact on
each sector will provide a better picture however that is not the scope of the current
analysis.
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Leverage analysis Debt Ratio: It is a measure of level of debt of the firm as percentage of total assets. It is
computed by dividing the total debt of the organization by its total assets. Debt ratio
determines the percentage of the total assets that are financed through debts and assist in
making assessment of whether this is sustainable for not. Debt ratio of Tyman plc was
0.39 in 2015 against 0.94 in the year 2014. On the other hand Debt ratio of Kier Group
plc was 0.07 in 2015 against 14.96 in the year 2014. Both the companies had a declining
trend which means that they reduced their reliance on debt during 2015. The decrease in
debt of Kier Group plc is more significant and favorable. This indicates that the
companies preferred to use internal resources to fund the operations and investment
activities. Higher debt to asset ratio indicates a greater risk for the company in terms of
interest payment and principal repayment liability which can impact net income and net
assets of the company. Debt to Equity Ratios: This ratio is regarded as the financial liquidity ratio that makes
comparison of organization's total debts to total equity (Debt to equity ratio, 2016). It
reflect the percentage of the firm financing which comes through the creditors as well as
investors. Debt to equity ratio of Kier Group plc was 3.6 in 2015 against 88.5 in the year
2014. On the other hand Return on capital employed of Tyman plc was 0.65 in 2015
against 1.64 in the year 2014. Higher debt to equity ratio demonstrates that greater
number of creditor financing that is bank loans have been used in comparison with
investors (shareholders) financing. The Debt to equity ratio of Tyman plc is much
favorable as it is lower, which demonstrates higher stability of the organization. On the
other hand the firm having higher debt to equity ratio are considered riskier, on
utilization of debt Tyman has been lower than Kier therefore has greater financial
strength.
 Interest coverage ratio: Interest coverage measures the ability of the organization to
make payment of interest on its debts within specified duration of time. The creditors as
well as investors makes calculation of this ratios with the aim to gain insight to the
profitability as well as riskiness of an organization (Interest coverage ratio, 2016). The
investor views that their firm is able to make interest payments on borrowed money on
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timely basis without compromising its operations as well as profitability. Interest
coverage ratio of Tyman plc was 3.5 in 2015 as against 4.03 in the year 2014. On the
other hand Interest coverage ratio of Kier Group plc was 3.9 in 2015 as against 2.4 in the
year 2014. The decline in Tyman is consistent with decline in debt and net income while
in Kier though the net income reduced significantly its interest coverage was still good as
it also used less debt in 2015. Higher interest coverage is better for companies as it
implies that it possesses sufficient resources to pay interest on borrowed money. Interest
coverage ratio is used by creditors to determine whether business can effectively support
additional debts or not. In case the firm cannot pay interest then it might not be able to
make payment to the principle. Both our companies had good coverage which shows
financial health from creditors view point.
Liquidity ratio analysis
 Current Ratio: Current ratio is used in measuring the ability of the firm to make payment
against its short term liabilities from its current assets (Current ratio, 2016). The current
ratio possess significance as it measures the liquidity as short term liabilities are due
within a year. Current ratio is significant in shedding light on the overall debt burden of
the organization. The firm with greater current assets that includes cash, cash equivalents
as well as marketable securities can effectively be converted in shorter duration of time.
Current ratio of Tyman plc was 2.5 in 2015 as against 2.3 in the year 2014. This
indicates an improvement from year 2014. On the other hand current ratio of Kier Group
plc was 1.12 in 2015 against 1.09 in the year 2014. This implies that current ratio of
Tyman plc is favorable as compared to that of Kier. Tyman can pay its current liabilities
more than two and half times from its current assets and therefore is highly liquid.
Though Kier can also pay its current liabilities from current asset as the ratio is positive
but it is less liquid than Tyman.
 Quick ratio: Quick ratio or acid test ratio is more stringent test to measure liquidity. It
compares coverage of current assets excluding the inventory, over current liabilities.
Quick ratio of Tyman plc was 1.47 in 2015 as compared to 1.46 in the year 2014. On the
other hand quick ratio of Kier Group plc was 0.58 in 2015 against 0.65 in the year 2014.
This shows that quick ratio of Tyman plc is favorable as it is significantly covers current
22

