Evaluation of Financial Performance of Restaurant Group Plc and Britvic Plc with Comparison to A.G. Barr

This article evaluates the financial performance of Restaurant Group Plc and Britvic Plc over the past three years, along with a comparison to A.G. Barr. It includes key ratios and metrics such as profitability, liquidity, efficiency, and solvency. The article also discusses the challenges faced by the companies and their key resources.

ACCOUNTING AND
FINANCE AAF0446 CASE
STUDY

Table of Contents
(i) Introduction.............................................................................................................................3
(ii) Evaluation of financial performance of Britvic Plc over the past three years.......................4
(iii) Discussion of Britvic Plc’s performance in comparison with its key competitor (A.G.
Barr).............................................................................................................................................7
(iv) Conclusion..........................................................................................................................10
REFERENCES..............................................................................................................................12
Books and Journals....................................................................................................................12
Online........................................................................................................................................13

(i) Introduction
Short introduction of the Restaurant Group Plc & its key features
Restaurant group Plc is a well-known restaurant group having pub restaurants &
restaurant across United Kingdom. It is a British chain of public houses & restaurants and is
publicly traded over London Stock exchange. It was founded in 1987 as a City Centre
Restaurants Plc with the aim of managing & owning the Garfunkel’s Restaurant Chain. It is
operating in restaurant group in London, England. In January 2004, the name of the company
changed to the Restaurant Group Plc. Throughout the UK, this restaurant chain is operating
through 450 restaurants & pub restaurants. Its principle brands include Chiquito, Frankie &
Benny’s, Joe’s Kitchen, Coast to Coast, Brunning & Price and Home Counties pub restaurants.
Current financial position of Restaurant Group Plc
For the evaluation of an enterprise’s financial position, the key metrics referred to are
profitability, liquidity and efficiency of the business. These matrices are used to track, measure
as well as analyze the financial health of the business. The following ratios have been obtained
through the annual reports of Restaurant Group plc to indicate its current financial position.
Ratio 2020 2021
Gross profit margin 10.57% 10.52%
Net Profit margin -27% -6.03
Current ratio 0.33x 0.83x
Total assets turnover ratio 0.34x 0.47x
These ratios show that the profitability of Restaurant group plc has reduced in terms of
gross profit margins indicating inability of the management in generating sales revenue
efficiently. Also, the net profit margins are negative but the losses in previous year are more as
compared to the current year which indicates improvement in the financial performance of the
company (Annual reports of The Restaurant Group Plc 2021). The current ratio is below 1
indicating inability of the enterprise in meeting its short term obligations. However, this ratio has
increased in the current year indicating reduction in the liquidity risks for the company. At last,
to determine the efficiency of the restaurant group plc, the total asset turnover ratio has been

calculated which is also very low in both the years indicating inefficiency of the total assets of
the business in generating sales for the company.
Key Resources
Key resources of the Restaurant Group plc include well performing employees who are
supporting in eliminating the costs associated with poor performance like losing customers to
competitors. Also, the restaurant is having good opportunities of using equity financing for
fulfilling its financial needs which is determined through the shift from debt to equity sources of
finance. At last, the copyright protected logo of the restaurant group is helpful for in protecting
the menu & recipes of its various foods & beverages.
Challenges faced by the Restaurant Group Plc in meeting its objectives in the market
 The restaurant group is facing the pressure of labor market because of labor shortages in
UK has resulted in high wage rates.
 General inflation associated with food & drink items derived by commodity market &
supply chain pressures have result in cost inflation leading to reduced profit margins of
the group.
 Raising capital & debt refinancing are other financial challenges that the group is facing
which has resulted in financial crisis within the group (Литвиненко, 2020).
 At last, there are several operational challenges the group is facing which involves
uncertainty due to the pandemic threat in the market and cut throat competition prevailing
in the restaurant industry of UK. Meanwhile, the company is also unable to manage its
overheads efficiently which has resulted in poor profit margins.
(ii) Evaluation of financial performance of Britvic Plc over the past three years
With the help of financial statements of the company, the following financial information has
been obtained in terms of key matrices or ratios indicating profitability, liquidity, efficiency &
solvency of Britvic Plc.
Ratio 2019 2020 2021
Gross profit margin 41.87% 39.71% 41.49%
Return on capital 12.70% 11.59% 13.61%

employed
Current ratio 0.87 1.06 1.08
Quick ratio 0.68 0.86 0.84
Total assets turnover
ratio
0.89 0.83 0.80
Receivables collection
period
85 days 87 days 98 days
Payables Payment
period
168 days 154 days 185 days
Debt equity ratio 3.19 3.55 3.15
The above ratios determined through the financial statements of Britvic plc for the past
three years indicating financial performance of the company in terms of profitability, liquidity,
efficiency & solvency ratios (Annual reports of Britvic Plc 2020, 2021).
Evaluation of financial performance in terms of profitability
There were two ratios calculated for determining the profitability of Britvic Plc which are
gross profit margin and return on capital employed. Through these ratios, it has been identified
that that these ratios have reduced from 2019 to 2020 and then increased in 2021. However, the
sales of the company have reduced continuously for the last three years. An increase in gross
profit margins indicate efficiency of the management in generating sales & vice versa. ROCE
also indicates the efficiency of management in terms of utilizing the available capital with the
business. This ratio has also follows the same pattern of reduction from 2019 to 2020 and then
again increasing from 2020 to 2021 (Bhowal, 2021). The operating profit of the business has
shown continuous increase for the past three years indicating operating efficiency of the
business. The increase or decrease in this ratio is directly associated with the efficiency of the
business operations which has increased in the past three years just because of effective
utilization of assets held with the business.
Evaluation of financial performance in terms of liquidity

Again there are two ratios that have been calculated for determining the liquidity position
of Britvic Plc which includes the current ratio & quick ratio. The ideal requirements pertaining to
these two ratios are 2 and 1 respectively. With regards to the current ratio calculated for Britvic
Plc for the past three years, it has been identified that the current ratio of this business is much
below the ideal requirement indicating that the company might face difficulty in meeting its short
term obligations that are going to arise within the short notice of one year. However, in spite of
being below the ideal requirement, this ratio is improving continuously from past three years
indicating better liquidity perspective for this business in the future (Guo and Ziebart, 2019).
Also, the quick ratio of Britvic Plc is below than what is required ideally in all the past three
years but again is showing improvements. A ratio below one means the company would not be
able to meet its short term obligations as and when it would arise.
Evaluation of financial performance in terms of Efficiency
To evaluate the efficiency of Britvic Plc, there are three ratios that have been calculated in this
regard which includes total asset turnover ratio, receivables collection period and payables
payment period. The total asset turnover ratio of Britvic Plc is continuously reducing for the past
three years indicating poor efficiency of the business in generating enough revenue by using the
available assets. However, the ideal requirements are between 0.25 and 0.5 and as this company
is having higher ratio than what is required ideally, it can be said that the efficiency of the
company’s assets is good.
Further, the receivables turnover days indicate the efficiency of the business in collecting
outstanding dues from the customers which should be between 30 to 40 days for a beverage
company like Britvic Plc. However, the trade receivables are taking too long in paying back the
dues and even the days are increasing which indicates the company’s liquidity position might get
affected because of the delayed payment from the customers (Welc, 2022).
At last, the payables payment period is the indicator of how much time does the business
is taking in repaying back to its suppliers. The payables payment period of Britvic Plc has firstly
reduced between 2019 and 2020 and then has increased between 2020 and 2021. Also, the day’s
payables outstanding determined for Britvic Plc is much high indicating that it is taking more
time to pay back their suppliers which is beneficial for the business in terms of having sufficient
cash available to invest it in short term investment proposals.

Evaluation of financial performance in terms of Solvency
For determining the solvency of Britvic Plc, the debt equity ratio has been calculated
which has increased from 2019 to 2020 and has reduced between 2020 and 2021. However, the
ratio has remained high in all the past three years. A high ratio is the indicator of financial risk
for the company because of the greater amount of debt component in the overall capital structure
of the business which leads to higher financial obligations in terms of interest as well as principal
repayments. Further, it reduces the subsequent capital raising in the form of borrowed funds.
Through the above discussion it has been identified that Britvic Plc is facing problems in
terms of poor efficiency and liquidity (Mahzura, 2018). This is because the current & quick ratio
of the company are much below the ideal requirements for the same and also the efficiency in
terms of using employed capital and collecting outstanding dues from customers is poor for
Britvic Plc. Further, the opportunity has been identified in terms of high payables payment
period which indicates that the suppliers of the company have lenient credit policies and
accordingly, it is advantageous for the business to invest the available cash in short term
investment proposals to raise their net profit margins.
(iii) Discussion of Britvic Plc’s performance in comparison with its key competitor (A.G. Barr)
The competitor chosen for the comparison of financial performance of Britvic Plc’s is
A.G. Barr limited which is another soft drink manufacturer operating in UK. It is also a LSE
listed company and headquartered in Cumbernauld, United Kingdom. The common size
statement of A.G. Barr is as follows for the past three years.
Common Size Statement
Income statement Common Size Income
Statement
Particulars 2019 2020 2021 2019 2020 2021
Revenue 279 255.7 227 100% 100% 100%
Cost of sales 156.5 150.7 133.4 56% 59% 59%
Gross profit 122.5 105 93.6 44% 41% 41%