liabilities but Kier has less than 1 quick ratio which indicates it requires its inventory to
turnover in order to meet its short term obligations. This implies that Tyman plc
possesses greater number of quick assets in comparison with the current liabilities and
consequently would be able to make payment of its current liabilities without making
sales of its inventory. Tyman is a very liquid company as is indicated by both its current
ratio and quick ratio as compared to Kier which is liquid but far less than Tyman.
Profitability ratio analysis Gross Profit Ratio: This ratio helps company in knowing the proportion of profits earned
by business through sale of products and services while considering direct costs and
expenses only. All fixed overheads and indirect expenses like Selling and administrative
expenses of company are not considered. Usually a higher gross margin is indicator of
better sale price as compared to costs incurred. With the rise in sales revenue of business
gross profits increases and direct relationship is present in between the two. In the year
2014 gross profit ratio of Kier Group plc was 8.61% and in the year 2015 it was 8.63%
which represent that overall gross profit of company is consistent with a slight increase.
Tyman plc gross profit ratio in the year 2014 was 32.70% and in the year 2015 it was
33.79% which means that it has bigger margin and its pricing mechanism is effective.
This also indicates that Tyman has larger cushion available to cover its selling and
administrative expenses as compared to Kier. Operating Profit Ratio: This ratio helps organization in measuring the percentage of total
revenue made by operating income. It is calculated by dividing operating income by
income sales of the company. This ratio shows the ability of business in running its
overall operations. Kier Group plc’s operating profit ratio was 1.17% in the year 2014
and it was 1.85% in the year 2015. This indicates that overall business operations are
improving and this is beneficial for the organization. Apart from this, in case of Tyman
plc in the year 2014 operating profit ratio of company was 5.39% and in the year 2015 it
was 6.36%. This is also indicating that business is carrying out overall operations
efficiently. On comparing operating profit ratio of both the firms it has been found that
Tyman plc is operating more efficiently as compared with Kier Group plc and business is
earning more revenue through its overall operating income.
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 Net Profit Ratio: It is comparison with revenues with net income after all cost of
production, administration, financing etc. Net profit is regarded as the indicator of cash
flow and incorporates large number of cash expenses such as amortization, depreciation
etc. A higher net profit margin indicates that the company has been able to convert more
of its revenues into net profit. For the year 2014 net profit ratio of Kier Group plc was
0.36% and in the year 2015 it was 0.16%. This ratio is indicating that business is earning
lesser profits after deducting all the major expenses. In case of Tyman plc net profit ratio
of company in the year 2014 and 2015 was 2.65 and 2.17% respectively. This is also
indicating business is earning fewer profits after deducting indirect and fixed expenses.
Tyman had gross margin of approximately 32-33% therefore it is spending almost 30%
of its revenue on indirect expenses. This means in order to increase its net income it
needs to shave off some of its selling and administrative expenses. On comparison
between net profit ratios of both firms it has been found that profit ratio of Tyman plc is
high as compared with Kier Group plc and this shows business efficiency.
Investor Ratios Total Assets turnover ratio: This ratio measures efficiency of company to use its assets in
generating sales revenue. Asset turnover of Kier Group plc in the year 2014 was 1.58 and
in the year 2015 it was 0.11 and this represents that business became less efficient in
utilizing its assets in the year 2015. In case of Tyman plc in the year 2014 total asset
turnover of company was 0.65 and in 2015 it was 0.69 and this shows business is
properly utilizing its assets at similar efficiency year over year. So, performance of
Tyman plc is far better than Kier Group plc.
 Dividend Payout ratio: It is regarded as the amount of dividend being paid to
stockholders relative to amount of total net income of the company. This ratio is linked
with the growth of enterprise. Dividend payout ratio of Kier Group plc in the year 2014
was 2.73 and in 2015 it was 7.52 which represents that business is growing due to which
higher dividends are paid to stockholders. In case of Tyman plc dividend payout ratio of
company in the year 2014 was 1.17 and in the year 2015 it was 1.89 which also
represents growth. Therefore, on the basis of this ratio it can be said that Kier Group plc
is more efficient in terms of dividend payment as compared with Tyman plc. For
24

short term liquidity position of Tyman Plc is quite better as compared with Kier group. In
the year 2015 current along with quick ratio of Tyman has increased and it is higher than
Kier group. This indicates that liquid funds are easily present with Tyman and through
this it is possible for business to carry out overall operations in proper manner. High
current along with quick ratio is representing strong liquid position of Tyman plc in the
market.
In terms of profitability gross, net and operating profit of Tyman is quite high as
compared with Kier plc. In short, it can be stated that Tyman is efficnet enough in utilizing all its
resources and this has lead to rise in profitability level of the organization in every possible
manner. Apart from this, Kier is not able to compete with Tyman as profits of business are quite
lesser as compared with Tyman. Every year performance of Tyman is rising at faster pace in
terms of profitability and through this it can be easily stated that organization is effective enough
in carrying out its major operations in comparison with Kier.
Total asset turnover ratio of Tyman plc is higher in the year 2015 as compared with Kier
group. This data clearly represents that organization is efficient enough in utilizing its major
assets and it has become one of the main reason behind success of Tyman plc in the market.
Apart from this dividend payout ratio of Tyman plc is lower than Kier group which indicates that
Kier group has given more dividend to its investors as compared with other firm.
In terms of gross and net margin Tyman plc position is quite strong as compared with
Kier group plc. Business is efficient enough in earning higher profits and this has lead to
improvement in overall position of business in the market. Apart from this, rising gross and net
margin of Tyman plc is indicating that company is efficiently carrying out its major operations.
After calculating all the key ratios it has been identified that performance of Tyman plc is
better than Kier group in every possible manner. All the ratios such as liquidity, profitability etc
are showing favorable results where overall performance of Tyman is enhancing at faster pace as
compared with Kier group. Due to this reason performance of Tyman company is better than
Kier group.
On the basis of overall analysis it is recommended to investors to invest funds in Tyman
group as compared with Kier group plc. Performance of Tyman group is quite high in terms of
profitability, liquidity position etc. By investing funds into the shares of Tyman group it is
25