Operating expenses 77.4 66.9 66.8 28% 26% 29%
Operating Profit 45.1 38.1 26.8 16% 15% 12%
Finance Cost 0.6 0.7 0.8 0.2% 0.3% 0.4%
Tax 8.7 7.6 6.9 3% 3% 3%
Net Profit 35.8 29.8 19.1 13% 12% 8%
Common Size Statement Showing changes in the financial performance of A.G. Barr over the
past three years
Ratios 2019 2020 2021
Return of Capital
Employed 19% 16% 11%
Current ratio 1.62 1.44 2.24
Quick ratio 1.29 1.14 1.85
Total assets turnover
ratio 0.94 0.86 0.75
Receivables collection
period 75 days 82 days 60 days
Payables Payment
period 133 days 127 days 119 days
Debt equity ratio 0.42 0.43 0.32

(Annual reports of A. G. Barr Plc 2020, 2021)
Through the above common size statement, it can be seen that the financial performance of A.G.
Barr in terms of profitability is continuously deteriorating as the gross profit margins and return
on capital employed both are reducing for the past three years. The reason for the reduction in
gross margin can be quoted as the reduced sales of the company in 2020 and 2021. This indicates
poor efficiency of management in generating sales for the company (Husain and Sunardi, 2020).
Also, the reduction in ROCE indicates despite of rise in the total assets of the business indicates
that the management is not capable of extracting sales out of the available assets with the
business. Therefore, the performance of Britvic Plc was better as compared to A.G. Barr because
the former’s performance has improved in the most recent financial year.
Moving on the liquidity of A.G. Barr where the current ratio seems to be improving in the
past three years along with satisfying the ideal requirement in the most recent financial period
which indicates that the company would be able to meet its short term obligations that is going to
arise in the short notice (Husain and Sunardi, 2020). Also, the quick ratio is above the ideal
requirement in all the three years along with showing improvements recently. Accordingly, A.G.
Barr’s financial performance in terms of liquidity is much better than Britvic Plc because the
latter has great liquidity risk of not being able to meet its short run obligations.
Financial performance can also be evaluated in terms of efficiency and accordingly, total
asset turnover ratio has been calculated. This ratio is showing continuous downfall over the past
three years for A.G. Barr and this trend is same as in the case of Britvic Plc. Therefore, the assets
of both the business is getting less efficient year over year (Jihadi and et.al., 2021).
However, the receivables collection period is decreasing for A.G. Barr which shows that
the efficiency of business in collecting dues from customers has improved continuously in the
past three years. This was not true is case of Britvic Plc as it was facing difficulty in getting
payment from their customer on time.
In addition to this, the payable payment period of A.G. Barr is reducing continuously
from the last three years which indicates that the business is making the payments to its suppliers
earlier in the recent years as compared to previous years (Madushanka and Jathurika, 2018).
However, this ratio was increasing in case of Britvic Plc and thus it can be said that A.G. Barr

must not be having cash available with them to exploit the opportunity of investing in short term
investment proposals.
At last, the debt equity ratio of A.G. Barr is continuously falling indicating that the company is
moving towards equity financing. Also, the ratio is much low over all the past three years and
accordingly, it can be said that A.G. Barr is having the opportunity of exploiting the financial
leverage which is not true in case of Britvic Plc which is having high financial risk (Rashid,
2018).
(iv) Conclusion
The above discussion is based on the evaluation of financial performance of three
different businesses operating in similar industry which includes the Restaurant Group Plc,
Britvic Plc and A.G. Barr limited. All these companies are traded over London Stock Exchange
and this report has evaluated its performance in terms of profitability, efficiency, liquidity and
solvency.
Joint venture is an agreement or contract where at least two business form temporary
business relationships with the aim of attaining their mutual goals. Accordingly, to determine
whether the businesses in question like Restaurant Group Plc, Britvic Plc and A.G. Barr’s
management or board should go for backing a new joint venture agreement, it is must to
determine how the needs of one business could be satisfied by the strengths of another business
(Edwards, 2021).
For instance, the Restaurant Group Plc has net losses in current financial period, so by
entering into joint venture with Britvic Plc or any other profit making entity, it can improvise its
profitability. Also, the Britvic would benefit from the increasing efficiency of the Restaurant
Group Plc.
Further, the new joint venture between the Britvic Plc and A.G. Barr would be beneficial
for both the firms as the latter is having an opportunity to exploit its opportunity of financial
leverage while the former is facing great financial risk and having no scope of getting external
funding. So, the joint venture would facilitate external funding for Britvic Plc as well. Britvic Plc
would also be able to benefit itself from the good liquidity position of A.G. Barr. Also, A.G. Barr
would be benefited with the opportunity of investing in short term investment proposals that

Britvic Plc have due to the lenient credit policies of its suppliers. The possibility of joint venture
with any other firm would also give the same benefits by identifying the needs of different
businesses.

REFERENCES
Books and Journals
Bhowal, C., COMPARATIVE ANALYSIS OF THE TREND AND FINANCIAL
PERFORMANCE OF PRIVATE INDIAN AIRLINES. Interpretation, 2018, p.19.
Edwards, J., 2021. Advantages and Disadvantages of Competing in International
Markets. Mastering Strategic Management-1st Canadian Edition.
Guo, H. and Ziebart, D., 2019. A GENERAL ANALYSIS OF THE IMPACT OF SCALE
DIFFERENCES WHEN INTERPRETING R 2 AS AN INDICATOR OF VALUE-
RELEVANCE. Journal of Theoretical Accounting Research, 14(2).
Husain, T. and Sunardi, N., 2020. Firm's Value Prediction Based on Profitability Ratios and
Dividend Policy. Finance & Economics Review, 2(2), pp.13-26.
Jihadi, M., VILANTIKA, E., HASHEMI, S.M., Arifin, Z., BACHTIAR, Y. and Sholichah, F.,
2021. The effect of liquidity, leverage, and profitability on firm value: Empirical
evidence from Indonesia. The Journal of Asian Finance, Economics and Business, 8(3),
pp.423-431.
Madushanka, K.H.I. and Jathurika, M., 2018. The impact of liquidity ratios on
profitability. International Research Journal of Advanced Engineering and Science, 3(4),
pp.157-161.
Mahzura, T.A.S., 2018. The analysis of the influence of financial performance, company size,
ownership structure, leverage and company growth on company values in food and
beverage industry companies listed in IDX 2012-2016 period. International Journal of
Public Budgeting, Accounting and Finance, 1(4), pp.1-12.
Rashid, C.A., 2018. Efficiency of financial ratios analysis for evaluating companies’
liquidity. International Journal of Social Sciences & Educational Studies, 4(4), p.110.
Welc, J., 2022. Financial statement analysis. In Evaluating Corporate Financial
Performance (pp. 131-212). Palgrave Macmillan, Cham.

Литвиненко, Е.В., 2020. BUSINESS ACTIVITY OF THE ORGANIZATION:
INTERPRETATION OF ANALYSIS RESULTS. In Концепции современного
образования: актуальные модели развития системы знаний (pp. 44-47).
Online
Annual reports of The Restaurant Group Plc 2021. [Online]. Available through <
https://www.annualreports.com/HostedData/AnnualReports/PDF/LSE_RTN_2021.pdf >
Annual reports of Britvic Plc 2020. [Online]. Available through
https://www.annualreports.com/HostedData/AnnualReportArchive/b/LSE_BVIC_2020.p
df
Annual reports of Britvic Plc 2021. [Online]. Available through <
https://www.annualreports.com/HostedData/AnnualReports/PDF/LSE_BVIC_2021.pdf >
Annual reports of A. G. Barr Plc 2020. [Online]. Available through
https://www.annualreports.com/HostedData/AnnualReportArchive/a/LSE_BAG.L_2020.
pdf
Annual reports of A. G. Barr Plc 2021. [Online]. Available through <
https://www.agbarr.co.uk/media/iffdio0f/annual-report-and-accounts-fy-2020_21.pdf >