possible for investors to obtain higher return and their personal expectations can be met easily by
the organization in every possible manner. Apart from this, business will provide them good
return as its performance is increasing every year.
Research methodologies are:
1. Positivism philosophy: The major advantage associated with this is that it is best suited
for quantitative analysis. Further it follows well defined structure while carry out the
investigation as well as discussions. The major disadvantage is relating with human
behavior. It states that objective inferences as well as conclusion can be reached in case
the individual doing the observation is objective and disregards the factor of emotions.
2. Descriptive research design: The major advantage associated with this is that it assists in
making discovery of features of population. Further it offers opportunity to the
researchers for exploring questions that cannot be examined with experimental process.
However its disadvantage is that investigators cannot control events for the purpose of
isolating cause and effect.
3. Inductive approach: The advantage of such is that it assists in determining the association
as investigation is conducted. It is regarded as logical approach that develops thinking
and observation. However demerit associated with this is that the generalization gained
out of few instances cannot be considered universal.
4. Quantitative research method: The major advantage of such research is that it can help in
making comparison between two organizations in an effective manner. However such
research type is lack ability to assess the human behavior and emotions of the individuals.
5. Quantitative data analysis: Use of quantitative tool has major advantage in terms that it
assist in gaining desired conclusion in an effective manner. However demerit with this is
that it might not be accurate in all the cases. Thus universal application cannot be made.
CONCLUSION
Discussion
From the analysis carried out it can be stated that financial position of Tyman plc is much
sound in comparison with Kier Group plc. This is due to the reason that it has greater liquidity
and profitability position. It has been gained that return on equity of Tyman plc is favorable. This
demonstrates that company is effective in generating income by the means of new investment.
26

Along with this the Debt to equity ratio of Tyman plc is much appropriate. This demonstrates
higher stability of the organization. On the other hand the firm having higher debt to equity ratio
are considered highly risky for the creditors as well as investors and compared with the one
having lower ratio.
On testing the liquidity position it has been gained that current ratio of Tyman plc is
favorable. The current ratio of Tyman plc has increased from the previous year and it is greater
than Kier Group plc. Thus this implies that firm can effectively pay its current debts. Moreover
quick ratio of Tyman plc is effective. This implies that firm possess greater number of quick
assets in comparison with the current liabilities. Such demonstrates that firm would be able to
make payment of its current liabilities without making sales of its long term assets. On
determining the profitability position it has been determined that profit margin of company is
increasing at faster pace. On comparing performance of two firms it has been found that Tyman
plc is efficient enough in selling different products as compared with Kier Group plc. While
comparing the operating profit ratio of both the firms it has been found that Tyman plc is
operating more efficiently as compared with Kier Group plc and business is earning more
revenue through its overall operating income. On making comparison between net profit ratios of
both firms it has been found that profit ratio of Tyman plc is high as compared with Kier Group
plc and this shows business efficiency. All such reflects that Tyman plc has sound position which
can assist the investors in attaining greater amount of return in longer run. On the other hand the
financial position Kier Group plc is not sound. Thus investors plans to invest in firms that
possess greater amount of profitability.
Limitations
There is greater amount of limitations that are associated with the present investigation.
This can be relating with time duration. It can be stated that carrying out entire research was
lengthy process but this has to be accomplished within specified duration of time. Thus it
become difficult for the researcher to cover each and every aspect within the present
investigation. This can be considered as major limitation of the present investigation. Along with
this another limitation of the present research is the restriction of the use of certain site. Thus this
has acted as barrier while making collection of secondary information from online means. There
27

is greater issues faced regarding adequacy in the secondary information. This affects the
collection of data in an accurate manner.
Conclusion
It can be concluded from the report that Tyman plc possess sound position. Thus from the
view point of investors they can effectively plan to invest in such company as it liquidity and
profitability position is effective. It can be inferred from the report that the objectives that have
been established for the present study have been attained in an effective manner. Thus the
purpose for which the study was being carried out has been accomplished in an effective manner.
This portrays that effective comparison of the organizations that is Tyman plc and Kier Group
plc has been carried out in order to draw valid conclusion from the analysis of the report.
In the present report financial statement of the companies have been analyzed. Through
this various ratios of both the companies have been computed. This develops clear picture of the
business that can assist in determining the financial status of both the companies and their
strengths as well. While examining the profitability position it has been inferred that profit
margin of company is increasing at faster pace. On comparing performance of two firms it has
been found that Tyman plc is efficient enough in selling different products as compared with
Kier Group plc. Thus this will the decision makers in gaining detail knowledge regarding the
ability of firm in yielding maximum amount of return in future course of time. By the means of
assessing past literatures adequate amount of data has been gathered in relation to the subject
matter under study. This is effective in showcasing the viewpoints of various authors on the
literature that is being carried out in past. The analysis of the financial position is effective in
demonstrating the real picture of the business.
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